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Text: Click the earnings materials box in the center of the page.
Jochen, let's get started.
As we look to 2021, it remains important to remember the unprecedented year that was 2020.
I am however very pleased with the pace of recovery we've seen across our business and strong numbers reflecting the implementation of our new strategy as demonstrated by the positive financial results this quarter.
We continue to manage through the impacts of COVID-19 with the extraordinary efforts of our global team, keeping employee safety and community well-being at the forefront.
We've overcome global shipping and supply chain challenges, adeptly managing the effects of disruption, ensuring that we were able to continue building and delivering the world's most iconic motorcycles.
As you can see today, the actions we've taken to reshape the business through The Rewire leading into the early months of our Hardwire execution are already having a positive impact on our results in particular in the most important North American region.
We can see the initial signs of consumer excitement and optimism returning, even if parts of the world are still lagging due to continued COVID related lockdowns and delayed vaccination efforts.
As we start to execute our five-year strategic plan, The Hardwire, I'm confident Harley-Davidson in 2021 is a significantly leaner, faster and more efficient organization and will continue improving and delivering in line with our H-D Number One culture.
I will talk more about stage one of The Hardwire later, but before I hand over to Gina, I'd like to address the announcement we made yesterday regarding the amended tariff ruling by the EU.
The decision taken by the EU is unprecedented, unfair and is a deliberate attempt to create a competitive disadvantage against our European competitors.
We are committed to fighting it and have launched an immediate legal challenge in Europe as we firmly believe that the original ruling on our BOI remains correct and should therefore be overturned.
Every big bike we sell in America comes straight from the hands of our hard working men and women of Wisconsin and Pennsylvania.
It bears repeating, if not for the tariffs, which are now threatening our recovering export potential, we could be investing in jobs at our American facilities, leading the world in electric innovation, research, engineering, design and advanced manufacturing.
Instead, we are facing huge tariffs in trade war -- in a trade war not of our making.
So as you saw from the numbers, we delivered a very strong quarter and I'll hand it over to Gina for more details.
As Jochen mentioned, we had a good start to our fiscal year with first quarter results reflecting stronger demand and an improved economic outlook.
Operating income of $346 million was well ahead of last year with growth coming from both our reported segments.
The Motorcycles and Related Products segment delivered $228 million which is $143 million better than last year, driven by units, a stronger product mix with growth in our Touring and Cruiser families and lower operating expense versus a year ago.
The Financial Services segment delivered $119 million of operating income, $96 million better than last year due to lower actual losses and a lower loss provision.
We delivered earnings per share of $1.68 with no significant restructuring charges taken within the quarter.
Internationally, the impact of COVID was felt more deeply as many key countries remained under stay at home protocols and shipping networks were severely strained by COVID related challenges.
The TAM declines were driven by a 30% net reduction in the number of dealers and price increases taken across the portfolio as we work to restore profitability within those markets.
Across the dealer network, worldwide retail inventory of new motorcycles was down 48% versus a year ago behind our strategic shift on supply and inventory management.
Inventories were up 60% over Q4 as we work to build back inventory ahead of riding season.
It's important to remember that our strategic shift and inventory management will result in 2021 Q1 through Q3 inventories being lower than our historical averages.
This shift is continuing to improve profitability and strengthen pricing dynamics with Q1 motorcycle transaction pricing in the United States up materially across all families, most of which are at or near MSRP.
Looking at revenue, total motorcycle segment revenue was up 12% in Q1, 3 points of this growth came from volume on motorcycle units and parts and accessories as we benefited from the retiming of the new model year launch and the lapping of the 2020 COVID shutdowns.
One point of growth came from pricing and incentives as we eliminated the corporate discounts and incentives as part of The Hardwire strategy to rebuild the desirability of our brand and products.
And finally, we realized 6 points of growth from mix as the increased contribution from Touring more than offset the unit declines in our less profitable small cruiser models.
Absolute gross margin percent of 34.1% was up 5.1 points versus prior year driven by stronger volume, favorable mix and the lapping of heavier promotional periods in Q1 of last year.
As anticipated, while we did realize higher logistics spend in the quarter, we were able to offset with other savings across our supply chain.
Total operating margin of 18.5% was up significantly versus prior year due to the drivers already noted, lower operating expense.
The lower expense was the result of The Rewire actions executed last year as well as some timing shifts in our Hardwire related investments.
We do expect the favorability realized in the quarter tied to these Hardwire initiatives to be retimed and spent back in subsequent quarters.
The Financial Services segment operating income in Q1 was $119 million, up over $95 million compared to last year.
Net interest income was down due to higher average outstanding debt as we proactively managed liquidity during the ongoing pandemic.
The total provision for credit losses decreased $102 million from Q1 2020 driven by an allowance decrease of $82 million and lower actual credit losses of $20 million.
The provision adjustment reflects an improved economic outlook and appropriately represents the estimated lifetime losses in our portfolio at the end of the quarter.
Actual retail credit losses continue to be down versus last year as a result of lower delinquencies as customers were supported by the recent federal stimulus packages and continued elevated levels of COVID related loan payment extensions granted to qualified customers.
Focusing in on HDFS' base business, new retail originations in Q1 were up 25.8% versus last year behind higher new motorcycle sales as well as strong used motorcycle origination volume.
Market share for new U.S. retail financing remains strong at 63.5%.
At the end of Q1 2021, HDFS had approximately $1.7 billion in cash and cash equivalents on hand and approximately $1.6 billion in availability under its committed credit and conduit facilities for total available liquidity of $3.3 billion.
Cash and cash equivalents remained elevated, but were down approximately $800 million from Q4 2020 levels as we gradually pull cash back down to normalized levels.
HDFS continues to manage its debt to equity ratio between 5 times and 7 times, and well within the debt covenants of no higher than 10 to 1.
HDFS' retail 30-day plus delinquency rate was 2.14%, down 123 basis points compared to the first quarter of last year.
The retail credit loss ratio was also favorable at 1.4%, a 133 basis point improvement over last year.
The favorable delinquency performance is largely due to federal stimulus assistance and elevated levels of COVID related extensions.
The vast majority of the extended accounts have made at least one payment after the expiration of their extension period.
While we do expect the delinquency rate to normalize over time, given the influx of stimulus funding and the improved economic condition, It's likely losses could remain low through most of the year.
Wrapping up with Harley-Davidson, Inc financial results, we delivered first quarter operating cash flow of $163 million, up $171 million over prior year.
Key drivers of the improved cash flow were improved net income and lower inventory levels.
Cash and cash equivalents ended the quarter at $2.3 billion, which is $856 million higher than Q1 last year, but $937 million less than the end of Q4 2020 as we gradually worked down the higher cash balances that were held in the face of the pandemic.
Finally, the Company's Q1 effective income tax rate was 24%, slightly lower than Q1 2020.
Looking forward to the balance of the year, a number of factors occurred in the quarter that had given us confidence in taking our guidance up over the previous estimate.
First, we have better clarity on the cost impact of the supply chain challenges and our ability to adapt, which we had built in as a significant headwind in our original plan.
Also, the economic outlook is much improved with filing unemployment numbers, a newly approved federal stimulus in the U.S. and continued progress on the global COVID vaccine rollout.
Finally, we have also been able to get a much better read on profitable demand for our new model year '21 motorcycles, which is stronger than we had anticipated, particularly in our most profitable segments of Touring and large Cruiser.
As a result of these factors, we are raising our motorcycle segment revenue growth to be 30% to 35%, an increase from the previously communicated growth range of 20% to 25%.
Moving on to Motorcycle segment operating income margins, assuming a successful outcome regarding the EU tariff situation, our updated guidance is a range of 7% to 9%, up from the previously communicated range of 5% to 7%.
This 200 basis point increase reflects an improved demand outlook and confidence in our ability to continue navigating through the global supply chain headwinds.
However, if we are unable to reach resolution, negating the additional EU tariffs, the impact would bring us back to our original guidance of 5% to 7%.
The Financial Services segment operating income growth guidance is now 50% to 60%, an increase from the previously communicated range of 10% to 15% driven primarily by the loss provision adjustment.
Lastly, capital expenditures guidance remains flat to our original guidance of $190 million to $220 million.
Given that, we've added Slide 12 to help provide transparency on how our revenue and profit margin is split.
We expect approximately 60% of our revenue to come in the first half of the year as we ride the momentum of our model year launch through the riding season.
As we get into the back half, we'll start to see inventories come down from the peak in Q2, and in Q4, we will change over the factories to begin production on model year '22.
Finally, remember that we will begin lapping the impact of cost savings actions we took in the face of the pandemic and our Rewire savings initiatives beginning in Q3.
The patterns on inventory and shipments will be similar to what we experienced in the back half of 2020.
We believe the substantial changes implemented with The Rewire have set us up to a win, and we will not rest here.
We will continue to explore additional opportunities as The Hardwire strategic plan is implemented and as we continue to deliver organizational speed, alignment and efficiency.
As we close this first quarter, we can see that we've been through a significant transformation over the course of the past year.
These changes are manifested in strong first quarter results and reinforce our decision to move the model year to coincide with the start of riding season for the first time in our modern history.
This new journey is powered by Harley-Davidson number one, a high performing winning organization based on our ten defined leadership principles and built on the powerful vision and mission of Harley-Davidson.
Through the pandemic and into this first quarter we have seen the willingness and growing capabilities of our team to win.
Our future successes will only come from an effort by everybody in our team.
As you know, The Hardwire and its success is rooted in desirability in our ambition to enhance our position as the most desirable motorcycle brand in the world.
Desirability is a motivating force driven by emotion.
It's in our DNA, it's embedded in our vision and it's at the heart of our mission and it's part of our 118 year legacy.
Done right, Harley-Davidson's desirability preserves the value of our customers' purchases, builds our brand beyond our riders, ensures loyalty and drives engagement.
Our strategic ambition for desirability is very simple: Design engineer and advance the most desirable motorcycles in the world reflected in quality, innovation and craftsmanship; build a lifestyle brand valued for the emotion reflected in every product and experience for riders and non-riders alike, and; focus on our customers, delivering adventure and freedom for the soul.
Desirability provides the framework of our Hardwire strategic plan and the framework for our success measures.
I will now address a few specific highlights for the quarter delivered against some of The Hardwire strategic priorities.
I'm increasingly more confident of the market conditions and consumer appetite for our brand, our iconic motorcycles and our new products.
The pandemic has provided a reminder of the power of getting outside, reconnecting with our community and the significant freedom and adventure that our brand represents.
We've experienced significant demand in the market for our products and our brand, especially since March of this year.
And the demand we are seeing is strongest in our most profitable segments.
This improved mix is resulting in stronger year-over-year motorcycle segment margins and can be attributed directly to our desirability and Rewire efforts.
This quarter has demonstrated the increasing strength of the market and the enduring power of our brand in both the USA and Canada as well as Asia.
Despite the continued impacts of the pandemic especially in Europe, we also see post pandemic potential as part of our streamlined market strategy.
We maintain a long-term focus on sustained, profitable and desirable growth in line with The Hardwire strategy, and we are excited by the initial impacts.
As we begin to execute against our strategy of 70:20:10 skewed to our stronghold segments of Touring, large Cruiser and Trike, we will work hard to continue to solidify our position as leaders, acknowledging that these segments are the most attractive of the global market in terms of our profit focus.
With The Hardwire, we also made a commitment to introduce a series of models that align with our commitment to further increase desirability and to drive the legacy of Harley-Davidson in our core segments.
In this context, today, I'm pleased to introduce our new icons collection and this year's icon model, the Electra Glide Revival.
Launching April 26th, icons will be extraordinary adaptations of production motorcycles, which look to our storied past and bright future.
Produced only once, each model will have a limited serialized production run of 1,500 bikes and deliver on what Harley-Davidson has always done so well; Iconic design and historic moments.
A new icons collection model will be released within each model year with no more than two models being released in any given year.
Production will be enough to fill allocation of approximately one per dealer globally, making each icon a rare and highly coveted model for our riders, while increasing the overall desirability of our brand.
When we announced The Hardwire, we also identified a focused expansion into new segments.
They are attractive and profitable segments that deliver a balanced combination of volume, margin and potential.
And they're well aligned with our product and brand capabilities with a clear path to leadership.
By narrowing our focus on those opportunities that meet these criteria, we make our intention clear.
We are in them to win, supported by the right allocation of time and energy balanced with the right investments in product, brand and go to market capabilities.
This gets me to PR and marketing launch of the Pan America, our first Adventure Touring bike.
With the Pan America, we see the potential to build on our off-road heritage and to innovate into the high growth and attractive margin segment of adventure touring.
We are targeting a new customer, but a new customer that wants the craftsmanship, heritage and legacy of Harley-Davidson and wants to be part of our community.
Pan America was launched globally on February 22nd at a virtual launch viewed by over 350,000 participants across the world.
We partnered with movie star Jason Momoa to produce launch content that build desirability and excitement for Pan America around the launch.
If you haven't already watched Everything is a Road: The Path to Pan America, I'd encourage you to do so.
To date, the Pan America has received widespread global media acclaim with over 2 billion media impressions at a 97% positive media sentiment.
With the Pan America launch earning [Indecipherable] reports endorsement as I quote, The most important model released in memory signaling a shift in both philosophy and demographic.
The press riding reviews that have been going on for several weeks now around the world have also been exceptional with overwhelmingly positive feedback from around the world.
The launch delivered a full sellout of the pre-order allocation, which is currently in production and on schedule to be delivered to our dealers around the work from May onwards.
Adventure touring is the largest segment in many European markets and is a largely untapped market in North America.
We believe this bike places us in a position to take market share in Europe and become market leader in the segment in North America.
There's also clear affinity for the bike in other high-potential global markets with the Pan America being awarded best bike of 2021 at the 42nd Bangkok International Motor Show.
Looking forward, we have great plans to expand on Pan America with unrivaled innovation and design in new products that will reach new audiences, as we look to unlock new customers and opportunities.
Following on from the Pan America launch, we continue to execute on our priority to selectively compete in attractive segments where we can profit and win.
And we're excited for the upcoming launch of our next product from the RevMax platform, which will redefine the premium middleweight Cruises segment.
We intend to increase the profitability of our offerings overall in the small to mid sized Cruiser segment and change the competitive landscape.
Leading in electric, combustion remains the core of our business, however we see great potential for long-term growth in electric vehicles.
With LiveWire widely regarded as the leading electric motorcycle in the world, we're excited about our future in this space.
Earlier this year, we announced our intentions to work toward a dedicated EV division, and this work is now in full swing.
This division will allow for dedicated level of strategic focus required to deliver desirable growth in this segment.
In the quarter, we hired our Chief EV Officer to help guide this focus as we look to build on the success of LiveWire and win in Electric.
By investing in electric technology, it remains our intent to be at the forefront of innovation and development as we look to be the pioneers in EV.
We'll be telling you more about our dedicated EV plans in Q2.
Growth Beyond Bikes, we've always been about more than a machine and our related businesses are huge opportunities for long-term expansion of the brand.
Parts and accessories and general merchandise form part of the Harley-Davidson lifestyle and together with HDFS played an important role in inspiring existing and new customers to discover the adventure.
Each business plays an important role in our overall vision and mission.
We see enormous potential to grow our customer base, both with riders and non-riders shaping our future success as a global lifestyle brand.
In parts and accessories with customization as part of our heritage, we continue working toward enhancing our position as the destination for high quality parts for all our riders both with new and used motorcycles.
As part of this new approach to our P&A business, the Pan America reveal included both P&A and general merchandise designed specifically for Harley-Davidson Adventure Touring motorcycles and riders.
Harley-Davidson's heritage underpins our general merchandise business.
It is authentic to motorcycle culture and puts us in an unique position to reach beyond motorcycle riders and into the sport and lifestyle space.
With prominent brand collaborations in the works for general merchandise, we see long-term potential to leverage our brand value.
We'll be telling you more about this important strategic pillar for future growth in the second half of the year.
As evidenced by strong performance this quarter, HDFS is a strategic asset with a track record of delivering growth and profitability.
It is our goal to make HDFS the preferred choice for all Harley-Davidson riders by building digital capabilities and that rival the innovators of financial services.
HDFS' is integral to Harley-Davidson's success and with expansion in Europe on the horizon, we are excited about its future.
Led by HDFS earlier this month, as you know, we announced H-D Certified, the first certified pre-owned Harley-Davidson motorcycle program designed to lead our industry, satisfy our existing loyal riders and also reach new customers venture into Harley ownership for the first time.
H-D Certified is a strategic effort to strengthen our competitive position and is part of our new approach to the used motorcycle marketplace, aligned to the strategic priorities of The Hardwire, targeting long-term profitable growth.
In partnership with our strong dealer network, we want to enhance the overall customer experience encouraging brand loyalty while supporting growth in parts and accessories, general merchandise and HDFS built around the used Harley-Davidson market.
To date, over 350 of our U.S. dealers have signed up to the program representing 63% of the U.S. dealer network on the day of launch.
Each certified pre-owned motorcycle will be sold with a 12 month limited warranty on the engine and transmission and will include a 12 month complimentary membership in HOG, our Owners Group.
In addition, special financing rates will be available through H-D Invest [Phonetic] to support the program.
We believe H-D Certified will drive Harley-Davidson connectivity and engagement with our customers and enhance the overall customer experience, allowing more riders to have access to our motorcycles providing them with an added level of confidence in their purchase and an invitation into the Harley-Davidson community.
Few words to summarize.
The strong Q1 financial performance despite the supply chain challenges of the quarter and an increase in demand, gives us the confidence to increase our guidance as Gina mentioned to deliver a strong performance for the full year.
That said, we expect the unprecedented pandemic related supply chain and logistics challenges to continue and recognize the potential associated risks well into the year.
Our brand is powerful and it is one of the most recognized globally.
With 118 years of uninterrupted heritage, craftsmanship and iconic design, we are unique.
No other brand even comes close to Harley-Davidson.
We've been through significant change, but I believe this change has set us up to be stronger than ever before.
We will not rest until we are best-in-class in everything we do.

user
harley-davidson inc delivers q1 gaap diluted earnings per share of $1.68.
delivered q1 gaap diluted earnings per share of $1.68.
qtrly motorcycles and related products (motorcycles) segment revenue up 12 percent.
qtrly revenue $1,423 million, up 10%.
harley-davidson - bottom-line results reflect q1 significant net income improvement with strong results in motorcycles and financial services segments.
qtrly motorcycles & related products segment revenue up 12 percent amid strong retail demand for touring motorcycles.
sees 2021 motorcycles segment revenue growth to be 30 to 35 percent.
sees 2021 motorcycles segment operating income margin of 7 to 9 percent.
sees fy 2021 capital expenditures of $190 million to $220 million.

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