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Jochen, let's get started.
We delivered a solid performance in the second quarter and first half of this year.
I'm pleased with the pace of improvements we've seen with today's numbers reflecting the execution of our Hardwire strategy as demonstrated by the positive financial results despite significant supply chain challenges.
As a company, we continue to manage through the impacts of COVID-19 with the extraordinary efforts of our global team keeping employees' safety and community well-being a priority.
The supply chain and logistics challenges linked to the pandemic faced by our industry and many others continue to impact the sector with our teams managing the effects of disruption to ensure that we are able to continue building and delivering iconic Harley-Davidson products to the world.
We are seeing the initial proof points of our Hardwire execution and the positive impact of this strategy on our results, particularly in the strategically important North America region.
While the pandemic and the related supply chain complications continue to impact our international business with certain regions at different stages of post-pandemic recovery, we can see the consumer excitement and optimism is returning, and we are encouraged by the signs of positivity in the market.
I also want to note our continued fight against the proposed EU tariffs that we discussed at the last quarter.
We continue to pursue all remedies to the additional EU tariffs.
We believe these tariffs relate to a trade dispute not of our making and that it's unfair for our business to be targeted as part of this dispute.
The initial outcomes of the trade talks at the G7 meeting are encouraging, and we remain hopeful for resolution.
But first, I'll let Gina provide more details on the financial performance of the quarter and first half of the year.
Second quarter results reflected continued strong demand and improved operating margins as we manage through a volatile supply chain environment.
Total revenue of $1.5 billion was 77% ahead of last year as we lapped the impacts of the COVID shutdown.
Given the 2020 dynamic to help contextualize this year's performance, we've included comparisons back to 2019 for this quarter.
Revenue was down 6% versus 2019, primarily driven by the actions taken as part of the Rewire to prune unprofitable motorcycles as well as exit unprofitable markets.
Total operating income of $280 million was significantly ahead of 2020 and 9% ahead of 2019 with growth across both of our reported segments.
The Motorcycles and Related Products segment delivered $186 million of operating income, which is $307 million better than 2020 and 3% better than 2019.
Even though the quarter had 12,000 fewer units than 2019, we benefited from improved motorcycle unit mix, significantly lower sales incentives as we focused on building desirability, and a reduced cost structure behind our Rewire actions.
The Financial Services segment delivered $95 million of operating income, $90 million better than 2020 and 25% ahead of 2019.
Second quarter GAAP earnings per share of $1.33 was $1.93 ahead of Q2 2020.
When adjusting to exclude the impact of EU tariffs and restructuring charges, our adjusted earnings per share was $1.41, up $1.79 over prior year.
Turning to year-to-date results.
Total revenue of $3 billion was 37% ahead of 2020 and 2% behind year-to-date 2019.
Again, the decline versus 2019 was primarily driven by the actions taken as part of Rewire to prune the portfolio and partially offset by increased volume driven by the shift in model year launch timing and improved unit mix.
Total operating income of $627 million was $635 million ahead of 2020 and 48% ahead of 2019.
This strong growth versus 2019 was driven by the Rewire actions noted as part of our Q2 performance, including favorable mix, lower sales incentives, and reduced operating expense.
The shift in timing of the model year launch had a positive impact as well.
GAAP year-to-date earnings per share was $3.01, up $3.16 from a year ago, while adjusted year-to-date earnings per share was $3.11, up $2.98 from last year.
Global retail sales of new motorcycles were up 24% in the quarter behind strong demand for core Touring and large Cruiser products in the U.S. as well as a successful launch of our Pan America motorcycle into the Adventure Touring space.
North America Q2 retail sales were up 43% versus 2020 and up about 5% over Q2 2019.
Growth over 2019 was driven primarily by improved sales in our core segments, Touring and large Cruisers.
In our international markets, COVID continued to have an impact, with many key countries in various states of lockdown and reopening throughout the quarter.
We also experienced a continuation of the logistics challenges noted in Q1, which resulted in longer ship times to key ports.
EMEA sales recovered after much larger declines in Q1 as sales of Touring and Cruisers rebounded.
This improvement was offset by our decision to not sell Street and legacy Sportster bikes.
The TAM declines were driven primarily by Rewire actions to close certain dealers, exit countries, and take pricing actions across select models.
We believe these actions are working to restore profitability across the market in spite of the retail unit declines.
In Asia Pacific, in particular, in India and Australia, Q2 retail sales were negatively impacted by the discontinuation of Street motorcycles.
The region was also disproportionately impacted by global transportation headwinds.
Worldwide retail inventory of new motorcycles at our dealers was down over last year and down versus the previous quarter.
Inventory levels were lower than originally planned, driven by stronger-than-anticipated demand, coupled with longer shipping times in our international markets.
While we originally have planned for Q2.
Inventory levels to build coming out of Q1, we have seen that these lower levels have helped to foster increased desirability as evidenced by strong new and used motorcycle retail prices in the U.S. and continued improvement in dealer profitability in the quarter.
International markets have seen a much larger impact in the global transportation challenges and it's likely some markets have seen retail sales impacted.
Looking at revenue, total motorcycle segment revenue was up 99% in Q2 and up 45% on a year-to-date basis.
Focusing on current quarter activity, 81 points of growth came from higher year-over-year volume and motorcycle units and parts and accessories as we lap last year's pandemic impact and work to meet the strong current year demand for our motorcycles, which includes the new Pan America; 13 points of growth from mix driven by a larger percentage of Touring bikes in the quarter along with favorable regional mix behind strong U.S. shipments; 5 points of growth from foreign exchange; and finally, one point of growth from pricing and incentives as we eliminated a majority of corporate discounts and incentives as part of the Hardwire strategy.
Absolute Q2 gross margin of 30.6% was up 14.5 points versus prior year driven by stronger volumes and favorable unit mix.
Higher logistics and raw material inflation and incremental EU tariffs were more than offset by volume leverage and other savings across our supply chain.
Q2 operating margin finished at 14% and was up significantly versus prior year due to the drivers already noted.
The gross margin gain was partially offset by higher operating expense as we lap the cost savings initiatives undertaken last year to preserve cash at the onset of the pandemic.
The supply chain remains very fragile, not only for our business but for every global manufacturer.
Our team has continued to do a great job managing through the unprecedented challenges, and to date, we've had no sustained downtime in our factories.
We have continued to see inflation across all modes of freight as well as within raw materials, and we are forecasting this to continue throughout the fiscal year.
To help offset, we implemented an average 2% pricing surcharge on select models in the U.S. effective July 1st for the remainder of model year '21.
Financial Services segment, operating income in Q2 was $95 million, up $90 million compared to last year.
Net interest income was favorable for the quarter driven by lower average outstanding debt and cost of funds as compared to the second quarter of last year.
The total provision for credit losses decreased $75 million year-over-year, primarily due to the reserve rate changes of $63 million as we lapped last year's increase, which was largely driven by the economic impacts of the pandemic.
In addition, actual credit losses were $12 million lower.
The favorability in credit losses was due in part to benefits provided to individuals under the recent federal stimulus packages.
Additionally, motorcycle values at auction remained elevated as the supply of used motorcycles was limited and demand remained strong.
Looking at HDFS's base business, new retail originations in Q2 were up 29% versus last year behind higher new motorcycle sales and strong used motorcycle origination volume.
At the end of Q2, HDFS had approximately $820 million in cash and cash equivalents on hand and approximately $1.3 billion in availability under its committed credit and conduit facilities for a total available liquidity of $2.1 billion.
Cash and cash equivalents remained elevated but were down, approximately, $900 million from Q1 as we continued to pull cash back down to normalized levels.
HDFS's retail 30-day plus delinquency rate was 2.21%, up 46 basis points compared to the second quarter of last year, which is the high point in issuance of pandemic-related extensions.
The delinquency rate continues to be favorable when compared to recent history.
The retail credit loss ratio remained historically low at 0.84%, a 103 basis point improvement over last year.
While we do expect the delinquency rate to normalize over time, given the influx of stimulus funding and the improved economic conditions, we believe it's likely losses will continue to remain low through the remainder of the year.
Wrapping up with Harley-Davidson Inc. financial results.
We delivered year-to-date operating cash flow of $644 million, up $34 million over prior year.
The key driver of improved cash flow was higher net income, partially offset by an increase in wholesale finance receivable originations.
As we look to the balance of the year, we are maintaining our guidance on the Motorcycle segment revenue growth of 30% to 35%.
For the Motorcycle segment operating income margin, during the second quarter the European Union made a decision to implement a six-month stay on raising the incremental tariffs from 31% to 56%, while negotiations occur between the U.S. and the EU.
The step-up in tariffs was originally planned for June 1st and it will now be in effect in December if a resolution does not take place prior to then.
Last quarter we provided two margin guidance ranges due to the uncertainty and how the tariff situation would evolve.
We had stated our official guidance to be 7% to 9%, which assumed complete mitigation of the incremental tariffs.
With the full impact of the incremental tariffs, our guidance was 5% to 7%.
Given the developments throughout the quarter, our tariff exposure in 2021 is more certain but less than what we originally communicated.
Based on what we know today, our estimated tariff impact for this year is, approximately, $80 million versus the initial estimate of $135 million.
This improvement would result in our estimated GAAP operating income margin moving from 5% to 7% to our revised guidance of 6% to 8%.
If we are successful in materially mitigating the incremental EU tariffs for the remainder of 2021 and get back to the planned tariff rate of 6%, our operating margin range would remain 7% to 9%.
We are increasing the Financial Services segment operating income growth guidance to 75% to 85%, which is an increase from the previously communicated range of 50% to 60%.
The improved outlook takes into account the loss favorability we had seen year-to-date as well as the outlook for the rest of the year.
Lastly, capital expenditures remain flat to our original guidance of $190 million to $220 million.
Slide 14 provides additional context on how our seasonality and strategy shift impact the back half of the year.
This chart is largely unchanged from the previous quarter with the one exception that it now includes the impact of the EU tariffs.
Assuming the $80 million tariff impact, we expect the back half operating margin percent to be negative mid-single digits.
This back half guidance incorporates the impact in the shift in model year launch timing, logistics and raw material inflation rates in line with what we've seen throughout Q2, the approximately 2% pricing surcharge, and a step up in operating expense as we invest into the Hardwire and prepare for the launch of model year '22.
As the Hardwire strategic plan is implemented, we continue to enhance organizational speed, alignment, and efficiency, which we believe has set us up to win.
The changes implemented through Rewire in 2020 and the intentional Hardwire-related outcomes underscore the significant transformation of Harley-Davidson over the course of the past year.
We continue to be guided by H-D1 as a high-performing winning organization based on our 10 defined leadership principles, built on the powerful vision and mission of Harley-Davidson.
Across our company, we continue to see the desire and growing capabilities of our team to win.
We know our future successes will only come from an effort by everybody on our team.
I know many of you are listening in today.
Talking about winning, I'm excited that this month our Harley-Davidson Screamin' Eagles team rider Kyle Wyman won the inaugural MotoAmerica King of the Baggers championship series aboard his Harley-Davidson Road Glide special.
Everyone at Harley-Davidson is immensely proud of our racing team and for the tireless commitment to securing this championship.
Kyle's incredible dedication and focus on winning was matched by the passion and energy of the team of Harley-Davidson engineers who developed these Baggers race bikes constantly working to improve the performance of these remarkable motorcycles.
This team and their success truly exemplifies the spirit of H-D1.
Not to mention, Kyle won this race despite having his arm in a cast following an injury and surgery only a couple of weeks before the final race, a true Harley-Davidson hero.
This win is a strong statement for our ability to lead and innovate in our core Grand American Touring segment.
As I've said since we started this journey, the Hardwire strategic plan and success is underpinned by desirability and our ambition to enhance and grow our position as the most desirable motorcycle brand in the world.
Desirability is our DNA.
It's embedded in our vision; it's at the heart of our mission; and it's part of our 118-year legacy.
Harley-Davidson's desirability preserves the value of our customers' purchases, builds our brand beyond our riders, ensures loyalty, and drives engagement.
By designing engineering and advancing the most desirable motorcycles in the world reflected in quality, innovation, and craftsmanship we are building our legacy.
In building a lifestyle brand valued for the emotion reflected in every product and experience for riders and non-riders alike, desirability will continue to provide the framework for our Hardwire strategic plan and the framework for our success measures.
I'd now like to address a few specific highlights delivered against some of the Hardwire strategic priorities.
It's been a busy few months at Harley-Davidson.
Aligned to our desirability and core product and category focus in Touring and Cruises, we continue to see an increase in consumer appetite and demand for our brand, our iconic motorcycles and our other products.
The pandemic has provided a reminder of the power of getting outside, reconnecting with the Harley-Davidson community and the unique freedom and adventure that our brand represents.
We continue to experience significant demand for our products and our brand with solid demand for our most profitable segments.
This improved product mix is resulting in stronger year-over-year motorcycle segment margins and can be attributed directly to our desirability and Rewire efforts.
This strong quarter underlines the increased strength of the market and of our brand, in particular in the U.S. and Canada.
And while we've continued to see demand in Europe and Asia, these regions are also being affected by both, the enduring impacts of the pandemic and the wider global logistics challenges.
In line with the Hardwire and our streamlined market strategy, we continue to maintain a long-term focus on profitability, and we are pleased with the initial outcomes as we continue to execute against the strategy.
Aligned with our focus on our core segments, in April we launched our Icons Collection.
Produced only once, these extraordinary adaptations of production motorcycles look to our storied past and bright future.
We've seen a fantastic customer response to the first model, the Electra Glide Revival with these limited serialized models selling out immediately.
The focus on selective expansion allows us to target segments that deliver a balanced combination of volume, margin, and potential, and that are aligned with our brand capabilities and identity.
We are in these segments to win, supported by the right allocation of time and energy, balanced with the right investments in product, brand, and go-to-market capabilities.
As highlighted at the last quarter, we've seen an exceptional response to our first adventure touring bike based on the Rev Max platform, the Pan America following its very successful launch earlier this year.
Dealers and riders have been taking delivery of Pan America motorcycles as part of the sellout pre-order allocation since May, and the response from riders on and off the road has been overwhelmingly positive, reinforcing our strategic launch within the adventure touring market.
We believe the opportunity within the Adventure Touring segment is significant, not just in Europe, the largest adventure touring market in the world, but in North America where the market remains a great opportunity, and we are now using our power to grow it.
We believe that with Pan America, we are well placed to take market share in Europe and to become the number one model in the segment in North America.
With Pan America, we've seen outstanding sell-through with the initial run selling out globally.
Looking ahead, we see great potential to build on the success of Pan America and to target new riders in the Adventure Touring space.
By targeting new audiences, we will continue to look to further unlock a whole new dimension of customer and opportunity for the company as we continue to grow our global market share in the Adventure Touring segment.
The success of Pan America reflects our focus and is an integral part of our Hardwire strategy of selective expansion.
We saw the potential built on our off-road heritage and to compete and win in what we believe is the high growth and attractive margin segment of Adventure Touring.
Aligned to Hardwire, we will continue to strategically pick and compete in categories where we see high potential and where we have a clear path to winning.
On July 13th we launched the Sportster S at our Global Reveal event from Evolution to Revolution.
Sportster is not only one of the longest continuously produced motorcycles in history, but also one of the most iconic.
The Sportster S is the latest all-new motorcycle built on the Revolution Max platform setting a new performance standard for the Sportster line.
The launch of this next-generation Sportster defined by power, performance technology, and style reinforces our commitment to introduce motorcycles that align with our strategy to increase desirability and to drive the vision and legacy of Harley-Davidson.
The Sportster S is equipped with a host of technologies designed to enhance the riding experience, including three pre-programmed ride modes with which electronically control the performance characteristics of the motorcycle and the level of technology intervention.
The global reveal event generated over 127 million PR impressions with overwhelmingly positive sentiment, with many publications heralding the return of the iconic Sportster.
We also saw one of the highest social engagement rates on our H-D social channels.
It is clear that riders around the world are excited for Sportster S. As we approach a week since launch, we have seen exceptionally strong customer engagement for Sportster S with the highest leads generated for a new model in recent years.
We're excited about the potential of this bike and look forward to seeing it hit the streets this fall.
As we continue to increase our customer focus, we're also driving an updated product segmentation that better reflects our customers' needs and preferences and our unrivaled combination of product, heritage, and innovation.
Sportster S will be the first motorcycle in the all-new sport category.
This category showcases how Harley-Davidson's innovating and redefining core motorcycle segments with unmatched Harley-Davidson technology, performance, and style.
The touring category has been renamed Grand American Touring, denoting our legacy and stronghold position in a key market segment.
Adventure Touring will represent our entry into critical global segment where we're competing to win.
Each of these segments, along with other existing segments, such as Cruisers, will build their own personalities and products, further enhancing the customer appeal and relevance.
As part of the Hardwire strategy, we also made a commitment that Harley-Davidson will lead in electric.
While we are clear that combustion remains the core for our Harley-Davidson business for the foreseeable future, we believe there is great potential for long-term growth in electric vehicles.
Earlier this year, we announced our intentions to launch a dedicated EV division to allow the strategic focus to deliver desirable growth in this high-growth segment.
We recognize the pioneering spirit and brand value in LiveWire for our community and took the decision to evolve the original LiveWire motorcycle into a dedicated EV brand.
On July 8th, we presented the evolution of LiveWire as a stand-alone brand and the introduction of LiveWire ONE, the electric motorcycle built for the urban experience with the power and range to take you beyond.
With the MSRP at launch in the US for $21,999, pre any applicable tax credit, we believe LiveWire ONE will redefine the segment through innovative engineering and digital capabilities and bring a whole new generation of riders and non-riders into our company's fold.
Innovating to win is core to our focus, and as the first OEM with a hybrid omni-channel model, LiveWire combines the best in digital and physical retail allowing the customer to interact with the brand on their own terms.
By launching online at LiveWire.com and at 12 LiveWire brand dealers in California, New York, and Texas, we placed geographic focus on EV customers and relevant charging infrastructure.
As this develops, we plan to increase the physical LiveWire footprint across the U.S. and the whole of North America.
We also plan to open our first LiveWire Experience Gallery designed to facilitate a fully immersive brand experience in fall-winter of this year in Malibu, California.
Our focus on the digital experience is aligned to the EV customer.
LiveWire.com, the new dedicated LiveWire app, and a new interactive bike build present a heightened ownership experience for the customer, including a digital path to purchase, a first for the LiveWire brand.
We've had a tremendous launch response to the new brand, and building on the U.S. launch, we intend to take LiveWire to international markets in '22.
By investing in electric technology, it remains our intent to be at the forefront of innovation and development as we look to lead the EV segment.
We've always been about more than a machine, and we believe our complementary businesses are huge opportunities for long-term global growth of the Harley-Davidson brand.
Parts and accessories and general merchandise form part of the Harley-Davidson lifestyle, and together with HDFS, play a valuable role in our overall vision and mission and inspiring existing and new customers to discover the adventure that is uniquely Harley-Davidson.
We believe there is great potential to grow our customer base, both with the riders and non-riders and to add to customer lifetime value shaping our future success as a global lifestyle brand.
Customization is a key part of our heritage, and this quarter in parts and accessories, we have seen a strong performance despite substantial supply chain challenges.
We continue to develop and evolve our product offering as we work toward enhancing our leadership position as a definitive destination for authentic parts and accessories for our riders of both new and used Harley-Davidson.
For many non-riders, general merchandise is the entry point to the brand.
We will be talking more about our H-D lifestyle in the fall, but we're excited by the long-term potential to leverage our brand value, to invest in our on and offline retail channels, and grow our general merchandise business globally.
For both, parts and accessories and general merchandise, aligned to our hardwire ambition, we continue to evaluate opportunities to redesign our supply chain and go to market capabilities to drive further efficiency and growth.
We also expect brand collaborations to be integral to our general merchandise strategy and allow us to leverage the unique and powerful brand that is Harley-Davidson.
Last week, we launched our first product collaboration of the year with Jason Momoa and the Harley-Davidson Museum as a limited production American-made collection of 16 vintage inspired men's apparel and accessory styled sold exclusively on Harley-Davidson.com and in our museum store.
Jason's genuine passion for the brand reinforces how collaborations such as this one line with our hardware strategy to expand our complementary businesses with engaging products, services, and experiences.
The response from our community to this collection has been terrific, and we expect full sell-through of the collection in the coming days.
Last but not least, building on the successful launch of H-D Certified last quarter, the first certified pre-owned Harley-Davidson motorcycle program ever, we're excited to launch H-D1 marketplace today on Harley-Davidson.com, the ultimate online destination for used Harley-Davidson motorcycles in North America.
By blending the best of a digital and in dealership experience, H-D1 marketplace is designed to facilitate the confident and seamless purchase journey for used Harley-Davidson motorcycles for the first time in our history, H-D1 marketplace will allow all Harley-Davidson pre-owned motorcycles, including H-D Certified bikes of every participating Harley-Davidson dealer to be online in one place making it easier for customers to find that unique pre-owned motorcycle that they had been searching for.
All, I repeat, all qualified dealers have signed up to participate.
With financing provided by HDFS, our goal is for H-D1 Marketplace to be the number one destination for anyone looking to buy used Harley-Davidson.
Additionally, customers will have the opportunity to sell their Harley-Davidsons directly through the H-D dealer network through the Sell My Bike feature.
We believe the H-D1 Marketplace will drive connectivity and engagement with our Harley-Davidson customers and dealers, acknowledging the important part that riders of pre-owned Harley-Davidsons play in our community.
The launch of H-D1 marketplace is also the first step in transforming H-D.com into the home of all things Harley-Davidson, from enhanced omni-channel purchase experiences to unique community engagement to exclusive content and learning on a global scale as we look to innovate online to lead the industry.
Before we head to questions, I'd like to summarize some of the highlights since we launched our new Hardwire strategy.
Following the new 21 motorcycles introduction, we successfully launched Pan America, our first Adventure Touring bike.
We introduced H-D Certified, our first ever pre-owned program.
We launched our Icons Collection with Electra Glide Revival selling out instantly.
We created a new EV division and stood up LiveWire as an independent EV brand with LiveWire ONE as its first product.
We launched Sportster S, the evolution of the iconic Sportster as part of a reclassification of our overall market segmentation.
And today, we introduced H-D1 Marketplace, the ultimate digital destination for pre-owned Harley-Davidson motorcycles in North America.
We delivered strong Q2 and first half financial performance despite the unprecedented pandemic-related supply and logistics challenges in the sector.
We expect these challenges to continue and recognize the potential associated risks to our business for the remainder of the year.
Harley-Davidson is a brand with global recognition and appeal.
With 118 years of uninterrupted heritage, craftsmanship, and unrivaled iconic design, we are truly unique.
We believe there is tremendous potential for our brand and business globally, and we will not rest until we are the best-in-class in every market we compete in.

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harley-davidson inc - delivered q2 gaap diluted earnings per share of $1.33.
delivered q2 gaap diluted earnings per share of $1.33.
qtrly revenue $1,532 million, up 77%.
qtrly adjusted earnings per share $1.41.
for fy 2021, continues to expect a.
motorcycles segment revenue growth to be 30 to 35 percent.
for fy 2021, continues to expect capital expenditures of $190 million to $225 million.
for fy 2021, expects financial services segment operating income growth of 75 to 85 percent.

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