Jochen Zeitz, Chairman, President and CEO Harley-Davidson, is quoted as saying: "Aligned to our Hardwire strategic initiatives, Harley-Davidson delivered a strong third quarter with solid growth for both revenue and operating income.
"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 global retail motorcycle sales 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."
Shipments
Q3 North American motorcycle retail 32,200 units
Global motorcycle wholesale shipments were up by +19% as the company saw recovery from the two-week shut-down in June. HDMC revenue was up +24%, primarily driven by that +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.
HDMC operating income margin of 17.9% was up +9.5 points, while HDFS operating income declined -24% as the credit environment normalizes. Diluted EPS of $1.78 was up +70%.
Harley CFO Gina Goetter said that consolidated revenue was up +21% in the third quarter versus Q3 2021, driven primarily by the +24% revenue uplift. This increase was driven by a "strong recovery in global motorcycle shipments after being adversely impacted by the unexpected production suspension in Q2. Consolidated operating income growth of +66% reflected +164% growth at HDMC and a decline of -24% at HDFS - as a result of a higher provision for credit losses as the credit environment normalizes, and higher interest expense."
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.
Q3 global motorcycle retail 49,600 units
Third quarter operating margin improved to 17.9% from 8.4% in Q3 prior year; total operating expenses were $20m higher compared to Q3 prior year, due in part to the increased spend on LiveWire.
H-D Financial Services
HDFS' operating income decline of $26m versus Q3 2021 was driven by a higher provision for credit losses and higher interest expense, partially offset by lower operating expenses. Total quarter ending financing receivables were $7.3bn, which was up 7% versus prior year.
YTD generated cash from operating activities was $575m; cash and cash equivalents of $1.7bn at the end of the third quarter were down -$331m compared to the end of the prior year third quarter. In Q3, the company repurchased $12m of shares (0.4 million shares); YTD share repurchases total $324m (8.4 million shares).
Guidance
Q3 net profit +60% at $261m
For the full year 2022, the company reaffirmed its guidance and continues to expect HDMC revenue growth of 5 to 10%, HDMC operating income margin of 11 to 12% and HDFS operating income to decline by 20 to 25%.
The company now expects that capital investments will be in the range of $170m to $190m from a previously expected spend of $190m to $220m.
The H-D share price hit a one year low in June of $30.10. In anticipation of improved quarterlies, the price had risen to $34.86 by October 20th. By month end, the price showed a positive response to the Q3 fiscals, trading at around $42.56 - not far short of its one year high.
Closing of LiveWire Business Combination
On September 26, 2022, Harley-Davidson and AEA-Bridges Impact Corp. ("ABIC") (NYSE: IMPX) completed their previously announced business combination (SPAC - Special Purchase Acquisition Company) under which LiveWire EV, LLC, Harley-Davidson's electric motorcycle division, combined with ABIC to create a new public company.
LiveWire share price back to launch number
The combined public company now operates as LiveWire Group, Inc. ("LiveWire") and its common stock and warrants began trading on the New York Stock Exchange ("NYSE") under the symbols "LVWR" and "LVWR WS," respectively, on September 27, 2022.
Through this combination, LiveWire raised approximately $294m in net proceeds after fees, including Harley-Davidson's contribution, and became the first and only publicly traded all-electric motorcycle company in the U.S. to list on the NYSE.
Following the close, Harley-Davidson has an equity interest in LiveWire of approximately 89.4% and will continue to consolidate LiveWire's results, with adjustments for non-controlling shareholder interests.
reaffirmed 2022 revenue, margin and HDFS outlook
The funds raised were lower than forecast and therefore Harley's equity position is much higher than the anticipated 70%. As at open on October 31, 2022, LVWR has just about regained its September 27 opening price of $8.25 at $8.15, but is still down from its initial October 4 high of $9.63.