Harley-Davidson (HOG): Navigating Challenges with Innovation and Resilience

Published on September 24, 2024 | Ticker: HOG

Harley-Davidson, Inc. (NYSE: HOG), the iconic American motorcycle manufacturer, has demonstrated its ability to adapt and innovate amidst a challenging market environment. In the fiscal year 2023, the company reported annual net income of $706,586,000 and annual revenue of $5,836,478,000. The company's annual operating cash flow stood at $754,887,000, while its annual free cash flow reached $547,483,000.

Financials

In the first quarter of 2024, Harley-Davidson reported net income attributable to the company of $234,941,000, down 22.7% from the same period in the prior year. Revenue for the quarter was $1,729,607,000, a decrease of 3.3% compared to the first quarter of 2023. The company's operating income for the quarter was $263,079,000, down 28.8% year-over-year.

HDMC Segment

The HDMC (Harley-Davidson Motor Company) segment, which encompasses the company's core motorcycle business, reported revenue of $1,476,106,000 in the first quarter of 2024, a decrease of 5.2% compared to the same period in 2023. Operating income for the HDMC segment was $238,445,000, down 29.0% year-over-year. The decline in HDMC's performance was primarily driven by lower motorcycle shipments and lower pricing, partially offset by improved product mix.

LiveWire Segment

The LiveWire segment, Harley-Davidson's electric motorcycle division, reported revenue of $4,704,000 in the first quarter of 2024, a decrease of 39.4% compared to the same period in the prior year. The operating loss for the LiveWire segment was $29,241,000, an increase of 19.1% year-over-year, as the company continued to invest in new motorcycle models and cost reduction initiatives.

HDFS Segment

The HDFS (Harley-Davidson Financial Services) segment, which provides financing solutions to Harley-Davidson customers, reported revenue of $248,797,000 in the first quarter of 2024, an increase of 11.5% compared to the same period in 2023. Operating income for the HDFS segment was $53,875,000, down 7.8% year-over-year, primarily due to higher interest expense, an increase in the provision for credit losses, and higher operating expenses, partially offset by higher interest income.

Geographical Performance

Geographically, Harley-Davidson's performance was mixed in the first quarter of 2024. Retail sales of new Harley-Davidson motorcycles in North America, the company's largest market, increased by 5.6% year-over-year. However, the EMEA (Europe, Middle East, and Africa) region experienced an 11.0% decline in retail sales, while the Asia Pacific region saw a 12.3% decrease.

Outlook

Looking ahead, Harley-Davidson has provided updated guidance for the full year 2024. The company now expects HDMC revenue to be down 5% to 9%, compared to its previous guidance of flat to down 9%. HDMC operating income margin is now projected to be between 10.6% and 11.6%, down from the previous range of 12.6% to 13.6%. The company continues to expect HDFS operating income to be flat to up 5% in 2024, and LiveWire to deliver between 1,000 and 1,500 electric motorcycle units with an operating loss in the range of $105 million to $115 million.

Recent Developments

Harley-Davidson's management has highlighted the company's commitment to innovation and product development as key drivers of its long-term success. The recent launch of the new Touring motorcycle lineup has received strong reviews from both the industry and customers, and the company believes this product will help drive growth in the coming years. Additionally, the company's partnership with Hero MotoCorp in India and its investment in the LiveWire electric motorcycle brand demonstrate Harley-Davidson's efforts to diversify its product portfolio and expand its global reach.

Liquidity

In terms of liquidity and capital allocation, Harley-Davidson ended the first quarter of 2024 with $1.8 billion in cash and cash equivalents, including $113 million at LiveWire. The company has also announced a new $1 billion share repurchase program through 2026, highlighting its commitment to returning capital to shareholders.

Conclusion

Despite the challenges faced in the current market environment, Harley-Davidson remains focused on executing its Hardwire strategy, which aims to drive profitability, innovation, and long-term growth. The company's strong brand recognition, loyal customer base, and continued investment in new product development position it well to navigate the evolving powersports industry.

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