Thank you for standing by. And welcome to the Harley-Davidson 2024 Third Quarter Investor and Analyst Conference Call. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Shawn Collins. Thank you. Please go ahead.

Thank you. Good morning. This is Shawn Collins, the Director of Investor Relations at Harley-Davidson. You can access the slides supporting today’s call on the internet at the Harley-Davidson Investor Relations website. As you might expect, our comments will include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted in today’s earnings release and in our latest filings with the SEC. Joining me for this morning’s call are Harley-Davidson Chief Executive Officer, Jochen Zeitz. Also, Chief Financial Officer, Jonathan Root; and we have LiveWire’s Chief Executive Officer, Karim Donnez. With that, let me turn it over to our CEO, Jochen Zeitz. Jochen?

Thank you, Shawn, and good morning, everyone. Thank you for joining us for our Q3 2024 results. In Q3, we saw an increasingly difficult global market environment in our and other big-ticket discretionary sectors. Macroeconomic and political uncertainty and the pressure of high interest rates affected both our industry and customers, especially in our core markets. This impact contributed to a decline of 13% in global retail sales of new motorcycles for Q3, with North America posting a 10% decline compared to 18% across international regions. For the U.S., through the end of Q3, Harley-Davidson retail was down 1%, which was better than the overall motorcycle industry. Overall, we continue to see greater spend from higher than lower-income customers, as evidenced by motorcycle mix, where our CVO motorcycles continue to be up double-digit percentages throughout the year. In the U.S. specifically, through the end of Q3, driven by our new touring lineup, our touring segment was up almost 10% and we gained more than four percentage points of market share, outperforming the category, our other segments, and the market as a whole. In EMEA, Q3 retail sales declined 23%, with mixed performance on a country-by-country basis. EMEA continued to be adversely impacted by macroeconomic conditions and geopolitical uncertainty, which has led to sluggish economic growth. From a motorcycle family perspective, touring, CVOs, and trike motorcycles performed strongest in the region. In Asia-Pacific, Q3 retails were down 16%, with larger-than-expected softness in Japan, partially offset by growth in Australia and New Zealand. Lastly, in LatAm, Q3 retails were up 4%. Despite the challenging overall operating environment, given the outstanding feedback we received from our customers, media, and our network, we continue to be enthusiastic about our new lineup of touring motorcycles to redesign in all-new road and street lines. We believe that our highly differentiated touring offering is well-placed to set the company up for future success in the years to come, in addition to our other plans in the motorcycle development lineup. Looking ahead, as Jonathan will detail, given the lower-than-expected retail demand in Q3, we are revising our full-year 2024 outlook. In Q3, we continue to support the reduction of dealer inventory levels, reducing our production units as retail softens. At the end of the quarter, dealer inventory was down 13% relative to the end of Q2 of this year. We are committed to continue to reduce inventory levels and support dealer health, both in North America and in our international markets, as we prepare for our new model year launch in 2025 with a range of new exciting bikes, supported by a strong marketing push in collaboration with our dealer network. Turning briefly to HDFS, with Harley-Davidson Financial Services, we believe that we have a best-in-class effort to support our dealers and our customers in both economically strong and more challenging times. With a strong performance for the quarter, driven by higher retail and commercial finance receivables, HDFS continues to be an invaluable asset for all of our stakeholders. With regards to LiveWire, as Karim will detail shortly, we continue to adjust to the overall and EV environment, increasing LiveWire’s focus on driving cost efficiencies and productivity across the business. Overall, despite the challenges facing the industry that have also impacted our business in the second half of the year-to-date, we’ve made progress towards our Hardwire II ambitions. We believe that, in addition to our new touring lineup that is by far the best product in the industry, we also have the right product in the pipeline in the coming years to drive profitable growth. We are committed to ensuring that our dealers receive that product at the right time and at the right price, in addition to providing strong marketing and sales support, which we expect to drive profitability across the company and our network. We’re working hard to set ourselves up for a solid 2025 and are optimistic in our ability to make sound progress in the new year. The combination of our best-in-class product and brand, coupled with a best-in-class dealer network, is a powerful pairing for success. However, we are mindful of the external factors, including interest rate reductions and improved consumer confidence, that are required to provide the industry with the needed tailwind. Both cost control and cost productivity gains, combined with tight capital allocation, are front of mind as we close out the year. We believe we have the right strategy with the Hardwire, especially compared to others in the market, and that the decisions we make to invest in innovation and our core category that we know our customers and dealers love are the right ones to both fuel the Harley-Davidson culture and business for years to come. Thank you, and now I’ll hand over to Karim.

Thanks, Jochen. Good morning, everyone. In Q3, the market proved to be challenging for EV products with slower than anticipated adoption amidst global political and economic uncertainty. In this context, year-to-date, LiveWire retains more on-road electric motorcycles in the U.S. than any other brand in the market. Within the CC+ HD on-road EV segment, LiveWire continued its leadership position in the quarter and in 2024 with 69% of the market share year-to-date. In Q3, LiveWire had several notable exposure events, including the Del Mar being awarded Best 2024 Electric Bike by MCN in September. In addition, this August in Paris, we enjoyed a global moment for the S2 Del Mar, making LiveWire a household name. Despite retail outpacing wholesale for a third consecutive quarter, we still ended short of our expectations. As a result, we are revising our full-year guidance to 600 to 1,000 motorcycle units. Operating loss guidance remains unchanged for the full year. Our focus is on right-sizing the business, given the market environment, delivering the best EV products out with a unique LiveWire look, sound, and feel, and preparing for future growth as the EV market expands. Looking ahead, we expect to diligently manage expenses and significantly improve our EV motorcycle product cost, reducing cash burn by an expected 40% next year compared to 2024. Actions have already been taken this year in anticipation of 2025, with the completed centralization of our lab operations in Milwaukee and the move to Juneau Avenue. We’ve also streamlined our organization, leading to an approximately 30% headcount reduction heading into 2025 compared to the start of 2024. Recognizing that the performance of our existing product offering is directed to enthusiasts, LiveWire is also actively looking at expanding its addressable market and increasing overall access to the EV experience. To that end, I’m pleased to confirm that we are planning to announce a new product segment at EICMA in November that we believe will bring additional revenue streams to the company in the medium term while meaningfully expanding our current addressable market. Stay tuned for more. Thank you, and now I’ll hand it over to Jon.

Thank you, Karim, and good morning to all. I plan to start on Page 4 of the presentation where I will briefly summarize the consolidated financial results for the third quarter of 2024. Consolidated revenue in the third quarter was down 26%, driven by HDMC revenue down 32%, and partially offset by HDFS revenue growth of 10%. Consolidated operating income in the third quarter was $106 million, down 49% from the prior year period, driven by a decrease of $120 million at HDMC. At HDFS, operating income was up $17 million, while the operating loss of the LiveWire segment was up by $1 million compared to a year ago. The consolidated operating margin in the third quarter was 9.2%, which compares to 13.5% in the prior year period, where HDMC operating income margin was down 720 basis points year-over-year, and HDFS operating margin was improved by 410 basis points. I plan to go into further detail on each business segment’s profit and loss drivers in the next section. Third quarter earnings per share were $0.91, which is down 34% from $1.38 last year. As we flip the page to our year-to-date results, total consolidated HDI revenue of $4.5 billion was down 6% compared to last year. The components of this were, at HDMC, revenue decreased by 9%, at HDFS, revenue increased by 11%, and at LiveWire, revenue declined by 30%. Total consolidated HDI operating income was $610 million, which was $190 million lower than the prior year. The components of this were, at HDMC, operating income of $491 million, which was 30% lower than the prior year, reflecting an operating margin of 13.3% in the year-to-date period; at HDFS, operating income of $202 million increased by 14% in the year-to-date period; and at LiveWire, an operating loss of $83 million was in line with our expectations. Year-to-date earnings per share were $4.27, down 8%, compared to $4.65 in the same period in 2023. As Jochen said in his introductory comments, in Q3, the global consumer has seemingly taken a pause from big-ticket consumer discretionary spending based on different dynamics in each region. As Jochen mentioned, dealer inventory at the end of Q3 is down by 13% relative to the end of Q2 this year, as we focus on reducing inventory levels in the second half of 2024, both domestically and internationally. We expect dealer inventory to be down around 20% from the end of Q3 2024 levels, so that dealers will come into 2025 with inventory at similar levels to the start of 2024. We look forward to a healthier 2025 environment where, as Jochen mentioned earlier, we are focused on improving profitability throughout the Harley-Davidson dealer network and partnering more heavily with our dealers to develop and grow our grassroots marketing activations. We continue to prioritize availability and inventory of touring, trike, softail, and CVO motorcycles. We will talk further about our expectations for both retail and wholesale motorcycles for the balance of 2024 in just a few minutes. Looking at revenue, HDMC revenue decreased by 32% in Q3. This was largely a result of the 39% decrease in wholesale units shipped in Q3, where we shipped 27.5 thousand motorcycles in Q3 of 2024 versus shipping 45.3 thousand motorcycles in Q3 of 2023. Focusing on the key drivers for the quarter from a revenue contribution standpoint, 32 points of decline were as a result of decreased wholesale volume at HDMC, where motorcycle shipments down 39% in the quarter were meaningfully lower than retail sales of motorcycles. 1 point of growth came from pricing, which includes the net impact of pricing actions on 2024 model year motorcycles and overall sales incentives. 1 point of decline came from mix, as we compare to the prior year introduction of all-new CVO motorcycles, focusing more on touring shipments in the first half of the year, and we round out the rest of the motorcycle portfolio shipments in the second half of the year. And finally, foreign exchange was largely flat in the third quarter. In Q3, HDMC gross margin was 30.1%, which compares to 31.7% in the prior year. The decrease of 160 basis points was driven by the negative impacts from lower volume and negative operating leverage. There were some positives in the quarter, including favorable net pricing, favorable foreign exchange, including hedging, and lower raw materials and supply chain management costs as we begin to accelerate our manufacturing and supply chain savings, which helps offset the rate of inflation seen during the quarter. On the operating expense side, expenses were $27 million lower relative to the prior year or 11%, as we continue to maintain overall cost discipline and increase our efforts to manage OpEx productivity at HDMC. HDMC operating income was $55 million, which was $120 million lower than the prior year due to the significant reduction in wholesales. HDMC operating margin came in at 6.3% in Q3 from 13.5% in the prior year. For the year-to-date period, HDMC gross margin was 31.3%, which compares to 34.2% in the prior year. The decrease of 290 basis points was driven by the negative impacts from lower volumes, negative operating leverage, moderate inflation, and less favorable net pricing, which includes overall sales incentives. These impacts were partially offset by the positive impacts from favorable motorcycle mix and lower raw material costs and lower supply chain and manufacturing expenses, which I will discuss more deeply in comments regarding productivity. Lastly, in the first nine months, operating expenses were lower by $13 million or 2%, as we maintained overall cost discipline due to actions that we began to take in late Q2 of this year. HDMC operating income was $491 million, which was $214 million lower than the prior year. HDMC operating margin was 13.3% through the first nine months, compared to 17.4% in the prior year period. Before we turn to the next slide, as I did in July, let me give a brief update on our productivity cost program. One of the initiatives identified as part of the Hardwire strategy, we are expecting to drive a $400 million improvement in productivity. As a reminder, we are now excluding the impact of leverage while holding our previously communicated multiyear target of $400 million. Excluding the impact of leverage, we delivered approximately $24 million in 2022 and $123 million in 2023. In 2024, we have delivered $84 million through Q3 this year. Turning to Slide 10 now and the Financial Services segment. At Harley-Davidson Financial Services, Q3 revenue increased by $26 million or 10%, driven by higher retail and commercial finance receivables, as well as higher average yields as the portfolio continues to reset over time with changes in Fed-based interest rates, which is currently driving higher interest income. HDFS operating income was $77 million, up $17 million or 29% compared to last year. The Q3 increase was driven by higher interest income and lower provision for credit losses, which were partially offset by increased borrowing costs, while operating expenses were largely flat. Total interest expense was up $10 million, or 12% versus the prior year. The increase was driven by a higher cost of funds as lower interest rate debt matured and was replaced with current market rate debt. In Q3, HDFS’ annualized retail credit loss ratio was 3.1%, which compares to an annualized retail credit loss ratio of 2.7% in Q3 of 2023. The increase in credit losses was driven by several factors relating to the current macroeconomic environment and related customer and industry dynamics. In addition, the retail allowance for credit losses for the third quarter came in at 5.5%, virtually flat compared to 5.4% at both prior year end and Q2 of 2024. This reflects our best estimate of the current and future retail lending environment. Total retail loan originations in Q3 were down 11%, while commercial financing activities were up 18%, to $1.2 billion. Total quarter-end net financing receivables, including both retail loans and commercial financing, was $7.8 billion, which was up 2% versus prior year. Turning to Slide 11 and to year-to-date results at HDFS, revenue increased by $74 million or 11%. HDFS operating income was $202 million, up $25 million or 14% compared to last year. The year-to-date increase was driven by higher interest income, which more than offset higher borrowing costs, higher provision for credit losses, and higher operating expenses. For the LiveWire segment, electric motorcycle revenue increased in the third quarter of 2024 compared to the prior year period due to higher unit sales of EV motorcycles in the quarter. At STACYC, the Electric Balance Bike business, revenue was down compared to the prior year, which we expected due to a reduction in third-party branded distributor volumes. Selling, administrative, and engineering expenses were down $2 million or down 6% in Q3 compared to prior year. LiveWire's operating loss of $26 million, $1 million more than a year ago, was in line with our expectations as LiveWire continued to invest in new motorcycle models and also actioned initiatives to reduce the overall cost of sales for EV motorcycles. For the year-to-date results of the LiveWire segment, revenue was $16 million, down 30% from the prior year, as a result of revenue at STACYC. For the year-to-date period, LiveWire sold 374 electric motorcycles, which is a triple-digit increase over the prior year period. For the period, LiveWire's operating loss was $83 million, which was in line with our expectations. Wrapping up with consolidated Harley-Davidson, Inc. financial results, we delivered $931 million of operating cash flow in the first nine months of 2024, which was up from $707 million in the same period last year. The increase in operating cash flow was influenced by positive changes in working capital as we focus on tight inventory management, as well as a change in wholesale finance receivables. Total cash and cash equivalents ended at $2.2 billion, which was $366 million higher than at the end of Q3 the prior year. This consolidated cash number includes $88 million at LiveWire. Additionally, as part of our capital allocation strategy, and in line with our commitment to return capital to our shareholders, in Q3, we bought back 4 million shares of our stock at a cost of $150 million. This brings our total amount of shares bought back in the nine months of 2024 to 9.5 million shares of Harley-Davidson common stock at a total value of $350 million, which is 7% of shares outstanding at the beginning of 2024. This compares to 6.1 million shares at a cost of $226 million in the first nine months of 2023. Given the lower-than-expected retail demand we experienced in the first nine months of the year, which we expect to continue into Q4, we are revising our full-year 2024 outlook. At HDMC, we continue to expect that retail units sold and wholesale unit shipments will be broadly balanced by the end of 2024, and we now expect retail and wholesale to be in the range of 149,000 to 153,000 units, which is a change from 163,000 to 168,000 units at Q2 earnings. We expect retail to be in the range of down 6% to 8% for the full year, which is a change from flat to up 3% for the full year, and we expect wholesale shipments to be in the range of down 16% to 17% for the full year, which is a change from down 7% to 10% for the full year. These lower revised topline inputs result in a change to our full-year HDMC revenue and HDMC operating income targets. We now expect revenue to be down in the range of 14% to 16% for the full year, which is a change from down 5% to 9% for the full year at Q2 earnings. We now expect operating income margin to come in between 7.5% and 8.5% for the full year, which is a change from the 10.6% to 11.6% range for the full year that we had previously guided to. The downward revision is due to production and wholesale reductions and the resulting impact of leverage. We believe these reductions position the company more appropriately for 2025. At HDFS, guidance for the full year of 2024 is revised upward, where we now expect operating income to be up 5% to 10% for the full year, which is a change from flat to up 5% for the full year at Q2 earnings. At LiveWire, guidance for the full year 2024 is revised. We now expect to deliver between 600 and 1,000 electric motorcycle units, while the operating loss in the range of $105 million to $115 million is unchanged. And we continue to expect capital investment in the range of $225 million to $250 million, which is unchanged. As a reminder, our capital allocation priorities remain to fund profitable growth of the Hardwire initiative, which includes the capital expenditures, paying dividends, and continuing to execute discretionary share repurchases as outlined in the previous quarter. We feel this highlights our operating discipline, overall cash flow generation, and long-term earnings power, and is supported by our continued commitment to deliver a 15% HDMC operating income margin by the end of 2025. And with that, we will open it up to Q&A.

Thank you. Your first question comes from Craig Kennison with Baird. Please go ahead.

Hey. Good morning. Thanks for taking my question. Jochen, I’m wondering if you could share any themes that may have come up through your recent dealer conversations and what your message is to dealers. It feels like that has changed a little bit.

Yes. Thanks, Craig. Obviously, and understandably, dealer profitability is front of mind. And as you’ve seen this week, it’s a tough time for the industry as much as it is for any discretionary business, whether you are in the marine business, RV business, or motorcycles. We held, as you mentioned, our annual dealer forum in October, and it was a really good barometer and opportunity to engage with our dealers, obviously, to the many interactions that we have throughout the year with our leadership team. At the forum, we presented the way in which we as a motor company are going to support the network in 2025, and I think the outcome is probably what dealers came away feeling good about what is in store for us collectively in 2025, and overwhelmingly rated the outcomes and the success of the forum with almost 75% rating it very good to exceptional. That’s a good indication of a network, even in the very difficult environment that we’re in with dealer profitability, obviously, at a level that we don’t want to see going forward. So the measures we put, a new product lineup for next year, and in particular, the co-marketing investments that we’re going to make in addition to other internal measures that we put in the forum will increase next year in strong force. As I mentioned earlier, there’s a lot of strength in a single brand network, and we are proud to have the best network in the industry, and we want to make sure it continues to be the most profitable network as well, and we’re working hard. That said, I would say other networks are probably more challenged than our network, but I’ll say that we will certainly continue to work very hard as a dealer network in terms of profitability.

Our next question comes from Megan Alexander with Morgan Stanley.

Hi. Good morning. Thanks for taking our question. I wanted to ask a couple of questions, if that’s okay, on retail. The down 13% in 3Q, obviously, I think, there was some well-telegraphed noise, particularly perhaps in August. I think you talked about maybe July off to an okay start last quarter. So first, can you just talk about maybe the trend of retail over the third quarter, how you exited the third quarter, and then how that informed your outlook for 4Q? Obviously, a wide range for the fourth quarter seems to be implied, but looks relatively similar, I guess, to what you reported in 3Q. So maybe you can just kind of help us understand the puts and takes around that?

Sure, Megan. So Q3 started out with a strong July, and we ended weaker than expected, especially in late September, which we think is pretty much in line with what we’ve heard from most power sports competitors and industries as a whole, and not just the U.S., but across the globe. So we believe and we assume that the greater macro and geopolitical uncertainty expected with changes in interest rates, especially in North America and EMEA, the upcoming U.S. elections, and some weather events in the U.S.

Our next question comes from James Hardiman with Citi.

Hey, good morning. Thanks for taking my question. So it sounds like the general outlook here for 2024 assumes retail in line with wholesale. I guess in light of the retail weakness, why do you think that’s still the right target at this point? And I guess the bigger question is, as we think about 2025, what’s your level of confidence that you won’t have to destock even more as we look to next year?

Sure. Hi, James. This is Jonathan. I'm happy to address your question. It seems your inquiries focus on dealer inventory and its connection to retail. At the end of Q3, dealer inventory decreased by about 13% compared to the end of Q2. We will keep working to further reduce dealer inventory in the final quarter of 2024. You might wonder where we see ourselves moving forward. We plan to lower inventory by another 20% from current levels, bringing us to roughly the same stock levels as the end of last year. We are committed to ensuring that our inventory of touring, trike, softail, and CVO motorcycles is readily available. Our core categories are essential to our Hardwire strategy and have supported our market share growth. It's important for our dealers to be well-prepared to maintain this momentum. As you've noted, we are committed to aligning retail and wholesale by the end of the year, which is something we've discussed as part of our 2024 guidance. I hope that clarifies our position.

I'm not sure I have time for a follow-up, but my question is why is that the right level? With flat inventories in a year where retail is expected to decline by mid-single digits, we would typically expect that inventories would need to decrease further from the beginning of the year to maintain flat inventory turns. Does this result in an additional potential challenge to consider when thinking about reductions for next year?

James, I don’t know if you can hear me better. I seem to have had some issues with the line here. We don’t think so, and we believe that although we have seen a weaker third quarter, the adjustments we are making this year and the shipments that we are planning in the four quarters of next year will address that in the right way. So we feel confident that this is the right thing to do and pretty significant adjustments throughout the year.

Our next question comes from Joseph Altobello with Raymond James.

Thanks. Hey. Good morning. Just to follow up on James’s question. So if I have my math right, you ended 2023 with 49,000 bikes in the channel and you were anticipating retail this year of 163,000 to 178,000 bikes. Now you’re saying you’re going to end this year at 49,000 bikes in the channel flat year-over-year. And I can’t imagine you’re anticipating that same retail level next year. So how do we square those two numbers?

Thank you, Joe. At this moment, we prefer not to delve too deeply into 2025. This is not the appropriate time for us to provide comprehensive guidance for 2025. However, as we assess our plans and projections, we anticipate reaching a retail unit range of 150,000 to 153,000, with the same expectations for overall wholesale units. We aim to ensure alignment in these areas, positioning our dealers effectively as we conclude this year and commence the first quarter of 2025. While we want to stay focused on the current year, as we transition into 2025, there will likely be some adjustments to our distribution strategy throughout the quarters. We will provide more detailed information in the earnings call next quarter.

Okay. That’s helpful. Maybe just a follow-up. You mentioned the cadence of retail in the quarter. Any pickup in October post the Fed’s rate cut temporarily?

Yeah. Well, as we said previously, we are going to be prudent and as an overall practice, I’m not going to comment on the running quarter in that case on October retail until we release Q3 and we will continue with this practice in the future. Just coming back to your inventory question, I think what you should bear in mind is that the big change in touring obviously is not going to happen again. We have fantastic touring bikes in the market, and we will carry them over into the new year. So bear that in mind in terms of the inventory that we’re carrying over rather than having an old platform that gets carried into the new year. We have the new platform carrying into the new year. So the quality of the touring inventory is a lot better than it was in the previous year. So that’s a qualifying factor to remember.

Our next question comes from Robin Farley with UBS.

Great. Thanks. I guess I had a similar question about slapping your inventory level, and I don’t know what you can tell us about your expectations for things turning around for next year retail. Maybe I’ll throw in a second question just in case there’s nothing more to add to that first one. It sits on the LiveWire business. Obviously, it’s a challenging environment for electric vehicle sales broadly. I guess just thinking about your commitment to that business long-term, is there a point at which if it doesn’t meet your expectations for another year, when we think about your sort of multiyear plan, a point at which you would reevaluate how long it might take to be profitable there and kind of how long you’d be willing to have those additional losses? I guess just trying to get a sense of, if you didn’t hit these targets, are you fine with sort of similar losses to this year and for how long? Just thinking about it like that. Thank you.

Thank you, Robin. Regarding our expectations for 2025, I can only emphasize that we are diligently working to ensure a strong year ahead, and we feel optimistic about our ability to make meaningful progress. We view this optimism as cautious. We believe the combination of our top-tier products and exceptional dealer network will create a powerful opportunity for success. However, we must remain aware that external factors such as interest rate cuts and improved consumer confidence are essential for providing the industry with the necessary support, which has been lacking for the past couple of years. Additionally, we are focused on maintaining our cost control and productivity measures. As Jonathan mentioned, we aim to achieve total productivity gains of $400 million along with careful capital allocation. We continue to believe our strategy positions us well, especially compared to others in the market. The choices we made in 2020 and 2021 to invest in innovation and core categories favored by our customers and dealers were the right ones. This is the extent of what I can share about 2025. Concerning LiveWire, under Karim's leadership, we have implemented significant measures that have substantially reduced our cash burn heading into next year, with a 40% decrease projected. Our operational costs are decreasing, and our team is dedicated to enhancing margins and reducing manufacturing costs, which will allow us to sell fewer units to reach breakeven or achieve a positive gross profit margin. These actions have been taken, and Karim can elaborate if needed. We believe it is essential to continue investing cautiously compared to when we initially launched this venture, as EV adoption has changed significantly in the automotive and other industries. We aim to position ourselves and LiveWire as leaders in the electrification of sports to ensure that Harley-Davidson can access this technology at the right time. However, we will take it one year at a time and monitor how the business evolves. For now, these are the steps we are taking.

Okay. Great. Thank you.

Our next question comes from Fred Wightman with Wolfe Research.

Hey, guys. Good morning. Jonathan, I think you made a comment to sort of reaffirming that 15% operating margin target for 2025. I’m wondering if you could just help us think about the big sort of building blocks from this year’s operating margin performance. I know that there’s a lot of deleverage from the lower volumes, but if you could just sort of help us think about the chunky pieces to get to that mid-teens target, that’d be helpful? Thanks.

Okay. Sounds good. And good morning, Fred. So, I think good question around the 15% operating margin. We’ve talked about that by the end of 2025. So, think sort of the full year 2026. We are pretty pleased with the actions that we’re taking and the way that we’re managing things inside of the four walls of Harley and how that really drives some improvement. This year certainly is unusual in terms of how much we’re taking down shipments in the second half of the year. We also have some, you know, I think we’ve talked about this a little bit, probably more this year than we ever thought that we would in terms of some of the differences between production and wholesale. And so, as we move forward into 2025 and 2026, we begin to line up the relationship between production, wholesale, and retail. So, with that, you obviously see some of the benefits that we enjoy from a leverage standpoint. So, there’s a pretty meaningful impact from that standpoint. Cost productivity for us is something that we feel really drives a pretty significant amount of improvement. So, you obviously have our commitment to $400 million of cost productivity, and as you may recall from earlier in this year, we actually removed leverage from that calculation. So, that’s like a real $400 million, not something that’s dependent upon units. So, you stack those two in order to see improvement. And then, in addition, as we have portfolio changes and product changes and tweaks, there are some things that we think we can do pretty surgically from a pricing standpoint. So, that helps. The other piece that I would just touch on is, you know, we have pretty strong operating discipline around operational expenses, and you actually see that really show up in this quarter. So, with some of the actions that we took last quarter, you end up hitting the P&L in a positive way within this quarter. You see OpEx down $27 million, for example, in Q3. So, down 11% due to the actions that we took. So, I think if you look across the P&L, there are a number of contributing factors that give us confidence in that 15% operating income margin target.

Okay. Thanks. And then, there were a couple mentions about dealer support. I’m just talking about the cut to shipments helping dealers out, or is there actually a different mechanism for that?

Well, there are many measures that we have taken to set our dealers up for a successful 2025. In my speech, I mentioned the significant marketing investment as a marketing development fund that would benefit the dealers on the ground as they execute in 2025. In addition, there are many other initiatives that we have presented to our network, including retail targets for next year that are achievable from our perspective, adjustments to how we digitally drive more traffic and leads to our network, and how we see the evolution of our fuel facility upgrades evolving over the next couple of years. So, there was a number of activities that are not just based around inventory reduction, which, of course, is critical as well, especially going into the next year. We feel that with rates coming down and all the other activities that we’ve announced, the dealer network should be able to see a strong improvement in overall profitability in 2025, in addition to the product that we’ve launched at the same time as well.

Great. Thanks.

Our next question comes from Alex Perry with Bank of America.

Hi. Thanks for taking my questions here. I just wanted to ask how we should be thinking about HDMC gross margins in the fourth quarter. Will you be leveraging promos to work down dealer inventory? And then a little bit of the follow-up from the last quarter, any help on sort of how we should be thinking about gross margins for next year, especially given some of the production shifts that you’ve announced and taking some increased costs out of the business? Thanks.

Let me start briefly on promos. Right now, we are offering select promotional support, mainly, however, in the way of interest rate assistance in a manner that we believe is in line with the market. In our core markets, however, we are less promotional than our competition, where our competitors are offering promotions that are more aggressive. But that said, we want to make sure that we achieve our retail targets for the fourth quarter. And Jonathan can highlight some of the promotions we’re having in the market right now.

Thanks, Jochen, and good morning, Alex. Regarding Q4, there are a couple of points to consider. In terms of margin, we anticipate a significant decrease in wholesale shipments, which you can see reflected in our projections for retail and wholesale. This reduction will certainly challenge Q4 margins. When it comes to promotions, we’ve noticed that consumers respond better to rate promotions. Many competitors are offering rate and cash promotions, but we have focused primarily on rate promotions, especially with our current model year. We plan to continue this approach for the remainder of the year to support our dealers. It’s important for us to provide campaigns that drive consumer traffic, close sales, and benefit both our consumers and dealers. Therefore, you can expect to see us continue with our current strategy.

Our next question comes from Noah Zatzkin with KeyBanc.

Hi. Thanks for taking my question. I guess first, just on LiveWire, not to put too fine a point on it, but I think you made the comment that you’re kind of working to stem cash burn by 40% next year. Is it fair to assume that that translates directly to operating expenses, meaning just trying to figure out if there’s a potential for $40 million to $50 million less loss from LiveWire next year?

Sure. I can start, and then Karim can jump in. Karim is very focused on managing the LiveWire business closely. There's a difference between the cash perspective and the operating income, due to depreciation and some compensation-related factors involved. Karim, I’ll let you elaborate on that. The key point is that cash burn is just one aspect of their profit and loss statement. They also have to account for depreciation and compensation-related factors. With that, Karim?

Yeah. Thanks, Noah. So, as Jonathan explained, yes, the cash burn obviously has a direct impact on the operating loss performance from next year. So we do expect a significant reduction in operating loss as well next year. Having said this, we’ve taken most of the actions already to be set up for a significant reduction next year. We’ve relocated entirely the lab from California to Milwaukee. We don’t have anything left in California at this point, which obviously was a fairly expensive place to operate from. And we’ve reduced our overall workforce by 30% compared to the beginning of the year. Everything is done now. We’ve streamlined our organization in a way that we still keep a key focus on innovation and make sure that we can continue working on introducing products that are fit for market. One of them will be announced in 10 days at EICMA, and again, we believe that those products will significantly expand the horizons for LiveWire. So we recognize the tough EV environment we’re under right now, but it is not true for all segments. If you look at different types of EV segments, there are actually pockets of good traction in the EV market, especially in Europe. So more to come on this one. But the overall LiveWire business right now is already set up for 2025 to have a very significant reduction in cash burden operating loss compared to the 2024 performance.

Thank you. If I could just squeeze maybe one more in on HDFS. I guess first, how you feel about the health of the book, and then obviously, nice performance this quarter. How are you thinking about kind of the interplay between expected recuts and the ability to drive growth there next year? Thanks.

Great question, Noah. We'll start with this year and then touch on next year briefly. From a 2024 perspective, consumers are definitely feeling some stress. The HDFS team is doing an excellent job managing losses and supporting consumers to keep them on track, which is reflected in our nearly unchanged reserve levels compared to the prior quarter and last year. Therefore, the outlook for consumer health seems positive, enabling us to raise our expectations for the HDFS business this year. Moving into 2025, as we've mentioned, we’re not quite ready to provide detailed guidance. However, we are currently reviewing budgets and it appears that we might see some resetting in the debt portfolio before seeing a similar adjustment in the retail sector. Overall, things are looking favorable for 2024, but I anticipate that 2025 will present some challenges before we eventually progress in the following years. More updates will follow, but I don't foresee HDFS performing as strongly in 2025 as it did in 2024.

Our next question comes from David MacGregor with Longbow Research.

Yes. Good morning. Thanks for taking the questions. I guess a pretty disruptive quarter from a weather standpoint; what do you think that did to your retail numbers? Is there any way to parse out how much that down 13% might have been attributable to just disruptive weather? And then secondly, I would just love to get your sense and I realize it’s still a little bit early to be talking about 2025, but how are you thinking about motor company market share in 2025? Thanks.

David, the weather has indeed made the retail environment more challenging, particularly at the end of September. That's when Helene impacted the East Coast, and we experienced a notable effect towards the end, with dealers having to close their dealerships for preparation and being unable to reopen right away. This has certainly influenced our operations in the U.S., although not as much internationally.

And then the market share in 2025?

Well, we’re not going to really comment much more on 2025 at this point in time. We feel we have a strong product lineup for next year in touring to continue. Our CVO segment, as I mentioned earlier, has been doing particularly strong. We’ve seen double-digit growth throughout the quarters in our strong CVO touring offering, including a CVO that we’ve offered in the adventure touring market. We have a good lineup for next year, but beyond that, I think we’ll have to wait until February before we can give some indication. We certainly believe that we are well-positioned to defend market share, maybe gain in some segments, but we shall see. And of course, that’s also impacted by the overall environment. As you’ve seen, we’ve taken market share in touring and have been most quarters up and outperformed the industry significantly in that segment, which is a great indication of innovation as part of our Hardwire strategy, really having a positive effect, even in tough times. So we continue to be confident that other innovations that we have in the pipeline for 2025 will have a similar positive effect going forward, in addition to additional actions that we are taking together with our dealer network to ensure that they are ready for it and we generate leads and traffic to the dealer network.

Our next question comes from Tristan Thomas Martin with BMO Capital Markets.

Hey, good morning. I have a question about your broader product portfolio. As you pointed out, you got a lot of success with the update to touring. I was just wondering, given some of the headwinds for big-ticket items, just kind of general consumer affordability concerns, is there any thoughts on maybe revisiting some more affordable bikes? Thanks.

Yeah. We’re not going to talk about pricing of our entry-level product next year, but rest assured we are addressing that in particular with our RevMax products going into 2025. But with that said, we need to wait until the new year, until the prices are out.

Our final question comes from Jaime Katz with Morningstar.

Hi. Thank you for taking my questions. Good morning. I’m hoping you can clarify your market share comments. I believe you had said that you gained 4% market share. But when you look on Slide 6 in your deck, it looks like both year-over-year and sequentially the market share in total touring Cruiser has not increased 4%. So what exactly have you gained market share in?

We have increased our market share mainly in the touring segment, which was our primary focus with the new product lineup this year. Throughout each quarter, we have significantly outperformed the industry in terms of market share. Overall, our retail sales declined less than the industry average. Even in the larger picture, we have slightly improved our market share when considering all segments. However, in terms of the touring aspect, we have consistently performed better than the market in this area every quarter.

Yes, I understand that. The slides show a 73% market share this quarter and the same figure for last quarter. My other question relates to reassessing the structural operating profile of the business. It's been some time since a major change occurred, but the shipment levels are clearly quite different from what they might have been a decade ago. What sort of indicators would prompt you to reconsider whether your capacity, labor utilization, or manufacturing footprint needs to be reevaluated at a more comprehensive level? Thanks.

Well, rest assured that we are looking at that constantly as we’re in the process of putting our budget together. This is a key consideration, of course, which is why we’ve emphasized so much that OpEx and cost productivity are key drivers. We’re going to make sure that we are basing those operations on a conservative outlook going forward. So that will be the case. We have made adjustments to our OpEx base already over the last 18 months, and we will continue to do so with an anticipated market environment that has certainly been challenged this year, no question about it. That said, I think what we have in our plans for next year is realistic, conservative, and that makes us confident, as Jonathan highlighted, that with the cost productivity measures that we are taking and a tight OpEx structure going into next year, we will see the improvement that we want to see in order to achieve our Hardwire stage two goals in terms of operating market.

Thank you.

Yeah, and Jaime, I would just add that, obviously, we remain very, very committed to delivering the $400 million in cost productivity, and that certainly doesn’t come without a great deal of work on the side of things relative to ensuring that we have everything optimized from a manufacturing perspective. So, we appreciate the relationship that we have with our unions. We think that they have displayed, you know, a level of flexibility and support that we certainly are appreciative of, and I think together, we’ve partnered to drive something that we feel is very sustainable in the future. And again, you have our strong commitment to delivering the $400 million that we’ve been talking about.

There are no further questions at this time. This concludes today’s conference call. Thank you all for joining. You may now disconnect.