Thank you for standing by, and welcome to the Harley-Davidson 2025 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, Artie Starrs; and Chief Financial Officer and President of Commercial, Jonathan Root, who is also the Chairman of LiveWire Group, Inc, and will be available to address any questions about LiveWire during the Q&A portion of today's call. With that, let me turn it over to Harley-Davidson CEO, Artie Starrs.

Thank you, Shawn, and good morning, everyone. I'm excited to be with you today and thrilled to be partnering with our Board, Jonathan and our leadership team, with the broader team here at Harley-Davidson and of course, with the Harley-Davidson dealer network. Over the past month, I've been truly energized by what I've experienced across the Motor Company at HDFS and dealerships and with the broader rider community. I'd like to take a moment to thank all the riders I've had the pleasure of meeting at dealerships and dealer events since joining the company. Your passion and connection to the brand are truly inspiring. On October 1, I started my HD chapter with the dealer network right here in Milwaukee at our Annual Dealer Forum, where over 1,500 of our global dealers came together in celebration of Harley-Davidson. During our time together, we reviewed our product launches and marketing strategies for 2026, celebrated the valuable role our dealers play in our business and most importantly, began our planning and alignment to deliver successfully in the year ahead. Since then, I've been working with our team of employees at Juneau Avenue and have visited company facilities in Wisconsin and Pennsylvania. I've been impressed with the level of talent, craftsmanship and the unwavering commitment to the brand from employees at all levels across the company. That resilience is part of what makes Harley-Davidson so special. On the road, I was pleased to meet with over 260 dealers from corner to corner across the country, listening and learning and beginning to shape our shared future together. It's clear that Harley-Davidson has the opportunity to improve dealer health across the network, and I'm committed to addressing it quickly. A healthy Harley depends on a healthy dealer network. And right now, we have work to…

Thank you, Ari, and good morning to all. I'd like to start with an update on what we refer to as the HDFS transaction. On July 30, Harley-Davidson announced a strategic partnership with KKR and PIMCO to transform Harley-Davidson Financial Services into a capital-light derisked business model. The transaction includes 3 key components: back book sale, sale of approximately $6 billion of existing HDFS loan receivables, forward flow agreement, sale of future HDFS loan originations and sale of equity interest, sale of a 9.8% common equity interest in HDFS to KKR and PIMCO. At the end of October, we signed and completed agreements for each of these 3 components. I will go into each of these in more detail. First of all, the back book sale. In Q3, HDFS sold the majority of its residual interest, resulting in a gain of $27 million and the derecognition of $1.9 billion of net finance receivables and $1.7 billion of related debt among other assets and liabilities. HDFS classified $4.1 billion of finance receivables as held for sale during Q3, resulting in the reversal of the related allowance for credit losses and driving the $301 million benefit in the provision for credit losses. In Q4, the $4.1 billion of finance receivables previously classified as held for sale were sold on October 30 to strategic partners, KKR and PIMCO. After the loan sale, HDFS plans to continue the management of all finance receivables sold to the strategic partners, where HDFS will receive a servicing fee of 1% for prime rated retail finance receivables and 2.5% for subprime rated retail finance receivables. Secondly, the forward flow agreement. Starting in Q4 on a monthly basis, HDFS expects to sell approximately 2/3 of retail loan originations over the course of its 5-year agreement. This did not have…

Thank you, Jonathan. Before we head to Q&A, I want to share some final observations of where we're at and what you can expect from us. We'll have much more to say about our go-forward strategy by next spring, both in terms of actions we are taking and our expectations about when those actions will deliver results. We're going to work quickly, but I fully expect that a number of the actions we will take will play out throughout '26 as we reset the company's trajectory for the future. In the meantime, there are several key focus areas that you can expect from us. First, dealers as our customer orientation. We succeed when our dealers succeed. Our efforts will prioritize dealer health, engagement and long-term profitability as the foundation of Harley-Davidson's success. Second, celebrating the joy of ridership and the experience of riding a Harley-Davidson. We need to bring more riders into the community while retaining those we already have. The emotion of being a Harley-Davidson rider is unmatched, and it's our job as a company to make that experience easier, more accessible and frictionless. Third, more simplified marketing programs, which will support local activations and events, ensuring that marketing investments hit nationally and drive local door swings. And lastly, fourth, analyzing and actioning our cost base for capital-efficient growth. We must ensure that every dollar we invest and every penny we spend drives value growth and sustainability for the long term. Since joining the community, one thing has become abundantly clear to me. There is no other brand that inspires the same level of passion, pride and pure enthusiasm as Harley-Davidson. I'm truly excited to begin this journey and look forward to what lies ahead. Thank you for your time this morning. And with that, we'll take your questions.

[Operator Instructions] Our first question comes from Craig Kennison from Baird.

Artie, nice to talk to you. Your second priority you mentioned was the joy of ridership and bringing more riders into the Harley-Davidson brand. Just as you've done your listening tour and some of the due diligence you did before taking the job, what were your thoughts around the demographic headwinds that Harley faces and ways that you can overcome what feels like a fundamental issue for the brand?

Sure, Craig. Great to be connected, and thanks for your question. I'm super excited to be here. And the getting riders into the brand and onto our bikes is I sort of have a unique perspective because I just went through that journey myself. I'll tell you that the inside of this brand, when you get into a dealership and you meet our people and they introduce you to the bikes is extremely warm and welcoming. And having gone through Rider Academy, it was an amazing experience. I think there's an opportunity that it can be a bit more fun. Young people are looking for something that's fun and maybe has seriousness to it, but maybe not as serious as we're currently presenting it. But some of the -- I think, the imagery that people have of Harley, we're reinforcing the fact that some of our riders are a bit more mature. And the legacy, if you look back at the 30, 40, 50 years of advertising that we put out -- and I had Bill Davidson do this for me recently, and he sent me a reel, which is just unbelievably inspiring when we were attracting young riders. There is immense joy. There was a tongue-in-cheek attitude. There was a playfulness in the work, and you can expect some of that to come back, and that's sort of on the brand front. Practically speaking, the product line that we have coming and specifically the Sprint bike coming in the second half of next year, I think, addresses 2 things. One is a bike that's lighter and easier to maneuver. And the second thing is a bike that's more affordable. So if you look in the -- if you walked into a Harley dealership right now, the price point is pretty high for a young rider to be interested in Harley. And I think the combination of brand, product and some augmentation to the experiential elements that make it more fun, I think we have a recipe to do that.

Our next question comes from Stephen Grambling from Morgan Stanley.

In your intro remarks, Artie, you had talked about market responsive customer-facing promotions. I was wondering if you could just elaborate on how you're thinking about that? Is that through specific channels? Or are there any kind of investments that you need to make around technology or otherwise to be more responsive?

Yes, Stephen, thank you so much. I'll say a few words, and then I'll let Jonathan go into some of the specifics that we've actioned. I think the first thing I'd say is our inventory levels at dealers are too high right now. So it's something that we need to do and need to mobilize quickly against. I think as Jonathan mentioned in his remarks, specifically on the touring side. So we have some promotional activity that is communicated at the local level that's been in place. And then just this past weekend, we put in some more as it relates to touring specifically. And Jonathan, I'll let you go through some of the details.

Okay. Sounds good. And Stephen, thank you for joining us. So I think a couple of details on that. As Artie talked about, as we go through and we take a look at sort of a pinpointed view on where do we have a concern from an inventory standpoint, one of the places that we have or probably the primary place that we have a little bit of concern is just around some pockets of buildup throughout the United States as we look at touring and maybe a couple of select places here or there from a CDO standpoint. We are making sure that we're passing along tools that support dealers in the way that they have the ability to move through those. There are things that we think that we can do that really inspire consumers to kind of drive door swings to our dealers. We know that when we get customers inside of our dealers, our dealers do an exceptional job of really engaging with that consumer, converting it through to a sale. And so I think some of the important elements are areas that we think are sort of building the brand and building the experience for customers. So looking at lower APR programs for consumers, making sure that those are programs that are extended out to 60, 72 months to really allow a customer to be able to get on to the bike and really address the affordability dynamic that you heard Artie talk about. So that's probably one of the best sort of near-term examples of some things that we are doing to make sure that we're driving sales. The last piece I'll touch on really quickly is that from a longer-term perspective, in 2025 calendar year and with the 2025 model year, we have experimented with some different price points to understand the impact that had from a consumer standpoint. So I think kind of magical price points of $99.99, $14.9, $19.9. And we do know that our customers have a psychological barrier around different price points for what they're willing to pay. That is something that you actually will see demonstrated a little bit more fully in what we're introducing in the 2026 model year. With that, I'll hand it back to Artie.

Yes. I think the only thing I would add is what we put into market with the financing support and some of the financial support on these bikes was in response to direct feedback from dealers. So we incorporated precisely what dealers thought they needed, and that's what Jonathan referenced.

Our next question comes from Noah Zatzkin from KeyBanc.

I guess, one, just on the impact of the transaction in the quarter. I think previously, you had kind of talked about expecting $275 million to $300 million of operating income benefit in the second half. I guess I suspect most of that or if not all of that impacted the third quarter. So just any thoughts around kind of the cadence of P&L impacts related to the transaction? And then just any color on how you're thinking about next year would be great.

Okay. Great. Thank you, Noah. So as we look, I think as we laid out sort of 3 main elements to the HDFS transaction, the back book sale, the forward flow and the equity element, we are super, super excited to partner on this with both KKR and PIMCO investment vehicles. We're excited about getting some of their thoughts and thought leadership into the way that we run the business. The good news, I think, as we look at this transaction is that we have the structure in place where from a dealer and a consumer perspective, they'll see no sort of day-to-day impact in the way that any of that is run. Yet at the same time, we get some of the really solid thinking from a couple of market leaders inside of our business in a fairly thoughtful way that helps us understand credit dynamics across the consumer industry with a little bit more depth than where we are today. As you talked about, this transaction really does close over multiple quarters. So there's some Q3 kind of accounting preparation work that you saw in place that occurred in the quarter, and you'll see more details as we kind of get our final releases out over the next few days. And then we have some other elements that close over the coming quarters. So a little bit of kind of carryover from one quarter to the next. But you are right. We do still feel very committed to that $275 million upside figure that we talked about. And then in addition, as you think through some of the interesting dynamics, there's a lot that gets freed up from a balance sheet perspective. So although the $275 million is the upside from an operating income standpoint, I just want to reinforce that we do have the $1.2 billion that gets freed up in cash by the time we get through Q1 of next year. And so with that, that obviously affords a tremendous amount of flexibility as Harley-Davidson, Inc. thinks about how to place priorities, where our smart capital investments, where are some smart areas of spend, what are some ways that we can really look at driving the business for growth as we move forward. So really, really excited about the optionality that the transaction enjoys. I hope that helps.

Our next question comes from Robin Farley from UBS.

Great. Thinking about next year and what shipments could look like for 2026. I know you had a lot of inventory cleared at the dealers this year, but it sounds like you want to do more of that. So if we're thinking about -- so first of all, I don't know if you have a thought on where retail -- how retail might look going forward. And if you don't, even if you thought that was flat, if we were trying to think about you're comping some inventory reduction, so that could mean shipments up, but it sounds like you want to see further inventory reduction. So if you could help us quantify whether that will be a greater amount year-over-year, just again, kind of thinking about so we can all translate this into kind of shipment expectations for next year.

Okay. All right. Thank you, Robin. So I'll just walk through a little bit of where we are and kind of what we've done on a year-to-date basis and provide a little bit of colored commentary, and then I'll pass it over to Artie for some thoughts. Obviously, he's done a coast-to-coast kind of North, South, East, West tour across the United States with a tremendous amount of feedback from our dealers. So overall, as we think about the progress that we've made on inventory throughout the year, in Q1, dealer inventory was down 19% versus same quarter prior year, Q2 down 28%, Q3 down 13%. And that's after last year where we actually worked things down a little bit to kind of across the full year spectrum. So if you recall, obviously, we've withdrawn guidance. But as we go through and look at some of the original guide, we had a 10% plus target of being down. We would envision being at that level or maybe slightly improved. One of the really important pieces that I think is there for us as we take a look at this is Artie kind of talked through the actions that we're taking to support the move through and sell-down of Touring. As we look at dealer inventory by family in Q3 of '25 versus Q4, every family is down by 20% to up to 45% with the exception of Touring and CVO, which is pretty flat. And so there certainly was some uniqueness as we look at 2024 due to the product launch of Touring that came out. So as we think through where we are from an inventory position, we're in a very, very healthy perspective across virtually all of the families. The one that in an era with slightly higher interest rates with a little bit more challenged consumer and the consumer affordability dynamic that Artie spoke about is really the touring side of things as we think through how we move people through that product in a way that works for them. So a little bit more color, I hope, helps understand the inventory position rather than just looking at a raw number. And then relative to 2026, we'll obviously issue 2026 guidance. as we move into the 2026 calendar year. But with that, I'll turn it over to Artie.

Yes. The only thing I'd add, Robin, is we're optimistic about the pricing ladder that Jonathan referenced earlier, starts with the 9 starts with the 14 starts with the 19, starts with the 24 on Nightster, Street Bob, Softail and Street Glide, coupled with the Sprint bike coming in the second half of next year. So it's -- the focus in the building right now is the inventory support and getting that down on the model year '25 so that these 26 models have the opportunity to be really successful.

Our next question comes from Joe Altobello from Raymond James.

Just to put a finer point on that, Jonathan, so just so we're all clear. So you're saying this year, you expect global inventories to end at about 43,000 or so units. and that number comes down a little bit further next year? That's my first question. Second question, the HDFS normalized operating income post all of this noise this year, are you still thinking around, call it, $120 million to $130 million going forward?

All right. Joe, nice to hear from you. So relative to dealer inventory, I think your math is probably about right as you look at how that reduction kind of translates through to units. Relative to the next calendar year, we're certainly not guiding on 2026 at this point. I hope that some of the commentary that I provided in terms of what we're seeing by family helps understand the uniqueness of the situation that we're in and certainly probably feels pretty consistent with the macro environment that we're operating in. I think as you look across sectors and across businesses, you see consumers who are sort of trading down rather than trading up in terms of products at this point from an overall consideration perspective. That really leans back into the elements that already talked about, the importance of us focusing on the affordability dynamics, really making sure that we are meeting our consumers where they're at. So that's something that you'll see us continue with and something that we're pretty excited about. Relative to the HDFS transaction, elements that we need to make sure that we're working through from a timing standpoint. So there are certain debt settlement elements that we're working through and contemplating right now. We'll see if we can get all of that squeezed into 2025 or how much of that carries over into 2026 So we'll have more when we're together in the next quarter, but certainly excited about everything that, that transaction does, the affordability that it offers up from strategic standpoint, and that's something that we'll be talking about more as we get together next time.

Our next question comes from James Hardiman from Citigroup.

This is Sean Wagner on for James Hardiman. I wonder if you can provide any color on how you're thinking about fourth quarter? What are you assuming for fourth quarter retail? And how did October retail perform?

Sure. So I think as we look -- great question around what we're seeing from a quarter standpoint. Please do pass along our best to James too. So I think from a full year perspective, we obviously have withdrawn our guidance a couple of quarters ago. We do feel that it's important that we're sticking with that. The reason for that is obviously an environment that is very, very dynamic and moving and fairly responsive to what we see from an overall approach to tariffs, the environment that's in front of the consumers. We do see that there's consumer sentiment that bounces around from 1 month to the next. We are really, really proud of the way that our dealers are out there working with each of the consumers who are walking in. We have seen kind of sequential improvements in traffic that's flowing into our dealers. So one of the biggest things for us is we know that door swings at dealers end up driving sales. We're pleased with a lot of the dynamics and the metrics that we're seeing on that front. Something that we haven't talked about in our time together today is around the marketing development fund. As you may recall, we announced that right at the very beginning of this year. We knew that, that would take some time to really gain some traction with the dealer body, make sure that collectively, we understand the importance of the spend between where do we go on marketing dollars, where do we go on events and activations and activities. We've really kind of honed-in on a mix of those elements that drive the best performance. So we're excited about what we're seeing there. But again, probably not in the position that we're actually guiding on the calendar year in total or in part unless it's something a little bit with a little more certainty like the HDFS transaction that we've spoken.

Our last question will come from Jamie Katz from Morningstar.

I have more of a theoretical question. As we think about shipments rising this quarter, what kind of sales growth do you think would be reasonable? Or what level of shipments maybe for us to really start to see a little bit of Motor Company margin expansion?

Yes, Jamie. So a lot to that one as we think through the theoretical possibilities of what you've spoken of. Obviously, as we think about the margin expansion dynamics and where we would go on that front, you effectively get there through the inverse of what you've been seeing in 2025. So if you think about the dynamics that we've called out that have made a year-over-year margin change line up in the way that it has, it's the flip side of that is how we would end up getting to something where we actually see margin expansion and margin growth. Again, one of the elements that I think is really important around there is some of the experimentation work that we've done with the price points. We are enthused about the early read on that and what some of that has done. That's a dynamic that we think will be really helpful across the business. We're also really, really excited about marketing development fund and as touched on, really gaining a more detailed understanding of the dynamics between events, activations, digital spend, marketing spend, how to get the different elements of sort of go-to-market balanced in the right way is something that we feel excited about how that can translate through supporting dealers at kind of at their dealership and really driving traffic and helping support sales. And then beyond the price points, as we think longer term about this business, product portfolio dynamics are elements that we certainly need to make sure that we're always thinking about. There are some pieces that I think Ari has touched on now and some more that you likely would hear from Arty as we move through spring of next year when you see an update and a refresh from a plan perspective. Artie, any other thoughts?

No, I think you covered it well, Jonathan. I think you covered it well.

We have no further questions. I would like to turn the call back over to Artie Starrs for any closing remarks.

Great. Well, thanks, everybody, for participating today. I'm super excited to be here and look forward to engaging and meeting so many of you in the coming weeks and months, and we'll see you on the call in February. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.