Harley-Davidson reported a strong fourth quarter, exceeding analysts’ expectations to cap off a positive 2021, the first under the company’s Hardwire plan.
The fourth quarter revenues totaling $1.02 billion, a 40% increase compared to the $725 million reported in the same quarter of 2020. That resulted in a net income of $22 million, compared to a net loss of $96 million in Q4 2020. For the year, Harley-Davidson reported a 2021 net profit of $650 million compared to a profit of $1 million in 2020.
The full press release is posted below, but there were a few interesting items discussed in the earnings call that are worth noting.
- As we reported earlier, the next electric motorcycle to launch under the LiveWire brand will be the Del Mar.
- The LiveWire dealer network has grown from the initial 20 retailers to 49.
- Under the Rewire plan, Harley-Davidson originally announced it would reduce its product lineup by 30%. In the end, it actually exceeded that target, reducing its offerings by 40%.
- Harley-Davidson reiterated claims the Pan America Special is the #1 selling adventure-touring model in the U.S. since its launch.
- Harley-Davidson claimed the entire first allocation of the 2022 Low Rider ST sold out in just 10 minutes.
Begin Press Release
Harley-Davidson delivers strong fourth quarter financial results and successfully completes the first year of The Hardwire Five-year Strategic Plan
Harley-Davidson, Inc. (“Harley-Davidson”) (NYSE:HOG) today reported fourth quarter and full year 2021 results.
“Harley-Davidson delivered a strong finish to the year, in which we have seen proof points on all elements of our Hardwire Strategy,” said Jochen Zeitz, Chairman, President and CEO, Harley-Davidson. “Looking ahead, we are fully committed to achieving our long-term Hardwire Strategy, as the most desirable motorcycle brand and company in the world.”
2021 Highlights and Results
- Successfully completed the first year of The Hardwire Five-year Strategic Plan
- Delivered full year GAAP diluted EPS of $4.19, up $4.18 vs. 2020
- Grew Harley-Davidson’s total revenue by 32% behind increased shipments and favorable motorcycle unit mix resulting from our Hardwire actions
- Achieved 9.0% GAAP operating margin for the Motorcycles and Related Products segment (“HDMC”), which was well ahead of prior year and +2.7 percentage points ahead of 2019
- Record Financial Services segment (“HDFS”) operating income of $415 million, up 112%, driven by lower provision for credit losses and lower interest expense
- Announced merger transaction for LiveWire with AEA-Bridges Impact Corporation; deal expected to close in the first half of 2022
Fourth Quarter 2021 Highlights and Results
- Delivered GAAP diluted EPS of $0.14 versus a loss of $0.63 in Q4 2020
- Grew Harley-Davidson’s total revenue by 40% on higher units, profitable unit mix and pricing
- HDMC achieved improved GAAP operating margin as Hardwire actions take effect
- HDFS operating income growth of $18 million and 24% versus PY driven by lower interest expense
2022 Financial Outlook
For the full year 2022, the company expects:
- HDMC revenue growth of 5 to 10%
- HDMC operating income margin of 11 to 12%
- HDFS operating income to decline by 20 to 25%
- Capital investments of $190 million to $220 million
The outlook assumes that supply chain challenges improve in the second half of the year.
The company’s cash allocation priorities are to fund growth through The Hardwire initiatives, pay dividends, and execute discretionary share repurchases.
Fourth Quarter and Full Year 2021 Results
| Harley-Davidson, Inc. Consolidated Financial Results | nm – not meaningful | |||||
| $ in millions (except EPS) | 4th quarter | Full Year | ||||
| 2021 | 2020 | Change | 2021 | 2020 | Change | |
| Revenue | $1,016 | $725 | 40% | $5,336 | $4,054 | 32% |
| Net Income (Loss) | $22 | ($96) | nm | $650 | $1 | nm |
| GAAP Diluted EPS | $0.14 | ($0.63) | nm | $4.19 | $0.01 | nm |
| Adjusted Diluted EPS | $0.15 | ($0.46) | nm | $4.21 | $0.63 | nm |
Consolidated revenue was up 40 percent in the fourth quarter and up 32 percent for the full year over 2020, driven by growth in HDMC revenue resulting from stronger unit sales and mix. Consolidated net income in the fourth quarter reflects HDFS operating income offsetting HDMC operating losses in the seasonally slow quarter. Consolidated net income for the full year was driven by significant operating income improvement with strong results at both HDMC and HDFS.
| HDMC Results | nm – not meaningful | |||||
| $ in millions | 4th quarter | Full Year | ||||
| 2021 | 2020 | Change | 2021 | 2020 | Change | |
| Motorcycle Shipments (thousands) | 29.1 | 20.9 | 39% | 188.5 | 145.2 | 30% |
| Revenue | $816 | $531 | 54% | $4,540 | $3,264 | 39% |
| Motorcycles | $546 | $320 | 71% | $3,477 | $2,350 | 48% |
| Parts & Accessories | $165 | $146 | 13% | $742 | $660 | 13% |
| General Merchandise | $73 | $50 | 46% | $228 | $186 | 23% |
| Licensing | $15 | $8 | 88% | $38 | $30 | 27% |
| Other | $18 | $7 | 159% | $55 | $38 | 44% |
| Gross Margin | 19.5% | 21.6% | (2.1) pts. | 28.6% | 25.4% | 3.2 pts. |
| Operating (Loss) Income | ($102) | ($196) | nm | $409 | ($186) | nm |
| Operating Margin | (12.5%) | (37.0%) | nm | 9.0% | (5.7%) | nm |
Revenue from HDMC was up significantly during the fourth quarter of 2021 primarily driven by a 39 percent increase in wholesale shipments, favorable motorcycle unit mix resulting from our Hardwire actions and pricing in the U.S. market. Parts & Accessories fourth quarter revenue was up 13 percent while General Merchandise was up 46 percent over Q4 2020, as both businesses were favorably impacted by increased wholesale shipments and refreshed product offerings.
Fourth quarter gross margin was down 2 percentage points to Q4 prior year as stronger units and pricing were offset by negative cost headwinds across the supply chain and higher additional EU tariffs (1.3 percentage point impact). Q4 operating margin was improved versus prior year due to lower operating expenses and heavier restructuring charges in the prior Q4.
| Harley-Davidson Retail Motorcycle Sales | ||||||
| Motorcycles (thousands) | 4th quarter | Full Year | ||||
| 2021 | 2020 | Change | 2021 | 2020 | Change | |
| North America | 19.6 | 18.1 | 8% | 134.4 | 110.1 | 22% |
| EMEA | 6.5 | 7.0 | (7%) | 31.1 | 36.9 | (16%) |
| Asia Pacific | 6.8 | 6.9 | (2%) | 25.1 | 27.2 | (8%) |
| Latin America | 1.0 | 1.2 | (16%) | 3.7 | 6.0 | (39%) |
| Worldwide Total | 34.0 | 33.3 | 2% | 194.3 | 180.2 | 8% |
Global retail motorcycle sales in the fourth quarter were up 2 percent versus prior year, driven by a robust performance in North America offset by declines across international markets. International results were the result of strategic decisions made as part of the Rewire and Hardwire Strategic Plan, including the exit of unprofitable product segments and markets, as well as macro supply chain challenges, including slower shipping times to the international markets.
| HDFS Results | ||||||
| $ in millions | 4th quarter | Full Year | ||||
| 2021 | 2020 | Change | 2021 | 2020 | Change | |
| Revenue | $200 | $194 | 3% | $796 | $790 | 1% |
| Operating Income | $95 | $77 | 24% | $415 | $196 | 112% |
HDFS operating income growth of $18 million over Q4 2020 was driven by lower interest expense and lower restructuring costs, partially offset by higher provision for credit losses.
Other Results
- Harley-Davidson generated $976 million of cash from operating activities in 2021. Cash and cash equivalents were $1.9 billion at the end of 2021, down $1.4 billion from the end of 2020 as the company has normalized cash balances.
- Tax Rate – The company’s 2021 effective tax rate was 21 percent, which was favorably impacted by several discrete income tax benefits recorded in the year.
- Dividends – The company paid cash dividends of $0.60 per share on a full year basis in 2021.
Update on LiveWire Transaction
On December 13, 2021, Harley-Davidson and AEA-Bridges Impact Corp. (“ABIC”) (NYSE: IMPX), a special purpose acquisition company with a dedicated sustainability focus, sponsored by executives of AEA Investors and Bridges Fund Management, announced a definitive business combination agreement under which ABIC will combine with LiveWire, Harley-Davidson’s electric motorcycle division, to create a new publicly traded company. Its common stock is expected to be listed on the New York Stock Exchange under the symbol “LVW”.
The transaction is expected to close in the first half of 2022 and is subject to the approval of ABIC shareholders and other customary closing conditions.
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