Harley-Davidson Aktie

Ladies and gentlemen, thank you for standing by, and welcome to the Harley-Davidson 2026 First Quarter Investor and Analyst Conference Call. Please be advised that today's conference call is being recorded. I would now like to hand the call over to Shawn Collins. Thank you. Please go ahead.

Thank you. Good morning. This is Sean 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 and Commercial Officer, Jonathan Root. With that, let me turn it over to Harley-Davidson, CEO, Artie Starrs.

Thank you, Shawn, and good morning, everyone, and thank you for joining us today for our Q1 2026 financial results as well as an introduction to our new strategic plan, which we're calling back to the bricks. I'll begin with an overview of our Q1 performance. Jonathan will then provide additional financial commentary before we turn to our strategy. Before I get into it, I'd like to take a moment to acknowledge our deeply committed and passionate Harley-Davidson employees, who worked tirelessly to bring Harley-Davidson alive across the world. Thank you, Team HD.

Starting with retail sales. We're pleased with our performance this quarter. North America delivered a 14% increase versus the prior year, contributing to global retail sales growth of 8% in what remains a challenging consumer environment. These results reflect the impact of the actions we've taken to drive demand and improve execution. As noted on the Q4 earnings call, dealer health and inventory levels remain a key focus for the company. During the quarter, we reduced global inventory by 22% year-over-year as we continued to prioritize dealer inventory sell-through and aligning wholesale shipments with retail demand.

We'll share more detail on this in our strategy discussion. Strengthening dealer relationships has also remained a priority. We recognize the critical role our dealer network plays in the Harley-Davidson ecosystem, and we're encouraged by the renewed sense of partnership and momentum across the network. This will be an important driver as we move forward into our next chapter.

During the quarter, we also formally reopened our Juno Avenue headquarters in Milwaukee, Wisconsin. Affectionately referred to by our Harley-Davidson Community as the bricks with our employees at headquarters returning to the office for the first time since 2020. Finally, we've been encouraged by the early reception to our new marketing platform, Ride. I'll speak more about the brand platform and the value we believe it will bring as part of our strategy presentation. With that, I'll turn it over to Jonathan.

Thank you, Artie, and good morning to all. I plan to start on Page 4 of the presentation, where I will briefly summarize the financial results for the first quarter. Subsequently, I will go into further detail on each business segment. Let me start with our consolidated financial results for the first quarter of 2026. Consolidated revenue in the first quarter was down 12% and driven primarily by HDFS revenue being down 54% as it moved into a new capital-light model after the closing of the HDFS transaction, where we sold a significant part of the retail loan book and agreed to a forward flow in which we expect to sell approximately 2/3 of future originations.

Consolidated operating income in the first quarter came in at $23 million compared to operating income of $160 million in Q1 of 2025. This was driven by a significant year-over-year decline in operating income at both HDMC and HDFS as we expected. The operating loss at LiveWire was $18 million which was in line with our expectations and $2 million favorable to a year ago. In Q1, earnings per share was $0.22, which compares to $1.07 in Q1 of 2025. Now turning to Page 5 and HDMC retail performance. In Q1, North American retail sales of new motorcycles were up 14% versus prior year with approximately 24,000 motorcycles sold.

In Q1, retail sales of new motorcycles outside of North America were down 4% versus prior year with approximately 10,000 motorcycles sold resulting in Q1 global retail sales of new motorcycles being up 8% versus the prior year with a total of approximately 34,000 motorcycles retailed. While we are relatively pleased with the start to the year, particularly in the U.S., we remain mindful of the global consumer discretionary landscape, which remains uneven. We are aware that pricing continues to be on the top of customers' minds given the current global setup that includes inflationary pressures, interest rates that continue to run above recent historical lows and global geopolitical uncertainty.

In North America, Q1 retail sales were up 14%, where U.S. retail sales were up 16% and Canada retail sales were down 8%. Results were driven by continued strength in our Touring and Trike models as consumers reacted well to our new 2026 Motorcycle Launch and targeted customer incentives. This translated into a significant market share gain with Harley-Davidson reaching 38% of the U.S. 601 CC+ market, up 2 percentage points year-over-year. Dealer inventory in North America declined 21% year-over-year, reflecting a more balanced setup as we enter the main riding season.

In EMEA, Q1 retail sales posted a modest decline of 3%. In the quarter, performance reflected a subdued economic environment in Europe, although supported with early model year 2026 product momentum across the continent, as evidenced by the quick sell-through of new units that began arriving later in Q1. The Rev Max platform continued to outperform the broader portfolio led by adventure touring, which showed strong growth year-over-year.

In addition, from a market share standpoint, we moved from 2% to 4% of share in the European market in Q1. In Asia Pacific, Q1 retail sales declined by 9%. In the quarter, we experienced modest declines in the core portfolio, including touring, strike and soft tail reflecting broad-based pressure across Japan, Australia and China, partially offset by positive results in our noncore motorcycle portfolio with strength in adventure touring. In Latin America, Q1 retail sales delivered another strong quarter with retail up 21%, where both Brazil, our largest Latin American market and Mexico were up, while other Latin American countries were down modestly year-over-year.

Touring and Trike were the standout categories in the market. Dealer inventory at the end of Q1 of 26 was down 22% versus the end of Q1 of '25. Specifically, North American dealer inventory was down 21% and dealer inventory outside of North America was down 23%. This has allowed Harley-Davidson dealers to start the upcoming 2026 writing season with a largely appropriate setup. In addition, the quality of dealer inventory is healthier today than 1 year ago as it is more current from a model year standpoint. At the end of Q1, North America dealer inventory was comprised of approximately 2/3 of current model year 2026 motorcycles.

In comparison, in the prior year period, a little less than 1/2 of all dealer inventory was current model year. We expect this improvement in healthy dealer inventory to pay dividends in future periods and believe it sets Harley-Davidson and our dealers up for greater success. Before we get into revenue, let's conclude with some information on wholesale shipments. From a wholesale shipment perspective, in Q1 of 2026 and we delivered approximately 37,300 units compared to 386,000 units in Q1 of 2025, which is down 3% year-over-year.

As we are now beginning the prime riding season in North America, we have recently heard from dealers that they could benefit for more inventory with regard to particular places, models, entrant levels. This is a good sign, and we expect to ship more units on a year-over-year basis in Q2 and Q4, while running lower in Q3 in comparison to the prior year period. We expect this will get us to a more even shipment cadence across the quarters in comparison to what we have delivered in recent years.

Now turning to Page 6 and HDMC revenue performance. In Q1, HDMC revenue decreased by 2%, coming in at $1.1 billion. We point out that from a business line standpoint, motorcycles came in at $836 million C&A plus apparel came in at $200 million and licensing and other came in at $20 million. The drivers of overall revenue at HDMC included lower volume or shipments and lower net pricing and incentive spend. These were partially offset by favorable foreign currency. Now turning to Page 7 and HDMC margin performance. In Q1, HDMC gross profit came in at 25.3%, which compares to 29.1% in the prior year.

The year-over-year decrease was driven by the unfavorable impacts of increased tariff costs of $45 million in Q1, which will be covered in more detail in the next slide, net pricing and incentive spend due to effective sell-through of prior model year dealer inventory. Product mix, lower volumes and higher-than-expected supply management costs as we work through a unique supplier situation. These were partially offset by the positive effects of tariff recovery settlement from prior years and favorable foreign exchange. In Q1, operating expenses totaled $248 million which was $49 million higher compared to prior year.

This falls into two broad buckets. The first piece is a restructuring expense of $15 million, driven by costs incurred related to strategic changes, including the company's decision to eliminate certain roles, resulting in onetime employee termination benefits and other recurring charges. The second piece consists of $34 million of additional costs in the quarter specifically due to higher warranty spend due to select product recalls, select people costs, primarily related to executive team changes on a year-over-year basis, increased marketing spend as the marketing development fund matures, and limited other discrete expenses to operate the business.

In Q1, HDMC had operating income of $19 million, which compares to operating income of $116 million in the prior year period. Turning to Slide 8. In 2026, the overall global tariff regulatory environment continues to evolve. There are a number of factors at play in the space, including the potential for increased tariff recoveries and evolution in the application of IIFA Section 122 and updates to Section 232 steel and aluminum tariffs. In Q1, we saw the most significant year-over-year impact in tariffs we expect to experience this year. This is a result of the increased tariff levels, which were initially put in place beginning in Q2 of 2025.

In Q1 of '26, the cost of new or increased tariffs was $45 million. As tariff policy changes, there are lags associated with the various tariff levels as these adjustments work their way through our parts inventory imported prior to the current Section 232 pronouncement. We continue to pursue mitigation actions where possible and pursue tariff recoveries when viable.

We note that recent U.S. administration tariff regulation announced in early April, included an exemption on certain motorcycles and for parts and accessories for the use in the manufacturing promoter cycles. We would note that Harley-Davidson is a business very centered in and around the United States. 3 of our 4 manufacturing centers are U.S.-based and 100% and of our U.S. core product is manufactured in the U.S. This change will serve in helping mitigate the impact to tariffs to Harley-Davidson and enable us to strengthen our commitment to U.S. manufacturing.

At this point in time, we expect the cost of increased tariffs to be in a range of $75 million to $90 million for the full year 2026, which is favorable to what we guided to in our prior quarter. From a cadence perspective, our expected tariff amount will decrease consecutively as we work our way across the remaining quarters in 2026. Turning to HDFS on Page 9. At Harley-Davidson Financial Services, Q1 revenue came in at $112 million, a decrease of 54% driven by lower interest income due to the decline in retail receivables related to the sale of loan assets as part of the new HDFS transaction.

Other income within HDFS revenue was favorable year-over-year due primarily to new servicing fees, investment income and new gains on third-party loan sales. HDFS operating income was $22 million, representing an operating income margin of 19.9%. On the expense side, interest expense and the provision for credit loss expense were both significantly lower, which was due to the decreased size of the retail loan portfolio and related debt on a year-over-year basis and as expected. With the change in strategy associated with the HDFS transaction. The HDFS team continues to manage expenses prudently with operating expenses decreasing by $1 million versus prior year.

Turning to Page 10. In Q1, HDFS' annualized retail credit loss ratio on managed loans was 3.6%, which compares to 3.8% in the year ago period. We are pleased with HDFS loan origination activities as total retail loan originations in Q1 were up 14%, coming in at $671 million in Q1. We Total gross financing receivables were $2.5 billion at the end of Q1, where retail receivables were $1.3 billion and commercial receivables were $1.2 billion. Now turning to Slide 11 for the LiveWire segment. For the first quarter of 2026, LiveWire revenue increased 87% over prior year driven by increases in electric motorcycle and static brand electric balanced bank units.

Consolidated operating loss decreased by 11% and resulting from improved gross profit and lower selling, administrative and engineering expenses. In turn, this drove an improvement of over 25% in net cash used by operating activities in Q1 of '26 compared to Q1 of '25. For 2026, LiveWire's focus is heavily geared around the imminent launch of its F4 Honcho products, in particular, continued network expansion cost savings and improvements and product innovation and development focused on products that will be profitable and positive drivers of cash flow. Now turning to Slide 12. We wrapping up with consolidated Harley-Davidson, Inc. financial results. We had net cash use of $228 million from operating activities in Q1 and which compares to $142 million of operating cash in the prior year period.

Operating cash flow was lower than the prior year due to reduced cash inflows at HDMC on lower wholesale shipments. Also at HDFS, the operating cash flow decreased due to reduced interest income and due to new originations of retail finance receivables under the forward flow arrangement that were classified as held for sale, which is classified as an operating activity under U.S. GAAP. As a result, the originations to be sold to our strategic partners or outflows reduced cash flow from operations as there were no comparative retail finance receivable originations classified as held for sale in the first quarter of the prior year.

This was partially offset by the inflows from the proceeds from the sale of retail finance receivables classified as held for sale. This will remain a distinct year-over-year item as we move through 2026 as a result of the HDFS transaction, which concluded throughout the second half of 2025. Total cash and cash equivalents ended Q1 of 2026 at $1.8 billion compared to $1.9 billion a year ago. As part of our share buyback strategy, in Q4 of 2025, we entered into an accelerated share repurchase agreement to repurchase $200 million of the company's common stock. As part of the ASR agreement, we received $160 million or 80% of the notional worth of shares or 6.3 million shares delivered to us before December 31, 2025, with the remainder expected to be delivered in early 2026.

On February 12, 2026, our ASR was concluded, and we received an additional 3.1 million shares on February 13 2026. These shares had a value of $64.7 million, considering the share price during the ASRs performance period. Beyond the ASR, the company also repurchased another 3.5 million shares on a discretionary basis for $63.3 million in the first quarter of 2026. Therefore, in Q1, we repurchased a total of 6.6 million shares worth $128 million on a discretionary basis. We note that since our Q2 of 2024 earnings announcement, where we also announced a plan to repurchase $1 billion worth of our shares through 2026 that we have repurchased a total of 26.8 million shares.

That is a total value of $726 million of Harley-Davidson shares purchased. We are pleased with the performance and have decided to conclude reporting on this program as we look forward to aligning our capital allocation approach with the updated strategy that Ed and I will walk through shortly. Share buybacks remain an important part of our capital allocation strategy, and you will hear more on this, including a refreshed and updated approach to capital return to shareholders.

As we enter the main riding season, we remain pleased with our dealer inventory levels and leading market share position in the U.S., new model year '26 motorcycle launch, including the new limited touring motorcycles and the all-new redesigned trike models. We are also pleased with the reception to a number of new, more affordable motorcycles, which have a focus on critical price points to help stone demand. While we are not changing our financial guidance, we would note that our optimism on the year has increased. This is due in large part to our retail results in North America, and we are also pleased with the early action of our cost reduction. For the full year 2026, the company reaffirms its guidance and continues to expect at HDMC retail units of $130,000 to $135,000 a and wholesale units of 130,000 to 135,000.

We believe that global dealer inventory levels are healthy, and therefore, we expect retail and wholesale to have a largely one-to-one relationship in 2026. In line with my earlier comments versus prior year, we expect shipments to be higher in Q2, relatively flat in Q3 and then up again in Q4. At the same time, we continue to expect production units at HDMC to be lower than wholesale units shipped in 2026 as we work to prudently manage overall company inventory levels. For 2026, we expect this will have a deleverage impact, which will put pressure on operating leverage and operating margin, but we expect to come into alignment by next year.

In addition, we still expect to face a greater overall cost for incremental tariffs in 2026 compared to 2025 and which we covered in detail previously. As a reminder, in full year 2025, we incurred a cost of $67 million in new or increased tariffs. And in 2026, we forecast a cost of between $75 million to $90 million of new or increased tariffs based upon current tariff levels and versus the 24 baseline. This is an update to the prior range we provided of $75 million to $105 million. At HDMC, we expect operating income of positive $10 million to a loss of $40 million. At HDFS, we expect operating income of $45 million to $60 million.

As a reminder, the new business model at HDFS, given the HDFS transaction, where Harley-Davidson Financial Services now employs a capital-light derisked business model and has significantly changed financial earnings profile relative to before the transaction. For LiveWire, we are forecasting an operating loss in the range of $70 million to $80 million.

And with that, I'll turn it back to Artie to cover our strategic plan.

Now turning to our strategic plan for Harley-Davidson. On behalf of our Harley-Davidson community, Jonathan and I are excited to introduce our Back to the Bricks plan. Designed to reignite brand enthusiasm with riders around the world while driving profitable growth for our dealers and shareholders. It is grounded in the work we've done since October. We've spent significant time assessing the business, engaging deeply with dealers and riders and most recently, through a global road show where we connected directly with the majority of our dealer network in all of our global dealer advisory councils.

The Back to the Bricks plan will restore Harley-Davidson and position the company for growth. First, we are intensely focused on leveraging Harley-Davidson's competitive advantages, specifically brand, diversified revenue channels and most notably, P&A and financing products and our dealer network. Second, we are leaning into a true win-win model with our dealer network. Our dealers are not only our retail channel, but the frontline builders of our rider community. They are the true source of strength and a competitive advantage when our dealers win the enterprise wins, and so do our shareholders.

Third, we have already taken immediate actions to recapture share by better serving the large and community of riders, where Harley-Davidson has a clear right to win. Fourth, we're doing this from a position of strength and plan to leverage our balance sheet, bolstered by cost and restructuring actions to enable both investment in the business and returns to shareholders. We are executing against a clear path to strong and growing free cash flow and EBITDA margin. And lastly, we brought on some great leadership talent to support the business as we enter this new chapter for the company.

Moving to Slide 3. There are really three things that define Harley-Davidson. First, we are a 123-year young brand that designs and manufactures the best motorcycles in the world. combining iconic design, precision engineering and a look, sound and feel that is unmistakably Barley Davidson. Second, through our best-in-class dealer network, we serve a global community across segments. We've helped define over decades. Our riders show up in powerful ways through hog chapters, rallies, events and by giving back to their local communities. And third, maybe most importantly, is the culture of riding.

Since starting at the company, I've spent time with riders and dealers at events, rallies and swap meats. And what stands out is the emotional connection riders talk about their motorcycles, their rides and their community in deeply personal ways. For them, riding isn't just about getting somewhere. It's about the experience itself. The ride is the destination. Turning to Slide 4. We're in the midst of a bold restoration of the business to drive value for shareholders. What's clear is that our heritage remains a powerful advantage, not something to preserve, but something to build from. It starts with our portfolio. Taking a step back over the last several years, we leaned heavily into touring and electric.

Going forward, we are shifting to a more rider-centric portfolio, one that is more accessible, more customizable and better aligned to the needs of the full spectrum of our riders. Touring will always remain our core. We're building clear pathways into the brand that support long-term touring growth. While also addressing other writing occasions and styles. Importantly, we can do this using our existing platforms, moving from too many of too few to a more balanced lineup. We're also adopting an enterprise profitability model, recognizing that our success is directly tied to the success of our dealers.

When dealers win, we win. By aligning Harley-Davidson and dealer economics, we can create more value for riders, stronger profitability for dealers and more dependable cash flow for shareholders. I'll come back to this in more detail shortly. Another key pillar is parts and accessories. Customization is at the heart of Harley-Davidson. It's how riders make each bike their own what we often think of as freedom for the sole or more personally freedom for our so. We're reestablishing parts and accessories as a core growth driver, one where we have a clear right to win, and in alignment with dealers as this is an important component of their profitability. We're also reinforcing motor clothes and apparel, growing from the core of the brand.

On promotions, as inventory has normalized, we are shifting to a more targeted and disciplined approach, one that supports volume while protecting margins. An expanded portfolio will play an important role here as well. From an investment standpoint, we continue to see upside in existing platforms, particularly within touring, but our near-term focus is on executing better with the platforms we already have rather than introducing entirely new ones. By leveraging our existing platforms and powertrain to bring new motorcycles to market, we are operating with a more capital-efficient model.

Finally, we've taken important steps to refocus our brand around our community as reflected in the launch of the ride marketing platform. Taken together, we believe these actions position us to revitalize the business by leaning into what has always made Harley-Davidson strong and executing with greater clarity and discipline. As you can see on Slide 5, a we've experienced a decline in retail volumes, and that's had a direct and meaningful impact on both company and dealer performance.

At the core of this is a loss of relevancy with riders, most notably with the exit of iconic motorcycles like the Sportster, which limited accessibility and contributed to lower volumes. Additionally, we are excited to introduce Sprint the perfect entry for many to the Harley-Davidson brand. At the same time, as volumes declined, our cost base remained largely fixed putting pressure on margins and driving a greater reliance on broad-based promotions, particularly on higher-priced motorcycles. And importantly, lower throughput at has had a direct impact on our dealers, reducing traffic, compressing profitability and limiting the performance of key revenue streams like parts and accessories and service.

All of this reinforces a critical point. restoring profitable volume is central to improving overall performance. And that's exactly what our strategy is designed to address, making the brand more accessible through a combination of portfolio changes, more targeted pricing and promotions and improved operational execution. Moving to Slide 6. While recent performance has been impacted, the underlying market opportunity remains significant. We see meaningful white space in existing markets, areas where Harley-Davidson has strong legacy equity and a clear right to win. Across new motorcycles, used motorcycles, parts and accessories and apparel, there is share of wallet that we were capturing as recently as 2019 that we are no longer capturing today.

That creates a very direct opportunity to regain market share and do so in segments where our brand is already strong. Importantly, this strategy is not about entering new categories where we lack a competitive advantage. It's about doubling down in the categories we know where we have credibility, scale and deep rider connection. We believe this positions us to regain lost share while driving meaningful volume growth over time. Now turning to our strengths on Slide 7. The foundation of Harley-Davidson is its legacy, an unparalleled brand with unique American heritage, as recognized recently by USA TODAY as part of their 50 iconic brands that shaped America Series. Underpinned by a best-in-class dealer experience, deeply committed riders and craftsmanship that delivers something truly unique.

When I first joined the company, those advantages were immediately clear. And as we've looked more closely at the data, they've only become more compelling. We are one of the most recognized and esteemed brands in the category and in many ways, we help define it. Our dealer network is a true competitive advantage, consistently delivering a best-in-class customer experience and serving as the frontline of our brand. Our riders have an incredible affinity for Harley-Davidson. They don't just buy our products, they live our brand. It's a level of loyalty and engagement that is difficult to replicate.

And all of this is anchored in superior craftsmanship and quality that continues to resonate strongly with our riders. Taken together, these strengths provide a powerful foundation as we execute our plan and move the business forward. Now turning to our strategic road map on Slide 8. Against the backdrop we've just discussed, we've developed a plan for the next several years that unfolds in three clear phases. First is the reset. This phase is already underway and focused on taking cost out rightsizing dealer inventory, strengthening our dealer relationships and rolling out the ride marketing platform. We're making progress across all these areas, and today, we'll provide an update on that momentum. Second is the growth phase.

Beginning next year, you'll see a more expanded and balanced portfolio designed around what riders want, while leveraging the full life cycle of the motorcycle to unlock additional revenue streams. Parts and accessories will play a much larger role both in dealerships and as a core revenue driver. At the same time, we're refining our promotional approach to be more targeted, driving traffic and volume while preserving profitability. And third is the acceleration of value creation.

As the portfolio becomes more accessible and better aligned to needs of our full spectrum of riders, we see opportunity to deepen ridership engagement. This includes greater participation in the used motorcycle ecosystem as well as further driving adjacent areas like apparel and licensing. With the foundation established in the first 2 phases, we believe we are well positioned to drive more sustainable enterprise growth in wider economic enterprise benefits. Turning to Slide 9. What are we doing right now? We've already begun putting this plan into action, and we're encouraged by the early momentum.

As part of Phase 1, our actions on cost and inventory have been swift and effective. We've moved quickly to reduce head count and take cost out of cost of goods sales, creating room to reinvest in key growth areas like parts and accessories. As we previously outlined, we expect to deliver at least $150 million in annual run rate cost savings that will impact 2027 and beyond versus 2025 levels. At the same time, we've made meaningful progress on inventory. Global retail inventory is now at a much healthier level, down significantly, 22% year-over-year.

So we still see opportunity to improve assortment and allocation at the dealer level. Importantly, these actions are starting to translate into results. we're seeing sales momentum return with retail growth and market share gains, including an 8% increase in global retail sales in Q1 2026. Now turning to our dealers on Slide 10. The Harley-Davidson dealer network is a clear competitive advantage, and our strategy is intentionally designed to support and strengthen their profitability.

I firmly believe this company will go only as far as our dealers take us. That's why dealer profitability is a central pillar of our plan. Since joining, I've spent a significant amount of time with dealers, along with the broader leadership team, listening and learning directly from them on the ground. Our focus is on earning their trust and ensuring they're confident and excited about the path forward. We've already taken action through inventory rightsizing, better alignment on promotions and structural improvements to dealer programs. And we're not done. There are additional actions ahead that we expect to further strengthen dealer economics.

Our objective is clear: to materially improve dealer profitability over time, supporting a stronger, more stable network and enabling long-term growth. As shown on the slide, we are targeting a meaningful step-up in dealer profitability over the next several years. Moving to Slide 11. It's important to understand the role dealers play in the Harley-Davidson ecosystem. Dealer profitability is nonnegotiable and ultimately a win for shareholders. At the core, brick-and-mortar economics and frontline enthusiasm are directly linked.

When our dealers are profitable, they can invest in their business, delivering a better rider experience at the point of interaction with our brand. Stronger dealer economics also reduced the need for discounting and OEM promotional support, helping preserve the premium positioning and long-term health of the brand. Dealers are not just our primary sales channel. They are a powerful marketing engine, building the brand and local communities at scale. When they are successful, we unlock the ability to invest more in rider growth through initiatives like Riding Academy, HOG engagement and events that deepen connection to the brand.

And importantly, healthy dealer profitability attracts capital, bringing more investment into the network and supporting long-term rider-centric growth. Moving to Slide 12. I want to spend a moment on the lens through which we're now viewing growth and profitability. We've done significant work to better understand how we make money as one enterprise, Harley-Davidson and our dealers together. What's clear is that focusing solely on wholesale and retail motorcycle margins is an incomplete view. A motorcycle generates value over its entire life cycle across parts and accessories, service finance and insurance and ultimately, the used market.

And importantly, Harley-Davidson and our dealers participate in that value at different points in time across multiple revenue streams. So going forward, we're managing the business against this broader enterprise economic model. By increasing new motorcycle volumes, we not only drive profit at the point of sale, we also expand the base of motorcycles in the market, which fuels downstream revenue across all of these channels. We believe this will create a more stable diversified and sustainable earnings profile over time. It also changes how we think about the portfolio. We intend to bring motorcycles to market in a way that supports the full enterprise profit model not just the economics of an individual launch for motorcycle. We expect this to reduce pressure on any single product and lead to more balanced performance across cycles.

And importantly, the portfolio changes we're making, particularly around accessibility and customization play directly into this model by supporting higher volumes and stronger life cycle value. Over time, we plan for this to become a compounding growth engine. The return of Sportster and the introduction of new models like Sprint are great examples of how this approach will create value across the system. We're really excited to announce that our iconic Harley-Davidson Sportster will be returning in 2027. This has been the most requested motorcycle from both our riders and our dealers, and we're bringing it back better than ever.

Sportster is a perfect embodiment of back to the bricks, and it fits naturally within our enterprise economic model. For context, Sportster has historically been a middle weight highly customizable motorcycle with an air cooled powertrain and accessible starting price point, making it an important entry to the Harley-Davidson brand. While it was discontinued in 2022, it has remained incredibly strong in the used market, often retaining value at or above original MSRP, which speaks to its enduring appeal. With its accessibility, we expect Sportster to drive higher volumes.

And with its customization potential, we expect strong attachment to parts and accessories as riders personalize their motorcycles. Beyond the motorcycle itself, Sportster also creates opportunity across apparel, licensing in the broader wider ecosystem. Importantly, it demonstrates how our strategy generates value across the full life cycle from the initial sale to entry into the used market. Taken together, Sportster is a critical part of our plan to restore volume, strengthen our portfolio and drive long-term enterprise value. We look forward to sharing more specifics later this year.

Additionally, we're excited to bring Sprint to market beginning in the back half of 2026. This lightweight, customizable and accessible motorcycle provides a great entry to the brand for many riders. We are excited to be returning to a space that we haven't been in since the 1960s. And we believe that the Sprint will provide a great starting point for riders to enter the brand as they progress through the portfolio. Over the coming periods, we will be providing more detail on how this aligns with our portfolio planning and lifetime value creation. Moving to Slide 15 and zooming out to a broader view of the portfolio, we are taking deliberate steps to realign the portfolio. Making it more rider-centric and better positioned to replicate the value creation cycle we just discussed across more models.

Over the past few years, pricing and portfolio decisions reduced accessibility for some riders which contributed to lower volumes and ultimately, pressure on profitability. We're addressing that directly. Going forward, you'll see a more balanced lineup across price points. while still maintaining our premium positioning. We're also expanding the use of blank canvas motorcycles, which we know is a key differentiator for Harley-Davidson. Giving riders more opportunity to personalize their motorcycles through genuine parts and accessories. These changes are informed by deep analysis of the used market, direct dealer engagement and what we've learned from recent promotional activity.

Importantly, we see clear gaps in the portfolio that we can address efficiently without starting from scratch. We're leveraging our existing platforms in Powertrain, where we see significant room for growth, allowing us to expand the lineup without incremental capital investment. Taken together, this positions us to deliver what riders want, improve accessibility and drive stronger volume and life cycle value across the portfolio. Now turning to parts and accessories on Slide 16. This is one of our most important revenue channels and a significant growth opportunity. We believe there is a potential to drive 20% to 30% sales growth over time. We also recognize that we've under-invested in this area in recent years. Customization is at the core of the Harley-Davidson experience and a key driver of dealer profitability. No two Harley-Davidson motorcycles on the road are the same and that's exactly how riders want it. So we've laid out a clear road map to rebuild our leadership in parts and accessories, leveraging our dealer network and existing manufacturing and supply chain capabilities.

That starts with expanding our assortment, including reinstating approximately 30% of SKUs that were previously eliminated. We're also refocusing on core categories where Harley-Davidson has historically been strong. Like seats, exhaust, lighting, windshields and handlebars and pairing that with an increased emphasis on blank canvas motorcycles that are designed for personalization. Importantly, we're integrating parts and accessories into the motorcycle launch process, ensuring availability at launch, supported by HDFS financing and aligned dealer incentives.

As we execute this, we expect stronger dealer performance, increased attachment rates and ultimately both revenue growth and margin expansion over time. Turning to Slide 17. We're also refining our approach to promotions. Historically, our promotional activity has been broader and less targeted. More recently, we used promotions to help reset elevated dealer inventory. Which, while necessary, put pressure on profitability. Now with inventory at healthier levels, we're shifting to a more disciplined and targeted approach. Focused on driving traffic and conversion at a lower cost.

An important enabler of this is our expanding portfolio, which allows for more value-based messaging across a broader range of products. rather than relying on heavy discounting on a narrower mix. We're also strengthening our capabilities with recent hires who bring deep experience in performance marketing in automotive retail. And the launch of our marketing development fund in 2025 is a key step in better aligning scale with more effective localized dealer messaging.

Together, these efforts are improving how we manage incentive spend, driving more predictable growth while recognizing that many riders don't require heavy promotion to convert. The result is a more efficient model. which we believe will support volume recovery while protecting margins. Now turning to our marketing approach on Slide 18. Last month, we launched our new brand platform, Ride, which really brings everything together. It's built on a simple but powerful insight, joy and Swagger.

At its core, Ride celebrates the experience of riding and most importantly, our riders themselves. They and their motorcycles are the stars of the show. This reflects a broader shift in how we show up as a brand. We're moving toward more authentic, rider-focused storytelling that reinforces the community and culture at the heart of Harley-Davidson. We're also reallocating our marketing investments. moving away from a heavier e-commerce spend and toward top of funnel, brand-building efforts to drive awareness and engagement. You may have even seen us recently on Wheel of Fortune.

At the same time, we're making better use of tools like the marketing development fund, while upgrading our digital platforms and programs to support both global scale and local activation. And perhaps most importantly, the power of ride is that it gives us a single unified voice while still allowing flexibility for riders and dealers around the world to bring the brand to life in their own way. It connects all aspects of Harley-Davidson from product to community to marketing under one cohesive platform. And as you can see on the slide, it creates a clear and flexible framework for how we bring the brand to life across riders, dealers and markets around the world. Over time, we expect this to drive stronger engagement, deeper relevance and ultimately growth.

Now I'll hand it over to Jonathan to take you through the financial section. Jonathan, over to you.

Thanks, Artie. Now turning to our financials on Slide 21. All of the facets of the strategy we've just laid out support our financial growth trajectory over the next few years. We believe we have a clear path to achieving $350 million plus EBITDA in 2027. The path to get there is clear and execution-driven anchored by roughly $150 million in fixed cost reduction, better alignment between wholesale and retail volumes the full impact of Sportster and Sprint, targeted expansion in high-margin parts and accessories and more effective disciplined promotions.

Beyond 2027, the story doesn't stop. We expect continued strong growth driven by further cost absorption, a broader P&A and motorcycle portfolio, incremental product improvement and smarter incentive execution. The bottom line is, this is a structural step change in profitability with clear levers and meaningful upside ahead. Now on Slide 22, we'll take a closer look at how we get there. This bridge outlines the key initiatives that will drive EBITDA improvement. In the near term, the focus will be on cost reduction and operating leverage, which we see as the primary drivers of performance.

With these actions already underway, we have a clear line of sight to achieving $350 million or more. Beyond 2027, a Drivers for continued growth will include, but not be limited to, improvements in motorcycle margins and volume supported by growth in parts and accessories. Turning to our medium-term targets on Slide 23. We expect to return to sustainable growth across key metrics. We expect to achieve mid-single-digit retail unit growth over the medium term. As Artie discussed, this return to growth will be driven by the significant actions we are taking across our business. Furthermore, we expect the momentum in retail units and other enabling actions to drive mid-single-digit growth in P&A and AML.

Combined with the ongoing inventory rightsizing, we expect this return to growth to have a significant impact on dealer health. From a margin standpoint, we expect to drive significant improvement in gross margins approaching 30%, while operating expenses as a percentage of sales decreased to less than 20% and from the 25% in 2025. Over the midterm, we expect CapEx to remain broadly in line with recent expenditure levels. In totality, we expect to deliver attractive top line growth and drive towards a 10% to 12% EBITDA margin over the medium term. These targets reflect a more balanced and resilient business model underpinned by the Back to Brick strategy.

I'll now touch briefly on HDFS on Slide 24. We believe that the business remains a highly strategic asset. Following the transaction, we have transitioned to a more capital-light model while maintaining HDFS' role in supporting motorcycle sales and dealer financing. We recently held a call to discuss the HDFS business in greater detail but at a high level, we expect HDFS to see improved returns while reducing capital intensity. We expect to continue to strengthen HDFS' leading position in powersports and intend to expand our high-value finance and insurance product suite with optimized offers supporting motorcycle sales.

In connection with our enhanced P&A offerings, plans to leverage additional financing to drive P&A sales. Lastly, we are also better training dealers to maintain the best-in-class penetration rate of HDFS. With all this in mind, we are targeting $125 million to $150 million in operating income for the business by 2029. Turning to capital allocation on Slide 25. Our priorities remain consistent. We will reinvest in the business where we see opportunities to drive growth across the key initiatives of our strategy. We also remain committed to returning capital to our shareholders through share buybacks and dividends. Additionally, we remain open to opportunistic value additive M&A.

And with that, I'll hand it back to Artie.

Thank you, Jonathan. To conclude, Harley-Davidson is built on a strong foundation, an iconic brand a deeply loyal rider base and a differentiated dealer network. We're excited about the path forward. Our dealers are energized, and we're seeing real enthusiasm from the rider community around back to the bricks. This strategy is intentionally grounded in our core strengths, and we're doubling down on what makes Harley-Davidson unique, especially our dealer network. Importantly, execution is already underway and we're seeing early signs that our actions are delivering results. We're doing this from a position of strength with a solid financial foundation to support both investment in the business and returns to shareholders.

And we have the right team in place. energized and equipped with the experience needed to deliver on this plan. We remain committed to working closely with our dealers every step of the way to create value for our riders and ultimately for our shareholders. Thank you for your time this morning. And with that, we'll take your questions.

[Operator Instructions]. We'll take our first question from today, and that is from the line of Robin Farley from UBS.

Two questions, if I may. First is -- just wondering what medium term is 2029 medium term just to kind of put a finer point on thinking about the targets? And then the other question is a little bit with tariffs, some of the bridge to your 2020 EBITDA is from, I guess, lower tariffs lumped in with some other things. And so if you could just help us think about that what you're expecting, what's factored in, in terms of tariff refunds into that? And your full year was unchanged, but tariffs seem a little better, so maybe there's an offset there.

And then just -- I don't know if the manufacturing for Sprint, if you're assuming tariffs on that, if that's going to be outside the U.S. and potentially tariffs. So I know that's a lot of tariff balled up into one, but just whatever you want to address.

Great. Robin, thank you. It's already -- appreciate the questions. I'll take the first one, and then I'll let Jonathan handle the tariff specifics. When we said medium term, we mean 3 to 5 years. So hopefully, that helps on the tariff piece of Jonathan?

Yes. So from a -- so thank you, Robin. From a tariff standpoint, I think when you look at our 2026 estimate, we obviously have a midpoint of $83 million on that, if you look within the first quarter, we had $45 million in tariffs that were paid. That leaves $38 million, again, just using the midpoint for simplicity for the balance of the year. Our viewpoint is that, that tariff amount will consecutively decrease by quarter as we benefit from the current tariff structure that we laid out on our slides.

So in effective Q2 as we got into April, there were some changes from an overall tariff philosophy perspective that were put out there. You see the benefits of those. Obviously, that sort of accrues over time. we think that, that sets us up for 2027. We're not providing 2027 guidance at this point. But at 2027, that is arguably more attractive than where we are from a 2026 perspective. So you can infer and use some of your own judgment on where that lands. From a tariff refund perspective, there's obviously a tremendous number of companies large and small across the United States that are working on tariff refund and approach to tariff refund right now.

Obviously, we will be working and following all of the guidelines that we need to from a tariff refund perspective, but a little difficult for us to talk through some of the specifics on timing. And when all of those dollars will hit throughout the year, we certainly have a little bit of benefit baked into our expectations, but it's not a tremendous driver for us. It's really more as we look, what are the current tariff rules that are in place how do we think that will accrue and you see the benefit that we've put in place from a guide perspective versus what we originally guided to for 2026.

Our next question comes from the line of James Hardiman with Citigroup. Your line live.

So two questions on sort of the back to bricks opportunity. I guess, first, when we talk to investors, the 1,000-pound gorilla fair or not is sort of the demographic backdrop, right, specifically lower popularity of motorcycling if you think about younger generations maybe relative to their baby boomer counterparts. Artie, obviously, that's something that you've had to consider how does the back to the Bricks address that?

Obviously, you've got some market share recapture goals that are pretty aggressive. Is there any concern that market share gains could be offset by category declines if those demographic headwinds persist? And I did have a follow-up if we could.

We can, James, thanks for your question. I think -- the biggest thing in this strategy back to the Bricks is we're prioritizing rider needs in a rider-centric portfolio. So we specifically called out. Two examples of how we're doing that. The Sportster, one of our most iconic motorcycles as recently as 5, 6 years ago, the market for that motorcycle is 35,000 to 40,000 plus on a global basis. Our riders and many younger riders and our dealers have expressed it is the #1 universal request from the motor company to deliver around a great Harley-Davidson Sportster and what we're talking about today is the 83.

And so when I look at the demographics, how young people have always entered our brand, over 123 years. It has been motorcycles like the Sportster and over the last 30 or 40 years, the sports there has been a critical entry point to the brand. The second motorcycle is the Sprint, we have not had a motor cycle like the Sprint in some time. We see it filling an important need in Riding Academy, as someone who recently went through Ride Academy, being able to get on a motorcycle and then buy that same or a similar motorcycle is a gap in our current portfolio, which we're extremely enthusiastic about what this print is going to do.

And I'd remind you that the number of designations at least in the United States right now, it's quite strong, as strong as it's been. And we see the opportunity for us as we present the brand as you look at the marketing campaign, this concept of Joy and Swager is something that we believe is and will resonate with young people. It's core to bringing young people into the brand over many, many years, which the brand had done successfully. So I'm quite optimistic. And the portfolio of motorcycles we're bringing forward, I think, addresses this well.

That's great. And it's a great sort of dovetail into sort of my follow-up question. Obviously, as we think about your medium-term target, of mid-single-digit retail growth, most specifically, I think if investors felt comfortable with that number alone, this would probably be a $40 or $50 stock, right? But help us understand that target while factoring in the return of sports there and the introduction of Sprint, how much of that retail growth is coming from those items? I'm just trying to understand sort of the organic versus the inorganic contributors to that mid-single-digit retail growth. Can you get to a place where the organic piece is also growing at a nice clip?

Sure. So thanks for the question. The Sportster is an important part, and Sprint obviously complements it as well. I referenced the volumes on Sportster historically. I'll go back to we feel that if we meet our riders where they're at, we can grow at these levels and beyond. I'm not going to give a specific number in terms of how much Sportster constitutes the amount of growth. But just based on historical numbers of Sportster that have sold and a projected number of Sprint, we believe that a significant portion of the growth will come from there. In addition to that, this concept of decontented or blend canvas motorcycles that we referenced in the presentation is something our dealers have been asking for.

And it does a couple of things. Number one, is it leverages existing platforms and powertrains that we have and provides more accessibility across Touring and soft tail. Which is extremely exciting. And I'll remind everybody that some of these things were in Q4, we took action with things like our solo introduction, they're already working. So some of the retail success that we saw in Q1, we've effectuated in these plants. So I'm very enthusiastic about growth in both cruising and touring with a more distributed and accessible portfolio of motorcycles. Sportster is a big part of it.

And given what's sold historically in Sportster, I'm quite confident and what's happening in the used marketplace on Sportster, if you look up in some of the used market channels, it's extremely exciting to see residuals maintain, and it's difficult to get your hands on an 83 right now, which means there's a real need. That's great color.

James, the one piece that I would add to is, as you refer back to what was in the strategy deck, there's a page in there that talks through the multiyear view of motorcycle and the ancillary revenue streams. And so as you listen to Arty talk through changes to that portfolio, some of the kind of early wins that we've been seeing with solo models and some of the benefits that our price point focus is beginning to drive. That obviously has showed up in the first quarter from a retail standpoint.

So inside of Q1, we've demonstrated the benefit to the approach that has been laid out. And then from an overall strategy standpoint, as we think through a life cycle and lifetime view, we can really envision people moving through the portfolio. We can see the benefit that accrues to both Harley-Davidson and our dealers that aligns with what Art talked through, and that's what gives us so much confidence in where we're going with the midterm targets and what's been laid out there.

Our next question is from the line of Joe Altobello with Raymond James.

A couple of questions on the category expansion here. You talked about Sportster talked about Sprint. It sounds like those are smaller bites. Are there other sort of subcategories that you're looking to expand into as well, just beyond smaller CC engines?

And then second question, there's a reason why Sports or was discontinued, right? It was hard to make money. So how is the economics of that bike changed?

Great question, Joe. Thank you. Let me take the second one first. So our team has done an extraordinary job over the last couple of years working on this project. And we have the cost at a place that we're extremely comfortable against the expected MSRP that we referenced. More importantly is this enterprise profitability model that has been just a fantastic way for us to communicate with our dealers. And when you think about the value that a motorcycle like Sportster Brings to Bear, it's very exciting when you look at the parts and accessories relevancy and opportunity. When you look at the service revenue that it brings through our dealerships, when you look at the used market that it feeds and maintain such strong residual values.

So we're comfortable with the profitability of the motorcycle itself. However, we're extremely excited about how it juices the economics for the overall enterprise. To your first question, as it relates to other additions inside the portfolio, you can expect to see and the slide in the materials that references some of the current holes in the portfolio, those are examples of where our dealers via our riders have specifically asked for motorcycles from us that they expect. They expect from us and have gotten in the past. Some of these include maybe a little bit more content, and many of them include less content.

But once again, within existing families and with existing platforms and powertrains, and I'll I can't give much more detail than that. I will share [ one teas ] with you, which you may have seen on social media, which you can expect from us to continue to do, and that's to get feedback from riders at the Mama Tried Show here in Milwaukee, subsequently at Daytona and then the MotoGP race in Austin, we teased a modern expression of our iconic Cafe racer. And it's got an extraordinary buzz and feedback from our riding community. And I think that would be the type of motorcycle that is still large in terms of large displacement powertrain that you can expect us to get feedback from riders, and you might see that from us and the market. But we're very excited about the response to it.

That's very helpful, Artie. I can just quickly follow up on that. The U.S. market for you has outpaced international for quite some time. Is the sports there is the Sprint part of that strategy to grow your international business?

The Sportster is number one request from global dealers. If you walked into our dealership in Shanghai, if you walked into our dealership in Louisville, Kentucky, if you walked into a dealership in Frankfurt, Germany. And you asked the deal or the sales team lead in those dealerships, what can Harley-Davidson do for you, you would hear bring back to Sportster. So yes, but it's global truth in terms of the enthusiasm around that bike.

Our next question is from the line of Andrew Didora with Bank of America.

Just kind of change gears a little bit to HDFS, Jonathan, the $125 million to $150 million op income target. I guess, what kind of -- I know the business has changed here. I guess what kind of receivables balance you kind of anticipate growing to over. Through that time frame? And then more importantly, just the revenue breakdown of HDFS, how should we think about maybe just interest income contribution versus the more kind of fee-based services income as the segment grows.

Okay. Andrew, thank you for your questions. I'll start with a little session that we put out a couple of weeks ago on HDFS that really walked through that business, the different revenue streams of that business in a little bit more detail. than obviously what we've covered here in earnings. That's probably a good refresher in terms of where that business goes as we move forward and what we're seeing.

Obviously, from a revenue stream perspective in terms of where we are -- we have -- we did at the end of last year, sell off the back book as we've covered. And then on a go-forward basis, we continue to service those loans, so important that we are continuing to make sure that we are retaining the customer focus on the interaction and then a lot that we think we can do as we think through how we move those customers through the portfolio over time in the way that we're marketing to them. On a near-term basis, we obviously will make sure that for any originations that we have from this point going forward, we retain 1/3 of those originations on our balance sheet and then 2/3, we have the ability to sell off to our partners.

We continue to service all of those loans. So over time, the fee income associated with servicing is something that continues to grow. We also retain the revenue streams fully relative to protection products we also retain the revenue streams fully relative to card products and what we do from a card perspective, and then we also fully retain everything from a wholesale and commercial loan standpoint. So dial in or tune into the recording that's available on our IR website that will walk through that in more detail. A couple of other pieces that I would call out from an HDFS standpoint, we're really pleased with what we're seeing on our managed annualized retail credit losses.

So we have a page inside of the Q1 deck that highlights the year-over-year-over-year improvement in credit losses. So pretty excited that we have Q1 '26 kind of back below where we were not only in Q1 of '25, but Q1 of '26. So overall, I think the dynamics of the business are performing pretty well. We obviously have provided the $125 million to $150 million guide with the viewpoint that, that is a more capital-light model versus the way that we've run historically. So while the operating income is at a different level. We're really excited about the return that, that generates for our shareholders and obviously, frees up a lot of capital for us to remain committed to the shareholder priorities that we put out there from a capital allocation standpoint. So hope that helps.

Okay. And then I know, Jonathan, you mentioned in your prepared remarks, like interested in opportunistic M&A. Just curious kind of what could that entail? Is that more on manufacturing capability or brand side? Just curious there.

Yes, Andrew, it's Artie. I think we would look at any M&A as something that would accelerate the core areas of growth that we've laid out in the strategy. So anything that could drive dealer profitability would certainly be of interest. Parts and accessories would certainly be on the table. It was listed as the third thing right now. So it's not a top priority for us. But we do want to call out that anything that would make us stronger and allow us to drive the strategy faster, we would consider.

Our next question is from the line of Molly Baum with Morgan Stanley.

I kind of wanted to ask maybe one or two about the affordability dynamics right now for your customers. You made a comment in the prepared remarks about how many riders aren't requiring have or don't require having promotion to convert. So can you maybe talk about you as it for motorcycle buyers at present and what you were seeing from a promotional standpoint in 1Q and maybe even right after you cleared through some of the heavy inventory levels?

And then just how you're thinking about affordability more broadly in the current environment and going forward.

Thanks, Molly. Yes. On affordability, I really look at it as accessibility. So it's certainly price is a part of it, but also meeting riders where they're at and filling their needs with our portfolio. So when we look at Q1, we were pleased certainly with how the promotions restored the dealer network to healthier inventory levels, and that was focused on model year '25 touring. But we were also pleased with motorcycle sales that weren't promoted. And it demonstrated to us in some of the maybe more modest tweaks we made with the 26 launch an action in Q4.

And going forward, having more options available to riders is important. Certainly is price, but also features and benefits. The freeze I'm using internally is we've had too many of too few models on dealer floors. And by using and leveraging existing powertrain existing platforms, we can have a much broader assortment of motorcycles to present across, certainly, Sprint and sports are good examples, but even within legacy cruising and touring. And what excites me about this is we're going to be more nimble as it relates to promotional activity. If you think about the promotions in Q1, we had a challenge. We actioned it on a model year '25 touring. But going forward, we will have more diversity within the touring lineup, where we can be a bit more surgical and segmented on which motorcycles we may have to promote at various points in time and maintain healthier margins on the balance, so to speak.

It's something dealers have asked for and we're going to be delivering on that as part of our go-forward plans.

Great. And maybe if I could ask one follow-up on the dealer profitability piece. You had talked a little bit about last quarter about some immediate changes you made with the fuel facility model adjustments, changes to e-commerce strategy. you kind of talk about how much of the doubling profitability by '26, doubling again by 2019. How much of that is kind of improving the cost base, getting excess inventory to the system versus how much is structural from these strategy changes that you're making?

What we put in place in Q4 and what is in place currently we believe is appropriate. There's always the chance that there's small adjustments that we would align with our dealers on. But the Back to the Bricks plan and the targets that we put forward do not contemplate a change in the structural arrangement with our dealers. The e-commerce strategy that we made tweaks to in Q4 as part of the go-forward plans. We instituted a marketing development fund, which is in place right now. So there's no structural change that no material structural change that's contemplated in driving the profitability.

It's inventory. It's the right motorcycles at the right time with a rider-centric portfolio. and certainly leaning into this marketing campaign, we think is going to pay a lot of dividends.

I think, Molly, the pieces worth adding on the dealer profitability side of the equation to is that, obviously, volume and throughput makes a pretty meaningful change in their bottom line. So as we think through the -- again, going back to the strategy and the page that we built out that really helps you envision all of the different revenue streams for both Harley-Davidson and our dealers. That's a pretty important page to envision the way that we're running the business as we move forward.

And so through that, the targets that we have on the mid-single-digit growth rates that you're seeing, are really, really important for us and the benefits that accrue to our shareholders, and they are equally important for our dealers. And then in addition, as you see us really double down on our growth surrounding P&A. Not only do you see P&A benefits from an overall revenue and margin standpoint.

But inside of the dealer side of the equation, it does also drive some really nice service growth. So we're pretty excited about the way that we actually get our dealers back to something that we think is a much healthier and much better way to run their business.

Our next question is from the line of Tristan Thomas-Martin with BMO Capital Markets.

I just want to kind of circle back to two questions I was asked previously. First, just in terms of the Sprint, my understanding is it's being built overseas. So how do kind of reason tariff changes regarding imports potentially impact pricing on that? And then have you -- did you provide a breakdown of your medium-term retail CAGR like your expectations for U.S. versus global markets.

Sure, Tristan. I'll take -- I guess I'll take both of those. As it relates to Sprint, we're finalizing the specific production plans. We did call out that Sportster, U.S. Sportster will be made in New York and our York, Pennsylvania facility. And obviously, we're pleased with the revised guidance that we put forward on tariffs for 2016, and we do contemplate based on current expectations that we have some favorability in tariffs going into '27 across the portfolio. And I'm sorry, the second question was the CAGR in terms of CAGR on U.S. versus international, we're not breaking that out.

I will tell you that there's not a material change, U.S. versus international, primarily because the motorcycles that we're talking about here and the rebalancing of the portfolio and filling in the holes are similar globally. So we generally have the same portfolio around the world right now. As I mentioned, the dealer request and enthusiasm around Sportster in particular, and motorcycles that are raw blank canvas and allow for parts and accessories, genuine parts and accessories additions to them are globally wanted. And so we don't have, I'd say, a material difference in the growth trajectory by market.

Okay. And just one follow-up on kind of the aftermarket plan. I'm not sure if I'm reading between the lines correctly, but are you -- is there going to be more focus on dealership kind of aftermarket add-ons versus factory aftermarket or kind of factor add-on you mean parts and accessories in our dealerships and some customization at the dealership level?

Yes. Yes. So what we're saying is we expect to have more motorcycles in the portfolio that are maybe more approachable from a price perspective and have less accessories on them. And then our dealerships would be equipped with the P&A to personalize them for the riders which is consistent with what the brand has done over many, many years. So it's frankly leaning into a legacy strength where P&A has maybe not been as a focus for us with many of our motorcycles, in particular large touring motorcycles, having a fair amount of content.

Our next question is from the line of David MacGregor with Longbow Research.

I guess the question is on LiveWire and just the rules that LiveWire plays in this product portfolio in vision. And just if it is sort of something you can -- are considering staying with just how we should think taking maybe that 3- to 5-year outlook you'd expressed earlier, just with the use of cash for that business over the next 3 to 5 years?

Yes, David, thank you. This is Artie. The first thing I'll say is we're excited about LiveWire team's efforts this year and the pending launch of the Hangzhou bike, which is, I think, an interesting and exciting addition to the portfolio, and we'll be monitoring that closely rest of the year to see how that does. But we're very excited to see how that comes to market. I'll repeat what I shared on previous earnings as it relates to LiveWire. We funded the loan in the back half of 2025.

And that's our outstanding capital commitment, and we don't have intentions to fund the business directly from Harley-Davidson at this point in time.

Is there a way that you can influence demand. I mean you're talking about creating a higher level of interest back to James' questions with demographics. And I'm just wondering if there's a way that you can shape demand as well on the electric front or you feel like there's steps you could take to maybe at a higher level of engagement.

Yes. We're focused on this back to the Bricks plan and driving dealer profitability and getting the portfolio in a place that we think riders want from us. Cream and his team are focused on the electric side of the house at this time.

Yes. And David, one piece that I would add, David, on the kind of demand influences that through what you would have seen with what we delivered in Q1 we certainly believe that when we get the right alignment on marketing promo and kind of how we run that, we can drive traffic to dealers, and we can drive higher close rates. As you heard already talk about, I think one piece that always fits with me from an RD perspective is too many of too few. And you heard him reference that earlier on the call today when we think through where the portfolio is going and some of the pieces that we have, the ability to drive, we're really excited as the product portfolio becomes a little bit more nuanced in terms of what we're putting into market.

We can lean into a lot of the strategies that we've really demonstrated some good success with and do that in a much more targeted way. So pretty excited about where we're going from the midterm as we think about both what we've demonstrated within Q4 of last year, Q1 of this year. And then with what we've lined up from a strategy perspective, where we're going. So excited to see that kind of demonstrated ability that we've put in market so far and how that aligns with the strategy that's built out.

Do you have goals in place for building dealer support for LiveWire?

The LiveWire team is certainly working on their approach to how they manage their dealer relationships.

Our next question is from the line of Brandon Rolle with Loop Capital.

First, just on the dealer profitability improvement. Would you be able to size the headwind from maybe a more standardized rebate program to HDMC margins?

Thanks, Brandon. You're talking about HD-1 rewards in the holdback?

Yes. I think under the previous management team, they had kind of made the rebate program or rewards program a little more difficult to pull back some margin into the company. So it seems like that's going back out to dealers. And I was wondering if you're able to size the headwind, if any, to or HDMC margins.

Yes. I would characterize the headwind as modest over medium-term period. The previous holdback was variable. So it was based on sales targets, and this is fixed. I wouldn't characterize it as it's not the primary driver of the profitability improvements that we're experiencing or forecast. I think it's a small amount on a year-over-year basis, but it's not the primary amount.

The larger impact which I heard consistently from our North American dealers, both in the fall and again on a recent road show was the predictability was so important. Predictability of having the fixed holdback was critical in terms of staffing levels, being able to project cash flow throughout the year. And I think it's just an example of us understanding our dealers businesses. and respecting what they need to run their business well and service our riders well. And so I'm pleased where we are and where we are today is precisely what we've modeled going forward.

Okay. Great. And just one last one. On your U.S. dealer network, how do you feel about the current size of the network? Obviously, there's been a lot of dealer consolidation over the last few years. Do you feel like you have the dealer networks at the right size? Or are you going to continue to kind of, I guess, move away from inefficient dealers and, I guess, not shrink the dealer network, but maybe make it stronger.

We're always looking for ways to make the dealer network stronger, and we love the fact that we have individual maybe smaller dealer owners, dealer principles in certain markets. And we also feel privileged to have some larger entities that own groups of dealerships. And I think the -- the strength of our brand is a balance of both. One of the amazing things about Harley-Davidson dealerships is we have dealerships along these iconic rides. Where families in some cases, have owned these dealerships for decades, in some cases, 70, 80, 90 years and extremely proud of that.

And at the same time, we had recent acquirers in the market where some of our largest and some of our most profitable dealer owners are getting bigger in the system and I love them all. We're committed to having a healthy dealer network, and we're not precious about size. We're precious about dealers that are enthusiastic about our brand and serve riders well.

Thanks for your question. Ladies and gentlemen, we have time for a final question from the line of Jamie Katz with Morningstar.

I will make it quick. I get most of the profit improvement that you guys have, a lot of it looks like it's coming from leverage within SG&A. But can you talk a little bit more specifically about the top opportunities that are being targeted for cost reduction this year? Just so we can get a better idea of where that low-hanging fruit is coming from.

Jamie, thank you for your question. Yes, so it's obviously a balance of some head count and then obviously some non-headcount-related costs and then also some cost of goods related actions. Our teams are -- have done a fantastic job in Q1 at identifying areas. We've obviously done a significant amount of both competitive benchmarking, but also what's the right thing for Harley-Davidson and ensuring that we can grow going forward. We're not going to provide detail beyond that at this time, but we're very confident and the targets that we put forward and specifically the $150 million plus that we've earmarked for 2027 and beyond.

Okay. And then just quickly, I know there was some gross margin impact by pricing and mix. Is there any way to think about how those are trending over the remainder of the year just sort of from where you stand today?

Yes, Jamie, I'll let Jonathan take that one.

Okay. Thank you, Jamie. So as we look at pricing and mix and sort of compare that to relative stability, I think, as we look through Q2, Q3 and Q4, you did hear in the Q1 financial comments, a little bit more information relative to timing. So take a listen to that call in terms of how we talked about year-over-year quarters and what you see there. So from an overall pricing mix perspective, pretty flat to kind of a little bit of favorability in the balance of the year.

As we look at what's coming, we're pretty excited about what we're going to be introducing, and you'll see some of the impacts from that. Please take a listen to what we talked about from a timing standpoint, that will be important as you're thinking through what our trajectory is going to look like for the year. And then you will see a little bit less of an impact from incentive-related activity. So as we've talked about, we were pretty aggressive in what we did from Q1 from a Q1 standpoint, we're really pleased with where we landed dealer inventory. And so we think that really set us up for a very successful balance of the year. And hopefully, that sort of helps address your question.

Thank you for your questions. And ladies and gentlemen, that will close down our Q&A session for today. Artie, I would like to turn it back over to you for any closing comments.

Well, thank you, everybody. I appreciate you participating in today's call. And hopefully, you can tell how enthusiastic our team is, and I am in particular about our path forward, and we look forward to updating you on our progress, and we'll talk to you next earnings. Thank you.

Thank you.

Thank you for standing by, and welcome to the investor discussion of Harley-Davidson Financial Services business. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to Shawn Collins, Head of Investor Relations for Harley-Davidson. Thank you. Please go ahead.

Thank you. Good morning. This is Shawn Collins, the Head 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. These risks include, among others, matters we have noted in today's investment discussion presentation and in our 10-K, which was filed on February 26, 2026.

Joining me for this morning's call are Harley-Davidson Chief Financial Officer and Commercial Officer, Jonathan Root; and Harley-Davidson Financial Services Senior Vice President, Charles Do.

We will not be holding a question-and-answer session as part of this call, but instead, we wanted to make this session and presentation available to you as an informational resource. As I said earlier, it is located on the Harley-Davidson Investor Relations website.

With that, let me turn it over to our CFO, Jonathan Root.

Thank you, Shawn. Good morning, everyone, and thank you for joining today's call. I am going to start on Page 2 of the presentation. Today, we aim to provide you with a brief discussion of the Harley-Davidson Financial Services business. We will likely refer to this by a shorthand term HDFS, from time to time. I will start with an introduction of the business. Charles Do, who runs the HDFS business, will give you some greater color on the HDFS transaction, our recently announced strategic partnership with KKR and PIMCO. And then Shawn Collins will provide some detail and explanation of some of the business concepts that may be useful from a financial modeling perspective. After that, I will provide a few key takeaways on the HDFS business.

Harley-Davidson Financial Services is a key part of the overall consolidated Harley-Davidson business and it is important to me personally. I joined Harley-Davidson Financial Services in 2011, and I worked in that business for the next 12 years, where I was responsible for a host of core operations of the HDFS business, before I then moved on to become the CFO of Harley-Davidson in mid-2023. In my last 3 years at HDFS from 2020 to 2023, I was responsible for HDFS globally across all areas of the business from strategy through to implementation and execution. The HDFS business was started in 1992, and was started by a finance executive who today is a prominent Harley-Davidson dealership owner. This helps demonstrate the strategic importance of HDFS to the Harley-Davidson business.

Turning to Page 3 of the presentation. HDFS is the captive finance company for Harley-Davidson and serves both retail consumers and Harley-Davidson dealers alike. While this is relatively common across some industries in the automotive industry, it is more common for an OEM to have a captive finance subsidiary. Auto companies with captives include General Motors, Ford, Toyota and BMW. In addition, equipment manufacturers, Caterpillar and John Deere both have captive finance companies.

As you can see on the slide, HDFS provides a comprehensive suite of financial services products. HDFS is engaged in the business of financing retail consumer loans and wholesale inventory receivables, primarily for the purchase of Harley-Davidson and LiveWire motorcycles. These are lending activities. HDFS also works with certain third-party partners to provide motorcycle insurance and voluntary protection products to motorcycle owners, and we earn licensing fees from Harley-Davidson-branded cards. These are non-lending activities. HDFS lending and non-lending activities are conducted principally in the United States and Canada.

On the lending side, we provide new motorcycle loans to retail customers with up to 96-month terms. And we also provide used motorcycle loans to customers. These services are an important advantage for Harley-Davidson as we offer a range of tailored loan solutions, including flex financing and rider-to-rider programs. We are able to work closely with Harley-Davidson dealers and respond to market conditions and opportunities in a coordinated cost-efficient and timely manner.

On the lending side, we also provide a host of financing solutions to Harley-Davidson dealers, mainly floor plan lending, lines of credit to dealers and assisting dealers with their working capital needs. This is a business where we know and are comfortable with the lending collateral, mainly Harley-Davidson motorcycles and related dealer equipment. Dealers view HDFS as an important equation to their business success and as a stable and dependable financial source, whereas other more traditional financial lenders, think regional banks, credit unions, thrifts and other specialty lenders are perceived to be less committed to the motorcycle industry and its financing needs, particularly over the long term.

On the non-lending side, under protection products, we offer insurance products on behalf of third-party insurance partners. In our card products business segment, we have co-branded credit card partnerships, including a program with U.S. Bank in the U.S. The Harley-Davidson name, brand and association are valuable to us and are also valuable to our third-party partners where we both benefit commercially.

Turning to Page 5 of the presentation. Briefly, I want to point out that HDI provided our financial outlook for 2026 for all 3 of our business segments on February 10, 2025, as part of our Q4 and full year 2025 earnings presentation. At HDFS, we laid out that we expect full year 2026 operating income within a range of $45 million to $60 million. Our last update on both the HDI and HDFS guidance was in the HDI 10-K filed on February 26, 2026.

In addition, you can see record results for the HDFS business in full year 2025. As a reminder, these results are positively impacted by the closing of the HDFS transaction in the second half of 2025. We anticipate the transaction will transform Harley-Davidson Financial Services into a less capital-intensive and derisked business model. It also changes the financial scope of HDFS starting in Q4 of 2025. We believe it affords a high degree of optionality in how we fund and run that business and an opportunity to grow the loan assets over time if we so choose. In the next section, Charles Do of HDFS will talk further about the new business model at HDFS.

Turning to Page 6 of the presentation. We wanted to point out several of the business highlights of the HDFS business as we see it. U.S. retail market share of new motorcycles was strong at 71% in 2024. Overall, including new and used motorcycles, we financed a total of approximately 139,000 new and used motorcycles in calendar year 2024. The percentage of loans for new motorcycles was approximately 60%, while the percentage of loans for used motorcycles was approximately 40%. This split is in line with historical new versus used mix. This equates to $3 billion of loan originations in calendar year 2024. The return on equity for the HDFS business in 2024 before the HDFS transaction was completed was 18%, while for the 5-year period from 2020 to 2024, the average return on equity was a healthy 21%. These are some of the characteristics that make us view HDFS as a strategic asset that supports Harley-Davidson's success.

At this point in time, I am going to turn it over to Charles Do.

Thanks, Jonathan. For those who may not know me, I'm Charles Do, Senior Vice President at HDFS, and I lead all aspects of the HDFS business. I'm going to start on Page 7 of the presentation. On July 30, Harley-Davidson announced a strategic partnership with KKR and PIMCO to transform Harley-Davidson Financial Services into a capital-light and derisked business model. We closed the transaction at the end of October of 2025. The transaction included 3 key components: the sale of the existing HDFS retail loan assets of roughly $6 billion. HDFS also expects to sell approximately 2/3 of future retail loan originations to KKR and PIMCO. And lastly, HDFS sold a total of 9.8% of equity interest for approximately $50 million in proceeds to KKR and PIMCO based on a 1.75x post-transaction book value.

By executing these 3 components, the transaction unlocked approximately $1 billion in dividends from HDFS to HDI and shrinks the balance sheet, while Harley-Davidson retains full control and majority ownership of HDFS without significant operational changes to the business. Please note that HDFS continues to refine its capital structure related to its retail loan assets.

The next page in the presentation, Page 8, details out more specifics about the mechanics of HDFS' strategic relationship with KKR and PIMCO. HDFS originates retail loan assets for both new and used motorcycles. In recent years, HDFS has originated, on average, approximately $3 billion in loans per year. For the next 5 years, HDFS expects to sell approximately 2/3 of its retail loan assets to KKR and PIMCO, which may generate a gain or loss on each loan sold. The remaining 1/3 of the retail loan assets will remain on HDFS' balance sheet. Post sale, HDFS will continue managing the sold assets for a servicing fee of 1% for prime loans and 2.5% for subprime loans. The strategic relationship has several benefits, including reduced capital market reliance and funding risk for HDFS.

Additionally, the credit risk of the sold retail loan assets will shift from HDFS to KKR and PIMCO. In the event where both parties can't mutually agree on overall loan pricing, there are mechanisms in the agreement for HDFS and each partner to enter a 12-month transition period prior to ending the partnership. The partnership is structured in a way to align each partner's interest and allows for us to end the relationship in an orderly and constructive manner if we can't mutually come to terms on pricing.

Page 9 of the presentation is meant to provide an illustrative view of how the partnership changes the retail business. Motorcycles will continue to get financed in the dealership. For loans HD keeps, funds are borrowed in addition to using our own equity to fund about 1 out of every 3 loans. The economics on these loans remain unchanged. A customer pays HDFS interest, HDFS pays interest on the money it borrowed while at the same time, taking credit risk. HDFS used to go through these processes for all the retail loans funded.

Going forward, we expect approximately 2 out of 3 loans will get sold to KKR and PIMCO. There will be a gain or loss associated with each sale. KKR and PIMCO will also pay a fee for HDFS to service those loans on their behalf. Our partners receive the economics as well as take the risk on the loans they purchased. HDFS continues to set the overall company credit policy and end consumer rates. Much of this happens behind the scenes, so our dealers and end customers won't notice a change due to our strategic relationship with KKR and PIMCO.

And now I'll turn it over to Shawn Collins.

Thanks, Charles. I'm going to start on Page 10 of the presentation. The aim is to try to touch upon some of the building blocks of the HDFS business that may be helpful for financial model forecasting purposes. We understand that owning a finance captive or specialty finance business is not an entirely common setup for a consumer company, making it easy to overlook from an analyst perspective. I will try to complement on a lot of what Jonathan and Charles touched upon.

I will start with our non-lending activities. You can see that in 2023 and 2024, these businesses had revenue of $152 million, and $148 million, respectively. After the HDFS transaction, these non-lending activities will continue in a similar manner, and we will receive new non-lending activity income within the HDFS segment. This will be for both servicing fees and any gain or loss on the sale of the loans. These new sources of revenue are derived from retail lending activities, but they are a service fee in nature and not part of lending activities. Thus, they will be captured as part of HDFS' non-lending activities. We expect to charge servicing fees on all loans sold to KKR and PIMCO as part of the HDFS transaction. On December 31, 2025, off-balance sheet retail loan principal was $5.1 billion.

Moving more into lending activities. Dealer financing, or as we sometimes call it wholesale financing, remains the same as before the HDFS transaction. Wholesale finance receivables have been at a level of approximately $1 billion at the end of the year in each of 2023 and 2024 and in 2025. Wholesale loans are usually due within 1 year, and they turn over as bike sell and new motorcycles are shipped and newly financed. Yields we charge are based on a number of factors, including overall interest rates and overall economic and market conditions. We believe we know this customer very well, that is the independent Harley-Davidson dealer network in the U.S. and Canada. At the end of 2025, we had approximately 600 Harley-Davidson dealerships in North America.

Now I would like to turn to Page 11 of the presentation. Here, I plan to focus on lending activities and specifically the building blocks of retail loan asset levels, specifically the ones that we classify as held for investment. These are owned retail loans that we keep on our balance sheet and earn a return on, subject to loan performance. As a reminder, retail loans are comprised of loans to consumers who buy a motorcycle, whether it is a new Harley-Davidson motorcycle or a used Harley-Davidson motorcycle. Using the end-of-year figure, before the back book sale of retail loan assets associated with the HDFS transaction took place. On December 31, 2024, gross retail loans were $6.7 billion.

Again, focused on Page 11, on the right-hand side, you can see that gross retail finance receivables held for investment were $754 million on December 31, 2025. This would be the beginning balance as you think about financially modeling the business in 2026 by quarterly periods or by annual periods. We expect this balance to grow over time as new retail loans are originated, and we expect 1/3 of those loans to be retained by HDFS. Retail loan receivable balances are dynamic. where at any point in time, someone is taking out a motorcycle loan while someone else is paying off a motorcycle loan. Just a reminder that retail loans are amortizing. Thus as soon as a motorcycle loan is taken out, each month thereafter, there is a contractual payment due. In addition to contractual monthly payments, we also assume some amount of voluntary prepayments by loan holders. And naturally, also, there is some amount of loan losses or write-offs, which are netted versus loan asset recoveries.

One point to keep in mind is when forecasting expected retail loan balances, the conceptual equation is, and it's on Page 11, beginning balance plus total originations, less originations to partners, less collections, less write-offs, equals ending balance. Again, the high-level concept is that at any point in time, someone is taking out a loan, represented aggregately by loan originations, while someone else is paying off a loan represented aggregately by loan collections. There are a host of other business drivers to be mindful of, which you can see in the box on the right-hand side of Page 11. These include retail market share, average amount financed and the assumption of a collections factor and assumed credit losses each period.

Turning to expense items. Again, for financial modeling purposes, you can see a few assumptions on Page 11. I know there's a lot of financial information and terminology in the presentation, but we hope that Pages 10 and 11 can be used as a type of resource when it comes to some of the assumptions behind building an HDFS financial model for forecasting purposes. This is how we think about these things, so we hope some of this information will be helpful.

Now I would like to turn to Page 12 of the presentation. I am going to briefly focus on the balance sheet at Harley-Davidson Financial Services and its capital structure. I know this page has a lot going on. We would recommend looking at each business, Harley-Davidson Motor Company, and Harley-Davidson Financial Services separate and distinct from one another, especially from a capital structure standpoint. This is simply because the businesses are very different.

At HDMC, after the transaction, we paid down $450 million of debt in the second half of 2025, and we received a cash dividend of approximately $1 billion from HDFS to HDMC in Q4 of 2025. As a result, HDMC or Harley-Davidson Motor Company on December 31, 2025, had debt of $297 million and a cash balance of $1.2 billion, resulting in a net cash position, which we would define as cash and equivalents less debt of $935 million. At Harley-Davidson Financial Services, or HDFS, the post-transaction capital structure will continue to change as HDFS continues to refine its debt and cash balances.

We would note two important things on this page, which is Page 12. At the end of December 2025, total debt at HDFS was greater than total finance receivables. As Jonathan will discuss next, Harley-Davidson expects HDFS to continue to increase its retail finance receivable base, while Harley-Davidson continues to refine its capital structure. Thus, we focus more on net debt levels here on this slide for HDFS, which are in line with expected levels. Last point here on Page 12, at the consolidated parent level, which we refer to as Harley-Davidson, Inc. or HDI, which is a roll-up of both Harley-Davidson Motor Company and Harley-Davidson Financial Services and also includes our LiveWire subsidiary. We would note that overall total debt levels are reduced significantly from $7.5 billion at the end of 2024 to $3.5 billion at the end of 2025.

At the consolidated net debt level, which is debt less cash and equivalents, as shown on the slide, Slide 12, it is reduced more significantly from $5.9 billion at the end of 2024 to $412 million at the end of 2025. This is another way to view the derisked and less capital intensity of the post-transaction balance sheet at Harley-Davidson, Inc. or the parent. Again, I know that there is a lot of financial information and terminology here all at once. Naturally, Jonathan and I are always available to discuss the Harley-Davidson business in greater detail with the investment community whenever it makes sense. Many people on this call may know how to get a hold of me, but if that is not clear, then I would direct you to the Harley-Davidson Investor Relations website, which has a significant amount of company and financial information as well as contact information.

With that, I am going to turn it over to Jonathan Root.

Thank you, Shawn. I'm going to turn to Page 13 of the presentation. As you can tell, we are optimistic about the HDFS business, and we see a path to growing operating income over time. At our Q4 2025 earnings on February 10, I outlined that as of that date for full year 2026, we expected operating income of $45 million to $60 million. As we move beyond 2026, we expect HDFS to continue to increase its retail finance receivable base over the coming years as it continues to originate retail finance receivables held for investment. We expect the anticipated increase in the retail finance receivable base will contribute to higher levels of HDFS operating income, which we expect to reach around 3x 2026 expected HDFS operating income in or around 2029.

Also important to note is that given the updated funding profile of HDFS and the unchanged approach to driving historical fee income plus the incremental servicing income generated through the retail loan sales, we expect this to allow for the continued high return on equity of the business. Also, the new forward flow funding mechanism affords a high degree of optionality in how we fund and run that business in the immediate future and overall, including in the long term.

Turning to Page 14 of the presentation for a few key takeaways. While the HDFS transaction was transformative and freed up significant levels of cash, we still note that HDFS is doing everything largely the same as it did pre-transaction, but has changed one simple but very important facet of the business. HDFS is now selling a portion of its retail balance sheet to its strategic partners. Also, HDFS has retained 100% of strategic touch points with Harley-Davidson dealers and riders.

Last, I want to wrap up by highlighting a few of the positive balance sheet impacts. HDMC had a net cash position of almost $1 billion at the end of 2025. HDFS continues to reduce indebtedness as planned, but had net debt less than total finance receivables at the end of 2025. And last, consolidated Harley-Davidson net debt was $5.9 billion at the end of 2024 and was at $400 million at the end of 2025. I'll leave you with Page 15 to read on your own, which summarizes some of the highlights that we have discussed today.

That will conclude the presentation. As always, we appreciate your interest and focus on Harley-Davidson. Again, we are not going to do a Q&A session. Instead, we want investors to use this discussion as an informational resource. As Shawn said earlier, we are always available to discuss the Harley-Davidson business in greater detail with the investment community whenever it makes sense and whenever you need us. Feel free to reach out to us directly or go to the Harley-Davidson Investor Relations website, which has a significant amount of company and financial information as well as contact information. Thank you.

This concludes the investor discussion of Harley-Davidson Financial Services business. Thank you for your participation. You may now disconnect.

Thank you for standing by, and welcome to the Harley-Davidson 2025 Fourth 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 and Commercial Officer, Jonathan Root. With that, let me turn it over to Harley Davidson CEO, Artee Starrs.

Good morning, everyone, and thank you for joining us today. for our Q4 and full year 2025 results. Before we get into it, I'd like to thank our Harley-Davidson employees, the HD dealer network and our riders that are listening in this morning. Thank you for all you do every day for the company. living and leading our brand in culture. This marks my first full quarter as CEO. I've spent this time focused on understanding the core of our business, our people, our dealers, our riders and the realities in the marketplace. Through extensive time on the ground, I've confirmed many of the early observations I shared last quarter.

I'm confident there's a clear path to put Harley-Davidson back on the right trajectory, and I now have a sharper view of what it will take to reset the business and get to a more stable operating and financial future in 2016 and beyond. This morning, we will provide more detail on the themes you heard from us on our last call as we work towards our expected strategic plan announcement in May this year.

Turning to our fourth quarter results, which we do not believe reflect the full potential of this company. 2025 was a challenging year. And while some of the pressures we are facing are macro-driven, others are firmly with our control. and we are moving with urgency, focus and discipline to address them. Wholesale shipments and associated margins were negatively impacted by intentional actions to address elevated dealer inventory, particularly touring inventory in North America through interventions on both the supply and demand sides.

During the quarter, we reduced wholesale shipments and implemented targeted promotions to accelerate the return to balanced retail inventory levels. These actions are beginning to deliver results. Ryder response has been positive with North American retail sales growth in the quarter, accelerating into December, yielding early indications of improving dealer profitability. We plan to continue these interventions with discipline as we work to optimize retail inventory, positioning the business in our dealer network for more sustainable performance going forward.

That said, we're encouraged by the early green shoots we're seeing. Our immediate priorities are both straightforward and deliberate. First, we believe we are stabilizing the business by restoring dealer confidence and aligning wholesale activity with retail demand. Second, we are finalizing a strategy that we believe builds a durable platform that leans into our core and positions Harley-Davidson to return to sustainable growth. Early in my tenure, I committed to immediate priorities, improving dealer profitability, reigniting brand momentum and reducing costs. These commitments have not changed.

Today, I'll walk you through the immediate actions already underway to advance these priorities. These actions are in the following areas: Restoring our relationship with improving inventory management, sharpening our customer focus with the right portfolio, leaning further into the strengths of our branded community and enhancing financial flexibility. Let me start with our dealer network. Harley-Davidson's dealer network is best-in-class distinguished by unmatched enthusiasm reach and strength. While the network remains a competitive advantage, dealer health today is uneven with some dealers facing challenges.

Dealer health is not optional. It is a critical foundation for our long-term growth and earnings power. We're resetting the relationship between the motor company and our dealers, that relationship must be built on mutual trust and respect shared objectives, shared accountability and shared success. Healthy inventory levels and a healthy dealer network are nonnegotiable. Over the last couple of months, I continue a series of roundtable discussions with our North American and European dealers, Most recently, I spent time in our European markets, including attending the Verona Bike Expo and a HOG Chapter morning meeting.

The insights from these engagements were consistent with my U.S. visits. Extraordinary passion for the Harley-Davidson brand and strong commitment to the business. Importantly, there is broad alignment around the changes required to drive sustainable growth going forward. These include healthier inventory levels, improved product mix, simpler and more effective rider engagement programs and greater flexibility to reflect local market conditions. Drawing on my experience and franchise-based models, I know that sustained success depends on alignment, transparency and disciplined execution.

We are committed to reestablishing that foundation, beginning with immediate interventions that we expect to improve our dealers' retail performance and financial trajectory while accelerating trust across the network. As we mentioned in Q3, we've begun to act with 2 quick and meaningful changes to support our dealers. First, we reviewed our fuel facility model guidelines adjusting the scope to better balance global brand identity with celebrating local communities.

Second, we made a commitment to reevaluate e-commerce. The company's e-commerce strategy has not historically delivered the intended results. It has created customer confusion and driven excessive discounting, placing unnecessary pressure on dealer economics. We've taken corrective action in North America by shifting to a model that is intended to drive incremental dealership traffic to support motorcycle sales. In the near term, our focus is clear. Support our dealers, drive traffic to dealerships and execute against our core business, selling motorcycles.

While retail sales are still meaningfully below what we would consider a healthy run rate, the early progress is encouraging. We believe these actions are improving predictability and positioning the business for more consistent execution. Turning to inventory. On our Q3 earnings call, I was clear that inventory discipline and adapting to the realities of the current retail environment would be central to our focus. As we've dug deeper, it's become evident that the challenges are more significant than initially anticipated, and we're addressing them head on.

We are aggressively addressing inventory through targeted promotional support for touring models and disciplined quarterly planning by model region and dealership -- we believe this approach allows us to align inventory with sales trajectories, account for regional needs and proactively manage production and shipments accounting for seasonality. The touring overhang remains pronounced and is being actively worked down through disciplined interventions designed to move the product efficiently without undermining long-term brand value.

In North America, dealer inventory declined 16% relative to the year-end 2024 levels. Globally, dealer inventory was down 17% over the same period. meaningfully exceeding our 10% global reduction target. This represents solid progress against our priorities, and I'm pleased with the team's execution and delivery. Overall, retail performance through the quarter was broadly in line with internal expectations. North American retail was up year-over-year, while international retail, particularly in EMEA, was softer than we expected. We expect the actions we are taking to assist dealers in moving through inventory to restore dealer health to have a near-term impact on our financial results.

With that in mind, we view 2026 as a transition year as we reset business and finalize our new strategy. I see a path to return to long-term earnings and free cash flow power of the business, to the levels we know are possible. I can tell you we expect margins to be under pressure in the near term as production runs below wholesale, creating operating deleverage. These are deliberate actions that we believe are necessary to support both dealer and company profitability and ultimately rebuild the long-term earnings power of the business. As I've discussed, we are in the early stages of a reset. We've made decisive changes in the work underway across the organization is designed to rebuild momentum in the right way for the long term.

Turning to the brand and our customer. Our leadership team is reorienting the organization around a clear priority. Our dealers are customer #1. When we enable our dealers to sell, customize and service the motorcycles, our riders want, everyone wins. I continue to spend significant time with dealers and riders, including attending a hog chapter gathering in Milan as part of [indiscernible] to Europe. The pride those members took in showing either Harley-Davidson and motorcycles was contagious.

It's clear our riders view their hardly as their individual motorcycle. Individual expression matters and customization is central to that experience. We have been 2 lacks on our parts and accessories business in recent years, and that will change. This is what our riders want. It's a critical business for our dealers. It creates more opportunities for our world-class service technicians, and it is core to what Davidson has always stood for.

Going forward, our focus in this area will have 2 parts. Designing and building motorcycles that invite Harley-Davidson customization and ensuring our supply chain can support that demand quickly and reliably. Brand storytelling has always been essential to what makes Harley-Davidson Harley-Davidson. At its core, our brand celebrates riders and the communities they create. In recent years, our work has been too serious and at times too dark. That's not who our riders are. When they ride and gather, our riders are joyful, passionate and community creators. I saw this firsthand and 80th anniversary celebration for a dealership outside Paris, France just a few weeks ago.

Ryder shared stories of journeys they've taken together, including [indiscernible] who proudly told me he had written all the way to our factory in Pennsylvania and was wearing his York PA Harley-Davidson gear while standing in Paris. You'll soon see more optimistic, joyful brand work from us. advertising that celebrates our community and a uniquely Harley-Davidson way.

Turning to product. To better align aspiration with accessibility, we are acting more breadth and flexibility in our portfolio. That means being honest about where pricing and portfolio choices have limited our reach and making deliberate choices to widen the funnel in our core. My own interactions with dealers and riders over the past 4 months, in addition to customer research and recent retail trends validate what our riders want. The look, sound and feel of a Harley-Davidson Motor settle, coupled with the ability to customize their Harley to make it their own.

The used market continues to reinforce the power of the brand and a strong desire for customers to purchase our products but at a price that is more aligned with today's economic realities. In fact, as we look at used auction activity, we feel enthused about recent demand trends and the positive impact they're having on used values, especially in Harley-Davidson core Softail models.

What's clear is that the portfolio actions taken over recent years have put the brand out of reach for some existing and potential riders to win, -- it's clear we need to sharpen our product focus, not only creating the highest-quality motorcycles that our riders want to ride, but doing so with a price in mind. We need to ensure that these are products that our dealers are excited about and able to sell at a profit level that works for them and for us. On to the team in our org structure, execution requires the right team and structure.

We've made targeted leadership team and organizational changes to strengthen our capabilities across product, supply chain, marketing, technology and brand. We've added back new perspectives and welcomed back proven leaders with deep knowledge of Harley-Davidson's rider culture and community. Importantly, Harley-Davidson should be a great place to work as well as a great business.

Strong corporate culture isn't just good for employee morale is good for business. Rebuilding our culture and identity as a Milwaukee icon truly matters. My direct reports are all working from Milwaukee at our Juno Avenue headquarters and we will be formally reopening the office later this quarter. By going back to the Bricks at our Juno Avenue headquarters, we are not only reigniting the cultural beat that has defined this company for over 120 years. But with these changes, we are improving decision-making speed, cross-functional collaboration and critically accountability.

I'm particularly pleased with how much more agile, nimble and speedy our leadership team is becoming working shoulder to shoulder in Milwaukee. I'm excited to get our teams back to Juno in the coming months. It's an inspiring place to work. Lastly, I'll touch on the financial actions we are taking to reposition the business for success. We are conducting a rigorous end-to-end review of our cost base and operating expenses supported by third-party specialists.

Our current corporate overhead manufacturing capacity and overall operating expenses are built for materially higher volumes than today's demand, and we will be addressing this mismatch head on. We will share more details in May. However, on top of previously announced targets, we anticipate at least $150 million of annual run rate savings that will impact 2027 and beyond.

In Q4 2025, we renegotiated and funded the term loan with LiveWire, reducing the principal to $75 million. LiveWire is now working diligently to attract its own sources of capital to continue to finance its operations and future plans. We remain excited about LiveWire's newest motorcycle to Honcho, soon to be in market later this year, well aligned with the evolution of the EV motorcycle category toward smaller mini motors.

Turning to HDFS. The recent transaction has delivered meaningful capital benefits. We now expect to be able to run the HDFS business with less capital than has been tied to this business historically. With these changes, we plan to take HDFS class-leading returns and delivering even higher ROE than we did historically. And as HDFS asset base rebuilds over the coming years, we expect to get back to earnings levels that run below historical levels.

Going forward, HDFS will operate with significantly lower capital commitments and with funding support from 2 trusted partners. HDFS continues to be a strategic asset for Harley-Davidson and a critical enabler for our dealer network, and we will talk more about HDFS strategically during our Q1 earnings call in May. While a key priority remains returning excess capital to shareholders, we are currently evaluating the timing of our share buyback initiatives.

In the near term, we expect to be measured in our approach to share repurchase and while we finalize our strategic plan that we expect to announce in May. Before I hand it over to Jonathan, I want to reiterate that Harley-Davidson has an iconic brand, a loyal community and a dealer network unlike any other. We are taking the hard necessary steps to stabilize the business and rebuild trust, which we believe will restore our long-term earnings power. The work is underway. -- execution is improving, and we are committed to delivering results.

Thank you. And now I'll hand it over to Jonathan.

Thank you, Artee, and good morning to all. I plan to start on Page 4 and 5 of the presentation, where I will briefly summarize the financial results for the fourth quarter and full year of 2025. Subsequently, I will go into further detail on each business segment. As a reminder, we closed what we call the HDFS transaction in Q4 at the end of October. The HDFS transaction is a strategic partnership with KKR & PIMCO that we expect will transform Harley-Davidson Financial Services into a capital-light derisked business model. It also changes the financial profile of HDFS starting in Q4 of '25 and affords a high degree of optionality on how we fund and run that business.

As Artee cited earlier, the financial results in 2025 have come under pressure in the current challenging operating environment. We have moved immediately to make inventory management and discipline, a central focus to resetting the business. This is evident in Q4 results and will continue to be essential priority as we move forward. Let me start with consolidated financial results for the fourth quarter of 2025. Consolidated revenue in the fourth quarter was down 28% driven by both HDMC revenue being down 10% and by HDFS revenue being done 59%.

Consolidated operating income in the fourth quarter came in at a loss of $361 million compared to an operating loss of $193 million in Q4 of 2024. This was driven by an operating loss of $260 million at HDMC and an operating loss of $82 million at HDFS. The loss at HDFS was driven by costs associated with liability management activities related to the HDFS transaction, where we retired a significant portion of HDFS debt in Q4 of '25. The operating loss at LiveWire was $18 million, which was in line with our expectations at $8 million favorable to a year ago.

In Q4, earnings per share was a loss of $2.44 and which compares to a loss of $0.93 in Q4 of 2024. Turning full year 2025, consolidated financial results on Page 5. Consolidated revenue of $4.5 billion was 14% lower compared to last year, while consolidated operating income of $387 million compares to $417 million in full year 2024. For the full year 2025, earnings per share was $2.78 and compares to $3.44 in full year 2024.

Now turning to Page 6 and HDMC retail performance. As Artee already mentioned, in Q4, North American retail sales of new motorcycles were up with 1,847 motorcycles versus prior year. In Q4, international retail sales of new motorcycles were down 10% and with 9,440 motorcycles versus prior year, resulting in Q4, global retail sales of new motorcycles being down 1% at 25,287 motorcycles versus prior year. The choppiness and volatility in global retail results is a continuation of what we have observed since mid-2024, with a difficult global backdrop in big-ticket discretionary sectors.

Pricing continues to be on the top of customers' minds given the current global setup that includes inflationary pressures and interest rates that continue to run above recent historical lows. In North America, Q4 retail sales were up 5%, where U.S. retail sales were up 6% and Canada retail sales were down 7%. For the full year 2025, North America retail sales written 13%. In the quarter, we experienced strength in our Grand American touring product, up 6%, driven by the promotional support in the marketplace. We also saw strength in lower-priced sport motorcycle models, up 33% as the updated pricing and marketing resonated with our dealers and customers.

Within Grand American Touring, Trike was down 24% on very tight inventory availability in advance of the January 2026 new Trike launch. In EMEA, Q4 retail sales declined by 24%, driven by weakness across the region and different bike families. EMEA continued to be adversely impacted by overall macroeconomic conditions. For the full year 2025, EMEA retail sales were down 11%. In the quarter, we experienced the most weakness in the touring and soft tail categories.

In Asia Pacific, Q4 retail sales declined by 1%, which was a significant improvement from the first half of 2025 and mostly attributed to a continued challenging environment in China, which was down meaningfully. The Q4 retail sales included positive results in Japan and the Asia emerging markets. For the full year 2025, Asia Pacific retail sales were down 15% and the softness was most acute in China for the full year and Japan for the first half of 2025. In the quarter, we saw retail strength across all families, except for sport and lightweight motorcycles which still had a combined inventory down nearly 30%.

In Latin America, Q4 retail sales increased by 10%, where both Brazil, our largest Latin American market and Mexico were up while other Latin American countries were down modestly year-over-year. For the full year 2025, Latin American retail sales were up 2%, where both Brazil and Mexico were up. For the full year 2025, global retail sales of new motorcycles were down 12% versus the prior year, where both North America and international markets turned in a similar performance. As Artee mentioned earlier, dealer inventory at the end of Q4 was down 17% versus the end of Q4 in the prior year. This compares to our stated goal at the beginning of 2025 of reducing dealer inventory by 10%.

North America dealer inventory ended down 16% and international dealer inventory ended down 20%. And with the regions coming in between down 19% to down 23%. This allows Harley-Davidson dealers to start the 2026 writing season much cleaner and with an appropriate as we look at the coming quarters. As discussed, we specifically focused on assisting dealers to reduce touring motorcycle inventory in North America as the market displayed its price and value sensitivity.

Let me briefly touch upon incentive and promotional spend within the current environment. In Q4, we selectively provided incentive and promotional support to Harley-Davidson dealers in the form of interest rate assistance low APR, customer cash and dealer cash credit. As I covered last quarter and already mentioned earlier, dealers have more touring inventory in the channel than is desired. And while we have made progress in Q4, we still have more work to do.

Based upon discussions with our dealers in December of 2025, we determined to continue with consumer promotions into Q1 of 2026 in order to work through these units, and therefore, we have taken accrual in our Q4 2025 financials. Again, we expect this will help us get out of the gate stronger in 2026 to help drive retail performance.

Now turning to Page 7 and HDMC revenue performance. In Q4, HDMC revenue decreased by 10%, coming in at $379 million. were the biggest drivers of the decline included net pricing and incentive spend and decreased wholesale volumes. For the full year 2025, revenue decreased by 13%, coming in at $3.6 billion, where the biggest driver of the decline was decreased wholesale volumes, where we shipped around 125,000 motorcycles, down 16% from the prior year, while net pricing was largely flat on the year.

Now turning to Page 8 and HDMC margin performance. In Q4, HDMC gross profit came in at a loss of $30 million, which compares to a loss of $3 million in the prior year. Q4 is typically our lowest gross margin quarter due to seasonality and model year changeover. The year-over-year decrease was driven by the negative impacts from increased tariff costs and net pricing and incentive spend while partially offset by the positive impact from manufacturing costs, including leverage and favorable foreign exchange.

In Q4, operating expenses totaled $230 million, which was $19 million higher compared to prior year or 9% due to greater marketing spend with the introduction of the North America focused marketing development fund for our dealers. In Q4, HDMC had an operating loss of $260 million, which compares to an operating loss of $214 million in the prior year period.

Turning our attention to whole year 2025 margins. For the full year 2025, HDMC gross margin was 24.2%, which compares to 28% in the prior year. The decrease of 380 basis points was driven by the negative impacts from incremental tariffs in calendar year 2025, which we will cover on the next slide, negative operating leverage and lower volumes. These impacts were partially offset by the positive performance from lower supply management and logistics costs, favorable mix, foreign exchange and net pricing was largely flat for the full year.

Lastly, for the full year of 2025, operating expenses came in at $895 million, which were higher by $18 million, due primarily to the marketing development fund mentioned previously. For the full year 2025, HDMC operating income was a loss of $29 million, which compares to operating income of $278 million for the full year 2024.

Turning to Slide 12. In 2025, the global tariff environment was more volatile and uncertain than we had expected at the beginning of the year. In Q4 of 2025, the cost of new or increased tariffs was $22 million. And for the full year of 2025, the cost of new or increased tariffs was $67 million. This included direct tariff exposure, Harley-Davidson importing and exporting product as well as indirect tariff exposure from suppliers. This excluded pricing mitigation actions as well as operational costs relating to new or increased tariffs.

Harley-Davidson is a business very centered in and around the United States. Three of our 4 manufacturing centers are U.S.-based and 100% of our U.S. core product is manufactured in the U.S. We also have a U.S.-centric approach to sourcing with approximately 75% of component purchasing coming from the U.S. We have a number of actions underway to mitigate the impact, and we expect this situation will remain fluid given the uncertainty that still exists.

As mentioned earlier, we closed the HDFS transaction in Q4 at the end of October. Just to restate a recap what we talked about in greater detail on the last earnings call the HDFS transaction includes 3 key components: back book sales, sale of approximately $6 billion of existing HDFS loan receivables forward flow agreement, the sale of future HDFS loan originations and the sale of equity interest sale of a 9.8% common equity interest in HDFS to KKR & PIMCO.

In the fourth quarter, we retired a significant portion of HDFS debt, which resulted in some discrete costs. These discrete liability management costs were $73 million in Q4. We while the full year results were record high earnings for HDFS, Q4 of '25 resulted in an operating loss of $82 million for HDFS. Let me provide some greater detail. At Harley-Davidson Financial Services, Q4 revenue came in at $106 million versus $257 million in the prior year. The Q4 decrease was driven by lower retail and wholesale finance receivables at lower yields. The decline in retail receivables was due to the sale of the retail back book in the HDFS transaction.

In Q4, interest income decreased from $224 million in Q4 of '24 to $46 million in Q4 of '25, while other income increased to $60 million due to new servicing fee streams. On the expense side, Q4 interest expense increased to $130 million from $95 million a year ago. This line item included the $73 million of discrete liability management costs to retire HDFS indebtedness. The provision for credit losses decreased to $7 million in Q4 from $72 million a year ago on lower retail finance receivables. Last, Operating expenses came in at $51 million in Q4 versus $43 million a year ago, primarily driven by increased hedging costs and employee costs.

In Q4, HDFS operating income came in at a loss of $82 million. For the full year 2025, HDFS revenue was $869 million, down 16% from prior year primarily due to lower retail receivables and lower wholesale receivables due to the transaction. For the full year 2025, interest income decreased from $891 million to $668 million. For the full year 2025, other income increased from $148 million to $201 million in the prior year, primarily driven by a discrete gain on the sale of residual interest and securitizations a component of the HDFS transaction and by servicing fee income.

For the full year 2025, HDFS operating income was $490 million, record high earnings for HDFS and up from $248 million in full year 2024. The increase was primarily driven by favorable provision for credit loss expense due to the HDFS transaction impact and higher other income, partially offset by lower net interest income and higher operating expenses. With the sale of $6 billion of retail finance receivables, the provision for credit loss line item became favorable rather than a cost, reflecting the release of CECL allowance associated with the sold loans.

Turning to HDFS loan origination activities, total retail loan originations in Q4 were up 2%, coming in at $487 million in Q4. Commercial receivables came in at $949 million at the end of the year relative to the prior year level of $1 billion, down 6%, reflecting overall lower dealer inventory levels in the channel. Total gross financing receivables were $2 billion at the end of 2025, where retail receivables were $1 billion and commercial receivables were $949 million. This is a significant change relative to a year ago, resulting from the sale of around $6 billion of HDFS retail loan receivables as part of the HDFS transaction.

For comparison purposes, gross financing receivables were $7.7 billion at the end of 2024, which includes both retail loans and commercial financing. Total HDFS loan assets fell 74% year-over-year as we shift to a capital-light business model that carried less risk.

Now turning to Slide 13 for the LiveWire segment. On a full year basis, electric motorcycle units increased by 7% and static units increased by 15%, while consolidated revenue decreased by 3% and due to increased incentives associated with the Twist & Go promotion. LiveWire maintained its position as #1 retailer in the U.S. 50-plus horsepower on-road EV segment and had its second consecutive record-setting quarter for retail sales. Consolidated operating loss decreased by 32%, driving a 45% decrease in net cash used during the year excluding the $75 million of proceeds from the term loan with HD.

During Q4 of 2025, LiveWire consolidated revenue increased by 9% and driven by a 61% increase in electric motorcycle units and a 7% increase in static units. Consolidated operating loss decreased by 30%. For 2026, LiveWire's focus is on the launch of its S4 Honcho products with production targeted to begin in the spring of 2026, continued network expansion, cost savings and improvement and product innovation and development focused on profitable products.

Now turning to Slide 14. Wrapping up with consolidated Harley-Davidson Inc. financial results, we delivered $569 million of operating cash flow in full year 2025, which was down from $1.6 billion in full year 2020. The decrease in operating cash flow was driven by lower motorcycle shipment volumes and unfavorable manufacturing and tariff costs as well as originations of retail finance receivables classified as held for sale, which are classified as operating cash outflows.

There were no originations of retail finance receivables held for sale in 2024 for the net outflows related to this activity contributed to the decrease in operating cash flows. Total cash and cash equivalents ended at $3.1 billion, which was $1.5 billion higher than a year ago. The HDFS transaction facilitated a dividend of $1 billion from HDFS to HDI in Q4, which together with a further dividend expected to be paid in Q1 results in a total dividend that will be consistent with our original expectations. In addition, HDFS debt will be further reduced by the maturity of a $700 million medium-term note in Q2.

As part of our capital [indiscernible] strategy, in Q4, we entered into an accelerated share repurchase agreement with Goldman Sachs to repurchase $200 million of shares of the company's common stock. We entered into the $200 million ASR and $160 million was delivered to 12/31 and with the remainder in early 2026. For the full year 2025, we repurchased a total value of $347 million or 13.1 million shares in total which represents around 11% of December 31, 2024, shares outstanding. This amount includes the aforementioned ASR agreement.

Now turning to Slide 16. While 2025 was a more volatile and challenging year than we had anticipated, we looked to 2026 where we start the year at more appropriate dealer inventory levels and look to reset the business. toward a more stable operating and financial future. As we look to our financial outlook for 2026, we remain pleased with our leading market share position in the U.S. new model year 2 motorcycle launch, including the all-new redesigned trige models as well as the long-haul touring and the introduction of our affordable lineup of motorcycles with a focus on critical price point motorcycles to help stoke demand.

At HDFC, we expect retail units of 130,000 to 135,000. We expect wholesale units of $130,000 to 135,000. As you can see, we believe that global dealer inventory levels are at appropriate total levels with some need to balance by model and family. Therefore, we expect retail and wholesale have a largely one-to-one relationship in 2026. At the same time, we expect production units at HDFC to be lower than wholesale units shipped in 2026 as we work to prudently manage overall company inventory levels.

For 2026, we expect this will have a deleverage impact, which will pressure operating leverage when it comes to operating margins. In addition, we expect to face a greater overall cost for incremental tariffs in 2026, which are likely to be applied more uniformly over the entire calendar year, whereas 2025 experienced partial applications during the year and was backloaded. As a reminder, in full year 2025, we incurred a cost of $67 million in new or increased tariffs. And in 2026, we forecast the cost of between $75 million to $105 million of new or increased tariffs based on current tariff levels and versus the 2024 base line.

At HDMC, we expect operating income of positive $10 million to a loss of $40 million. At HDFS, we expect operating income of $45 million to $60 million. The forecast is based on the new business model at HDFS, given the HDFS transaction, where Harley-Davidson Financial Services now employs a capital-light derisked business model and has significantly changed financial earnings profile relative to before the transaction was done, particularly in the near term.

Additionally, both retail and wholesale asset levels are lower than we previously believed and nonservicing fee income is also being viewed more cautiously. At LiveWire, LiveWire is forecasting an operating loss in the range of $70 million to $80 million. These guidance elements exclude impacts from our updated strategic plan, which we are looking forward to announcing in May along with Q1 earnings.

And with that, we'll open it up to Q&A.

[Operator Instructions]

Your first question comes from Craig Kennison with Baird.

On HDFS, just based on the message that came out of the HDFS transaction last year, I think the expectation was that HDFS operating income could be maybe half of what it used to be. So at least $100 million, granted, that was just an expectation that came out of the presentation materials, but you're looking to be about half of that. Maybe help us unpack what's going on with the math behind HDFS? And what the long-term profitability of that business should look like?

Thank you for your question, Jay. So obviously, from an HDFS standpoint, as we take a look at what we're guiding to, as you say, for 2026, we have a guide for the HDFS business. to come in between $45 million and $60 million as we flow forward and look to kind of a standard run rate for this business, which will probably take a 2.5, 3 years to get to that point. We would view kind of at the midpoint that HDFS would be on a standardized basis, making approximately triple the midpoint. So that's where we think the business goes long term as we think about some of the short-term related impacts and where is there a difference versus monthly invest we obviously have a cautious outlook relative to what we're looking at from an overall volume standpoint. And so we're being careful and considered there.

And then in addition, with what you saw with our Q4 year-end results, with dealer inventory down significantly and more than what we envisioned. Obviously, we have lower wholesale assets too, so that pressures earning the power of base. So hopefully, that explains what you're looking for and provide the perspective.

Don't you need more retail and more wholesale stock units in order to triple that income? Or are there other adjustments?

Yes. No, it's time for those time for the retail assets to kind of flow their way in. So obviously, we need multiple years of building -- kind of rebuilding the balance sheet in order to drive what we need from an income statement standpoint. And that is. And then as we talk wholesale levels are lower than what we envisioned with already focused on how we really maintain tight and disciplined inventory with our dealers.

Your next question comes from Noah Zatzkin with KeyBanc Capital Markets.

I guess just on kind of the wholesale guidance, you kind of talked about a one-for-one dynamic. Obviously, the implication is shipment growth in 2016. So I guess, in terms of cadence, how should we think about that building through the year? And then on inventory levels, like I guess is the implication that you're kind of more comfortable now with where you're sitting at the end of the year?

Sure. So why don't I start a little bit with Cadence and then maybe we'll have Artee talk through total inventory levels and provide a little bit of commentary around that. So from a cadence standpoint, as we think about wholesale shipments and the way that will look on a year-over-year basis, again, we're being what I would define as careful and considered in what we're sending into the dealer network. So Q1 of 2026 will probably be down from a wholesale shipment perspective, down a little bit versus where we were in Q1 of prior year.

We think that we'll end up kind of popping up a little bit higher in early Q2. So making sure that we have dealers who are well positioned for when the season is starting. So we're not asking them to carry that inventory in the January, February time frame, but we do want them to be appropriately positioned from an inventory standpoint. So Q2 wholesale shipments will be a little bit higher than prior year. Then as we take a look at how we walk into Q3, again, probably just a little bit lower as we work through some timing elements within the portfolio and some things that occur from that standpoint.

And then as we end up ending Q4, obviously, we were pretty measured in what we shipped into the dealer network in Q4 of 25. So there's room for a pretty pretty material change in what we're sending in, in Q4 of 2026. So certainly, as you kind of take all of those different factors, a little bit more backward internship cadence in the second half of the year versus the first half? And even with that sort of a little bit more towards Q4. And then Artee, you can...

Yes. No, just broadly on inventory, the focus is on supporting our dealers and selling through the touring inventory. We remain pleased with the progress there. There's still support there and will continue to be. And we're also pleased with the 26 model year launch, a lot of enthusiasm in the market. So we'll be monitoring that closely. But in my script and in these comments, I just want to be abundantly clear we're we're hyper focused on healthy inventory levels and the focus is on the model year 25 touring right now.

Your next question comes from Robin Farley with UBS.

Great. I wanted to ask a little bit your expectations for retail to be flat globally. Just wondering what that counts on for U.S. retail? And then also just kind of what's behind the expectation of flat just how you're thinking that -- how you're coming to that expectation? And then if I could just also by the way, just squeeze in a quick clarifying point on LiveWire. I think previously, the expectation had been that you were limiting the kind of losses you would underwrite. And is it fair to say based on the guidance you're giving for '26 that you are willing to continue to invest or see live, why or maybe lose more than kind of the commentary last year?

Robin, it's Artee. Thank you for the question. I'll take the LiveWire one and then Jonathan will walk through the retail forecast. On LiveWire, we we extended the $75 million loan, which is originally $100 million. So we worked through that with them. And they're actioning other sources of capital at this point in time. So in terms of funding the operating losses or so on. We've extended our commitment on the loan, and that's it. So Jonathan, you can walk through the retail piece.

Okay. Sounds good. Thanks. So on the -- I think you asked about U.S. specifically from a retail standpoint. So as we flow through and take a look at it, we're obviously really, really excited about what's happening with the introduction of the new limited -- so as we take a look at where we are from an overall retail sales perspective, we do envision that we have a little bit of upside in terms of 26% versus 25% in from a steering standpoint for a couple of reasons. You heard Art talk about our focus on 25 model year sell-down and how that was focused around doing.

So at retail, that actually really helps us in terms of moving through the 25 touring bikes and what we have back on top of that is the new limited and the new limited that hit, and we're really excited about those and the initial reception to that. So a lot of enthusiasm from our dealer network around sold orders and what they're seeing on that front. As we move along on the retail side, we also have the introduction of the new rice Again, as we look at dealer enthusiasm and customer feedback around what those look like, we're really proud of what our engineering team has done from a suspension perspective.

So if he thinks through handling in the way of that motorcycle or for some real positives, I think, in terms of how customers will feel and enjoy that motorcycle. So a little bit of enthusiasm in terms of where we sit from a price perspective. And then just a couple more pieces that I'll touch on quickly. As we take a look, we are being careful and considered in what CBO retail and CEO wholesale shipment ship in looks like.

We do want to make sure that those banks really are put up on a detail and we're being possible about what we're shipping in, which obviously will challenge retail a little bit within that particular family. And then overall, we have the full year of soft sales. So really, really excited that we have dealers who are well positioned. We've kind of moved some price points in a way that are pretty customer friendly. And so overall, feeling good about where that is. So those are many of the puts and takes for 2026.

Your next question comes from Tristan Thomas with BMO Capital Markets.

Can you give us $150 million of annual run rate savings in 2020 and beyond as you guys called out, is that spread among all 3 segments? And then also, is there any way to anything porous kind of the cadence of that next year, specifically would be very helpful as we build out the models?

Tristan, I'll take that. The $150 million would not incorporate anything at LiveWire that would just be the motor company and in HDFS. And in terms of cadence, we would expect to realize some of those savings beginning in the back half of this year. We've not incorporated any restructuring charge in the guidance. So that would complement that but we've been clear in saying we expect those savings to be realized on an annual basis starting in 2027.

Your next question comes from James Hardiman with Citi.

So any help you could give us sort of bridging what I think is about 4% to 8% wholesale growth, if I sort of use the wholesale guide to where you ultimately land in terms of operating income still being a modest loss on the CMC side. Obviously, there are some tariffs in there. It sounds like there's some deleverage as we think about sort of production versus wholesale?

And I guess I'm also curious on the ASP side or the mix side. I think what I'm hearing is that even though inventories for the year will be flat touring will be down. So you're going to be undershipping touring. Just curious what impact that might have on ASP and [indiscernible]?

Okay. Yes. Great question. Thank you. I hope you well. As we take a look at where we are, we certainly have a number of factors that come into play as we look at motor company operating income in '26 versus '25. So you're right. If you kind of look kind of where we land from a midpoint perspective, really, really close to flat. We have a number of factors that come into play. So we have a full year of tariff exposure. So that adds about a $25 million headwind year-over-year. Again, going back to the tariff update page that we included within the deck, you can see some of the details there.

Obviously, as we complete our final year of getting discipline back into the operating environment in terms of balancing out wholesale and production that poses a little bit of a deleverage challenge. And then we certainly have some associated supply chain impacts that we're contemplating. As you talked about, we do have a broadly one-to-one relationship between retail and wholesale which does happen an offsetting positive. And then as we look, there are some non-motorcycle implications around P&A and AML.

So all in, as we look at where we are, if you do a midpoint comparison just effectively sitting right on top and obviously, an improved setup for out-year performance as we work through our final issues in '26.

Your next question comes from Brandon Rolle with Loop Capital.

I just had a question around the used versus new pricing spread. How do you feel about where that spread is right now? And obviously, with all this promotional activity, do you see that spread tightening as you kind of pull away the promotional activity? Or is this something that the spread is going to keep expanding as maybe prices go higher, and it seems like people are digging in lower and lower into the used values for a deal? Just any comments there on the spread.

Okay. Thanks, Brandon. I'll start with a couple of numbers, and then maybe Artee can provide some perspective in addition. So I think from a couple of different factors that you speak about. So as we think about where we're sitting today from a Q1 standpoint, we were forthcoming in terms of the charge that we took in Q4 of '25 in order to make sure that we were position to clear through touring in the way that Artee has talked about.

So relative to the factor on the new side, as we think about affordability, monthly payments and investor consumers, we recognize that we're doing -- we're putting some programs in market at the moment that are helping drive a reduction in the gap between new and used motorcycles. So we have some stimulus that we think is helping drive a really nice value equation for our customers.

I think what's really exciting is that in addition to that, as we take a look at what we're seeing on used values we have seen sort of stabilization to some nice improvement in used values and what we're seeing come through at both auction and retail on the used side. So I think that that dynamic is also helping us from an overall consumer standpoint. So a couple of nice factors to bring that together.

Yes. And I think one of the insights we're seeing is that some of the parts of our portfolio that we've walked away from in recent years, the used values have jumped. So it's informing some of our product development work, so it's encouraging to see core equities that we've been known for a long time, really responding quite well in the used market, and it's informing some of the innovation that you're going to be seeing from us.

Your next question comes from Jamie Katz with Morningstar.

Sorry. I'm hoping that you guys can talk about maybe what you envision as the potential for the motor company operating margin beyond '26. Like do we go back to a high single-digit rate? Do you guys see more opportunity to expand margin if maybe we can get some volume improvement to take hold and just sort of what you see as the potential for that segment over time?

Yes, Jamie, that's a great question, and it's something we're going to clearly call out in our May investor meeting and strategy discussion and earnings. So if you tune in that, I'll give you more detail. Obviously, we're -- we don't think the current results reflect the full potential of the company. So a lot of upside and Look forward to updating you in May.

Okay. And then do you have a target for leverage metrics at the end of 2026, given that you're still paying down some of it?

Yes. I think everything from an overall capital allocation perspective, as Artee talked about in our Q1 earnings call that we do in May, we'll make sure that we walk through strategy. overall capital allocation, our approach to the way that we're running the business on leverage for HDMC as well as HDFS and then what we look at on a go-forward basis, we will be sure that we cover all of that.

Sorry. The 1 thing I'd just remind is the EUR 700 million note that we're going to be paying off. That's the 1 thing that we've called out.

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

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, [ Arty ] 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 on the year ahead. Since then, I've been working with our team of employees at [ Juno ] 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 do to strengthen that foundation starting with dealer profitability. I've already made some quick decisions aimed at supporting the network in the immediate term.

First, we're accelerating our focus on improving motorcycle inventory management. Jonathan will share more details in a moment, but our focus is on reducing overall inventory levels at dealerships, particularly in the touring and CVO segments to ensure a healthier, more balanced mix across the network.

Second, we're introducing market responsive customer-facing promotions. These are designed to drive traffic to our dealers, help close more sales and support the reduction of touring inventory by moving units through retail. But this is especially important given the challenging macro environment we're operating in.

Third, we're assessing alternative approaches to e-commerce, working closely with our U.S. dealer advisory council. The goal here is to better meet the expectations of today's consumer while maintaining the right balance with the needs of the dealer network.

And fourth, we're reviewing fuel facility guidelines to provide more flexibility for dealers. While that review is underway, penalties for noncompliance will be suspended for 12 months.

These are immediate actions, but they're also an important step towards strengthening our relationship with dealers, while setting us up for a stronger, more resilient future together. Jonathan will get into more details on the quarter, and while we are disappointed by the results of the Motor Company, our Q3 results positively reflect the HDFS transaction, demonstrating the strategic value of HDFS as part of the overall business.

Aligned to what you've seen in the numbers, I'd like to share some initial observations about the strengths and opportunities that I've seen since joining the company. Starting with the [indiscernible]. First, brand and community.

As someone new to the sport of riding into the Harley-Davidson community, having earned my motorcycle license this year, I'm blown away by the incredible comradery that surrounds the brand. The support, passion and shared spirit among riders make it feel like more than just a community, it's a family. That passion is one of our greatest assets. a key driver of future growth for both the brand and business.

Second, our product. Harley-Davidson is building the best bikes in the world. We'll continue to focus on delivering the best products for our customers and on strengthening our manufacturing capabilities to ensure excellence in every bike that leaves our facilities.

Third, our dealer network. It's clear to me that the exclusive HD dealer network is a unique and powerful differentiator. As I said a moment ago, we need to build on that foundation. We'll continue to invest in supporting and strengthening the network as we all navigate the evolving commercial environment.

And fourth, HDFS. The HDFS business continues to be a significant strength and asset to the company and to the HD dealer network. Post transaction, this will continue to be the case.

Now turning to the opportunities. First, given the continued interest rate environment, affordability will be critical in winning in the market. Our product portfolio must balance aspiration with accessibility. Finding the right mix across our future portfolio will ensure we don't over-index on one product family while continuing to appeal to new writers.

Second, we must improve our speed to market. We're building the best bikes, but we need to move faster to bring innovation to market and capture new riders. That won't happen overnight, but the competencies and talent exist within Harley-Davidson to accelerate how quickly we bring new products and experiences to customers. Lastly, in the current demand environment, we must sharpen our focus on cost and capital efficiency.

Before I hand it over to Jonathan, I want to say a few words on LiveWire. I want to congratulate Karim and the team for the successful launch of the [ S4 Honcho ] last month. The product has been met with a lot of positivity and we look forward to seeing the bikes in the street next year.

And with that, Jonathan, over to you.

Thank you, [ Arty ], 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 three key components. Back book sales, sales 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 three 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 an impact on the Q3 financial statements. The continued management of the finance receivables sold to the strategic partners will result in servicing fees for HDFS, where HDFS will receive a servicing fee of 1% for prime rated retail finance receivables, and 2.5% for subprime rated retail finance receivables.

And finally, the sale of equity interest. HDFS has sold a 9.8% common equity interest in the fourth quarter to investment vehicles managed by KKR and PIMCO, 4.9% to each, based on a 1.75x post-transaction book value. We expect KKR and PIMCO to participate in 9.8% of future HDFS equity activity, including earnings and equity raises, with strategic partners holding an exchange right into [indiscernible] after 7 years.

Taking a step back, by executing these 3 components, including selling approximately $6 billion of loans in the back book sale at a premium [ to par ], and then with a portion of the proceeds paying off the HDFS debt that corresponds of the loans over the balance of Q4 and into Q1 of '26, this will rightsize the debt structure at HDFS. And as a result, the company expects the transaction to unlock $1.2 billion to $1.25 billion in discretionary cash through Q1 of 2026.

In addition, as HDFS transforms to a capital-light model, HDFS will have reduced capital requirements as the KKR and PIMCO investment vehicles will be funding these assets. In return, we expect this will result in a higher return on equity for the HDFS business.

At the HDI level, or parent level, HDI expects to use the proceeds, first of all, to reduce HDI indebtedness; secondly, to buy back Harley-Davidson shares; and thirdly, for other corporate purposes. We expect that [ Arty ] will provide more details on these uses by spring of 2026.

Stepping away from the numbers. We are excited to unlock some of the significant value of HDFS for our shareholders through the sale of a minority stake, while transforming HDFS into a capital-light financing business. In addition, beginning in 2026, the transaction creates a path that we believe will grow HDFS operating income over the coming years through new loan origination fees and loan servicing fees. And with this transaction, we retain full control and majority ownership of HDFS, where there is absolutely no change to how our dealers, or customers transact with, or are serviced by Harley-Davidson and HDFS.

Now I will turn to Q3 results at Harley-Davidson. I plan to start on Page 6 of the presentation, where I will briefly summarize the consolidated financial results for the third quarter of 2025 and subsequently, I'll go into further detail on each business segment. Consolidated revenue in the third quarter was up 17%, largely driven by the increase in revenue of 23%, or up $198 million versus prior year at HDMC. HDFS revenue was down 3%, while LiveWire revenue was up 16%.

Consolidated operating income in the third quarter was $475 million, primarily driven by HDFS operating income, which was favorably impacted by the HDFS transaction. At HDMC operating income was down 2% relative to prior year. The LiveWire segment had an operating loss of $18 million. Consolidated operating income margin in the third quarter came in at 35.4%, up significantly, relative to 9.2% in the third quarter a year ago, primarily due to the impacts associated with the HDFS transaction. 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 was $3.10. In Q3, Global Retail was down 6%, with the North American market being down 5%, and international markets down 9%, reflecting continued soft demand amidst unfavorable consumer confidence, high relative interest rates and inflation concerns. In North America, our dealers continued to experience lower customer traffic. We experienced this in a more dramatic manner in the first half of 2025 but adjusted our consumer marketing and go-to-market strategies at the end of Q2 and into Q3, which had a positive impact in Q3, evidenced by the sequential improvement in North America retail performance.

On a positive note, the Softail family delivered strong growth of 9%, reflecting the strength of the revised product lineup. Non-core motorcycles in North America, including adventure tutoring, and [indiscernible] model motorcycles also saw solid gains. Specifically, adventure touring bikes were up 4% in Q3 of 2025, driven by the refreshed 2025 [ venture turing ] lineup where the [ Pan America 1250 FT ] was newly introduced.

In EMEA, retail was down 17% after a comparatively strong first half. Core families, [ Touring ], [ trike ] and Softail were down more than noncore motorcycles, reflecting affordability and inflationary concerns in EMEA. This was partially offset by strong positive growth in noncore segments, including adventure touring and night secure model motorcycles. From a country perspective, within EMEA, the cluster of Spain, Portugal and Italy performed strongest versus the rest of Europe, although it was still down modestly in Q3 of '25 versus prior year.

In APAC, retail was down 3%, which is a relative improvement from the first half of 2025. The Softail family was up 6% as consumers responded positively to the updated Softtail portfolio. There continues to be intense competition in the lightweight and smaller motorcycle segments. From a country perspective, we welcomed Japan turning in positive growth for the first time since Q4 of 2023. In addition, we saw positive retail performance in Thailand, Malaysia and Taiwan.

In Latin America, retail was up 16%, where both Brazil and Mexico were up significantly in the quarter. This is the first quarter of growth for the region since Q3 of 2024 after 3 quarters of declines. Softails were the big positive standout in the region, while on the other hand, touring bikes were down low double-digit percentage points.

In Q3, on a global basis, the Softail family delivered positive growth versus prior year, and as I mentioned earlier, Softails were up 9% in North America alone, reflecting the strength of the revised product portfolio, and it's a [ field of core ] riders. In the U.S., market share for HD in the large cruiser category expanded from 61% in Q3 of 2024, to 68% in Q3 of 2025, underscoring the momentum behind our updated lineup.

Moving on to dealer inventory. Global dealer motorcycle inventories were down 13% at the end of Q3 of 2025, compared to the end of Q3 of 2024. We continued to prioritize reducing global dealer inventory, and we are committed to supporting a significant year-over-year dealer inventory reduction by year-end with the continued goal of better matching inventory with demand.

Looking at revenue. HDMC revenue increased by 23% in Q3, focusing on the key drivers for the quarter 20 points of increase came from increased wholesale volume at HDMC where motorcycle shipments in the quarter were up 33%, coming in at 36,500 units. Pricing net of sales incentives, was flat in Q3. 2 points of increase came from mix as we balance out the delivery of motorcycle models and markets. And finally, foreign exchange impacts resulted in 1 point of growth to Q3 revenue relative to prior year.

In Q3, HDMC gross margin was 26.4%, which compares to 30.1% in the prior year. Third quarter gross margin was down 3.7 points versus prior year due to unfavorable operating leverage as higher unit costs is derived from production levels experienced in Q2 of 2025, but sold in Q3 of 2025. The cost of new, or increased tariffs, implemented this year, which came in at $27 million in Q3 of 2025, and unfavorable foreign currency impact. These factors were partially offset by the favorable impact of net pricing and mix. Third quarter operating income margin was down 1.3 points due to the factors above, while operating expense was $20 million higher than a year ago, due in part to higher marketing spend at the dealer level.

Turning to Slide 11. In the year-to-date period, HDMC gross margin was 28.0%, which compares to 31.3% in the prior year-to-date period. The decrease of 320 basis points was driven primarily by the negative impacts of lower operating leverage, and the cost of new or increased tariffs implemented in 2025. On their own, the cost of new or increased tariffs in 2025 resulted in $45 million of incremental costs in the year-to-date period, creating a headwind of 140 basis points for the year-to-date gross margin. This excludes operational costs of $7 million to mitigate tariff impacts.

The year-to-date results include modest cost inflation of about 1%. The negative impacts I outlined are partially offset by the positive impacts to gross margin of pricing, mix and foreign currency. Operating expense in the year-to-date period came in approximately flat relative to prior year at $665 million, which resulted in a HDMC operating margin of 7.2%, which compares to 13.3% in the prior year-to-date period.

Before we turn to the next slide, I would like to provide an update on our ongoing productivity cost program. We achieved $75 million of productivity year-to-date, primarily from logistics and supply chain initiatives, and continue to expect to achieve $100 million for all of 2025. As a reminder, for the cumulative 3-year period of 2022 through 2024, we have achieved productivity savings of $257 million with another $100 million expected for full year 2025. In 2026, we have plans to achieve another $100 million, exceeding our target by over 10%, as mentioned last quarter.

Turning to Slide 12. The global tariff environment remains uncertain, but we wanted to provide an update. In Q3 of 2025, the cost of new or increased tariffs was $27 million. As mentioned earlier, the cost of new or increased tariffs in 2025 through the end of Q3 was $45 million. This includes direct tariff exposure Harley-Davidson importing and exporting products, as well as indirect tariff exposure from suppliers. This excludes pricing mitigation actions as well, as operational costs related to new or increased tariffs.

Harley-Davidson is a business very centered in and around the U.S. 3 of 4 manufacturing plants are U.S.-based and 100% of our U.S. core product is manufactured in the U.S. We also have a U.S.-centric approach to sourcing with approximately 75% of component purchasing coming from the U.S. With that in mind, we estimate our full year 2025 impact from the direct cost of new, or increased, tariffs to be in the range of $55 million to $75 million. We have a number of actions underway to mitigate the impact, and we expect this situation will remain fluid given the uncertainty that still exists.

Turning to Slides 13, 14 and 15 to touch on HDFS and its financial results. At Harley-Davidson Financial Services, Q3 revenue came in at $261 million, a decrease of 3%, where interest income was down $35 million, and other income was up $26 million for a net result of down $8 million in Q3 of 2025, relative to Q3 of 2024. Interest income was down due to lower retail loan receivables at a higher average yield and lower wholesale receivables at a lower average yield. Q3 2025 other income includes a $27 million gain on the sale of 95% of HDFS' certificate interest in certain securitization residual interest, which closed in late August.

HDFS' operating income increased by $362 million in the third quarter, or 472% versus prior year, driven by the impact of the HDFS transaction. The increase was primarily due to a lower provision for credit losses and higher other income, partially offset by lower net interest income and higher operating expenses. The provision for credit loss expense was favorable primarily due to the reversal of the allowance for credit losses on held-for-sale retail finance receivables, which drove a $301 million benefit in Q3 of 2025, compared with an expense of $58 million recorded in the provision for credit losses in Q3 of 2024.

In Q3, HDFS' annualized retail credit loss ratio was 3.2%, which compares to 3.1% in the year-ago period. Retail credit losses were $35 million in Q3 of 2025. Total finance receivables at the end of Q3 of 2025 were $6 billion, a decline of 24% versus prior year, primarily due to the HDFS transaction. The $6 billion of quarter-end finance receivables included $4.1 billion of finance receivables classified as held for sale which resulted in the reversal of the associated allowance for credit losses during Q3 of 2025. The held-for-sale finance receivables were sold in October as part of the HDFS transaction.

Total retail loan originations in Q3 of 2025 came in at $757 million, roughly in line with the $754 million of retail loan originations in Q3 of 2024. For the LiveWire segment, which is on Page 16, consolidated revenue increased in Q3 of 2025 compared to the prior year period, driven by an increase in electric balance like and electric bike revenue for the quarter year-over-year. Selling, administrative and engineering expense was also lower by $9 million for the quarter year-over-year.

In Q3, Livewire delivered a 30%, or $8 million improvement in consolidated operated loss and reduced its use of cash and cash equivalents through Q3 of 2025 by 39%, or $31 million, compared to Q3 of 2024. We now expect LiveWire's full year operating loss to come in between $72 million and $77 million. On a unit basis, LiveWire reported sales of 184 units in Q3, compared to 99 units sold in the prior Q3. This increase in unit sales for the quarter was driven by the [ Twist & Go ] promotion, which began on August 28.

Wrapping up with consolidated Harley-Davidson in Q3 financial results, we delivered $417 million of operating cash flow in the Q3 2025 year-to-date period, compared to $931 million in the Q3 2024 year-to-date period. The decline was due to new originations of retail finance receivables that were classified as held for sale, which is a change as this is classified as an operating activity under U.S. GAAP. As a result, the originations outflows reduced cash flow from operations as there were no comparative retail finance receivable originations classified as held for sale in the prior year.

Total cash and cash equivalents ended at $1.8 billion, which was $469 million lower than at the end of Q3 prior year. This consolidated cash number includes $16 million at LiveWire. Additionally, as part of our capital allocation strategy, we remain committed to returning capital to shareholders. In Q3 of 2025, we bought back 3.4 million shares of our stock at a value of $100 million. For the Q3 2025 year-to-date period, we have bought back 6.8 million shares of our stock at a value of $187 million.

Slide 18 outlines our aggregate capital returns. Since the start of 2022, we have returned an aggregate of $1.7 billion through discretionary share repurchases and cash dividends. Given that the global tariff situation remains ongoing and uncertain, we continue to withhold our full year 2025 financial outlook for HDMC and HDI. We continue to expect HDFS to come in at approximately $525 million to $550 million of operating income for 2025.

As we move into Q4 of 2025 and with the noted closing of the HDFS transaction, I will summarize the intended use of proceeds, which will support Harley-Davidson's capital allocation priorities. Cash is expected to be used for the following. First, approximately $450 million of debt reduction at the HDI level. Second, investment in HDMC and organic growth initiatives. And finally, continued share repurchases, evidenced by today's announcement where Harley-Davidson announced its plans to enter into an accelerated share repurchase agreement with Goldman Sachs to repurchase $200 million of shares of the company's common stock. This announcement is part of the previously announced plan to repurchase $1 billion in shares by the end of 2026. The company expects the transactions under the ASR agreement to complete it by no later than the first quarter of 2026.

And with that, I'll turn it back to [ Arty ].

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 success. Second, celebrating the joy of ridership and the experience of riding of 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.

Your second priority you mentioned was the joy of ridership and bringing more riders into the Harley-Davidson brand. Just as you've done, you're listening tour and some of the due diligence you did before taking the job, what were your thoughts around the demographic headwind 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 -- 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 the bikes is extremely warm and welcoming. And having gone through [ Ryder ] 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 real, which is just unbelievably inspiring and 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 two things. One is a bike that's lighter and easier to maneuver. And the second thing is the 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 interim remarks, [ Arty ], 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 Arty 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 are 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 [ CBO ] 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 that 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 [ Arty ] 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 here.

With that, I'll hand it back to Arty.

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, I 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, 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. 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 elements. 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 closed over the coming quarters. So a little bit of kind of carryover from 1 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 all of 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.

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 reductions, 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 Arty for some thoughts. [indiscernible] 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. It's Arty 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 [indiscernible], which is pretty flat. And so there certainly was some uniqueness as we look at 2024 due to the product launch of [indiscernible] 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 Arty 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 our [indiscernible] 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 Arty.

Yes. The only thing I'd add, Robin, is we're optimistic about the pricing ladder that Jonathan referenced earlier start with the [indiscernible] start with the [ 14 ], starts with the [ 19 ], starts with the [ 24 ], [ nicer street Bob ], Softail and [indiscernible], coupled with the Sprint bike coming in the second half of next year. So 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 final point on that, Jonathan. So just 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 was 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. So relative to dealer inventory, I think your math is probably about right. As you look at how that reduction kind of translates through 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 us 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 Arty 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, but the affordability that it offers up from a 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 performed?

Sure. So I think as we look -- great question around what we're seeing from a quarter standpoint, please do pass along our best 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 of.

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 may be 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 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 lineup 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 is 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, activation, digital spend, marketing spend, how to get the different elements of sort of go-to-market balance 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 Arty 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.

Arty, 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 Arty 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.

Thank you for standing by, and welcome to the Harley-Davidson 2025 Second 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. Good morning, everyone, and thank you for joining today's call. This morning, we're going to start with details on our HDFS transaction that were announced earlier today before moving on to the Q2 results. We're very pleased to share that we've entered into strategic partnerships with both KKR and PIMCO for HDFS after completing a rigorous selection process with over a dozen parties bidding for the HDFS business over 3 rounds. We've consistently spoken about the strategic and financial value of the HDFS business, and we are very excited to announce this transaction that clearly reinforces our view.

On our first quarter call, we laid out 4 key objectives that any transaction involving HDFS would need to achieve. And I'm pleased to say that we are checking the box on all of them, providing the business with a lot of flexibility in the future. First, we said it would have to reflect the significant value HDFS represents to Harley-Davidson and its shareholders. The investment in HDFS equity at approximately 1.75x post-transaction book valuation for these 2 world-class investors clearly achieved that goal, illustrating HDFS' class leading returns and corresponding significantly higher valuation to book value.

Second, the transaction would have to create value over the long term with a strategic partner. We expect this transaction will accomplish that across a range of fronts. Our new strategic partners will purchase about 2/3 of HDFS' future retail loan originations at a premium on an annual basis for 5 years. Going forward, HDFS will retain 1/3 of new consumer loans. And when combined with new fee streams, we expect it will significantly increase HDFS' go-forward ROE to the high 20s. And with a minority equity ownership of HDFS, KKR and PIMCO are in it for the long term.

Third, a transaction would have to allow us to maintain or lower our overall cost of funding. With this transaction, we are reducing our overall leverage and the perceived risk highlighted every time the business environment deteriorates, freeing up significant equity on the balance sheet and creating a long-term stable funding mechanism, all of which we believe will contribute to greater funding flexibility and lower borrowing costs. We expect this transaction to boost HDFS earnings substantially this year by $275 million to $300 million in operating income.

On top of the strong HDFS operating results expected this year, we believe there's a clear path to growing HDFS operating income quickly towards pre-transaction levels in an asset-light manner in future years. We plan to achieve this through the retention of only approximately 1/3 of annual consumer originations as well as through new fee streams from loan originations and servicing fees and organic growth, along with the commercial finance, insurance, car products and international partnerships that we retain.

Lastly, but importantly, we were clear that the transaction could not have a negative impact on our customers or dealers. For customers, this transaction will be transparent, with HDFS continuing to originate and service both new and existing retail loans. And for our dealers, HDFS will be able to continue providing dealers with service, benefits and flexibility commensurate with what HDFS currently provides. Most importantly, this transaction will free up cash and allow additional flexibility to support demand driving initiatives.

Overall, we believe the new partnership is a big win on all levels. In addition to other significant future benefits, this transaction is expected to generate cash that will allow HDFS to pay a distribution of approximately $1.25 billion to HDI and leave HDFS well positioned to continue to serve our customers and dealers in the best possible ways. With the cash generated from this transaction, we are planning to reduce our debt by about $450 million and to accelerate our $1 billion share buyback program announced last year with the intention to purchase $500 million in the second half of '25. Also, we expect this will give us the flexibility to invest up to $300 million of additional funds into future growth opportunities. The post-transaction book value multiple realized in this transaction is a significant valuation for HDFS, and we believe will serve as a major value unlock over time, as it clearly highlights the substantial undervaluation of HDMC relative to other comparable companies.

To summarize, the post transaction HDFS business's equity has been valued by our partners at around $500 million or approximately 1.75x post-transaction book value. As a result of this transaction, HDFS intends to distribute $1.25 billion of cash to HDI, representing around 40% of our current market cap. The combined $1.75 billion of HDFS driven value compares to Harley-Davidson's current market cap of approximately $3 billion. In addition, HDI was holding $1.6 billion of cash and equivalents at the end of Q2. This transaction implies that HDFS is trading at around 8x consensus operating income compared to peers at around 14x.

Turning to HDMC and Q2. In the face of a continuously challenging commercial environment for discretionary products in particular, consolidated revenue for the second quarter declined 19%, driven primarily by a planned reduction in motorcycle shipments and soft demand. Global motorcycle retail sales were down 15% year-over-year, reflecting the continued impact of elevated interest rates and customer purchasing behavior product demand softness and overall economic uncertainty. In response to the ongoing uncertainty and persistently higher-than-expected interest rates, the company will look to introduce a new efficiency program and enhance and where possible, accelerate its existing productivity initiatives. Any efforts will leverage technology, including AI, which we expect will deliver substantial cost savings and drive further productivity gains across the business.

Across our portfolio, performance was mixed depending on the segment. Touring continued to face headwinds as we left a strong model year '24 launch of the redesigned Touring platform. That said, through the quarter, we remained disciplined in motor company-led promotions, even as competitors leaned heavily on promotional activity, an area where we have exercised greater restraint, including on our '25 models.

The newly refreshed Softail lineup is performing better in the market. Additionally, our RevMax platform, including both Adventure Touring and Sportster models, grew 16% year-over-year in North America. This growth was driven by several factors, including the strategic repricing of [ nights ] below $10,000 and increasing consumer appreciation for the platform.

Overall, in the U.S., while market share of Touring declined, we saw an increase in our overall Cruiser business as well as a modest increase in our Adventure Touring offering in a challenging overall market. As promised during the quarter, we continued to reduce dealer inventory with global levels down 28% compared to Q2 '24. This aligns with our ongoing commitment to rightsize inventory and better match demand.

The fluid global tariff environment and negative consumer sentiment remains a challenge for the business. However, our ongoing engagement with various governments gives us cautious optimism that future trade agreements may help limit the overall impact on our operations. The EU agreement announced this past weekend looks to be a positive step forward. In the meantime, our teams are working diligently to manage the near-term effects on '25 while also implementing longer-term mitigation strategies to minimize potential impacts on the business.

Additionally, following productive engagement with the U.S. administration, we are pleased that Harley-Davidson motorcycles have been included in the recently signed automotive tax reduction legislation, part of the broader Economic Bill. Under the new law, interest paid on loans for new U.S. built motorcycle purchases up to $10,000 annually is tax deductible when all vehicle and customer eligibility criteria are met. We believe this will have a positive effect and stimulate demand as the tax incentive takes hold in the market.

Turning to racing. Since '21, we've leaned into our racing heritage, both through product development and the revival of Harley-Davidson Factory Racing, competing at the highest level in both the King of the Baggers and Hooligan series, where we are proud to be leading both this year. Drawing inspiration from the [ track ] and the [ street ], in March, we introduced our first limited production race replica inspired by our King of the Baggers race bikes, the CVO Road Glide RR. This model blends elite performance with the signature craftmanship of Harley-Davidson's CVO lineup. As expected, the 131 motorcycles priced at $110,000 generated an oversubscribed wait list and preorders, underscoring the growing excitement around our racing inspired offerings, including P&A and racing experiences, highlighting new opportunities in the future.

We remain energized by the power of racing to ignite passion and are committed to leveraging it as a strategic catalyst for brand and product innovation. In that spirit, this May, we announced a landmark partnership with MotoGP, the leading global motorcycle racing championship in the world, to launch a new racing series in '26 featuring Harley-Davidson bagger motorcycles. The 12-race championship would span 6 Grands Prix across Europe and North America, with each round showcasing 2 races on race-prepared Harley-Davidson Road Glide motorcycles. The grid will feature 6 to 8 teams, each fielding 2 riders, and will be supported by Harley-Davidson Factory Racing. I'm pleased to say that we're in advanced stages of signing various teams following a very strong interest from many race teams.

With this new series, we will be bringing a bold high-performance expression of the Harley-Davidson brand to the global stage, celebrating our storied racing legacy while redefining its future. It promises to be a thrilling addition to the world's premier motorcycle racing landscape. Stay tuned for more.

Our race team's home will soon be located at Juneau Avenue, where we're making substantial investments into our historic headquarters to ensure the site is workforce ready by year-end, complementing our already remodeled [ HTU ] building and newly built Harley-Davidson Park.

As mentioned in our previous earnings call, we are planning to introduce new entry-level products in smaller displacements as well as an iconic classic starting next year. Today, I'm pleased to confirm the launch of our first small displacement motorcycle for the U.S. and international markets, which has been in development since '21. Inspired by our heritage and the spirit of the iconic Harley-Davidson Sprint motorcycle, this new bike embodies boldness, irreverence and fun, capturing the rebellious energy that defines the Harley-Davidson experience. Scheduled for release in the first half of '26 and for presentation to our global dealer network in October of this year, I'm pleased to share that we are targeting an entry price below $6,000. We believe this motorcycle will not only be highly accessible, but also profitable, marking a significant step forward in driving Harley-Davidson's future profitable growth and opening up a new path and motorcycle segment for the company in future years for its key markets.

The new Harley-Davidson Sprint motorcycle will be complemented by an additional and for the first time in an expected profitable iconic [ enterprise point ] motorcycle in our traditional Cruiser segment planned to follow soon after. All of this will be in addition to other new and exciting products we will be launching next year.

Lastly, a few words about LiveWire. The company remains committed to significantly reducing cash burn and operating losses, and the LiveWire team has worked diligently to manage operating expenses across the business. In Q2, LiveWire delivered a 34% improvement in consolidated operating loss compared to Q2 '24 and reduced its use of cash and cash equivalents for the 6 months ended June 30 by 36% compared to the same period in '24. We're encouraged by the progress made, and there is more to come. LiveWire continues to focus on its strategic pivot, maintaining market presence amid ongoing industry challenges, while staying at the forefront of innovation, adding new high-volume segments.

Today, we can confirm that LiveWire intends to launch production versions of its 2 latest concept models that were showcased at Harley-Davidson Homecoming earlier this month. These new mini models represent a strategic refocus in LiveWire product portfolio, aligning with evolving customer expectations, broader adoption trends, given the significantly changed consumer and incentive environment since we launched the brand and fast-growing global demand for lightweight, off-road and urban friendly mobility solutions. These products mark an early step into new segments, with more developments expected in the coming months. LiveWire has seen a tremendous response to these spikes over the past few weeks, and we look forward to formally launching them at EICMA in November.

And with that, Jonathan, over to you.

Thank you, Jochen, and good morning to all. While Jochen touched on many of the benefits of our new strategic partnership with KKR and PIMCO, I wanted to provide a transaction overview before I go into the Q2 results at Harley-Davidson.

Harley-Davidson has agreed to sell a common equity interest in HDFS at approximately 1.75x book value, with each partner acquiring a 4.9% stake. As part of this transaction, HDFS has agreed to sell over $5 billion of existing gross consumer retail loan receivables and residual interest in securitized consumer loan receivables at a premium to par value. As a result, we will have a benefit from the release of loan loss reserve and sale of consumer loan receivables at a premium to par value. We expect this to contribute $275 million to $300 million incremental to HDFS operating income in fiscal year 2025. This will allow us to execute on our expectations to reduce approximately $4 billion of HDFS debt associated with consumer retail loan receivables.

In addition, going forward, on an annual basis, we expect the strategic partners to purchase around 2/3 of HDFS future retail loan originations annually for 5 years, also at a premium to par value. The partners will pay a fixed servicing fee of 1% and 2.5% for prime and subprime receivables purchased from HDFS, respectively. Of note, in this transaction, we are not selling any wholesale receivables. There is no direct impact on commercial lending, card products, insurance and protection products or international beyond the equity stake mentioned. And Harley-Davidson retains a controlling interest in HDFS with over 90% ownership. The transaction is expected to close in the second half of this year.

In summary, we are excited to unlock significant value of HDFS for our shareholders through the sale of a minority stake, while transforming HDFS into a capital-light financing business. In addition, following 2026, it is creating a path that we believe will grow HDFS operating income in the future through new loan origination fees and loan servicing fees. Naturally, we welcome that with the transaction, we will generate $1.25 billion of discretionary cash for Harley-Davidson to use while we retain full control and majority ownership of HDFS.

Now I will turn to the Q2 results at Harley-Davidson. I plan to start on Page 7 of the presentation, where I will briefly summarize the consolidated financial results for the second quarter of 2025. And subsequently, I will go into further detail on each business segment. Consolidated revenue in the second quarter was down 19%, largely in line with our expectations across HDMC and HDFS, while revenue also decreased at LiveWire. Consolidated operating income in the second quarter was $112 million, driven by a decline of 69% at HDMC. Operating income at HDFS came in at down 2% relative to prior year. At the LiveWire segment, the operating loss came in at $19 million.

Consolidated operating income margin in the second quarter came in at 8.6%, relative to 14.9% in the second quarter a year ago, representing a 629 basis point decline primarily due to the impacts associated with lower volume as we deliver on our commitment to help bring down dealer inventories. I plan to go into further detail on each business segment's profit and loss drivers in the next section.

Second quarter earnings per share was $0.88. As said previously, in Q2, global retail was down 15%, with the North American market being down 17% and international markets down 12%. Broadly speaking, customers are continuing to seemingly take a pause or wait-and-see approach to some extent based on higher interest rates and overall macro uncertainty, both factors having a meaningful impact on our specific customer profile buying patterns.

In North America, the market continued to experience lower customer traffic coming into Harley-Davidson dealerships. We also experienced this in the first quarter, even though traffic trends improved in Q2. Our conversion rates actually remain fairly solid relative to recent history. Starting in April as greater global tariff uncertainty was introduced, it added to the overall economic uncertainty that we experienced in Q1 and has stayed with us through most of Q2.

North America performance for Q2 saw a year-over-year decline, but was an improvement from the decline experienced in Q1. As we get through July, we are seeing some signs of improvement in customer traffic in dealerships in North America based on some of our most recent go-to-market initiatives, such as new marketing initiatives, targeted promotional activity, our renewed approach to strategic price changes in each family and amplified and more creative rider testing initiatives. We are also seeing our new Marketing Development Fund truly being embraced by our North American dealers, with impacts now showing up in market.

In EMEA, retail is down 5% and experienced overall volatility due to the global tariff situation. Softail motorcycle retail was positive in Q2, up 4%, as the redesigned model year '25 Softails hit the market. From a country perspective, we witnessed growth in the German region and the Benelux and Nordic region. These were offset by declines in France and the U.K.

In Asia Pacific, retail continued to be soft and was down 21%. This was due to intense competition in the lightweight and smaller motorcycle segments. From a product perspective, our refreshed Softail model year '25 lineup performed fine as it hit the market in Q2, but we are optimistic for a stronger performance in the second half of the year. From a country perspective, the sharpest declines were in Japan and in China due to continued economic uncertainty.

In Q2, in the total Cruiser category, we experienced plus 6% volume growth in the U.S. and gained 3 points of share in the total Cruiser segment, growing to 53% market share in Q2 of '25 from 50% market share in Q2 of '24.

Moving on to dealer inventory. We believe current dealer inventory and product availability are in an improving and healthier position overall as we are now in the midst of the 2025 riding season. Global dealer motorcycle inventories were down 28% at the end of Q2 compared to the end of Q2 of '24. We are committed to supporting a significant year-over-year dealer inventory reduction by year-end. We are well on our way to this, as already demonstrated in the first quarter and again in the second quarter, which marks our third consecutive quarter of decreasing dealer inventory on an equivalent year-over-year basis.

Looking at revenue. HDMC revenue decreased by 23% in Q2. Focusing on the key drivers for the quarter. 23 points of decline came from decreased wholesale volume at HDMC, where motorcycle shipments in the quarter were down 28%, coming in at 36,000 units compared to 50,000 units in the year-ago period. This level balances our need to be prepared for the ongoing riding season and balance against any changes in the demand environment, given the recent macro headlines and uncertainty. 1 point of growth came from favorable year-over-year pricing net of sales incentives for 2025 model year product. 1 point of decline came from mix as we balanced out the delivery of motorcycle models and markets. And finally, foreign exchange impacts resulted in 1 point of growth to Q2 revenue relative to prior year.

In Q2, HDMC gross margin was 28.6%, which compares to 32.1% in the prior year. The decrease of 350 basis points was driven by the revenue factors I just spoke about and lower operating leverage, which includes modest cost inflation of less than 1%.

In order to deliver on our commitment to help bring down dealer inventory, production volumes were down commensurate with the lower wholesale shipments in Q2 of 2025. The lower production volumes resulted in a higher fixed cost per unit on motorcycles shipped in Q2 of 2025. The unfavorable impact of lower operating leverage was modestly offset by other productivity savings related primarily to supply management during the quarter. In addition, the cost of new or increased tariffs implemented in 2025 resulted in $13 million of incremental cost in the Q2 period, creating a headwind of 125 basis points to the Q2 2025 operating income margin.

Operating expenses in Q2 came in $2 million higher than prior year at $237 million, which resulted in an HDMC operating margin of 5.9%, which compares to 14.7% in the prior year period. This higher OpEx was primarily driven by the planned spend for the Marketing Development Fund I spoke of earlier and was partially offset by lower people costs, which we achieved through robust cost discipline.

Turning to Slide 12. In the year-to-date period, HDMC gross margin was 28.9%, which compares to 31.7% in the prior year. The decrease of 280 basis points was driven by lower volumes and lower operating leverage, partially offset by the positive impact of pricing, mix and foreign currency. The year-to-date results include modest cost inflation of less than 1%. In addition, the cost of new or increased tariffs implemented in 2025 resulted in $17 million of incremental cost in the year-to-date period, creating a headwind of 80 basis points to the year-to-date operating income margin. This excludes costs of $7 million to mitigate tariff impacts.

Operating expenses in the year-to-date period came in $21 million lower than prior year at $436 million, which resulted in a HDMC operating margin of 8.4%, which compares to 15.4% in the prior year period.

Before we turn to the next slide, I would like to update on our ongoing productivity cost program, where we were expecting to drive a $400 million improvement in productivity by 2025. As a reminder, for the cumulative 3-year period of 2022 through 2024, we have achieved unlevered productivity savings of $257 million. We continue to expect to achieve another $100 million for all of 2025 and again in 2026, exceeding our Hardwire dollar target by over 10%, as mentioned in February.

In the first half of 2025, we achieved $48 million of unlevered productivity, split evenly by quarter, primarily from logistics and supply chain initiatives.

Turning to Slide 13. The global tariff environment remains uncertain, but we wanted to provide an update. In the first half of 2025, the cost of new or increased tariffs was $17 million. This includes direct tariff exposure, Harley-Davidson importing and exporting product, as well as indirect tariff exposure from our suppliers. This excludes pricing mitigation actions as well as any expenses to accelerate product deliveries ahead of tariffs. We do expect that the direct tariff costs will increase in the second half of the year, but the environment remains volatile.

Harley-Davidson is a business very centered in and around the U.S. 3 of 4 manufacturing plants are U.S.-based, including final assembly in York, Pennsylvania and powertrain operations and injection molding with class leading paint application, each in Wisconsin. We also have a U.S.-centric approach to sourcing, with approximately 75% of component purchasing coming from the U.S. And all of our core products sold in the U.S. are proudly assembled in the U.S.

With that in mind, we estimate our full year 2025 impact from the direct cost of new or increased tariffs to be in the range of $50 million to $85 million. This has been reduced from $130 million to $175 million at Q1 release on May 1. We have a number of actions underway to mitigate the impact, and we expect this situation will remain fluid given the uncertainty that still exists.

Turning back to HDFS and its performance. At Harley-Davidson Financial Services, Q2 revenue came in at $257 million, a decrease of only 2%, driven by modestly lower retail receivables and commercial receivables. HDFS operating income was $70 million, down less than $2 million or 2% compared to last year. The small Q2 decrease was driven by lower net interest income and higher operating expenses, partially offset by lower provisions for credit losses and higher other income.

The provision for credit loss expense was $6 million lower as a result of a favorable reserve change, partially offset by higher credit losses. The reserve change was $7 million favorable as compared to Q2 2024, primarily driven by a smaller increase in retail receivables during Q2 '25 compared to Q2 of 2024.

In Q2, HDFS' annualized retail credit loss ratio was 3.25%, which compares to 3.12% in the year ago period. Retail credit losses were $1 million higher than a year ago. In addition to the small increase in credit losses, the June 2025 annualized retail credit loss ratio was further negatively impacted by a decline in retail receivables, while delinquencies remained elevated as customers continue to be impacted by higher bike payments and general inflationary pressures.

The retail credit losses moderated, thanks to improved repossession success rates and stabilizing recovery values at auction. There were no commercial finance credit losses during Q2 2025. In addition, the retail allowance for credit losses for the second quarter remained flat at 5.7% from Q1 of 2025. Total retail loan originations in Q2 were down 15%, while commercial financing activities were also down, decreasing 20% to $1.1 billion as a result of the significant reduction in motorcycle inventories at our Harley-Davidson dealerships. Total quarter end net financing receivables, including both retail loans and commercial financing, was $7.3 billion, which was down 9% versus prior year.

For the LiveWire segment, which is on Page 17, electric motorcycles revenue decreased in the second quarter of 2025 compared to the prior year period, driven by lower unit sales of LiveWire electric motorcycles. Selling, administrative and engineering expenses were $8 million lower compared to the prior year. LiveWire operating loss of $19 million in Q2 of 2025 was in line with expectations and compares to an operating loss of $28 million in the prior Q2. We now expect LiveWire's full year operating loss to come in between $59 million and $69 million.

On a unit basis, LiveWire reported sales of 55 units in Q2 compared to 158 units sold in the prior Q2. The uncertain macro environment and the lack of any incentive continued to weigh on the consumers' discretionary appetite for bigger motorcycles and early-stage EV products.

Wrapping up with consolidated Harley-Davidson Q2 financial results, we delivered $509 million of operating cash flow, which was down $68 million from the prior period. The decrease in operating cash flow was due to lower net income and due to working capital activity, partially offset by lower net cash outflows related to wholesale finance receivables in the first 6 months of 2025 as compared to the same period last year.

Total cash and cash equivalents ended at $1.6 billion, which was $261 million lower than at the end of Q2 prior year. This consolidated cash number includes $29 million at LiveWire. Additionally, as part of our capital allocation strategy, we remain committed to returning capital to shareholders. Given the unexpected operating environment since early April due to the sudden and unpredictable changes in global tariff policy, we moved to the sidelines in Q2 and did not buy back any Harley-Davidson shares during Q2. We did buy back 3.4 million shares of our stock at a value of $87 million in Q1 of 2025. Given that the global tariff situation remains ongoing and uncertain, we continue to withhold our full year 2025 financial outlook for HDMC and HDI.

Following today's announcement, we expect HDFS should come in at approximately $525 million to $550 million of operating income for 2025. As we move into the second half of 2025 and with the noted closing of the HDFS transaction, I will again summarize the intended uses of proceeds. We plan to increase the pace of buybacks and are working hard to deliver on our $1 billion commitment in share repurchases we announced in July of 2024. Our plan is to purchase $500 million of shares during the second half of the year, as mentioned earlier. We also plan to reduce our debt by $450 million and have a meaningful balance remaining to invest into the business. We expect this will give us the flexibility to invest up to $300 million of additional funds into future growth opportunities.

And with that, we will open it up to Q&A.

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

One on the HDFS transaction. What are the components you are using to calculate that 1.75x book value marker? I'm just not seeing it clearly in the numbers.

Sure. Craig, it's Jonathan. Great question. So as we look at where the 1.75x lands, it's actually the derivative of the proceeds that come in from KKR and PIMCO for their equity investment in the business. And as you would flow through and you would take a look at kind of where the book value of the business would come in and then how the equity is associated with that book value, it kind of lines up to a 1.75x multiple. So we'll have more disclosures in our Ks and Qs that are coming that will kind of help outline all of this, but it's effectively the relationship between the premium that they pay versus the post-transaction book value of HDFS.

Our next question comes from Joe Altobello from Raymond James.

So a couple of questions on HDFS. I guess, first, the underlying profitability of that business looks like it got better than you guys originally anticipated. What's driving that? And then post transaction, I know you mentioned that you expect that business to grow and get back to its normal profitability over time. But what is the normalized profitability for that business under this new arrangement in 2026, for example?

Okay. Joe, so just answering a couple of your questions. So from an HDFS profit standpoint, as we think about 20 -- your first question around 2025, 2025, we have seen from an overall HDFS standpoint, we disclosed what you're seeing going on relative to delinquency. We covered some of the drivers and the characteristics from a loss standpoint. So we're pretty pleased in terms of the stabilization and slight improvement in used values.

So we used -- the source that we find is the most consistent and most reliable in terms of used values is Black Book data. So as we kind of go through and parse the Black Book data and take a look at that comfort that we're seeing a slight improvement in used values, that's helping us as we think about what the overall HDFS business looks like. We're really pleased with what we're seeing from our dealers in terms of dealers showing up at our auctions. So when we do have to repossess a unit, the dealer participation at auction for us is very helpful. That helps us from both a value perspective and then also as we think about kind of giving us another swing to have another contact point with those customers when the used motorcycles get retailed through our Harley-Davidson dealers, that helps us too. So we've seen some really nice stabilization in terms of Harley-Davidson dealer control of use. We've seen some nice stabilization and slight up in used values.

And then we've also been very pleased about repossession rates. The HDFS team is doing a wonderful job of really driving the repossession rate in a direction that's favorable. So as we put all of those underlying factors together in terms of kind of loss characteristics, we're very pleased with the way that the business is performing on that front. And that's been a trend that's improved as we've moved through the months in the year. So pretty pleased with the base level there. Sorry, go ahead, Jochen.

Yes. Now just to add to what Jonathan said, it's not just the stabilization of used values or a slight improvement. It's also that the used motorcycle business actually grew in Q2 compared to the new business. And obviously, HDFS finances both used and new. So that's an additional factor.

Okay. And then one last point, Joe, on your question around kind of normalized earnings. If you take a look at what we've provided on Page 24 of our earnings deck, so we have a little longer earnings deck this quarter to try to cover details of the transaction. But if you would walk through that, it starts to tell you kind of the time that things take from a normalization standpoint. And we think of normalized HDFS earnings, to answer your question directly, of about $240 million, $250 million a year in operating income.

Next question comes from Tristan Thomas-Martin from BMO Capital Markets.

I know you mentioned that consumer traffic picked up in July, but has that translated to improved retail performance?

Yes, Tristan, I can't give you the final number for July yet, but we've seen a sequential significant improvement if you look at the North American figures. In fact, if you look back all the way from February, retail trends for new motorcycle unit sales improved every month, and we expect that to continue in July as well, significant improvement expected. And then going forward for the rest of the year, we believe we can actually comp positive given the measures that we've taken in the market and easier comps compared to last year. And some of the measures we've taken, Jonathan has already highlighted. So July, another improvement in the U.S., and we expect that to continue until the end of the year.

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

Just a 2-parted question. Can you just talk through about how you feel about current dealer inventories and sort of what the target is for year-end? And then the timing of the model launch shift. Can you just talk about how you're going to sort of sequence that in? Are you planning to launch bikes this fall? Just wanted to get more color on how you're thinking about new model launch timing.

Yes, I'll take the first question. And in terms of dealer inventory, you've seen the commitment that we've made earlier in the year to significantly reduce the dealer inventory, and that has happened across the world, including the U.S. with the market decline that we had mentioned earlier today. As Jonathan mentioned earlier, we expect that to continue and expect a significant reduction. To what extent, it's difficult to say right now. It, of course, also depends on retail sales, but definitely double-digit decline should be target, considering that the last year, last quarter of last year, we already saw a decline of about 4% in our inventory -- dealer inventory that then accelerated in terms of decline in the first and second quarter. And so overall, we think that we are ending the year with very healthy levels of dealer inventory.

And Alex, I'll take the piece on model year shift. So from a model year shift perspective, we're still working through some of the details with our dealer network in terms of exactly what it means and the timing. And truthfully, as we look at some of these things, there are differences between model year launch in the United States or North America and the rest of the globe just as we think about where we have a preponderance of manufacturing. And so as we look at that carryover kind of -- sort of -- think sort of a refresh of our Touring bikes, our Softails, that all takes place beginning this fall. And then we have the ability to kind of continue to drop some exciting intros throughout the year as you have seen us do over the last couple of years.

I think a great example of that is as we look at this year, our [ Grego ] Softail, for example, that product has sold very, very well. That is something that has generated a lot of buzz, a lot of enthusiasm and a lot of excitement across the dealer body. So you'll continue to see some special iterations and special vehicles dropped throughout the year. So we will always be driving excitement and freshness into the dealer body, but we are excited to be able to pull the model year shift forward and back into the fall.

For us, that does a couple of things. It really helps us as we think about throughput and how we get everything through our network into our dealers and prepared for the coming season. It also helps us extend the season a little bit by keeping some excitement showing up in our dealerships toward the end of the calendar year. And so full details, we're working through with our dealer partners. But you will see that excitement come back into the fall. Thanks so much.

Our next question comes from Stephen Grambling from Morgan Stanley.

This is a bit of a multi-parter on the HDFS transaction. Why was the 4.9% equity sale the right level sold? Are there any tax ramifications to think through that are incorporating to that $1.25 billion in cash unlocked? Or is that a gross number? And then also, how is the exchange rate in the HOG stock set that's in the presentation?

Okay. Thank you, Stephen. So I'll start with the 4.9% question. So a really good one, why 4.9%. As we go through and we take a look at the HDFS business, it is a pretty complex little business. We're super proud of the way that, that business runs and what it generates across Harley-Davidson. One of the elements that we have to factor in from an HDFS standpoint is the fact that we have an industrial loan corporation, so Eaglemark Savings Bank. ESB is FDIC regulated. And so from an FDIC perspective, there are caps and covenants around ownership, the percentage of it that we would own and then investment into the business.

So the 4.9% threshold is something that the FDIC has a comfort level with in terms of any sort of additional owner. So we limited around the 4.9% to a high degree, because of regulatory ease. And when we start moving beyond that, it's not that it can't be done. It's just a little more complex in terms of the hoops that you have to jump through. So that's really why the limit -- KKR with their 4.9% ownership and then PIMCO with their 4.9% ownership. That's the rationale for the 4.9% limit.

As we think about the 1.25, the 1.25 that flows up from a distribution from HDFS to the parent company, that is a pretax figure. So obviously, we will end up having to sort of flow through all of our normal tax planning and tax management on that front. I think in the latest quarter you saw is probably low 20s from a tax rate perspective that we've been running at on a year-to-date basis.

And then as we think about your last question around exchange right, I think as you flow through that piece, we probably need to have a follow-up conversation with you just to make sure that we understand the detailed nature of your query on that front. I don't quite know what the question is, so I'll struggle to answer that one.

And the business is primarily the U.S. business that we're talking about, so there shouldn't be any specific exchange effects. So -- but we'll get back to that, Stephen. And just to add to what Jonathan said, so the reasons you highlighted are, I think, important reasons why we've limited the sale at 4.9% from both perspectives, from the partners' perspective and our perspective. And as we mentioned earlier, we had more than a dozen bids that ranged from all the way from long-term committed purchases of loan receivables, but also to an outright sale of the majority of the business. And we actually could have sold the majority or all at significant premium to book value. But given the 4 key objectives that I have mentioned that any transaction involving HDFS would need to achieve that we set out already earlier in the year, we feel that this was the best possible outcome at least requiring least complexity and a big win really on all these levels.

Our next question comes from Robin Farley from UBS.

I also wanted to ask about the HDFS transaction, kind of two-part question, I guess. One is, is the transaction assuming any kind of growth in retail sales of Harley growth and receivables or any kind of guarantee at all along those lines that's coming with the sale where the terms might change if certain sales or receivable or operating income thresholds aren't hit?

And then also just thinking about that, what you're giving up in exchange for the 1.25, just looking historically, financial services I think last year was more than 40% of the total company earnings, maybe would be more than 50% this year. I know there's no guidance for the full year. But -- so just trying to think about -- can you help us quantify what earnings come out of your go-forward number in exchange for those proceeds?

Okay. Thank you, Robin. So let's start with the first part in terms of guarantees. So as you would imagine, both KKR and PIMCO are pretty highly assumed -- pretty savvy investors. There are no guarantees around maintaining a certain growth rate, maintaining certain loss levels. So as we take a look at the way that that's done, there aren't guarantees of any nature, sort of kind of in answer to your question and the pieces that you hinted at.

The great news is that as Jochen touches on, we had -- as we go through this process, we kind of began with a pretty wide range of parties that were interested in the business. We narrowed that down to about a dozen or so as we got into more serious negotiations and then came down to the final 2 in terms of KKR and PIMCO. They have a super high degree of comfort in terms of the way that the business is run, the prudence with which the team underwrites the business collects on everything. And I think it really is a testament to the leadership that we have at HDFS and the way that, that business runs.

So there aren't any sort of guarantees in terms of performance where we have risk or exposure from that standpoint. There's a high degree of comfort that we will continue to run the business in the way that we have, where it runs profitably kind of through cycles. And obviously, when we look at the strength of the partners and what it means from a liquidity standpoint and a comfort level as to how we actually fund that business going forward, we are extremely happy to have each of them as engaged partners in the business.

As we think about what we're giving up, the main thing is that with what we have outlined. We end up with about 1/3 of the annual originations on our balance sheet for the retail business, rather than 3/3 that we would have had previously. In exchange for the 1/3 that goes to KKR and the 1/3 that goes to PIMCO, they are obviously paying, as we have outlined, a premium to par on the retail loans that we originate. And then they also pay the servicing fees that we outlined in the conversation. And -- but you can see that there is a little bit of a curve to the earnings. So we have the tremendous benefit from an earnings standpoint that we've outlined for 2025.

And then on page -- again, let me check the exact page. But on Page 24 of our earnings deck, we outline what happens from an overall capital perspective, and then what happens from an earnings standpoint. So on the right of that page, you'll see sort of a directional earnings curve. We'll get into more detail later. And then on the left, you see the significantly reduced capital levels inside of the business as we move forward. That's what drives the ROE benefit that Jochen spoke of.

Our next question comes from James Hardiman from Citi.

So just a quick clarification. Jochen, I think you said that you expected retail to be positive in the second half. Just maybe clarify that and how do we get there? But my bigger picture question, the small displacement bike, right? There was some discussion of that in the prepared remarks. Obviously, there's a lot that you guys are working through today. That seems like a really big deal, particularly as we think about what's been elusive to Harley historically, right? An entry-level bike that's both popular and profitable.

And so if you're successful with that, that could really move the needle, but maybe speak a little bit more about how that's possible, right? That profitability component in particular, how have you been able to accomplish that, whereas previous generations of Harley management has not and what that profitability should look like going forward?

Thanks, James. Yes, going forward, we expect retail sales certainly in North America to be positive for the given reasons that we had mentioned that's concerned. And as we've seen, the trend since February improved. It won't take much to achieve that considering also the easier comps as of August.

In terms of SDB, I completely agree with you. This is a big step for the company, not only with our SDB, but also with the iconic Cruiser that we are working on that we are going to launch thereafter and both for the first time in a manner that we believe that we can actually make money on both of them. And the price point starting at $6,000 and then having additional price points over future years, that will allow us to play in a segment which especially when you look to this year, but even last year is the only area that really shows growth right now, which very much is a result of affordability issues that our core customers have that we need to take into consideration.

This bike has been in development since '21. It's taking time, but we feel confident that it can achieve a profitable margin. And from there, obviously, we can build a profitable business in various segments that we have not -- or partly not competed in the Cruiser segment that we had competed before. But as you know, that has never been a profitable business for many decades. We believe that how we've engineered this product, it will be profitable.

So that's a significant unlock, which is why we've mentioned it. We've mentioned that there's also on this call because we are going to present the small displacement vehicle to our dealers in early October. And as you are very well connected, we thought we'll give you a heads up already now rather than wait until October. But that's -- I don't want to go into specifics of how we feel we've accomplished that. But we have worked very hard over a long period of time and believe this is absolutely possible. And we've learned a lot in the last 5 years, in particular, to be confident that we can achieve this finally for the company.

So yes, agreed, significant unlock for the business and especially in the current business environment. So if you at some point, see the business returning in the big bike segment, which has been challenged over the last almost 2 years. And in addition, the new fuel that we will be put on the fire with these bikes over the next few years, coupled with new product developments, that will come out starting next year. This is, I think, all good news.

Our last question comes from Jaime Katz from Morningstar.

Just a clarification to start. The $300 million that's going into HDFS, should we dump that into 3Q or 4Q? Because it's going to swing earnings pretty significantly whenever it goes in, I suppose. And the other thing you guys talked about that wasn't mentioned was a new efficiency program. Is there any intel on the magnitude of that impact? Are you in the early stages? And what might you be focusing on?

Okay. Thank you, Jaime. So as we look at the $300 million upside that you referenced from an HDFS perspective, we will likely end up closing -- I think we've announced we're closing in the second half of the year due to the sort of complexity of this as we settle different elements of the transaction. There will probably be some elements that close in Q3 and then also some elements that close in Q4.

So I think as we look at different tranches of the loans in some different buckets, it's kind of broken into those 2 quarters. We are going to make sure that we are clearly working with our partners, KKR and PIMCO, on the settlement of each of those pieces. So more to come on that front. And Jochen, I'll hand it over to you from an efficiency standpoint.

Yes. Jonathan already talked about our $400 million productivity gain commitment that we've made that we will be overachieving by about 10%. And we have identified new opportunities to further those productivities and increase those productivity gains, but we also see significant opportunity in a new efficiency program, details of which will be outlined in future earnings calls. And we believe that especially technology, including AI, will really help drive substantial cost savings for the business and will affect the overall structure of the business going forward to drive further productivity gains across the entire business.

Rest assured, the decisions that we are taking in this regard will be aligned -- closely aligned with the Board and then the incoming CEO. So there's full alignment in the handover process and the transition process with regards to this efficiency program as well. But we're not going to go into detail, but we feel confident that there are a number of activities that we can start immediately and many more to follow by -- until the end of the year to really change the model quite significantly also with the help of AI.

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