Harley-Davidson presented its fourth quarter 2022 financial results, and the results were generally strong, but not without a few hiccups.
The quarter was strong, compared to the previous year, with revenues ($1.14 billion vs $1.02 billion), operating income (profit of $4 million vs loss of $7 million) diluted earnings per share ($0.28 versus $0.14) showing increases in 2022. For the year, Harley-Davidson reported revenues of $5.76 billion compared to $5.34 billion in 2021, and an operating income of $909 million compared to $823 million in the previous year.
Motorcycle shipments were up 18% in the quarter and up 3% on the year, in spite of a production stoppage in May caused by a regulatory compliance issue with brake lines from a third party supplier.
Harley-Davidson’s full fourth quarter results are available on its Investor Relations site, but there were some key takeaways from the company’s presentation that we found particularly interesting.
The LiveWire Group
The fourth quarter represented the first full fiscal period with LiveWire as its own separate company, with its numbers presented separately from the rest of Harley-Davidson’s motorcycles. Harley-Davidson still owns a 89.4% stake in LiveWire Group, which includes both electric motorcycles plus STACYC electric balance bikes, so the brand was still heavily featured in the company’s report.
LiveWire shipped 69 motorcycles in the quarter, down from 186 units in the same quarter of 2021. For the year, however, LiveWire shipped 597 units, a 30% increase from the 461 motorcycles shipped in 2021, and well above the brand’s goal of shipping 500 models.
For 2022, LiveWire reported $47 million in revenue compared to $36 million in the previous year when it was still a part of Harley-Davidson. Breaking off from the parent brand means having to hire more people and increasing capabilities, plus adding product development costs, so despite the rise in revenue, the LiveWire Group reported a larger operating loss of $86 million compared to $68 million from the previous year.
There was some bad news about LiveWire’s second model, the S2 Del Mar. Ryan Morrissey, president of LiveWire, said the company had to push back the launch of the Del Mar to the second half of 2023 from the original plan of a spring launch.
LiveWire has accordingly adjusted its forecast, now expecting to produce between 750 and 2,000 motorcycles in 2023, with an expected operating loss of $115-125 million. A lot of the growth will come from Europe, which LiveWire will officially enter in 2023, with retailers already lined up in France, Germany, the Netherlands, the U.K., and Switzerland.
Harley-Davidson X350RA
The presentation marked the first formal acknowledgement of the Harley-Davidson X350RA. Jochen Zeitz, Harley-Davidson chief executive officer, officially confirmed the launch of the X350RA as the new motorcycle for the company’s Riding Academy, replacing the discontinued Street 500. Zeitz said Harley-Davidson has plans to expand the Riding Academy program in the next few years, with the X350RA playing an important role.
Zeitz also confirmed that the X350 will not be available for purchase in North America, and will exclusively be used here for the Riding Academy. What he didn’t mention were plans for the X350 in other markets. The small displacement model was developed with the Qianjiang Group for Asian markets, with many of the components shared with the 302S from the QJ-owned Benelli. In fact, Zeitz made no reference at all to QJ, which suggests the Chinese brand may be spearheading the marketing of the consumer model internationally.
Performance in International Markets
Speaking of international markets, Harley-Davidson reported growth in retail sales in the Asia Pacific region. In fact, Asia Pacific was the only region that reported sales growth in 2022, with decreased unit sales reported in North America, Latin America and Europe, Middle East and Africa (EMEA) regions.
Gina Goetter, Harley-Davidson chief financial officer, said Japan reported double-digit growth, now making it Harley-Davidson’s second largest market behind the United States. China also saw high single-digit growth to reach its highest sales volume ever.
Project Fuel
Harley-Davidson provided more information on Project Fuel, a large-scale redesign of its dealerships and “redefine the Harley-Davidson customer experience”. Project Fuel is now in full swing globally, with 15% of the North American dealer network already signed on. The Project relies on a lot of investment from dealers, so it will be interesting to see how many more will buy in.
Profit per Bike
Harley-Davidson’s presentation introduced a new metric the company hadn’t used in previous fiscal reports, measuring what it calls Unit Profitability. Simply put, it’s the average amount of operating income from sales of motorcycles, parts and accessories, and apparel, plus licensing, divided by wholesale shipments.
For the 2022 fiscal year, Harley-Davidson says it made a profit of $3,500 per motorcycle shipped. That puts it somewhere between the figures reported in 2014 and 2015 and a large improvement from 2019’s profit of $1,300 per bike, and 2020’s operating loss of $700 per unit caused by COVID-related shutdowns and the start of Harley-Davidson’s Rewire actions.
The metric is significant when you consider Rewire included the elimination of multiple models and the exit from some low-performing markets. Harley-Davidson says it shipped 23,000 fewer units last year compared to 2019, but is now making 2.7 times more operating income per motorcycle.
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