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Thank you for standing by, and welcome to the Harley-Davidson 2026 third quarter investor and analyst conference call. Please be advised that today's conference is being recorded. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I would now like to hand the conference over to Faisal Ghori, Head of Investor Relations and Strategy. Please go ahead.

Thank you. Good morning. This is Faisal Ghori, Head of Investor Relations and Strategy at Harley-Davidson. You can access the slides supporting today's call on the internet at the Harley-Davidson IR 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 CEO, 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, Faisal. Good morning, everyone, and thank you for joining us today. Before I get into the quarter, I want to thank our Harley-Davidson employees and dealers around the world. The progress we are seeing reflects your focus, urgency, and commitment to this brand. I also want to thank our riders and the broader motorcycle community for supporting Harley-Davidson and holding us to the high standard this company has earned over 123 consecutive years. We are well into our first year of executing Back to the Bricks, and I am pleased with our continued progress. From the start, we said this work would require discipline, stronger execution, and renewed focus on our dealers, riders, and the fundamentals that make Harley-Davidson distinctive. It would not happen overnight, but we would move urgently and measure progress through tangible proof points. This quarter provided several of those proof points.

At the end of September, we hosted our 2026 Global Dealer Forum, bringing together approximately 2,000 dealers, team members, and employees. We further aligned on strategy, prepared for 2027, and previewed the motorcycles and initiatives defining our next phase. The energy was strong, the engagement candid, and the enthusiasm clear. I also completed my third North American dealer roadshow. Across nine U.S. stops, our team met with dealers to discuss our long-term shared vision for Harley-Davidson and our near-term areas of focus, including parts and accessories, the Sprint 440 and Sportster 883 launches, and inventory optimization. Internal category leaders joined me for these conversations, connecting dealers directly to our Milwaukee teams to reinforce our forum messaging. That dialogue helps us move faster, sharpen decisions, strengthen dealer economics, and improve the rider experience. The quarter's results reinforce that progress. Domestic retail rose more than 9%, extending strength in our home market.

It shows that riders respond when we put the right motorcycles, dealer engagement, and marketing support in the market. We also improved dealer inventory health and quality. More than 88% of global dealer inventory is model year 2026 product, marking our seventh consecutive quarter of year-over-year inventory declines. We remain disciplined in aligning wholesale with retail demand, improving channel quality, and strengthening dealer margins. Dealer health is non-negotiable and foundational to Harley-Davidson's long-term earnings power. With the right inventory, timing, and margin profile, dealers can focus on serving riders, building community, and growing the brand. North American dealer profitability has made tremendous strides quickly. Dealer enthusiasm is strong, and we look forward to updating you in the first quarter of 2027 on 2026 performance against target. More work remains in North America, though average profitability improvement is tracking ahead of plans communicated earlier this year.

Continued progress against our strategy will accelerate and broaden that improvement. Significant work remains internationally, especially in Europe. Our product work provides another early proof point of Back to the Bricks. Super Glide's second quarter success and Deadwood's third quarter success are generating brand enthusiasm and improving dealer economics through strong sell-through. These are authentic Harley-Davidson motorcycles with real character, designed for customization, and a stronger emotional connection with riders. Riders have responded well to our initial portfolio adjustments. Sell-through is strong, MSRP realization is at a two-year high, and we have gained significant market share, particularly in U.S. Softail. The signal is clear. The market responds to desirable, authentic Harley-Davidson motorcycles supported by a sharper go-to-market approach. Our marketing is also working harder. The messaging is resonating, especially through grassroots partnerships with custom bike builders and shop owners around the Super Glide and Deadwood launches.

These partnerships put the brand in the hands of people who live motorcycle culture every day. That is Harley-Davidson's home and where we belong. Parts and accessories is tracking ahead of our plans, and our newly formed P&A leadership team is actioning to expand our 2027 portfolio, supporting model year 2027 launches. This will include P&A for Harley-Davidson Sprint and Sportster launches. Customization is core to the Harley-Davidson experience. It deepens rider connection, creates dealer opportunity, and supports a stronger, more diversified revenue model. Apparel and licensing, which we have rebranded MotorClothes internally, consistent with our Back to the Bricks strategy and department heritage, is also tracking ahead of our beginning of year plans. HDFS is also executing well. It remains a strategic asset and critical enabler for dealers and customers. The team continues advancing a more capital-efficient model while supporting retail sales, dealer financing, and the rider experience.

Together, progress in domestic retail, dealer inventory and profitability, product launches, parts and accessories, apparel and licensing, and HDFS gives us confidence to raise our full-year guidance. We are still early, but the business is moving in the right direction. Our strong balance sheet and disciplined capital allocation also enabled us to repurchase approximately $91 million of shares in the quarter. That reflects confidence in the business, our commitment to returning capital, and restored enterprise free cash flow. That said, we also have areas where we need to improve and areas where the operating environment remains uncertain. First, Europe remains challenging, and we are dissatisfied with our performance. We are making portfolio adjustments that we expect to help significantly over time and applying the same discipline used across the business. Better alignment of product, price, customer demand, dealer economics, and local market needs.

European dealers are excited about the near-term Harley-Davidson Sprint and Sportster 883 launches. These smaller displacement motorcycles were critical to Europe's mix and are essential to healthy, durable dealer profitability. Second, we continue working through supplier challenges, primarily in the U.S. Our team has managed them well, but margins remain affected. We are improving reliability, reducing supply chain friction, and supporting our manufacturing and product teams to deliver consistent quality. Third, tariff uncertainty persists. The environment continues to evolve, and although mitigation actions are underway, we are watching it closely. Harley-Davidson is centered in the U.S. with a deep commitment to U.S. manufacturing, and we will manage tariff impacts with discipline. We are clear-eyed about these challenges. Back to the Bricks is not a campaign. It is a sustained reset of how we operate, support dealers, bring products to market, and connect with riders.

Our progress gives us confidence in our plan and the targets we have set. Lastly, I want to acknowledge LiveWire's announcement this morning that conditions and events raise substantial doubt about the company's ability to continue as a going concern, and that LiveWire has withdrawn its guidance. On Monday, LiveWire announced that a Special Restructuring Committee has been formed. As was previously stated, we do not intend to fund the company's operating losses. Looking ahead, the foundation is stronger. Dealer inventory is healthier, down nearly 26% year-over-year. Dealer profitability has improved and is tracking favorably against our goal of doubling it in 2026. New motorcycles are generating enthusiasm and strong sell-through. Marketing is more focused and connected to the community. Parts and accessories and apparel and licensing are ahead of plan. HDFS is executing well, and our teams are operating with greater focus and urgency.

Significant work remains, but the early evidence supports our strategy. We will keep listening to dealers and riders, making disciplined choices on inventory, product cost, and capital, and holding ourselves accountable for translating the Harley-Davidson brand into stronger, more durable performance. I want to close by thanking again our employees and dealers, and our riders and the motorcycle community. This brand is strongest when it stays close to the people who ride, customize, sell, service, and celebrate these motorcycles. Back to the Bricks puts that truth at the center of the business. In the coming weeks, I look forward to seeing riders and enthusiasts at SEMA, a large automotive aftermarket event, and EICMA, the world's largest motorcycle show, which takes place in Milan. I'm also eager to meet dealers and market while in Asia and Europe later this quarter to learn how we can serve them even better.

Harley-Davidson Sprint will launch first internationally, and enthusiasm is strong among dealers who have recently test-ridden the bikes. Finally, formal planning is underway for Harley-Davidson's 125th anniversary in 2028. The motorcycle lineup has been in development for some time, and our rider-centric events and engagement will be our best yet. We will use 2027 to build excitement across the motorcycle community for an extraordinary celebration. More to come. With that, I will turn it over to Jonathan.

Thank you, Artie, and good morning to all. I plan to start on page six of the presentation, where I will start on HDMC retail performance. In Q3, North American retail sales of new motorcycles were up 9% versus prior year, with over 25,000 motorcycles sold. In Q3, North America and APAC were positive, while EMEA and Latin America experienced declines. Retail sales of new motorcycles outside of North America were down 3% versus prior year, with just over 10,000 motorcycles sold, resulting in total Q3 global retail sales of new motorcycles being up 5% versus the prior year, with a total of approximately 35.8 thousand retailed. We are pleased with the performance, particularly as we displayed strength in the U.S. and mindful of weakness in EMEA. In North America, Q3 retail sales were up 9%, accelerating from 3% in the previous quarter.

Results were driven by continued strength in Trike and Softail combined. This translated into continued significant market share, with Harley-Davidson reaching 37% of the U.S. 601+cc market, up by three percentage points versus prior year. Dealer inventory in North America declined 26% year-over-year. In EMEA, Q3 retail sales posted a decline of 5%, an improvement from Q2, albeit still negative. In the quarter, overall performance reflected a subdued economic environment in Europe, although the region did experience positive results in the Touring, including Trike and Sport families. In addition, from a market share standpoint, we are now at 4% share, up from 3% in the previous quarter. In Asia-Pacific, Q3 retail sales were up a modest 1%. From a regional standpoint, Australia and New Zealand led Asia-Pacific with growth of 15%. At the motorcycle level, the region experienced positive results in the Sport and Softail family categories.

In Latin America, Q3 retail sales were down 7%. At the motorcycle level, Touring and Trike categories continued to show growth, while the other categories were negative. Turning to page seven, delivering on the commitments already discussed. Dealer inventory at the end of Q3 of 2026 was down 26% versus the end of Q3 of 2025, and down 6% versus the end of Q2 of 2026. Specifically, North America dealer inventory was also down 26%, and dealer inventory outside of North America was down 25%. This has allowed Harley-Davidson dealers to continue through the 2026 riding season with what we believe is a largely appropriate or balanced setup. At the end of Q3 in North America, 91% of dealer inventory was comprised of current model year 2026 motorcycles. This number was 87% for Q2.

We expect this combination of lower total inventory levels and healthier inventory model year mix to pay dividends in future periods and to set Harley-Davidson and our dealers up for greater success. As we think about dealer inventory longer term, we must recognize that as we broaden our product portfolio and aim to achieve our Back to the Bricks strategy metrics, inventory levels will need to adjust accordingly. With that, before we get into revenue, let's conclude with some information on wholesale shipments. From a wholesale shipment perspective, in Q3 of 2026, we delivered 33.6 thousand units compared to 36.5 thousand units in Q3 of 2025, which is down 8% year-over-year. This disciplined wholesale shipment volume, which was less than the growth in retail delivered, allowing for improved dealer profitability. Inventory management and discipline continues to remain very important to all of us.

Now, turning to page eight and HDMC revenue performance. In Q3, as wholesale motorcycle deliveries were reduced, HDMC revenue decreased by 10%, coming in at $964 million. From a business line standpoint, motorcycle revenue came in at $734 million, P&A came in at $153 million, apparel and licensing came in at $60 million, and other came in at $18 million. Changes in P&A and A&L revenue on a year-over-year basis are explained as we are in the early innings of our Back to the Bricks strategy, which is built around serving riders through our dealers rather than e-commerce. Now, turning to page nine and 10 in HDMC margin performance. In Q3, HDMC gross profit came in at 28.1%, which compares to 26.4% in the prior year or up 173 basis points versus prior year.

Gross profit was impacted favorably by manufacturing and other costs, including tariff and supplier recoveries that benefited gross profit as well as foreign exchange effects. The favorability was offset by the following unfavorable impacts, product mix, net pricing, and raw materials. In Q3, operating expenses totaled $227 million, which was $2 million favorable compared to prior year, driven primarily by lower marketing and warranty and recall. This amount includes $14 million in restructuring expense in Q3. Before restructuring expense, Q3 operating expenses would be $16 million favorable compared to prior year. In Q3, HDMC had operating income of $44 million for an operating income margin of 4.6%, which compares to operating income of $54 million in the prior year period and a margin of 5.0%. This amount includes $14 million in restructuring expense in Q3.

Before consideration of restructuring, Q3 HDMC operating income would be $58 million, for an operating income margin of 6.0%, favorable by a full percentage point. At the EBITDA level at HDMC in Q3, HDMC adjusted EBITDA came in at $94 million, for an adjusted EBITDA margin of 9.7%, which compares to an adjusted EBITDA of $94 million in the prior year period, and an adjusted EBITDA margin of 8.7%, with the drivers similar to those previously mentioned. Some brief comments on tariffs in Q3 and the full year 2026. Turning to tariffs. Year to date, we have incurred approximately $94 million in gross tariff-related costs, compared with $45 million in the same period last year. At our second quarter call, we estimated full year gross tariff costs of $75 million-$90 million.

As a result of the changing tariff environment, we now expect full year 2026 gross tariff costs of approximately $105 million-$120 million. The gross tariff is higher due primarily to supplier reciprocal charges as they respond to a dynamic environment and pass costs on. Recoveries are higher by a very similar amount to the change in growth. This means we net to virtually no change in 2026 operating income impact due to tariffs. All of the improvement that resulted in an increase in HDMC operating income guidance is due to the underlying performance of the business. Looking ahead, and assuming the current tariff structure stays in place, we do not expect gross tariff costs in 2027 to be higher than in 2026. We have already offset part of the tariff impact through overall business performance, and we expect that to continue.

We do not anticipate any further recoveries in 2027 as of now, unless there are further changes to tariff structure. The tariff environment remains uncertain, with frequent policy changes and ongoing legal challenges. Turning to HDFS and page 12. At Harley-Davidson Financial Services, Q3 revenue came in at $111 million, a decrease of 58%, driven by lower interest income due to the decline in retail receivables related to the sale of loan assets as part of the HDFS transaction that was completed last year. HDFS operating income was $11 million in Q3, representing an operating income margin of 9.7%. The sale of loan assets also resulted in a release of the allowance for credit losses on retail finance receivables, reclassified to held-for-sale status in advance of their sale in the fourth quarter of 2025.

As a result, the provision for credit losses provided a $301 million benefit in the prior year, compared to a $20 million provision this year, driving a year-over-year reduction in HDFS operating income. On the expense side, interest expense was 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. HDFS operating expenses came in at $47 million for Q3, which was 1% less than the prior year. Turning to page 13. In Q3, HDFS's annualized retail credit loss ratio on managed loans was 3.0%, which compares to 3.2% in the year-ago period. We are pleased with the HDFS loan origination activities as total retail loan originations in Q3 were up 4%, coming in at $786 million in Q3.

Total gross financing receivables were $2.7 billion at the end of Q3, where retail receivables were $1.7 billion and commercial receivables were $1.0 billion. Now, turning to slide 14 for the LiveWire segment. In addition to Artie's comments, for the third quarter of 2026, LiveWire revenue increased 41% over prior year's same quarter, driven by increased unit sales of both electric motorcycles and STACYC brand electric balance bikes. Now, turning to slide 15 and 16. Wrapping up with consolidated Harley-Davidson Inc financial results, we had net cash of $276 million from operating activities in Q3, which compares to $417 million of cash provided by operating activities in the prior year period. Operating cash flow was lower than the prior year, primarily due to reduced cash inflows at HDFS under its new capital-light model.

As part of our share buyback strategy, in Q3, we repurchased a total of 3.4 million shares worth $91 million on a discretionary basis. Returning capital to shareholders is a top priority at Harley-Davidson, especially via share buybacks. We will continue to maintain the liquidity required to operate the business through the seasonal cycle and fund our product investments. Beyond those needs, we remain committed to disciplined return of excess capital to shareholders, including through opportunistic share repurchases. At the end of Q3, we had $2.1 billion of cash and equivalents. This compares to $1.8 billion a year ago at the end of Q3 of 2025. Turning to slide 16, we point out the unique balance sheet of each business segment.

For the HDMC balance sheet, cash on its balance sheet is $1.4 billion at the end of Q3, versus total debt of $297 million at the end of Q3, resulting in a very attractive net cash position at HDMC. For the HDFS balance sheet, net debt is $1.9 billion at the end of Q3, versus total finance receivables that are held for investment of $2.2 billion. Now, turning to slide 17 of the presentation. I will briefly summarize the consolidated financial results for the third quarter at the Harley-Davidson Inc, or HDI, level. Consolidated revenue in Q3 was down 19%, driven primarily by HDFS revenue being down 58% as it moved into a new capital-light model after the closing of the HDFS transaction. Consolidated operating income in the third quarter came in at $37 million, compared to operating income of $475 million in Q3 of 2025.

In Q3, earnings per share was $0.40, which compares to $3.10 in Q3 of 2025. Turning to page 18, we are beginning to see some early results from our successful execution of the Back to the Bricks strategy, giving us greater confidence in full-year numbers. For the full year 2026, the company now expects the following. For HDMC, global motorcycle retail sales in the range of 135,500 to 139,000 units, an increase from the previous range of 133,500 to 138,500. Global motorcycle wholesale shipments in the range of 135,500 to 139,000 units, an increase from the previous range of 133,500 to 138,500. Note, we envision dealer inventory ending broadly flat with prior year with these guidance figures. Operating income at HDMC is expected in the range of $25 million-$55 million.

This is an increase from the previous range of $10 million-$50 million and includes the year-to-date headwind of $31 million of restructuring costs. At HDFS, operating income in the range of $60 million-$70 million, an increase from the previous range of $55 million-$70 million. At LiveWire has withdrawn guidance. For HDI, capital investment of $140 million-$165 million, a reduction from prior guidance of $175 million-$200 million. With that, I will turn it back over to Artie.

Thanks, Jonathan. Before we go to Q&A, I am pleased with our results in the quarter and year-to-date, specifically on North American retail and dealer profitability, two key tenets of our Back to the Bricks strategy. Our recent motorcycle launches of Super Glide in Q2 and Deadwood in Q3 have our community highly engaged. Despite higher tariff costs, we remain on track to deliver $150 million in fixed cost savings and remain committed to $350 million in HDMC EBITDA in 2027. Our confidence to raise our full-year 2026 guidance comes from stronger-than-expected retail, and our strategy gives us multiple ways to win. We have built the business to be resilient as conditions change. With the Harley-Davidson Sprint and Sportster motorcycles coming, we are very excited about 2027. Thank you. Now we will turn it over for questions.

We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimal sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Spencer Hanus from Wolfe Research. Your line is now open. Please go ahead.

Good morning. Thank you for the question. Dealer inventories were well managed again in the quarter. Just curious how comfortable you are with the amount of product in the channel today. Are there any pockets where you see inventories need to be worked down further? And then ultimately, how do you see this translating to better dealer profitability over time?

Yeah. Thanks, Spencer. Appreciate the question. I think the first thing I would say is that five months ago, we came out with this strategy. We put dealer profitability at the center of the actions we were taking, and prudent inventory management was a big part of that. When we look at dealer profitability in North America year-to-date, we came out and said, "Hey, we'd like to double that number from prior year," and we're on track to do that, frankly, pacing ahead of where we thought we'd be. And certainly the profitability improvements, it can vary by region, it can vary by dealership, but by and large, most dealers that are experiencing the improvement. The opportunity forward is, as you alluded to continue to be more consistent with that widespread improvement.

When we look at the portfolio going forward, we think we have the product and the motorcycles and the parts and accessories to do that. Sprint coming shortly, and then obviously Super Glide and Deadwood over the summer were outstanding proof points, high MSRP realization, bikes that move quickly at price points that we had holes in our portfolio. In terms of the levels across the portfolio and with specific dealers, I would characterize we're in a relatively good place, meaningfully better than a year ago, high 20% reduction, which is, I think extremely encouraging. A year ago, the phone calls that I was getting when I started were probably 80%-90%, "We need help selling through some of these bikes." That's completely flipped. Most dealers are asking for more bikes.

I think when we look at the guide in Q4, we are set up well going into 2027 and balance of year. We raised guidance on retail, we raised guidance on wholesale with the portfolio expansion. We feel like we are right on track from that perspective. There are dealers that certainly are a little bit heavier and dealers that are certainly a little bit lighter, and I view that as that is an opportunity for us to get better at Harley-Davidson. I was just on the road last week across nine cities. We hit about half of the dealer network just a couple of weeks after our round tables, and it was really helpful for my team to hear directly from dealers on how we could serve them better. I am very optimistic that we have additional opportunity to improve that sort of regional allocation that can serve our dealers better.

It was really a good quarter across the board from my perspective, and the inventory levels are a big part of the success that we are seeing with the improvement in the dealer network.

Yep. Got it. That is helpful. Just shifting to retail, it accelerated in 3Q. Curious what you have seen quarter to date and how the recent strength here has informed your view on 2027, because you are lapping over tougher compares in the third quarter, you still saw the acceleration. Just curious how you are thinking about retail going forward here.

Yeah, we are not going to say anything on Q4 beyond what we put in the guidance. Obviously, the guidance contemplates the business up until this point, so there is a little bit that we are seeing in there. By and large, we feel very good about how retail is progressing, and we look forward to updating you on the full quarter early next year.

Great. Thank you.

Your next question comes from the line of Joe Altobello from Raymond James. Your line is now open. Please go ahead.

Thanks. Hey, guys. Good morning. I guess first question for you, Artie, obviously, you have been traveling the country talking to dealers. You mentioned your roundtable. What specifically did you hear from them that they want to see from corporate in 2027?

I think just continue to action against the things that we have said we were going to do. I would say what I have heard is we get a check mark from, hey, we came out and said five months ago, here is what we are going to do. We listened to the dealers, and by and large, we have executed against them with speed, and conviction, and collaboration. I think it is more of the same. Obviously, the macro environment is dynamic. I am very excited about the portfolio that we are putting forward. Our dealers are very excited about our model year 2027 launch, in particular Sprint and Sportster. So just strong execution against the things that we said we are going to do.

Okay, got it. And maybe one for Jonathan. You mentioned that dealer inventories will have to adjust, assuming retail continues to grow here. I think you guys are talking about mid-single digit retail growth. I have weeks on hand around 14. What's the right number you think dealers should hold in a mid-single digit growth environment?

Sure. Yeah. So really good question, Joe. Nice to hear from you. So I think as you go through and you look, obviously, with our Q4 guide, we've got ourselves to what continues to be alignment for the full year between wholesale and retail. So the 135,500 to 139,000, obviously delivers a Q4 where you'll see a couple more wholesale units than retail units as we get dealers set up in the right way. Some good questions on why is that happening. Obviously, as you heard in Artie's script, Sprint is getting introduced in EICMA, so we're going to be over there in a few days to really leverage that launch and grow excitement among the dealer body and consumers around all things that Sprint does for this brand and for this portfolio.

As we get that motorcycle in, that's a broadening of the portfolio, and we do need to make sure that we have dealer coverage on that front. As we get the 2027 model year in, we're really excited about some things, so stay tuned for 2027 model year. Some excitement in terms of what we're introducing and what's coming on that front. You will see an extremely disciplined approach to what we're doing from a dealer inventory standpoint, but do expect that there will be a little bit of growth in what we're putting out from a dealer inventory standpoint to make sure that they are supported with a widening range of products across the portfolio.

Okay. Thank you.

You are welcome.

Your next question comes from the line of Anthony Bonadio from Wells Fargo. Your line is now open. Please go ahead.

Yeah. Hey, guys. Thanks for taking our questions. I wanted to ask about margins and specifically commodity pressure. A lot of your peers have talked about headwinds there into the front half of next year, just given price moves we have seen in freight and metals pricing. I guess, how to think about impact there, mitigation, and then just remind us how you guys think about hedging and the timing of those.

Sure. So thank you, Anthony. I can start with that. So from a margin perspective, obviously, as you look within the quarter, we laid out where we landed from a margin perspective. So within there, you saw some improvement in where we were from a margin standpoint. I think you see the adjusted EBITDA margin in Q3 of 2026, up about 102 basis points versus Q3 of 2025. Obviously, a lot of that was driven on gross margin improvement within the business. As we think about what we see from an overall inflationary environment, there is a lot of headwinds around where you see cost drivers and cost increases as we think about things like these elements that are outside of our control.

Our team is doing a great job of managing cost out in a way that gives us confidence as we bridge toward the future and how we actually land and align in the ranges that we have talked about. Overall, if you take a look at the bridge that we provided on page 10, you can see that inside of here, there was about a 1% headwind on gross margin percentage in the quarter for raw materials. Then as we look at the manufacturing and other performance inside of the four walls of Harley-Davidson, we actually grew some really nice efficiency.

Okay. That is helpful. Then just maybe on market share, it looks like you guys saw some nice gains in Q3. Can you just talk a little bit more about what you saw there as you moved through the quarter and what you think is working well?

Yeah. The Super Glide and Deadwood launches were, I think, extremely successful. Going back to what we communicated in May, I would characterize them as early signs of pent-up demand for Harley-Davidson motorcycles that have our distinctive look, sound, and feel characteristics that are made to be customized. These are, if you recall the language we used was more blank canvas motorcycles. These were squarely in that category. They were at price points that we had gaps in. If you recall the slide that we put out which demonstrated, "Hey, here is where the portfolio is from top to bottom in terms of MSRP," we were able to quickly fill a couple of those holes.

The work that our brand team is doing and our marketing team is doing in presenting and telling the stories around these motorcycles, it is always difficult to quantify, but the creative, the response, we are just getting outstanding response and outstanding feedback. We are celebrating authentic people in the motorcycle community. We had the two gentlemen that were in the two ads at our dealer forum. It was super high energy. I think all this ladders up to enthusiasm in the rider community and our dealer network, which is just super exciting. More to come. It is early. We still have a lot of work to do. Super Glide and Deadwood, when you look at the Cruiser market share gains, we can clearly point to those actions and the actions that we said we would take in the strategy.

Thanks, guys.

Your next question comes from the line of Noah Zatzkin from KeyBanc Capital Markets. Your line is now open. Please go ahead.

Hi. Thanks for taking my questions. I guess maybe at a high level, could you speak to the target customer for Sprint and Sportster? Is there maybe more of a focus on new riders than before? And then just any thoughts around the marketing approach and messaging around those launches—

Sure.

—to drive excitement? Thanks.

Yeah. Thanks, Noah. Had the good fortune of seeing the work come to life over the last few months as we've sort of finalized the storytelling, and I'm quite excited about it. If you'll allow me, I'll wait for the actual consumer reveal to go through the specifics, but I can talk to you about the insights that are embedded in it. The first thing I would say is the Sprint is a motorcycle that we've had some of our most experienced riders here in Milwaukee riding it for some time, taking it out on the highway. It's an outstanding motorcycle. Yes, it will appeal given its size, given its positioning, given its price point. It will appeal to some new riders.

But I will tell you, we're also getting enthusiasm from long-time riders who might be riding bigger bikes right now, that it's sort of a beckon for maybe their first bike, and they're excited for it to be something that they ride around town. So there's this balance of new riders and some experienced riders that are looking for a Harley-Davidson for maybe a different use case. I'll give you a specific data point, in particular on the new rider side that's quite exciting for us. We train in the United States approximately 50,000 riders every year through our category leading Riding Academy programs across many of our dealerships. The yield on new bike sales for Harley-Davidson for those students, those prospective riders, it's quite low. It's only about 8%-10%.

That number historically had been much higher when we had offerings like the Sportster 883 and others in prior years. And we know that many of these riders are just buying other bikes because we haven't had something that met their needs. In visiting with dealers last week, in visiting with dealers who got to ride the motorcycle in Milwaukee during our dealer forum, there's tremendous enthusiasm that we now have a motorcycle that those with Riding Academy can present something that someone got to ride while they were learning how to ride and then immediately take it out on the road, which we think is a huge win. So more to come on that. But the target is people who love to ride. Naturally, those who are newer to riding are going to be attracted to this bike.

But I'm telling you, we're seeing enthusiasm from many of our most experienced riders that are on big Touring bikes today.

Very helpful. Maybe just one, I know you kind of reiterated the path to $150 million of fixed cost savings in 2027, but just maybe any color on progress there or positioning ahead of capturing those savings would be helpful. Thanks.

Yeah. Our team's been working very hard on this. We restated the $350 million and the $150 million in my remarks. I'd say a couple things. The strategy, I think, has been an outstanding exercise and tool for the company to filter decision making. We've said the $150 million is going to come from a balance of cost of goods and operating expenses. That remains true. I'd point you to the CapEx number for this year as maybe some early signs of the discipline that we're putting forward. CapEx will bounce up or down in future years. That $175 million-$200 million range is the range that we expect. However, by galvanizing and focusing the org against the things that really matter, against dealer profitability, driving retail sales, expanding the portfolio methodically, we've been able to, I say, chalk up some early wins there and we're excited to print 2027.

Thank you.

Your next question is from the line of Craig Kennison from Baird. Your line is now open. Please go ahead.

Yeah. Thanks for taking my question. Wanted to focus on Europe, where you mentioned some challenges. I am just wondering, how much of that do you attribute to sentiment towards American brands today versus some Harley-Davidson-specific issues?

Sure, Craig. I will start, and then Jonathan can chime in with some additional color given his leadership with the commercial team. The first thing I would say is the market share numbers for us in Europe were stable to up, versus prior quarters. I happened to be at Faaker See in Austria for European Bike Week, late summer. The enthusiasm for Harley-Davidson, saw many riders with Harley-Davidson H.O.G. vests and the American flag on them. I cannot speak to the entire continent. I can speak to those who are riding that there is a lot of raw enthusiasm from getting on their Harley-Davidson. The challenges that we face in Europe, Germany, certainly, France, certainly, putting aside some of the current events, the actions that we are taking that our dealers over there are excited about is introducing the Harley-Davidson Sprint and reintroducing the Harley-Davidson Sportster 883.

Those motorcycles were particularly important in Europe. They were important around the world, but in Europe, particularly important. Many of the markets that I visited, many of the dealers that I speak to, the Sportster was 30%-40% of the mix. So pretty significant hole that we have had in the portfolio for some time for those dealers. Those who have gotten to ride the Harley-Davidson Sprint, they will soon get to ride the Sportster. I would just say significant enthusiasm about what that is going to do for foot traffic, dealer profitability, and if you recall, the balance of revenues and how dealers make money, having these motorcycles at $6,000 and $10,000 are going to be extraordinarily important in driving top line and bottom-line recovery for our European dealers. Jonathan, if I missed anything, please add in.

Sure. Just a couple more details, Craig. Good question. As we look, we have effectively six sub-markets that we use to run the European business. Of those, Germany and France are two that are critical. Germany and France are the only two sub-markets where we are actually down and facing pressure. Certainly, as you look at macro, there are a lot of things that we have heard in headwinds. The French market is front and center, obviously, in a lot of the news at the moment. But as you look at some of the smaller markets, we are pleased with the performance and what we saw in Q3 in Belgium-centered markets, as we look at what we are seeing in Eastern Europe and Spain, Portugal, Italy, U.K., Ireland. Those markets, we actually saw growth in all of them.

And that really is evidenced in what you heard Artie reference in the growth in share within the quarter. So overall, I think our team is doing a really nice job of managing along with the dealer network to drive growth in the places that we can. The only other part, Artie already said this, that I would just put an exclamation point on, is so much excitement with what's coming from a Sprint perspective and getting that out there, which is why Artie made the decision to launch that globally at EICMA.

I'll add one quick thing. The market share gains we saw in North America with Super Glide and Deadwood, we had to action getting those bikes to market so quickly. Those bikes were not in Europe. So Europe has not benefited from the portfolio changes and the strategy in a material way yet. So we're very excited to bring these bikes to market.

Thank you.

You're welcome.

Your next question is from the line of Andrew Didora from Bank of America. Your line is now open. Please go ahead.

Hi. Good morning, everyone. Thanks for the question here.

Hey, Andrew. How are you?

I just have one. Good, Artie. Just have one here, and Artie, you might have kind of alluded to this earlier, but just with the launch of Sprint and Sportster, just would like to get your thoughts around the potential cannibalization of the existing portfolio. And maybe as you look to the launch, what are maybe the one to two KPIs you'll look towards just to show whether they're expanding the rider base rather than just kind of shifting buyers down the value chain?

Sure. Great question. This is something that we've done our own work on internally, as you might expect, with our analytics team and consumer insights team. Probably more importantly, the direct conversations and feedback that we've gotten from dealers and our dealer advisory councils around the world. Is there risk? Yes. The risk, we don't believe, is significant, however, for a couple of reasons. Number one, the price point, $6,000-$10,000, are not price points that we're currently really even close to. They're really a class of motorcycle that we're not in. The second thing is the use case for these motorcycles, the customization opportunity for these motorcycles, is quite different than the middle of the fairway of our Softail lineup and our Touring lineup. So how riders are going to utilize these motorcycles day to day is just a bit different.

The third thing is, we will have a marketing campaign and partnerships with dealers in terms of getting these bikes to move. Our part is the production levels for these bikes relative to historical demand, we believe there's going to be a lot of demand for these bikes based on the first year that we're going to be in production. So there's going to be, I think, a lot of enthusiasm to get them when they get on the floor. Once they get into Riding Academy later in 2027, we've got this sort of sell-through opportunity there. So we're very confident in the conversations we've heard from dealers that these bikes sort of fit a different need, and we expect the sell-through to be extremely strong. We're being very judicious with the targets that we put forward against the production levels.

Great color. Thanks, Artie.

Thank you.

Your next question is from the line of Tristan Thomas-Martin from BMO Capital Markets. Your line is now open. Please go ahead.

Hey, good morning.

Hey, good morning, Tristan.

Good reference. Morning. You referenced tariff rebates or refunds in the quarter. Can you just kind of quantify what that is, and then if you're expecting any 4Q? Then just on the cadence of Sprint and Sportster, when exactly are they hitting dealers? Thank you.

Yeah, let me take the second question, then I will have Jonathan take the tariff recovery question. We will be introducing the Sprint at EICMA. The bikes have already begun shipping, and it will hit internationally first before the end of the year. There will be some markets that have the motorcycle in late Q4. Sprint will flow through into the balance of the world early in the first half of 2027. Sportster, all we are saying is first half of 2027 at this point. More to come on that.

Yeah. Okay. From a tariff standpoint, obviously with what we have put out from a tariff perspective, this quarter, gross tariffs are higher due primarily to kind of supplier reciprocal charges as our suppliers catch up and pass costs on to us. As we have been kind of negotiating and working on that with each of them. Our recoveries are higher by a really similar amount. Obviously all of that nets us to virtually no change in the total supplier or no change as we think about tariffs and the impact that they have on our 2026 operating income. With what we have put out, virtually all of the improvement that we are talking about for the year in operating income, through what we put out in the guidance raise, is due to the underlying operating performance of the business.

You can see in what we provided on page 11, that from an overall tariff impact perspective, you can see the growth and where we are year to date, and then what we are laying out for the full year estimate. You can see the same thing in what we provided from a net basis, and then the comparison. I would refer you to page 11, what we included within the couple of tables to get really clear and clean on what was laid out there.

Okay. Got it.

Your next question comes from the line of James Hardiman from Citi. Your line is now open. Please go ahead.

Hey, good morning. Thanks for fitting me in.

Hi, James.

So, seems like the biggest headline number here. Hey, good morning. So 5% retail growth globally, 9% domestically. We've sort of talked around it, but maybe put a finer point on what you think the why is behind such strong retail growth with a particular look at sort of the sustainability of that growth. Obviously, 9% is probably not sustainable and you've got some difficult Q4 compares. Your guide doesn't assume that continues. But, should we be thinking that this is a business that can sort of grow organically into 2027? Obviously, you've got the Sprint and Sportster, but even ex that, the growth this year has been fantastic, and I think the number one question I get from investors is just to the sustainability question of what we've seen here in 2026.

Sure. Well, I will stick with the facts, which is we saw an opportunity five months ago, which we communicated that there were areas in our portfolio where there was real demand that we had holes. We quickly actioned two motorcycles in our largest market, but not around the world. It was not possible to do it as quickly, and we got a fantastic response. Look, sound, and feel characteristics, the price point, and the advertising, I think are three things that I would point to that we view as repeatable. Certainly, you can expect motorcycles like that to be a part of our global portfolio going forward as we have had a little bit more time with production, engineering, and manufacturing, obviously, to get ready for 2027.

We are quite optimistic about the portfolio we are putting forward, and we still have a lot of work to do, and we still have a lot of opportunity. What I have told our dealers this year, as recently as last week, when I look at our model year 2027 lineup, vis-a-vis the strategy that we put together, I think we are halfway there. So I see significant runway. Sprint and Sportster we have a lot of data points on because it has been just a core part of the portfolio for multiple decades. It has not been in the portfolio for the last five years, and we can look at the used market to see how much demand there is for that motorcycle and the residual values of those motorcycles, which is extremely powerful.

Sprint, the last time that bike was in market was many years ago, so I do not think we can point as clearly to that one, in terms of like we can with the Sportster 883. However, test riding against the competitive set, having dealers on the motorcycle, its ability to drive enthusiasm through Riding Academy, and frankly, the new news for me is the joy and the enthusiasm that our most experienced riders are having on that bike, which includes our dealers. I am sitting here in our product development center today, and many of the folks on our leadership team, we are extremely proud and excited about that bike and to see riders who have got tens of thousands of miles behind them get excited about that bike, it is quite encouraging.

Yeah, James, just a couple of pieces that I would add is, and I will stay focused on North America. As Artie has said, that is the place that we actually have really, really started to execute the Back to the Bricks strategy, in light of the closeness. Obviously, a lot that is coming internationally with launching Sprint internationally at EICMA. As you go through and look within the quarter, really, really nice growth in Trike. So the market reaction and responsiveness to the redesigned Trike has been really, really strong. Softail, you have heard Artie talk quite a bit about sort of what were the key drivers around that and what did that do, and we also are continuing to see growth in where we are from a custom standpoint.

We take those elements together, Softail Custom in particular, and look at Cruiser with share, again, up 12 points in North America. As we take a look at Touring, a little bit more of a challenge as you think about the durability of that price point, but our share is up 4 points in North America within there. As we think and connect this back to what are we doing on dealer inventory, Touring dealer inventory is down 39%, CVO is down 46%. As we think about the ways that we're managing and connecting what we're doing in terms of what we're shipping in with sustained retail growth, I'm really proud of the way the team's approaching things on that front.

Got it. That's great color. Thank you both. I wanted to ask about LiveWire. It's a sensitive topic, obviously. We've got the going concern language, which is incremental. I think you've got about $40 million of cash, or they've got about $40 million of cash, I guess I should say, at LiveWire. At the current pace, maybe that gets cut in half by the end of the year. The Street's modeling about $60 million of additional losses next year. Is that likely or even possible given what we now know about the trajectory and the funding possibilities?

Yeah. We can't really comment much beyond what's been publicly disclosed on LiveWire. I'll just restate that it's consistent with what I've said over the last year. We don't intend to fund the operating losses of LiveWire going forward. The team there has been working on other forms of capital, and what's been announced has been announced.

Understood. Thank you.

Thank you.

Your last question is from the line of Robin Farley from UBS. Your line is now open. Please go ahead.

Thank you. I just need to apologize because I have been hopping between earnings calls this morning. I do not think you addressed this when I was skimming the transcript as I was hopping between calls. I wonder if with the lower shipments than what you had guided in Q3, but you are raising Q4, how much of that higher shipment amount in Q4 is because retail maybe late in Q3 came in better than you thought? Or how much is due to maybe a change in timing difference of new model shipping that maybe we did not even know was your plan. You have plans about new model shipping that we would not know. Just how much of it is those two factors and maybe something else that I am not thinking of. Thanks.

Great. Thanks, Robin. Great question. I will let Jonathan take it.

Yeah. So thank you, Robin. I think as we go through and we take a look at what we're doing from a timing perspective, we obviously are ensuring that we're careful in not getting ahead of anything from a retail standpoint. As you've heard Artie talk through repeatedly an extreme amount of discipline inside of this company in managing the relationship between wholesale and retail. As we look at what we're doing from a Q4 2026 perspective, you can kind of back into our numbers with the guide that we've provided and what that implies for Q4. We obviously are excited about what we're doing in terms of model year timing change and thinking about the way that we're going to end up with health of model year and what's shipping into the dealer network on that front.

We think sets us up really, really well for a solid 2027. Overall, I think some thoughtfulness in the discipline between retail, wholesale, what that implies for dealer inventory. You've heard Artie talk a lot about 2027 getting alignment between production, wholesale, and all of that being guided by retail. That's the other piece that we end up with in terms of the benefit that occurs really beginning in Q4 of this year as we begin rolling forward.

I'll add one thing. Obviously proud of how our team and partners with our dealers have actioned inventory and sell-through, but also the current model year versus prior balance. As we look at 2027s being introduced to the market here in Q4, the floors are just in such better condition as riders come in and see what we have. It's quite exciting what riders and prospective buyers are going to see walking into a dealership in Q4 of 2026 with model year 2027 versus Q4 of 2025 with model year 2026. It's really exciting.

Oh, thank you. Just to clarify, it sounds like you're saying obviously the model year timing change would drive an increase in shipments, and we knew that before today, you knew that before today. Is the incremental change in your Q4 shipments compared to your implied increase back in July? It sounds like, I think you're saying that has been driven by retail demand and not by any sort of timing of delivery of certain models. Is that correct?

Clearly, retail demand year to date has been higher than we had forecasted and I think above expectation, so to speak. That's definitely an element of the shipments. We're also pulling forward a little bit as well from prior year launches.

Yeah, but I think, Robin, you're right. As you go through and you take a look at where we guided to, we obviously moved the midpoint of our retail guide up. With what we've seen in terms of the way that we've run, we're pleased with what we're seeing at retail, particularly in North America, and that supports us making sure that we kind of land inventory in the right place so that dealers are set for 2027, too.

Okay. Thank you.

You're welcome.

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

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 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, and Chief Financial and Commercial Officer, Jonathan Root. With that, let me turn it over to Harley-Davidson CEO, Jochen Zeitz.

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 work 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 Juneau 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, Jochen Zeitz, 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. 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%, 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 two-thirds 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. 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%. 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 Revolution 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, Trike, and Softail, reflecting broad-based pressure across Japan, Australia, and China, partially offset by positive results in our non-core 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 2026 was down 22% versus the end of Q1 of 2025. 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 riding 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 two-thirds of current model year 2026 motorcycles. In comparison, in the prior year period, a little less than one-half 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, we delivered approximately 37,300 units compared to 38,600 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 from more inventory with regard to particular places, models, and trim 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 periods. 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. 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, P&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. 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 recoveries, 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 2 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 one-time employee termination benefits and other restructuring 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 this space, including the potential for increased tariff recoveries, evolution in the application of IEPA 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 2026, 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 pronouncements. We continue to pursue mitigation actions where possible and pursue tariff recoveries when applicable. 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 of motorcycles. 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. 100% 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-$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's 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. 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. 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 STACYC brand electric balanced bike units.

Consolidated operating loss decreased by 11%, 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 2026 compared to Q1 of 2025. For 2026, LiveWire's focus is heavily geared around the imminent launch of its S4 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. Wrapping up with consolidated Harley-Davidson, Inc. financial results. We had net cash use of $228 million from operating activities in Q1, 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 US 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 shares 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 31st, 2025, with the remainder expected to be delivered in early 2026.

On February 12th, 2026, our ASR was concluded, and we received an additional 3.1 million shares on February 13th, 2026. These shares had a value of $64.7 million considering the share price during the ASR's 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 Jochen Zeitz 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 stoke 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 actioning of our cost reduction work. For the full year 2026, the company reaffirms its guidance and continues to expect at HDMC retail units of 130,000 to 135,000 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 1-to-1 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 that 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-$90 million of new or increased tariffs based upon current tariff levels and versus a 2024 baseline. This is an update to the prior range we provided of $75 million-$105 million. At HDMC, we expect operating income of +$10 million to a loss of $40 million. At HDFS, we expect operating income of $45 million-$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, de-risked business model and has a significantly changed financial earnings profile relative to before the transaction.

For LiveWire, we are forecasting an operating loss in the range of $70 million-$80 million. With that, I'll turn it back to Jochen Zeitz 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 roadshow, where we connected directly with the majority of our dealer network and 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. Lastly, we've 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 3 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 Harley-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. 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 meets, 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 clearer pathways into the brand that support long-term Touring growth while also addressing other riding 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 & 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 soul or more personally, freedom for your soul. We're reestablishing Parts & 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 is 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. 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, 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. Importantly, lower throughput 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 on 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. 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 Fifty 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 front line 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. 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. Turning to our strategic roadmap on slide 8. Against the backdrop we've just discussed, we've developed a plan for the next several years that unfolds in 3 clear phases. First is the reset. This phase is already underway and focused on taking cost out, right-sizing 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 lifecycle 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. 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 and wider economic enterprise benefits. Turning to slide 9, what are we doing right now? We've already begun putting this plan into action. 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 headcount and take cost out of cost of goods sold, 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. 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. Turning to our dealers on slide 10. The Harley-Davidson dealer network is a clear competitive advantage. 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 right-sizing, better alignment on promotions, and structural improvements to dealer programs. 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 non-negotiable 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 reduce 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 in 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. 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. Importantly, Harley-Davidson and our dealers participate in that value at different points in time across multiple revenue streams. 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 or motorcycle. We expect this to reduce pressure on any single product and lead to more balanced performance across cycles. Importantly, the portfolio changes we're making, particularly around accessibility and customization, play directly into this model by supporting higher volumes and stronger lifecycle 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. We're bringing it back better than ever.

Sportster is a perfect embodiment of Back to the Bricks. It fits naturally within our enterprise economic model. For context, Sportster has historically been a middleweight, 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. 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, and the broader rider 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, 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 and 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 lifecycle value across the portfolio. Now, turning to Parts & 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%-30% sales growth over time. We also recognize that we've underinvested 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.

We've laid out a clear roadmap 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. Also strengthening our capabilities with recent hires who bring deep experience in performance marketing and automotive retail. 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. 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. 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. I'll hand it over to Jonathan to take you through the financial section. Jonathan, over to you.

Thanks, Jochen Zeitz. 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, 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 already 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 A&L. Combined with the ongoing inventory right sizing, 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 decrease to less than 20% 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%-12% EBITDA margin over the medium term. These targets reflect a more balanced and resilient business model underpinned by the Back to the Bricks 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's 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's 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, HDFS 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-$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. With that, I'll hand it back to Jochen Zeitz.

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. 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. With that, we'll take your questions.

Thank you. Ladies and gentlemen, if you do have questions for today, all you need to do is to hit star plus 1 on your telephone keypad for today. We'll take our first question from today, and that is from the line of Robin Farley from UBS. Your line is live.

Great. Thank you. 2 questions, if I may. The first is just wondering what medium term is. 2029 medium term, just to kind of put a finer point on thinking about the targets. The other question is a little bit trickier with tariffs. Some of the bridge to your 2027 EBITDA is from I guess lower tariffs lumped in with some other things. If you could just help us think about what you're expecting, what's factored in in terms of tariff refunds into that. Your full year 2026 guide was unchanged, but tariffs seem a little better. Maybe there's an offset there.

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 tariffed. I know that's a lot of tariffs balled up into one, but just whatever you want to address. Thank you.

Great. Robin, thank you. It's Jochen Zeitz. Appreciate the questions. I'll take the first one, and then I'll let Jonathan Root handle the tariff specifics. When we say medium term, we mean 3 to 5 years. Hopefully that helps. On the tariff piece, Jonathan Root.

Yeah. 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 tariff amount will consecutively decrease by quarter, as we benefit from the current tariff structure that we laid out on our slides. In, you know, 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, a 2027 that is arguably more attractive than where we are from a 2026 perspective. 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, 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 expectation, 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? You see the benefit that we've put in place from a guide perspective versus what we originally guided to for 2026.

Thank you.

You're welcome.

Thanks for your questions. Our next question comes from the line of James Hardiman with Citigroup. Your line is live.

Hey, good morning. Thanks for taking my questions. 2 questions on sort of the Back to the Bricks opportunity. I guess first, you know, when we talk to investors, you know, 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. Jochen Zeitz, obviously, that's something that you've had to consider. How does the Back to the Bricks address that? You know, 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? I did have a follow-up, if we could.

Sure.

Go ahead.

Well, 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. You know, we specifically called out, you know, two examples of how we're doing that. The Sportster, one of our most iconic motorcycles as recently as, you know, 5, 6 years ago, the market for that motorcycle was $35,000-$40,000 plus on a global basis. Our riders and many younger riders, and our dealers, have expressed it is the number one universal request from the Motor Company to deliver on a great Harley-Davidson Sportster, and what we're talking about today is the 883.

When I look at the demographics, how young people have always entered our brand, over 123 years, it has been motorcycles like the Sportster, over the last, 30 or 40 years, the Sportster has been a critical entry point to the brand. The second motorcycle is the Sprint. We have not had a motorcycle like the Sprint in some time. We see it filling an important need in Riding Academy. As someone who recently went through Riding 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 the Sprint's gonna do.

I'd remind you that, you know, the number of M designations at least in the U.S. right now, is quite strong, as strong as it's been. We see the opportunity for us as we present the brand, as you look at the marketing campaign, this concept of joy and swagger 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. I'm quite optimistic. The portfolio of motorcycles we're bringing forward I think addresses this well.

That's great. It's a great sort of dovetail into sort of my follow-up question. You know, obviously, as we think about your medium-term targets 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?

Sure.

Help us understand that target while factoring in the return of Sportster 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? Thanks.

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

It does 2 things. Number 1 is it leverages existing platforms and powertrains that we have and provides more accessibility across Touring and Softail, which is extremely exciting. I'll remind everybody that some of these things where in Q4 we took action with things like our Solo introduction, they're already working. Some of the retail success that we saw in Q1, we've effectuated in these plans. I'm very enthusiastic about growth in both cruising and Touring with a more distributed and accessible portfolio of motorcycles. Sportster is a, is a big part of it. You know, given what's sold historically in Sportster, I'm quite confident.

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 883 right now, which means there's a real need.

That's great color.

Yeah, James.

Thanks, Jochen Zeitz, and good luck.

James-

Oh, I'm sorry. Go ahead.

The one piece that I would add too is, as you refer back to what was in the strategy deck, there's a page in there that talks through the multi-year view of motorcycle and the ancillary revenue streams. As you listen to Arty talk through changes to the 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. Inside of Q1, we've demonstrated the benefit to the approach that has been laid out. 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 Jochen Zeitz 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.

Thank you both. Good luck, guys.

Thanks.

Thanks, James.

Thanks for your questions. Our next question is from the line of Joseph Altobello with Raymond James. Your line is live.

Thanks. Hey, guys. Good morning. Couple questions on the category expansion here. You know, you talked about Sportster, talked about Sprint. It sounds like those are, you know, smaller bikes. Are there other sort of subcategories that you're looking to expand into as well, you know, just beyond smaller CC engines? You know, second question, there's a reason why Sportster was discontinued, right? It was hard to make money. How has the economics of that bike changed? Thanks.

Great question, Joe. Thank you. Let me take the second one first. 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. 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 maintains such strong residual values.

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 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. Once again, within existing families, and with existing platforms and powertrains, and I can't give much more detail than that.

I will share one tease 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 Motorcycle 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 gotten extraordinary buzz and feedback from our riding community. I think that would be the type of motorcycle that is still, you know, large in terms of, you know, large displacement powertrain that you can expect us to get feedback from riders and, you know, you might see that from us in the market. We're very excited about the response to it.

It's very helpful, Jochen Zeitz. If I could just quickly follow up on that. You know, the U.S. market for you has, you know, outpaced international for quite some time. Is the Sportster, is the, you know, the Sprint part of that strategy to grow your international business?

The Sportster is number 1 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 dealer or a sales team lead in those dealerships, 'What can, what can Harley-Davidson do for you?' You would hear, 'Bring back the Sportster.' Yes, but it is, it's global truth in terms of the enthusiasm around that bike.

Okay. Thank you.

Thanks for your questions. Our next question is from the line of Andrew Didora with Bank of America. Your line is live.

Hey, good morning, everyone, and thanks for taking the questions. Just kind of change gears a little bit onto HDFS. Jonathan, the $125 million-$150 million op income target. I guess, you know, what kind of I know the business has changed here. I guess, what kind of receivables balance do you kind of anticipate growing to, you know, over, you know, through that timeframe? Then more importantly, just the revenue breakdown of HDFS. You know, how should we think about maybe just interest income contribution versus the more kind of fee-based services income as the segment grows?

Okay. Hey, Andrew Didora. Thank you for your question. 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, you know, we did at the end of last year sell off the back book as we've covered. Then on a go-forward basis, we continue to service those loans.

Important that we are continuing to make sure that we are retaining the customer focus, in, on the interaction. 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 a third of those originations on our balance sheet, and then two-thirds we have the ability to sell off to our partners. We continue to service all of those loans. 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. We also fully retain everything from a wholesale and commercial loan standpoint. Dial in or tune in to the recording that's available on our IR website that'll 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. We have a page inside of the Q1 deck that highlights the year-over-year-over-year improvement in credit losses. Pretty excited that we have Q1 2026 kind of back below where we were not only in Q1 of 2025, but Q1 of 2024.

Overall, I think the dynamics of the business are performing pretty well. We obviously have provided the $125-$150 guide with the viewpoint that that is a more capital-light model versus the way that we've run historically. 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. Hope that helped.

Okay. Thank you. 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. Thank you.

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. Anything that could drive dealer profitability would certainly be of interest. Parts and accessories would certainly be on the table. It, you know, it was listed as the third thing right now, so it's not a top priority for us. We do want to call out that anything that would make us stronger and allow us to drive the strategy faster, we would consider.

Thanks for your questions. Our next question is from the line of Alexander Potter with Morgan Stanley. Your line is live.

Hi. Thanks so much for taking our question. I kind of wanted to ask maybe 1 or 2 about, you know, the affordability dynamics right now for your customers. You made a comment in the prepared remarks about how many buyers aren't requiring heavy or don't require heavy promotion to convert. Can you maybe talk about elasticity for motorcycle buyers at present and what you were seeing from a promotional standpoint in 1Q and maybe even in right after you know, cleared through some of the heavy inventory levels? Just how you're thinking about affordability more broadly in the current environment and going forward. Thanks.

Thanks, Alexander. 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. When we look at Q1, you know, we were pleased certainly with how the promotions restored the dealer network to healthier inventory levels, and that was focused on model year 2025 Touring. We were also pleased with motorcycle sales that weren't promoted. It demonstrated to us in some of the, you know, maybe more modest tweaks we made with the 2026 launch in action in Q4 and going forward, having more options available to riders is important. Certainly is price, but also features and benefits. The phrase 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, you know, certainly Sprint and Sportster are good examples, but even within legacy cruising and Touring. What excites me about this is we're gonna 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 model year '25 Touring. 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, on the balance, so to speak. It's something dealers have asked for, and we're gonna be delivering on that as part of our go-forward plans.

Great. 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. Can you kind of talk about how much of the, you know, doubling profitability by 2026, doubling again by 2029, how much of that is, you know, kind of improving the cost base, getting excess inventory out of the system, versus how much is structural from these, you know, strategy changes that you're making?

What we put in place in Q4 and what is in place currently, we believe is, you know, appropriate. You know, there's always the chance that there's, you know, small adjustments that we would align with our dealers on, but the Back to the Bricks plan and the targets that we've put forward do not contemplate a change in the, you know, structural arrangement with our dealers. You know, the e-commerce strategy that we made tweaks to in Q4 is part of the go-forward plans. We instituted a Marketing Development Fund which is in place right now. There's no structural change, 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.

Certainly leaning into this marketing campaign we think is going to pay a lot of dividends.

Got it. Thanks so much.

Yeah, Alexander Potter, I think the piece.

Oh, sorry.

I think, Alexander Potter, the piece that's worth adding on the dealer profitability side of the equation too, is that obviously volume and throughput makes a pretty meaningful change in their bottom line. As we think through 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. Through that, the targets that we have on the mid-single-digit growth rates that you're seeing are really important for us and the benefits that accrue to our shareholders, and they are equally important for our dealers.

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. 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.

Got it. Thank you.

Thank you for your questions. Our next question is from the line of Tristan M. Thomas-Martin with BMO Capital Markets. Your line is live.

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

Sure, Tristan. 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, you know, U.S. Sportsters will be made in York, in our York, Pennsylvania facility. Obviously, we're pleased with, you know, the revised guidance that we put forward on tariffs for 2026. We do contemplate based on current expectations that we have some favorability in tariffs going into 2027 across the portfolio. I'm sorry, the second question was?

Just

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, you know, 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. 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, you know, raw, blank canvas and allow for, you know, parts and accessories, genuine parts and accessories, additions to them, are globally wanted. We don't have a, I'd say, a material difference in the growth trajectory, you know, by market.

Okay. Just one follow-up on kind of the aftermarket plan. I'm not sure if I'm reading between the lines correctly, but is there gonna be more focus on dealership kinda aftermarket add-ons versus factory aftermarket add or kinda factory add-ons? Thanks.

You mean in, you mean parts and accessories in our dealerships and it's in customization at the dealership level? Yes. 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. 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, you know, many, many years. 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.

Great. Thank you.

Thank you for your question. Our next question is from the line of David MacGregor with Longbow Research. Your line is live.

Yes. Good morning. Thanks for taking my question. I guess the question is on LiveWire and just, you know, the role that LiveWire plays in this product portfolio envision. Just, you know, if it is sort of something you are considering staying with, just how we should think taking maybe that three to five-year outlook you'd expressed earlier, just, you know, with the use of cash for that business over the next three to five years. Thanks.

Yes, David. Thank you. This is Jochen Zeitz. The first thing I'll say is, you know, we're excited about the LiveWire team's efforts this year and the pending launch of the Honcho bike, which is, you know, 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. 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. You know, we funded the loan in the back half of 2025. You know, that's our outstanding capital commitment, and we don't have intentions to fund the business, you know, 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 in the electric front, or you feel like there's steps you could take to maybe create a higher level of engagement.

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

Okay. Thanks very much.

Thanks for your question.

Yeah. David, one piece that I would add, David, on the kind of demand influence is 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. You heard Arty talk about, I think one piece that always sticks with me from an Arty perspective is too many of too few, 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. 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. Excited to see the 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 relationship.

Got it. Thanks very much. Good luck.

Thanks for your questions. Our next question is from the line of Brendan Rolle with Loop Capital. Your line is live.

Good morning. Thank you for taking my questions. 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, Brendan Rolle. You're talking about H-D Membership and the holdback?

Yeah. 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. It seems like, you know, that's going back out to dealers, and I was just wondering if you're able to size the headwind, if any, to HDFS or HDMC margins.

Yeah. I would characterize the headwind as modest over a medium-term period. The, 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 forecasting. It's a small amount on a year-over-year basis, but it's not the primary amount. The larger impact, which I, you know, heard consistently from our North American dealers both in the fall and again on a recent roadshow, 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, you know, respecting what they need to run their business well and service our riders well. I'm pleased where we are, and where we are today, is precisely what we've modeled going forward.

Okay, great. 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 network's at the right size, or are you going to continue to, you know, kind of, I guess, move away from inefficient dealers and, you know, I guess not shrink the dealer network, but, you know, maybe make it stronger? Thank you.

We're always looking for ways to make the dealer network stronger, and we love the fact that we have individual, you know, maybe smaller dealer owners, dealer principals in certain markets. We also feel privileged to have some larger entities that own groups of dealerships. I think 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, you know, 70, 80, 90 years. We are extremely proud of that.

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

Great. Thank you.

Thanks for your question. Ladies and gentlemen, we have time for a final question from the line of Jaime M. Katz with Morningstar. Your line is live.

Thanks for squeezing me in. I will make it quick. I guess most of the profit improvement that you guys have, a lot of it looks like it's coming from leverage within SG&A. 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. Thanks.

Hi, Jamie. Thank you for your question. It's obviously a balance of some headcount and then obviously some non-headcount related costs, and then also some cost of goods related, you know, actions. Our teams 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 gonna provide, you know, detail beyond that at this time, but we're very confident in the targets that we put forward and, you know, specifically the $150 million plus that we've earmarked for 2027 and beyond.

Okay. 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? Thank you.

Yeah. Jaime, I'll let Jonathan take that one.

Okay. Thank you, Jamie. As we look at pricing and mix, if and sort of compare that to Q1, you know, 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. Take a listen to that call in terms of how we talked about year-over-year quarters and what you see there. 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 gonna 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'll be important as you're thinking through what our trajectory is gonna look like for the year. Then you will see a little bit less of an impact from incentive-related activity. 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, we think that really set us up for a very successful balance of the year. Hopefully that sort of helps address your question.

Thanks.

Thank you.

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

Well, thank you everybody. 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. We look forward to updating on our progress, and we'll talk to you next earnings. Thank you.

Thank you.