Harley-Davidson, Inc. (HOG) Earnings Call Transcript & Summary

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 our latest filings with the SEC. Harley-Davidson disclaims any obligation to update information in this presentation. [Presentation]

Good morning, everyone. Thank you for joining us today at the Harley-Davidson Museum in our hometown, Milwaukee, for our Analyst and Investor Day 2022. It's great to see so many of you after 2 years of virtual calls. 1903 here in Milwaukee, 4 young Wisconsinites had a dream to build the greatest motorcycle company in the world and the world had ever seen. 119 years later, we are here today talking about the iconic Harley-Davidson, the most desirable motorcycle company and brand in the world. More than building machines, we stand for the timeless pursuit of adventure, and we are committed to building our legend and leading our industry through innovation, evolution and emotion. Today, we'd like to talk to you about the transformation we are on, where we're headed, what the opportunities are and how we are planning to accelerate as a company and the brand. All with the ambition for Harley-Davidson in mind to be the most desirable motorcycle and lifestyle brand in the world, building upon a 119-year history and leading motor culture into the future. Over the past 2 years, we've been on quite an unprecedented journey. There have been many significant macro developments that impact the world and our sector. First and foremost, the COVID-19 pandemic and its residual effects on both consumers and to the supply chain, inflation, and more recently, the Ukraine war, which in addition to the tragic humanitarian crisis is increasing political and economic volatility across the world. Despite these continued challenges, today, we are here to show you why you should be paying attention to our story and why we believe Harley-Davidson is a great investment for the future. Firstly, Harley-Davidson is one of the most powerful brands in the world, with market leadership in almost every category that we compete in. Second, unlike any of our competitors, we have a tremendous opportunity in building a unique, global lifestyle brand rooted in motor culture. The iconic bar and shield is one of the most recognized logos in the world. And again, unlike any of our competitors, we have the opportunity to evolve our lifestyle brand to new heights, if we rigorously pursue and execute on our strategy in the coming years. A strategic pillar of our Hardwire strategy is growth beyond bikes, and today, you will hear more about one element of that strategy, Apparel & Licensing, where we see a significant opportunity for growth once we've built a solid foundation that we can grow from. Third, we have a clearly-defined vision and strategy to capture profitable growth opportunities. We are seeing the proof points of the Hardwire, and today, we are taking it to the next level. In motorcycling, when you want to get more out of an engine, you upgrade it by adding a Stage 2 kit. Today, that is what we are doing with our Hardwire strategy, tuning the engine of our business for improved acceleration and increased performance. Fourth, as our CFO, Gina Goetter, will detail later this morning, we believe we have the financial and growth profile and ambitions to make Harley-Davidson the right investment for the long run. And lastly, you will hear this morning how we are seeing solid motorcycle demand across all our countries and what that means for our company. Since 1903, Harley-Davidson has pioneered motor culture, and today, is bringing this unique lifestyle to both new and existing audiences. The power of the Harley-Davidson brand is one of our greatest assets, and as we approach our 120th year, the brand is at a pivotal point in its history. Today, our brand awareness extends past motorcycles as we grow as a global lifestyle brand underpin it by our focus on desirability. Desirability is a motivating force driven by emotion. It's in our DNA. It's embedded in our vision, and it's at the heart of our mission and part of our 119-year legacy. Done right, Harley-Davidson desirability preserves the value of our customers' purchases, builds our brand beyond our riders, ensures loyalty and drives engagement. Desirability provides the framework of our Hardwire strategic plan and the framework for our success measures, and is a significant demand driver for the brand. With Hardwire Stage 2, we now put the customer at the heart of everything we do, and because of this commitment, we will know our customers better than ever. We are investing in understanding our customers, their specific needs and their expectations of our brand, both as riders and non-riders. And what is overwhelmingly clear that we have a brand that people want to be part of, and that's whether they ride or not. Within our community, we have our core and our non-riding consumers. Our core customers skewed 2 ways, non-traditional and traditional. We know that within both these groups, we have a customer base that wants the most authentically Harley experience that we can provide, invariably linked to riding, but most importantly, at the heart of more to culture. With our non-riding customers, we have an incremental opportunity. There is a large community out there who have a passion for the Harley-Davidson brand despite not being riders. In developing consumer personas, and here is just a simplified version of it, we're able to think differently about the opportunity that exists within our existing and potential new customer base, and how that is applicable across our business from the motorcycles that we design to the Parts & Accessories we create, all the way to the Apparel & Licensing we provide and how we engage with our different consumers. When we look across the consumer personas, what is clear is the shared passion inspired by the Harley-Davidson values of freedom and adventure, whether it is engaging with us today, in the future, with -- or whether they are already part of our community. This new way of thinking for us at Harley-Davidson is allowing us to be smarter in the way in which we cater to our different customers, and most importantly, the way in which we target them, ensuring that we continue to grow our community of riders and non-riders alike and how we capture the growth for our business. Capturing profitable growth is essential to our future as the most desirable motorcycle and lifestyle brand. And despite the challenges facing our world and industry today, we are seeing positive drivers impacting our company and brand. First, we expect our most profitable segments and markets to grow. You'll hear some more today about the growth of touring that we are seeing and that we expect to continue. Second, the Harley-Davidson Riding Academy is bringing more people to the sport, and more importantly, more people to the Harley-Davidson brand. And I'm pleased to say that in the U.S. today, more people are riding Harleys than ever before. Third, not only are we bringing new riders to the sport, we are reaching a new incremental customer through our strategic additions of new market introductions. You will hear later how we are using both adventure touring and sport categories to do this. And lastly, sales of our most profitable products are growing faster with younger riders as we see cultural shift within motorcycling aligned to the growing of touring and performance. I want to spend some time on the underlying dynamics of the markets, and where we believe this will support our growth in the future. We expect the global market for new and used 600cc plus ICE motorcycles to grow through at least 2030. Several factors underpin these projections, most notably, macroeconomic trends with steady growth in disposable incomes, Gen Z, interest in auto pursuits and our timing expectations for the transition of core Harley-Davidson ICE segments to EV. We expect growth in new and used, with the used part growth mostly offset by lower overall output over recent years and a tighter new used transaction price ratio. While these are the projections for the overall market, it's important for us to also consider the dynamics most relevant to our Harley-Davidson business. First, we look at global growth across segments, and we expect touring a stronghold and highly profitable segment for Harley-Davidson where we enjoy a strong leadership position to grow largely in line with the total 600cc plus market, with important opportunities in Asia Pacific and North America. Secondly, as we look at global growth across regions, we project growth in our core market of North America which represents a disproportionate share of global motorcycle profits, where we once again enjoy significant strength and clear market leadership. The markets in which we participate are one important dimension. Our participation in those markets through the health of our ridership is, of course, equally important. Our ridership in 2021 in our core market of the U.S. across new and used reached an all-time high, with more customers on the Harley-Davidson bike than ever before. We can see a supporting trend in terms of the growth in our Riding Academy training program with over 450,000 riders trained since 2015. We believe this provides a strong basis for the future, given the average age of those trained is around 40 years old with many more years of great riding ahead of them. Finally, we wanted to address what we've seen and expect to see with regards to our Harley-Davidson riders. As mentioned, we've seen and expect to continue to see a strong influx of new riders to our brand, and while it is true that a significant portion of them exited, it is very important to distinguish the quality of that exit. Only 30% to 35% of those exiting actually age out, with the bulk of those exiting retaining the possibility of returning to the sport as their life stage evolves. We have said that one of the metrics for desirability is also price in market. A more disciplined approach to inventory and a commitment to reducing discounting behavior has resulted in higher price realization and improved profitability. As an example, for critical touring category in the U.S., we have seen pricing within a plus/minus 2% band to MSRP for the past 12 months, a significant change to historical patterns despite significant pricing actions over that same time period. Before we get into the future, I'd like to take a moment to look back and acknowledge the huge transformational change we've been on as a business and as a brand over the past 24 months. In 2020, through The Rewire, we fundamentally reset our business both commercially and culturally, with a focus on high performance and immediate-term profitability in addition to cost and complexity reduction. We set about this by cutting $135 million, representing a reduction of 13% from our OpEx. We reduced our current and future motorcycle SKUs by 40%, and we exited 40 markets. Rewire laid the groundwork for Hardwire, our 5-year strategy to take us to 2025, leading with profit focus in motorcycles while adding select and focus expansion moves and investments in key strategic capabilities. Some highlights of Hardwire have included a flat HDMC top line despite a 25,000 reduction of units when comparing '21 to '19, and an additional 2.7% of operating margin growth, again, when comparing 2019 to '21. All of it, bearing in mind, the significant macro challenges out of our control that we continue to navigate. [Presentation]

You might ask why now, especially given the macro challenges. The answer is clear to us. The Hardwire is working, and we are making significant progress in transforming our business, and now is the moment to elevate our ambition beyond the current environment. As mentioned earlier, we are evolving how we view our consumer opportunity. Today, we get to know our consumers better than we ever have. This information provides us with the opportunity across our business to engage and connect in more meaningful ways, improving our consumer engagement and delivering the right message at the right time. We are driving our core motorcycle market back to growth. Our most profitable segment and our most profitable market, U.S. Touring, has returned to growth after many years of decline. Aligned to selective expansion, we've also entered new profitable segments like Adventure Touring where we are attracting new and incremental customers, and in the case of the U.S. market, have already emerged as a leader in the segment. We continue to build the desirability of our products and our brand. After a history of discounting, we're minimizing promotions and building our brand to a level where products are selling at MSRP. We've also seen a substantial increase in the demand for used motorcycles with increased prices, closing the gap between new and used. Our introduction of H-D1 marketplace has been a strong driver in the market, and it has quickly become the leading source of Harley-Davidson online dealer listings. This week, we will surpass 2 million total views on the platform, in turn, facilitating over 40,000 customers and dealer connections. In our strong dealer network, we have a great asset to our business. We've been working to improve the health of our overall dealer network, with our dealer network having experienced historic levels of profitability despite the very low levels of inventory. Transforming our business beyond motorcycles is also a new focus of ours. Now, this is twofold. With Apparel & Licensing, we believe that we have a huge long-term opportunity to grow this business with riders and non-riders alike. As a brand that defines more to culture, this is squarely within our plans to build a core capability, and it's an ambition of ours. And rooted in motor culture is personalization. With Parts & Accessories, we know our riders want to make their Harley uniquely theirs, and we are transforming our approach in P&A in several ways. Lastly, we're changing the way we work and are investing in new capabilities, both internally and externally. Our digital capability has been lagging behind for too many years. Our new digital and performance marketing capabilities are setting the stage for future growth. And with our organization we're doing 2 things. We are rethinking the way in which we -- in which people work through our future of work initiative; increasing productivity while eliminating unnecessary cost and complexity. And we're investing in our talent, increasing our capabilities and expertise in our leadership teams, setting us on the path to achieve our goals as a high-performing company. In this context, it is worth noting that all my direct reports are new in their role, and about 70% of our second- and third-tier global leadership team have changed over the past 24 months. Today, we are here to tell you that we see an opportunity to capitalize on the early success of Hardwire. And as we continue to navigate the current circumstances, we believe that by accelerating our core Hardwire initiatives and by making bold moves in spaces that Harley-Davidson can win in, we are confident that we can deliver not only further improvement in top but also bottom line performance. Given the dramatic shifts we are experiencing real-time, we will look for additional cost productivity and maintain prudent spending across all aspects of our business in order to stay ahead of the headwinds and turbulence coming at us. By now, I'm sure all of you are familiar with the Hardwire pillars that form the basis of our Hardwire Stage II acceleration plan. I'll now provide detail on select initiatives that we will focus on to accelerate and further transform the business as part of Hardwire Stage II aligned to our pillars. As part of the Hardwire, we made a commitment to invest for growth within our core segments. Aligned to Pillar 1, profit growth, we are strategically investing into Touring where we believe we can capture growth. This investment is driven by the opportunity in our stronghold categories and most profitable segments at the core of our business. We expect to invest $300 million over the next 5 years in innovation to reinvent, reimagine and reinvigorate in key categories where we see the potential to grow our leadership, Friendly Touring, Cruiser and Trike. As the market leader, it is down to us to continue to innovate within these segments, both through technology and design, building on our 119-year heritage. Within these core segments, we know that our community values elevated design and premium quality. In CVO, icons and our new Enthusiast offering that is to launch soon this year, we are doing just that. The custom vehicle operations, CVO motorcycles, are undoubtedly the most desirable in the world. Looking ahead, we will focus on growing CVO in the market, taking the very pinnacle of Harley-Davidson design to the next level. Our Icons Collection, which launched last year, is a collection of extraordinary adaptations of production motorcycles, which look to our storied past and bright future. Produced only once, each model will have a limited serialized production run and deliver on what Harley-Davidson has always done so well: Iconic design and historic stories. A new Icons Collection model will be released within each model year. Production will be enough to fill allocation of approximately one per dealer globally, making each icon a rare and highly coveted model for our riders while increasing the overall desirability of the brand. The Electra Glide Revival was our first icons released and sold out instantly. Our Enthusiast collection, which will debut later this year, will be another special edition inspired by Harley-Davidson riders and their unique stories, but more when we launch it later in the year. In addition to investing in our most profitable categories, we are also focusing even more on building our leadership by investing in our most profitable markets. In North America, we are the undisputed market leader in what is the most profitable motorcycle market in the world, and we will continue to invest in preserving and extending this lead. In Asia Pacific, we believe we have a significant opportunity to grow the premium segment across the regions while striving for leadership in the most profitable markets of China, Japan, Korea and New Zealand and Australia. In EMEA, we will be using our most premium motorcycles to grow share, leveraging our brand and playing to win. Additionally, we plan to participate in the region with new product where our profitability targets are met. And lastly, LATAM, a region that has been historically focused in the lower CC space, but where we're exploring new opportunities that best fit our profitability goals. After our successful product launches, this in last year, will focus on delivering profitable growth with both high potential adventure touring and sports segments, utilizing our Rev Max platform. We know that to achieve our Hardwire ambitions, we cannot only focus on our core segments. And aligned to Hardwire, we are therefore committed to expanding where we have the right product to win and where the profit profile is right. Last year saw the launch of Pan America, the company's first adventure touring bike, and in a whole new category for the company. Designed to conquest market share, grow the brand reach in EMEA and grow the Adventure Touring segment in North America, the response to Pan America has a phenomenal, with the Pan America allocation effectively being sold out from launch, and the bike being named multiple times the most -- the best motorcycle of 2021. Pan America has helped build the fastest-growing segment in North America, with the Pan America 1250 Special becoming the #1 selling adventure touring motorcycle in the U.S. in '21. And as we continue to see its success, it is very well suited to delivering growth in high-potential international markets too. With Sport, we know that the category skews younger, with a response to Sportster S being very strong. We're seeing a higher proportion of new-to-the-brand riders in this section, in addition to it, playing an important role as an incremental bike for existing and new customers. Delivering new to the Sport riders is the heart of our objectives to attract new customers to the brand in addition to expanding the garage of our existing riders. The Nightster that we launched just last month to step into the footsteps of a 65-year legacy of Sportster is another great example for that. Looking ahead, we plan to tap into the potential of the Rev Max platform using modularity to explore new markets for the company. Modularity in design is a key advantage and allows the company to invest for multiple categories while using the same platform. And now, I'd like to invite our VP of Design, Brad Richards to the stage to talk about how we design with modularity in mind, and how this allows us to unlock innovation. [Presentation]

Good morning, everybody. Welcome to Milwaukee. For those of you who don't live here, this is exactly what the weather is like all year long. So you're here at a good time. I want to talk to you a little bit this morning about these 3 motorcycles to my left. These are the 3 members of our Revolution Max family. So Jochen mentioned, a key part of the Hardwire transformation was also thinking about maybe transforming the way that we actually create our products and design our motorcycles. This has led us to the Revolution Max architecture and platform. So modularity was a very important element within the Rev Max project. And basically, the reason that was important is because, if you think about these 3 motorcycles and look at them, you wouldn't at first think that they come from the same essentially suite of components, but they do. So we knew we had to do a motorcycle like Sportster, which really hearken back to our original Sportster DNA from some 65 years ago, but we also had to create bikes like Pan America that operated in a totally new segment. So that was quite a challenge for the design engineering team. So let's talk about what modularity actually enables. First of all, it's really -- it enables a dramatically-improved dynamic experience for the rider, not just the expert rider, but also the new-to-the-sport rider, because it's -- it enables a bunch of very ease of use attributes. Like lightweighting, for instance, is one of those. Of course, it also enables less complexity within our engineering and manufacturing facilities, which is a huge bonus as well because that allows us more resources to do other things and make other motorcycles. And finally, most important to the design team was that this modularity enables this incredible breadth and form factor, which I talked about. So in addition to these attributes and modularity, we also knew we had to apply our mantra of look, sound and feel to every motorcycle that we design. That's what we do today. And that really gives the riders emotional connection to our products that they love so much. We call it our sweet -- become our sweet sauce. Our secret sauce, rather. So let's talk about the Revolution Max bikes we have here in front of us. And I want to start with Nightster, which is the red bike there in the middle. Nightster really had 2 key goals. I mentioned, number one, it had to deliver that classic Sportster form factor in DNA, which I think you can all see that we did, especially if you take a trip to the museum and look at our classic Sportsters. The second thing is it needed really to create a great platform for new to sport riders as well as riders that were a little bit more advanced, and we wanted to make sure that we were able to do this. So one of the key pieces of innovation that we unlocked were ride modes. So on Nightster, you can actually, through selection of ride modes, you can dial the bike into a rider's capabilities, which is really, really great. We're also able to shed about 80 pounds of weight with Nightster and added quite a bit more horsepower to the motorcycle as well. So again, that dynamic capability was greatly enhanced. So I'm going to move now to Sportster S, which is the white bike sitting here next to me. So Sportster S was really -- we wanted to create what we call the Apex Sportster experience. So we want to -- we knew that the Revolution Max architecture was going to unlock all of this incredible dynamic capability with lightweighting, horsepower and great braking and technology. We really wanted this motorcycle to kind of embody all of that. So I really -- we wanted to just kind of set the stage for putting the Sport back in Sportster, if you will. And the cool thing about this bike is it's attracting customers that were never interested in Harley-Davidson before. So we have folks coming from sport bikes and other brands that are now interested in Harley-Davidson because of the capability that this motorcycle has. And then finally, Pan America, the black motorcycle at the end of the line there. Now, it's the best-selling Adventure Touring motorcycle in North America, and it has multiple Best Bike 2022 award sitting on it's tank, which is fantastic. So Pan America definitely utilizes a unique design. We do not follow what everyone else was doing with Adventure Touring motorcycles in terms of its aesthetic, and that was a very deliberate move to kind of carve out our own space within the Adventure Touring segment. The design language is very steeped in Harley-Davidson, go-anywhere DNA, but it's also steeped in North American off-road DNA with vehicles like Jeep, Scout, Bronco, so that form factor really came from there and kind of gave us our unique space. It also has a great bit of tech in it called Adaptive Ride Height, or ARH. What ARH allows is almost a 2-inch drop in the seating position, the effective seating position of the motorcycle. One of the problems with adventure touring, which just -- by the way, is one of the fastest-growing segments in motorcycling, is that a lot of folks can't experience adventure motorcycling because the seats are too high on the motorcycles. So we invented some technology that actually drops the motorcycle seat up to 2 inches depending on the rider's inputs. This allows a more diverse group of people to experience Adventure Touring. This has also had another side effect in having -- creating a more diverse group of people experiencing Harley-Davidson motorcycles, which is exactly what we wanted. So now with all the bikes available to be experienced, growing rider accolades are piling in on the motorcycles, and it's great to read the reviews. They've been very positive, so we know Rev Max is working. So Pan America, Sportster S and Nightster had brought new customers to Harley-Davidson, and actually, Harley-Davidson into new product spaces as well, which is really exciting. So this is driving a shift in perceptions, which is one of the things that I'm most excited about being part of the design team at the company, is that we're beginning to have -- make people think a little bit differently about who the Harley-Davidson customer is and what a Harley-Davidson product is. And I think that's a really good thing, because we're basically just expanding the pool of potential customers. But regardless of customer, use case or style of motorcycle desired, the one common thread with all Harley-Davidson customers is a desire for a unique and very authentic experience. This defines the Harley-Davidson experience and the welcoming community that surrounds it. So with that, I'd just like to say thank you, and give it back to Jochen.

Thanks, Brad. When Harley-Davidson set its EV ambitions 10 years ago, we did so knowing that the electrification of motorcycles would be a long journey. The convergence of factors needed for EV to be applicable to our core segments of Touring and Cruiser, LiveWire is spearheading the market development in its segments for the urban and beyond consumer. And as the wider 2-wheel market continues to develop, Harley-Davidson will target the electrification of its core segments as soon as the technology permits. Battery technology needs to advance before delivering against the core segment of Harley-Davidson, but other tech advancements in EV apply well to our core ICE business, too. In short, electrification and the development of EV will allow Harley-Davidson to better our overall technology across the business. Both Harley Davidson and LiveWire will continue to co-develop and invest in relevant technology while exploiting opportunities and synergies for scale and efficiency. And while overall EV infrastructure is improving especially in urban centers, it will be some time until the infrastructures and broader EV network in non-urban areas becomes mainstream. Lastly, beyond electrification, we continue to pursue fuel efficiency solutions, including assessing opportunities for alternative fuels. Customization is at the heart of motor culture, and for many, is an integral part of the overall Harley-Davidson lifestyle. P&A allows us to have a truly personal relationship with our customers and their bikes. What could be better than making your Harley-Davidson uniquely yours. And with a global opportunity of $3.5 billion, we know there is a bigger potential for growth than we originally anticipated. As part of Pillar 4, Growth Beyond Bikes, we are focusing on growing our overall Parts & Accessories offering. When we look at the way in which our customers engage around P&A, it split 2 ways. Firstly, our dealer loyalist, who will spend anywhere between $1,600 to $8,000 per year on their bike through our dealer channel. While this is likely to be on new motorcycles, we think that there's an opportunity to inspire more top spenders, capturing strength of wallet, and importantly, creating a more engagement with the customer. And secondly, our channel agnostics, who are not dealer loyal, but who spent an average of $1,200 per bike every year. This customer set presents a significant opportunity for us to think about how we expand our reach, creating compelling product that can drive additional customer engagement. To capture the P&A opportunity, we will intensify our focus in this space and expect to capture incremental new and used motorcycle volume in addition to maximizing our share of wallet across our motorcycle segments, and this is not just about touring. We can offer accessories for new products, having it available from launch so that we are able to increase accessorization on new motorcycle purchases at launch, capturing the growth from the get-go while maximizing the opportunity within the used motorcycle segment, too. A key differentiator of Harley-Davidsons is the service that we can provide. We see service as a key driver for growth, ensuring that our customers have the best experience possible while inspiring them to maintain and deepen their relationship with Harley-Davidson. And lastly, we know that we have a high potential to grow our channel. A focus for us will be through investment into digital, including e-commerce, ensuring that our customers are able to have a seamless purchase experience. Thanks, everyone. We are taking a 10-minute break and see you right. [Presentation]

As I mentioned in the beginning, the power of the Harley-Davidson brand is undisputed. Harley-Davidson is one of the most recognized brands in the world, whether you're a rider or not. Rooted in authenticity and heritage and defined by motor culture, we have the opportunity to bring more people into our community, and we think that our Apparel & Licensing is a high potential way to do that. As I mentioned earlier, what is special about our brand is that it appeals to a broader audience than just our core riders, from people just discovering the brand to brand loyalists on their 10th Harley. All you need to do is to go online and look at some of the social channels. I guarantee you that you will see a much wider representation of our community than you would have, especially Instagram and even TikTok. Our marketing is rapidly evolving to capture these opportunities in different ways, to engage with our different consumer personas, both digitally and physically, satisfying our core and reaching out to new fans. With Hardwire Pillar 4, we are pushing our growth beyond bikes, opportunity beyond motorcycles and Parts & Accessories, and a key focus of that will be investing in apparel and licensing capabilities to accelerate our growth. Riding gear must be a core competency of the company and brand. By evolving our MotorClothes offering, executing a seasonal forward-looking plan, we plan to strengthen and modernize the way in which we design, develop and source our product, driving efficiencies through the business while growing our MotorClothes offering. Harley-Davidson lifestyle is where we see the overall Apparel & Licensing opportunity, especially as it relates to non-riders but brand aficionados. By creating a unique Harley-Davidson aesthetic, taking inspiration from the past but for today's consumer, we think we are able to bring more interested people to the brand, leveraging the unique power of Harley-Davidson. And lastly, we know that we must improve our commercial execution of our Apparel & Licensing business. Having brought in new leadership, we are fundamentally changing our approach to Apparel & Licensing. We will be creating a product offering that is inclusive of our community, including non-riders. And as we look at the product pyramid, you will see that with clear segmentation, using our customer personas, we are able to address both the lifestyle and more practical elements of our brand based on the clear distribution channel strategy. You'll hear more about this later in the year. Our overarching ambition is to elevate the design and craftsmanship of our apparel offering, with form, fit and function as a priority underpinned by quality. I'd now like to hand over to Edel O’Sullivan, our Chief Commercial Officer, to talk through Pillar 5, the integrated customer experience. Edel?

Thank you, Jochen. Good morning, everyone. Thanks for coming to Milwaukee to meet with us. Delivering on the growth ambitions that Jochen just shared across our Motorcycles, our Apparel & Licensing and Parts & Accessories business requires us to really transform how we think about the customer journey and to really meet, and in times, exceed the expectations of our customers for a modern retail experience, most notably at the intersection of our digital and physical channels. From the moment that a customer first engages with their brand all the way through post-sales, support and service, it is our intent to allow our customers to engage with us where and how they choose. We have made significant progress on this dimension over the past year, and let me give you one example of that. At the beginning of the riding season, we expanded the capabilities of our pre-order program to allow for customers and dealers to more directly order a bike that was of their interest as well as for us to modify how we then send those bikes to market to be able to more directly fulfill that demand in an environment where we all know we're very lean on inventory. Leveraging this program for one of our most popular models this year, the Low Rider ST, allowed us to sell out the allocation of that bike, the initial allocation, in less than 6 minutes. This is just the beginning of what we want to do with this program. You can imagine over time that this will start with much more robust tools for capturing that demand directly. We will use that to feed into a much more flexible and robust system for inventory. We're actually thinking about piloting a couple of different rapid replenishment models to allow us to test customer demand and wait times, allow for more specific customization and personalization of the bike pre-purchase, all the way to then providing better visibility and tracking to the customers and to our dealers as that bike is in production. This is just one aspect of it. Across the entire purchase journey, there are a couple of hallmarks of what we're trying to build. The first and most important thing is we want to have an excellent search and configure capability. We know that the customer journey starts online, increasingly for many of our customers. That then needs to port with facility and ease into the dealership environment where much of that inspiration, customization and engagement takes place for things like test rides and fitment. We want to simplify the transaction to allow this to be a much better customer experience, and for the dealer and the customer to spend a lot more of their time on the excitement of the purchase as opposed to the paperwork. And then finally, as you've heard throughout the course of the day, the ability to engage in service and customization post-purchase we think is not only a great opportunity for the business, but a true driver of engagement for our customers. As we look to deliver that journey, we know that there are many capabilities that we will have to deliver, and we're making the investments in the systems and infrastructure to allow us to do that. First and foremost, we need much more robust digital tools that allow us to build, to configure, to customize. Secondly, we need an inventory allocation system that is more modern, that is more based on a lean inventory environment, which has significant benefits for ourselves and for our dealers, but that preserves the ability to meet customer demand for what we know is still, in many instances, an impulse purchase. Third, we need to make sure that, that customer ID, that customer identification and their history, is fully transparent across channels. It is portable, so you can start in one channel and end in another one as you choose. And finally, it requires us to continue to work with our dealers to modernize the in-dealership experience. As we think about the history of our dealers over the past few years, let me start by saying dealers are, of course, for us, an important part of our overall journey. There are our partners in this journey in delivering that customer experience. The past couple of years under the spirit of desirability, which has led to higher price realization, as Jochen mentioned earlier, as well as a much leaner inventory environment has significantly improved the profitability of our dealers, and we are thrilled to see that. We also think that this provides the basis for significant strength going forward and the capability to invest in transforming the in dealership experience. We intend to keep our network as the strongest, most competitive and most exclusive network in all of power sports as it is today. This is a brand that thrives on emotion. It is a brand that's about connection, it's about community. It is not just about the transaction. And at their best, our dealers do this better than anyone, to be able to really establish that relationship and that connection with the customer. Over the course of the next 10 years, we expect that our dealer network will invest close to $2 billion in order to transform the in-dealership experience, to more completely deliver that experience in dealership. The hallmarks of this transformation will be a better alignment to the brand, a stronger representation of the brand, a more flexible approach. Sometimes we hear that can be a little bit intimidating for non-riders, so we want this to be an environment that is friendly to riders and non-riders. That is more integrated with the digital experience I just spoke to. But crucially, that really invests in the experience, the engagement and the community that sets this brand apart. As part of this transformation, we do expect that there will be further network optimization, both in the size and, quite frankly, the shape of the dealer network to ensure that we keep disciplined and focus while very, very importantly ensuring that we keep the market coverage and the strength of our network today that allows us to invest so significantly in service, in customization and in experiences. So we're very excited for this transformation. For a little bit more detail, let me show the following video to you. [Presentation]

So I said, we're excited to roll this program out over the next couple of weeks. We have been collaborating extensively with our dealer network over the past few months to really ensure that we drive that consistency, that improved experience, but also preserve the character and the uniqueness, which again, denotes the Harley-Davidson dealership and the strength of that dealership in connecting with our customers. So in summary, over the next few years, we see significant transformation in our go-to-market and in our relationship with the dealers. We see a world that transitions from much more siloed processes around transactions with products and services in very different sort of buckets, in terms of the customer experience, to a much more seamless approach, where products and services are all integrated. From a world where we have slightly disconnected and fragmented digital experiences to one that again matches the expectations of a modern retail experience with a lot more integration, and that really puts the customer and their experience at the center of the journey, from something that was really largely based on new sales and the transaction around new sales to an experience that recognizes the value of that customer through their entire journey, again, emphasizing engagement, emphasizing community service customization and ultimately, preserving that customer's long-term value for the brand. We see a transformation also in how the network works with each other from a somewhat more fragmented approach, with a little bit more ad hoc to something where we're all collaborating together on our ultimate goal, which is for Harley-Davidson to win. And finally, from a world in which each dealership is sort of its own point in time and in place, with its own sort of most of the activities oriented around allocation and trying to manage sort of a specific pool of inventory, to a world where we think more holistically about all of the profit opportunities within a dealership and do more of the inventory management at the center to preserve that delicate balance of desirability with the ability to meet our customer demand. So we're just getting started. We couldn't be more excited. And with that, let me turn it over to Gina for a recap of the financials of Hardwire, too.

Thank you, Edel. Who is ready to talk some numbers, get the spreadsheets out? Welcome, everyone. Thank you so much for joining us in my hometown of Milwaukee. It's lovey to be here. Thank you for coming in. Thank you for bringing the weather. It is definitely -- the motorcycle guys are definitely shining in us this week. It is definitely getting time to ride. Over the past few years, Harley has been on a transformation journey. We have restructured the company. We have streamlined our product portfolio, and we have refocused our strategy against our core markets and our core products. Looking at the financial measures. In year 1 of our Hardwire, we delivered about $4.5 billion of revenue, which was just shy of 2019, but we delivered that with 25,000 fewer units. And as Jochen talked about upfront, we saw growth come back to the categories, and we were growing share in our most profitable category and our most profitable market. We are very proud of the margin improvement that we were able to drive in 2021, with 2.7 points of improvement versus where we were in 2019. And as we've talked about before, this margin growth was really driven by the actions that we took as part of Rewire to take out the cost to really refocus the portfolio and also actions that we took as part of our year 1 of Hardwire to kind of keep going towards our core focus areas, our core products and restoring the profitability of the company. After a dividend hiatus in 2020, we went back to dividends in 2021, and we gave back $92 million to our shareholders. With a solid foundation now set in '21, we turn the corner to year 2 of the Hardwire. And as we highlighted a couple of weeks ago on our earnings call, we remain committed to be on track to delivering our 2022 guidance. As you have seen in our Q1 performance, we were largely in line with internal expectations. Chip shortages and supplier production impacted our ability to efficiently produce, build dealer inventory and meet demand. And we continue to see high levels of cost coming into the P&L across supply chain. 2022 is definitely going to be a back-half story for Harley, assuming some improvement in the supply chain in the back half of the year, also assuming that we don't have any new material supply disruption from our supply base. We expect that Q2 is going to look very similar to Q1, in terms of the production, in terms of shipments. And we're not expecting a meaningful change in cost inflation or chip availability. As we turn to the back half, we're planning for more efficient production and logistics costs to stabilize. And while there will continue to be volatility, just given all of the macro global events, we will continue to pivot and take action to make sure that the business is on track to deliver the goals for the year. Hardwire Stage II is all about acceleration. And as you've gone throughout the morning, hopefully, you're walking away with confidence that our business fundamentals have improved. We're investing for long-term growth within our most profitable markets and categories. And we're building capabilities that will allow us to expand our customer reach and dealer engagement and ultimately, that we are focused on those initiatives in those areas of the business that drive the most amount of value for all of our stakeholders. With LiveWire as a separate business, we will set different target metrics for the 3 businesses, based on what matters most for their business model. These updated targets are through the same time period as our original Hardwire plan, so through 2025. And as we said last year, the base for our algorithm will be 2021 when we landed the year in '21. So for the motor company, we are now targeting revenue growth to be 5% to 7% through 2025. This revenue growth is inclusive of ICE motorcycles, our Parts & Accessories business and our Apparel & Licensing business. This updated target is ahead of our original Hardwire expectations and is driven by the confidence we have in our ability to continue growing our motorcycle business desirably over the long term as well as the step changes that we're making across P&A and Apparel & Licensing. For HDMC, we believe we have a path back to 15% margin by 2025 through continued focus on the fundamentals of pricing and cost management, including a more ambitious agenda around the long-term supply chain optimization. For HDFS, we continue to expect solid earnings growth, using [ '21 ] as the base, the CAGR is minus 3% to minus 5%. But remember, this includes the historically low losses and loss allowance reserve rate that we had -- a reserve release that we had back in '21. That was worth about $100 million, and we do not expect that to be repeatable as we move forward. So when you look at the HDFS 2022 through 2025, we expect operating income to grow 3% to 5%. Turning to LiveWire. We continue to be committed to the targets we issued back in December. By 2025, we expect to deliver about 53,000 motorcycles as we continue to expand into in new markets with new products. And the revenue growth of 140% includes the motorcycle unit growth as well as growth within our StaCyc kid motorbike business. And we're going to talk more about LiveWire and StaCyc a little bit later this morning. Since Harley is going to own the majority stake of LiveWire, we will continue to consolidate the business into Harley-Davidson, Inc., and LiveWire's results will flow through to the income statement and with an adjustment for minority interest. And so for total HDI, Inc., we are targeting low double-digit EPS growth through 2025. These updated targets represent what we know of today, in terms of the macro operating environment, and our ability to navigate all of the headwinds that are coming at us. One of the biggest questions that we received, coming out of our LiveWire announcement in December, was how does the ICE market coexist with the EV market? So as EV is rapidly growing, what is this going to mean for your ICE business? And earlier, you can watch through that we expect through 2030 that our ICE market and the categories in which we compete, will continue to grow. In many of these markets, in many of these categories, we are the category. We are the market. And it is our job to continue to invest behind innovation and brand development to continue to lead. And at the same time, as ICE is expanding, the EV market is accelerating. And we expect double-digit growth as customer preferences continue to shift, the EV infrastructure continues to expand and the market continues to mature. Looking a little bit more closely at revenue. Our HDMC revenue target of 5% to 7% growth is made up of the 4 main businesses, of Motorcycles, Parts & Accessories, Apparel & Licensing and Experiences. And we expect that all 4 of these businesses are going to grow over the next 3 years. For Motorcycles, we expect revenue growth towards the lower end of that 5% to 7% range as we grow units behind innovation and continue to focus on profitable mix and pricing. For P&A, A&L and Experiences, we expect growth above the HDMC segment range. P&A growth will accelerate as we continue to emphasize customization of new and used as well as we have a reengagement with the park through service. For A&L, growth projections are based on our expectation of higher attach rates and things like riding gear as well as us stepping into the new opportunity with new customer segments, as Jochen outlined earlier. Experiences will drive growth by engaging customers in the brand across services, events and various touch points. We are also committed to getting back to 15% operating margin across HDMC, excluding LiveWire. So in 2021 [Audio Gap] today. The next big area of opportunity for cost takeout is across the supply chain. And in 2021, we saw almost $200 million of cost to come into the P&L. And in 2022, we're guiding to similar levels. So all of this volatility, though, it has opened up the opportunity for us to rethink how we approach productivity. So within manufacturing, we are reassessing our footprint to optimize delivery times and improve profitability in all of the markets, in which we compete. This work will inform our capital strategy and the type of investments that we're going to need to make at both our York and our Thailand facilities. And we also have an opportunity to continue investing in automation and digital technology across all of our facilities to drive efficiency and enhance our product quality. For logistics, we will have a concentrated effort on bringing down our expedited shipping costs as our supplier health improves. And as we relook at the overall network design, we are expanding on our capabilities to improve visibility of our inventory by creating seamless system connectivity that will connect orders all the way through to operations to drive better predictability and speed. And finally, for supply, our opportunity here is to reshape our supplier network to best serve our updated global footprint. A big factor in us being able to deliver these targets will be talent and capabilities. And over the past year, we have brought in new leadership across all of our buckets of supply chain. And they bring with them decades of expertise and best practices that we are going to put to use on our own journey. This cost savings commitment is a critical part of our Hardwire II targets because it allows us to expand our margin. It allows us to stay ahead of inflation, and it provides the fuel that we need to continue investing back into the business. Moving outside of HDMC. Our Financial Services business provides a distinct competitive advantage to us as well as to our dealers. We currently finance about 2/3 of all of the new and used motorcycles that are flowing through our network. And for every bike that we are financing, we generate about $1,000 of profit per that bike, plus there's additional revenue and additional profit from other services such as extended warranties, insurance, [ card ] products. HDFS has been a steady performer, that is cash generative and self-funding. We have grown our return on equity from the high teens in the 2012 to 2017 period to an average of 21% over the past 5 years. This ROE regularly benchmarks, is best-in-class amongst other finance captives. And we continue to work to improve it as we maximize our net interest margin, make greater use of our Eaglemark Savings Bank and grow our revenue from all of our other services that we provide. Taken all together, HDFS continues to be a strategically important segment of Harley, which drives value across our entire ecosystem. Turning to our capital allocation strategy. The first priority continues to be funding the investment against our Hardwire strategy. Over the next 3 years, we anticipate spending $225 million to $250 million behind ICE product innovation, manufacturing modernization and continued evolution of our go-to-market strategy. Our remaining priorities continue to be returning cash to shareholders via dividends and share buybacks. I have talked with many of you over since our Q1 earnings release on what our plan is on share buybacks. And we do expect this will continue to be part of our capital allocation strategy. But we will balance the buybacks with other cash priorities that we have across the business, including potential strategic M&A activity that is aligned with our strategy. So as we think about both growth opportunities, organic or inorganic, that will be the priority for our cash, with buybacks then kind of taking a backseat to those. As we think about M&A, we will take a focus and approach in accelerating and evaluating potential opportunities that will complement our Hardwire to growth strategies and accelerate our capabilities. A good example of this is within our Parts & Accessories business, where M&A could play a role in either filling product gaps, expanding our retail or omnichannel presence or enhancing our business model. It's important to call out the targets that I shared with you earlier, they do not include any material M&A activity in them. So one final slide as I wrap up. This is the first time that we are providing guidance for all 3 of our businesses. And the announcement of LiveWire as a separate public company is definitely an accelerator from our original Hardwire targets. We put together this chart to an apples-to-apples of -- if LiveWire and HDMC Hardwire, LiveWire and HDMC kind of in the Hardwire Stage II. So you can see apples-to-apples how that model is shifting. For all of my [ sell-side ] friends, this table -- I know that last year, we probably didn't make your job very easy trying to fit all the left-hand side into your model. So hopefully, the specificity of what we're providing today gives you a better sense for where we're headed, from a business model standpoint. We believe that the step-ups that we're making really across all areas of our business model leads to stronger revenue and a healthier margin profile, creating a sustainable business model that sets us up for what comes next after the Hardwire. And with that, I will wrap up, and I will turn it back over to Jochen.

Thanks, Gina. Thanks, Edel. Inclusive stakeholder management is an integral sixth pillar of our Hardwire strategy, and it is applicable across everything we do. Highlights since initiation the [ ISM ] inclusive stakeholder management program across the business include driving a commitment to a diverse workforce, establishing a path to net zero and operations, driving share [ transparency ] for all stakeholders through fair, equitable and ethical policies and practices and investing in our community, ensuring it's not just a great place to work, but also a great place to live. Driven by our commitment to people, planet and profit, we are continuing on our journey as not just a great brand but a great company. Thank you very much. And before we take your questions, I would really like to take the opportunity to thank the Harley team for all their very hard work and dedication to win, especially in the current environment, and leading this amazing brand to new heights with new ambitions. Thank you very much, and we're open for questions.

When we do Q&A, if you can please just state your name and where you're from. Okay?

Robby Ohmes with Bank of America. I'm going to ask two quick follow-ups to Gina just because she went last and then probably going to raise my hand again for other questions. Just on the guidance, one question is just the, what would the gross margin assumption be for Harley-Davidson Motor Corp. in 2025 on the 15% EBIT margin? And then the second question on the Motorcycle guidance. The unit assumption falling below the 5% to 7% revenue growth. How much of that is an assumption about demand versus the new strategy under Jochen to not make as many motorcycles maybe as people want?

So on the gross margin question, I'm not going to give guidance on gross margin. But what I would hint to you and say that our operating expense and kind of where we're running today in 2022, we're planning to spend in 2022, that could be a good gauge when you look at it on a percent of revenue, moving forward. So that should kind of help you back into what that right gross margin could be. We -- getting away from giving precise gross margin guidance gives us the flexibility because we've got investment decisions that we make within operating expense that we can continue to flex up or down as we're going throughout the year, and we're watching what is happening to us in gross margin and being able to respond to that. So -- but that could be a hint from a modeling question of how to think about it. In terms of the unit growth forecast within -- we -- there's absolutely an element of we're not going to go back to where we were previously, of pushing demand at any cost. We are being very mindful of what we're putting in the market is good from a revenue standpoint, but it's also good from a profit standpoint as well. And we feel confident in the work that we did around our ICE segment modeling. We know that there is growth in our most profitable segments, in our most profitable markets. So we'd rather put and focus there than chase demand at any cost. I don't know if you want to add.

No. And as you said, we expect Motorcycle unit growth to be an absolute growth at the lower end of the range that we provide for that very reason as well.

It's Craig Kennison from Baird. Gina, just a quick one for you on the tariff issue. Are you saying you expect incremental tariff relief to give you that benefit? Or are you asking analysts to exclude a number?

No, I'm saying we got to 9% last year. There was a little over one point of margin drag that was attributed to those incremental tariffs. So if you kind of back that out, knowing that we don't have those this year, that kind of is an easy give on our margin that gives us that point. That's what we're saying.

And then just on the dealer side, if I could, how have dealers reacted to your plan? And where are they pushing back the most?

So we have very constructive conversations with our dealers and all of this evolution. I think the past 18 months have been actually a really interesting proof point on the value of a more restrained and disciplined strategy. I think they see that in their results, and they understand the value of that. They also, of course, know because they can see it in their own customers and in their own behaviors that the world is evolving in terms of how people connect and their expectations across channels. So I think we are moving very closely together in alignment on all of those questions. Of course, there are issues that are raised around how do we effectively work together and make sure that we maintain a fair and equitable approach to the network, that the investments that we are asking them to make are reasonable and that we are going to hold up essentially our end of the bargain and being very disciplined how we manage volume and how we ensure that profitability, going forward. So that are the negotiations of the conversations, really, where we engage the most. This is a conversation, obviously, in North America but also globally, ensuring that we continue to evolve the relationship with the dealer and the value of the dealer. One thing that is very clear for us, and I mentioned it in my comments, the experience that our dealers are able to provide is very critical to this brand and is very critical to this category. And we intend to continue to work together to make sure that we do the best we can, collectively, for our customer.

It's Fred Wightman from Wolfe. I was hoping you could just walk through some of the assumptions. I think it was Slide 14, where you have the new rider assumptions, you have sort of the new ads, the exits. Could you talk -- I know that it's sort of different timeframes. One was 6 years. It looks like this next one is 9. But it looks like there's a step-up in the assumptions for the ads, new rider ads. Can you just sort of walk through what's driving that?

Do you want to do it?

Yes. I think the big thing that is -- we don't have our hand signals. Usually during earnings calls, we do hand signals to each other. Now we're doing real-time hand signals. So that -- in that chart -- this is the one that you're talking about that goes up and down and then -- yes, okay. So as we think out and beyond, it's the tailwinds that are starting to help us within the category to increase ridership. So the pieces that Jochen walked through of, we've got more people that are going through Rider Academy. We've got growth coming back into our categories. Both of those things provide the tailwind that more people are entering in than are leaving.

I think what's really important is, and it's not something that the company has really emphasized, is the fact that we talked a lot about aging out but never talking about aging in, right? I take myself as a rider. I started almost 16. And in my 20s, I stopped. And I came back to riding before I joined Harley. Because it's a life stage. You have to age into to be ready to ride a Harley, right, and to have the time and the money to actually do that. And that's a huge asset for us. And I don't think any other brand has that opportunity to go after this consumer that is ready to ride again. And how we changed the company to understand who that customer is, when the customer is ready, is absolutely critical. It was not a focus of the past strategies to actually go after that segment. The focus was always how do we keep people riding. And for us, a significant focus has to be to focus on those who want to think about riding again and being there when that decision is there, right? So that's a very important focus of ours. And that's something I think all of you should be focusing a lot more on because, yes, consumer is aging, but that's just life, right? I mean, people get older, but that doesn't mean that as a company, you don't have a responsibility to bring new people into the sport. That's our responsibility as the market leader. And we've been way too much focusing, "Oh, that headwinds, the headwinds, people are aging out," rather than say, "Well, actually, there's more people coming into this board, if we so choose to focus on them." So while we want to keep people riding. And the customers are riding longer in their lifetime because they're fitter, their average age is going up and all of that. The key focus needs to be to get to those customers that want to start riding again, just like I started to ride again in my late 30s. And I think that's absolutely important to focus on it and not just thinking, can you get an 18-year old to become a Harley rider? That's really not focusing on the right thing. And then in addition, it's really not just about demographics. It's about psychographics. It's what does the consumer -- when is that consumer ready? What are -- is it just the age? Probably not because life at 30 and 40 might vary from where you live and what you do. And having all that data available about the consumer is critical because that's when you can focus on a customer when he or she is ready to step up again and say, now it's time to ride.

Yes. That's why that chart is so powerful because before it was always very black and white with the company, the previous narrative, right, that's people are getting older. And what we try to do with that chart is to show that it's so much more nuanced.

Joe Altobello, Raymond James. A couple of questions, if I could. I guess, first, in terms of the EPS guide, the low double-digit CAGR through '25, how much of that is coming from capital allocation, and in particular, the stock buybacks? Are you assuming your share count comes down? Or are you just offsetting stock-based comp? Is that a significant component of that double-digit EPS growth?

It is not a significant component. No. It's a measure component, it's not a significant component.

And then secondly, in terms of your dealer footprint, what does that look like in '25 versus today? Are we up? Are we down? Are we flat?

Yes. I would expect that as we go between now and 2025, that we will continue to see some optimization of the network. The two guiding principles for us is to make sure that we create enough focus and discipline, but that we preserve market coverage. That's one of the things that is particular to our brand. And it allows us to have, quite frankly, the size of the share that we have is because we provide excellent aftermarket support and service that nobody else can do. So as that network potentially becomes a little bit more optimized, a little bit smaller over the next few years, we're looking to preserve that balance and that coverage. The other thing that I would tell you is it's not only the number of dealers, but we're also looking very closely at the format of those dealers, right? So we may not need them to all look the same. We may not need for all of them to do the same things in the future. It may be characteristics that look very differently, depending on the market, depending on the customer, depending on the geography, quite frankly. So all of these factors are going into consideration. But in terms of the general trend, I would say, it will be smaller and more flexible than it is today.

I think of what Edel just said is a tiering of your dealer network, right? It could be a Tier 1 or Tier 2 dealer, maybe Tier 3, depending on the location, to Edel's point, depending on the customer base, depending on the location. Is it an urban dealership? Is it not? So I think dealer tiering is something that is critical. As you divide, who could be a service dealer? Who could be an experienced dealer? It's not just about selling motorcycles. That's critical.

More questions?

Brett Andress, KeyBanc. Just following up on Joe's question on the level of investment in the dealerships. I mean, how many dealers do you think can actually make that level of investment? And just maybe getting back to a more precise number around what is the optimal number here in the U.S.? And then second on just inventory turns. Where do you think inventory turns ultimately settle out when you get to 2025, at the dealership level?

Yes. So on the first part of your question, this is certainly -- this is not an approach that we have done sort of in a vacuum. And we've worked very, very closely with the dealers over many months to ensure that the affordability of this is front and center. We do not want this to be a situation that actually creates distress in the network and that actually makes it difficult for us to preserve the strength of the network. So that's a very flexible template. It has a lot of different alternatives. It has a lot of customization opportunities in it being Harley of enough customization that allows the dealer to be very flexible in how they think about implementing this program. It is also a gradual rollout. So it ensures that we have the time and the dealers have the time to build up sort of the right financial projections to make themselves able to go through the program. And then the last element that I would say is, these have been very profitable years for the dealers, which we are thrilled to see. But that also, we think, provides a good opportunity to go through what is a very long overdue transformation of the dealer environment. On your second question on inventory, I mean, what I would say is, we're definitely too lean today, I think that, that is certainly an industry trend. We are not going back to the sort of 110 days of inventory. What we are trying to do is to create the right balance between impulse purchase and the right representation of the brand in dealership, with a much more flexible and much more sort of rapid replenishment view of inventory, so that you are able to engage in the dealership or in a digital way to create and customize your bike. It does not have to be on the floor. It also limits the possibility of discounting, if it's not the right bike in the right place, but you're still able to access it in a reasonable timeframe. So we would expect it will come up from where we are now. It will probably be much closer to where we are now, though, than where we were in 2019. But it's going to be, ideally, a much, much more flexible approach to how we replenish inventory and how our dealers access it.

Questions?

It's Colin from [indiscernible]. I've got a couple. First off, on apparel, the distinction between motor clothes and lifestyle as noted. Talk to me about lifestyle and how that goes to market. I imagine I'm not having to walk into a dealership to buy this stuff. Online has its own challenges, branded [ High Street ] presence has its own challenges, too. So how do you do that? That was the first question. The second question, the CapEx guidance, so you're going from $205 million to $275 million midpoint. In the words of Kingly, "and nothing comes from nothing." But maybe you want to give us some sense of where the extra $70 million a year spend is going?

So Colin, to your first question, I just talked about tiering of dealers, right? When you think about the parallel licensing, you also have to think of tiering your channel. That's what consumer brands do. You sell certain products in certain channels. And then even within the dealer network, you have an opportunity to sell more lifestyle apparel, e.g, think the urban consumer, the urban dealers versus the nonurban dealers and consumers. So within the apparel and licensing opportunity, we will have the chance to segment our apparel and licensing offering based on the consumer that we think we can attract into certain dealerships. There might be opportunity also to think outside of the dealer network together with our dealers, if their location is not exactly where we think it should be. There might be, and I'm saying might be because it's something that we will be looking at very selectively a few stores that we might want to own in order to understand that consumer in the urban area better as an experience center, but not to make it a big part of our business, but to learn retail because retail is detail and to give a better guidance to our dealers. There certainly will be an e-commerce component as well where we think that apparel -- and I mentioned that sometime later in the year, we are launching a new collection or collections rather that will appeal to the more lifestyle consumer. There is an opportunity to go direct to the consumer as well, select dealers but also e-commerce. And in some instances, there might be a channel out there, and I'm not thinking department stores, I'm thinking those who can really live up to the values and the positioning of the brand that could carry a selective product of ours as well. So there will be a clear segmentation based on the pyramid you've seen of who gets what and what collection has what aspiration, what price points so that our dealers have their genuine motor close, which has 2 components: performance, functional gear but also lifestyle gear, T-shirts, for example, is a very important component for their business, localized T-shirts, but then there's also a component for some dealers that can sell a more upscale lifestyle and an opportunity beyond that. So all of that will be part of the game plan for the coming years.

And in terms of capital and the step-up, year 1, we saw a lot of good momentum across our core business. And as we head into year 2, 3, 4, it's really investing behind innovation, particularly within our core products of touring and strike. So doubling down, making sure we've got the investments needed to make that profitable core growing, continuing to grow. The second place where we're stepping up investment is across the supply chain. So there's a lot of cost productivity that we're putting on the table with that comes work that we have to do across our network, both in terms of automation, digital enhancement but just some -- there could be some infrastructure investments that we're going to need to make as we kind of get that footprint in the right spot, depending on where the forecast that we've got for each market -- volume opportunities. So those would be the 2 that I would call out of what's driving that step change.

So Colin, I'd like to just talk a little bit more about apparel and licensing to give you a bit more background. The company has not really been in control of its own destiny from a branding perspective. We kind of said, hear this, right, sign some licensees, give dealers the opportunity to design T-shirts and other things. So we essentially lost control of our brand. And that's changing, right? We are taking that control in-house and build a core competency that never really truly existed because it was all about the motorcycle. So having a dedicated parts and accessories team, having a dedicated, skilled apparel and licensing team is a complete change, that is quite extraordinary. That will take a little bit of time, but it will bring a competency in-house that we've never had. We used to have 3 T-shirt licensees, 3, that all competed for space within the dealer, right? And the design was provided by the dealer. You can't run a licensing business like that. We let our licensees decide where they want to sell their product, no channel strategy. We have several competing licensees for the same segment beyond T-shirts as well. And we have not really looked at licensing as a business opportunity that goes beyond creating royalties or generating royalties but actually helping to build the desirability of the brand, think sunglass, as an example, think footwear, think bags and all of that has never really been managed as a business. Now that's obviously my background, and I'm like, wow, that's quite extraordinary that a brand like Harley-Davidson gives away the keys to its house to actually control and manage with the competent team what this business should be. And it is a true unique opportunity because once you identify -- and that's why I've highlighted so much the non-rider versus the rider, once you identify with the brand, that's your first step into a motorcycle or the first step into the brand. And there are a lot of fans out there that don't know where to buy Harley-Davidson other than in dealerships that don't want to go into a dealership. And we have to provide that experience and that aesthetic that is appealing. And that's why I also highlighted going to TikTok, look at influencers, what are they wearing. There is a huge fan base out there that we've never really serviced. Think of the vintage market. Now try and buy a 30-, 40-year-old leather jacket. It will cost you several thousand dollars. It's there as a market, but we are not actually going after that consumer or after that market opportunity because people associate with the heritage and the vintage aspect, but we've never really created a product to service that consumer and bring them into the brand drive and saying here's the dealerships and here's a whole world out there that we then actually don't talk to. We need to start building that relationship. We need to know everything about the customer, have different customer personas and what I presented is really reduced version of what we are actually doing in-house because we don't want to really talk too much about it in the outside. But everything we do is to focus from a product development, from a design, from a price point perspective, from a channel perspective, targeted towards those customers that range all the way to -- from a traditional core customer to contemporary core customer all the way to those who are fans and aspire to come into the brand. And I always think the first T-shirt that you buy is the first step into the motorcycle. That's really, really important. So it's a revenue and profit opportunity as well as it is a brand opportunity and the leverage to actually get people to ride.

And Jochen, if I could add one other dimension to it? I think it also gives us a much more balanced approach to the female consumer that is just naturally less at this point, less in our motorcycle market. So it creates a completely new opportunity for us to engage with the female consumer, introduce them to the brand and eventually sort of move into the space of riding, which we think is a huge growth opportunity in our core business as well.

And if you look at our announcement for the 120th anniversary, the language changed a lot to what we would have advertised in the past. It's for fans, it's for families, it's for kids and it's for riders, right? And we purposefully decided when we go to an event, it's not just about the traditional core customer, but it's expanding and offering a diverse set of experience to those who just think Harley is a cool brand.

Gerrick Johnson, BMO. I had a question on the optimization of the dealer network, specifically on exclusivity, most dealers are exclusive, but not all. Is there going to be a push to make them all exclusive or continue to allow them to sell off the products? One reason why I ask is the northern markets, I find an extreme turnover in salespeople because they have nothing to sell in the wintertime, and so there's a lack of a relationship with a customer when you have that turnover. So how do you fix that in some of those northern markets where you don't have anything to sell in winter? And what's the corporate policy on exclusivity going forward?

Yes. We think it is very important for our network to remain as exclusive as possible. As you state, there are certain conditions under which that's a little bit more understandable. But the strength of the brand is best expressed in a space that is dedicated to Harley-Davidson, and we intend to continue to encourage dealers in that pursuit, sort of exclusive coverage of Harley-Davidson. Again, harking back to the points around profitability, around the model that we are driving now, around creating quite frankly, a lot more opportunities aside from the pure transaction of a new motorcycle. We think that that creates much more opportunities for our dealers to continue to be extraordinarily profitable with us. The position that we have in the market in North America and, quite frankly, globally with very high margin, very premium product, I think, is a real element that is encouraging and very attractive to dealers, and we intend to continue to maximize that going forward. So providing more balance across all other profit centers of the dealership, including apparel and licensing, customization and service is one important part. And as we roll out this program, ensuring that we encourage our dealers to remain sort of exclusive to Harley-Davidson and all the benefits that that provides is another component.

David MacGregor, Longbow Research. Congratulations on all the progress, by the way. It's encouraging. I guess a couple of questions. First of all, on the dealer optimization, we seem to be focusing on that here this morning. But how do you grow the rest of the world? And I realize in one of your early charts, you'd indicated that you're looking for 2x the growth in the U.S. versus the ROW, but just talk a little bit about that rest of world dealer organization, how do you grow it? How do you invest in it? And then secondly, just if you could talk a little bit about the Riders Academy as a gathering device and an opportunity to engage people and just grow the number of riders that are out there and maintain your share, obviously. But how do you invest in that? And is there sufficient capacity at the dealership for that now? Or do you have to invest there as well?

Yes. Thank you. So globally -- so this program that we just described today is actually a global program for us. The same principles apply. And it's an experience. It's based on all of the profit centers and all of the value streams that Harley-Davidson can provide to our consumers, to our dealers -- and to our dealers. So all of the same elements are there. Obviously, the regulatory environment is different in different parts of the world. There are different opportunities and different restrictions in different geographies, which are obviously part of what we are considering. But if you recall in Rewire, one of the actions that we took was to significantly scale back our country participation with the intent of being able to go deeper and greater profitability in the countries in which we remained, and that is inclusive of our dealers. The same actions of optimization, we're looking at them in other regions of the world, and we intend to continue now with that reduced footprint to have it be more profitable for us and for our network. So it harkens back all the way to Rewire in terms of thinking about a smaller footprint, but one that is much more profitable, and we intend to continue to do that going forward. And I'm sorry, I forgot the second part of your question.

The Riders Academy. Just how do you invest in that and create a greater level of awareness around that program?

Yes. As I said, we've created 450,000 new riders. It's a fantastic tool that is led by our dealers. And it's something we would like to expand. Not every dealer can have a Riding Academy. We are booked out on everything we offer. There's also an incremental opportunity, think adventure touring, for example, and providing when we talk about aging into riding, making people feel confident about riding. You might have been a rider, but you've been out of it for 10 years and providing not from scratch experience, but one that gets you comfortable again and improves your skills. So we believe there's an opportunity be beyond beginners to actually tap into that rider that would like a freshen up or would like to get better at riding as well and feel more comfortable. So that's a new element that we are targeting in the coming years as well.

Ryan Sundby, William Blair. You touched on new technologies like ride mode and the adaptive seat height to improve the rider experience. Can you maybe just touch on where you stand in terms of more connected bike and where you see opportunity moving forward?

Well, as I said earlier, that's the unique opportunity that we have with LiveWire being a stand-alone company and innovating in its own space, but still having the ability to actually inspire each other in terms of development. The whole question of connectivity is definitely something that is more led by the EV consumer, but it's something where we, from a Harley perspective, will also learn, give back to LiveWire, but also benefit from the connectivity aspect that is going to be absolutely critical. As you've seen in the order space, it's become a very important ingredient over-the-air updates, frequent updates, you might have a program, but that program evolves in terms of connectivity, in terms of what your bike can do just like it can improve your ability to drive for a motorcycle. It's better adaptability of the bike. So there's huge opportunities here where the ICE business will benefit from the overall change in approach to motorcycle. And that's exactly what we are planning to do. So there will be more innovation coming from us in the coming years. As I mentioned, core investments in our core segments is critical. We want to expand our market leadership, not just defend it at all, and innovation will play an important role, as Brad talked about innovating in ICE, but at the same time, also changing the look and feel of our bikes also in safety aspects, which will be more and more critical as you think into the future. And that's what technology can play a very important role as well.

Two quick questions. The first, Jochen, you've mentioned social media a few times, TikTok, things like that. You've done some incredible things already, I think, with the long way up. And is there -- can you give us any color on what you may be doing next or what you might be doing on the social media digital influencer to achieve these brand goals?

You have to start surfing on TikTok to find out.

We'll do a TikTok for you right now. TikTok right in the...

No. Look, as I talked about, consumer personas, different things for different people, right? But you always stay true to your brand. That's important. You do not want to be everything to everybody. The authenticity is absolutely critical, and that needs to translate from your overall brand communication point of view to your PR and to your -- how you show up in social media. And I -- for those who follow us closely, when you look at the evolution of our social media posts and engagement over the last 2 years, it's been a radical change, right? And if you look into the commentary section, radical change. If you look at the Nightster launch that we just did, how we approach the whole launch is a huge evolution. It might not seem that way, but it is, based on how we would communicate in a very traditional way, in a singular way towards a certain customer in the past, that is evolving tremendously. But what's really important is that segmentation, right? You can't talk about the same things to everybody because then you don't reach anybody. And that's where that segmentation is critical, whether it's social media, PR. So what we post on LinkedIn is probably not what we would post on Facebook, for example. So that differentiation is the level of sophistication that we have in our overall approach. And that applies to product. and the messaging in itself, but always paying back into this Harley heritage of 119 years, but with the performance and innovative face to the brand that I don't think we've really pushed for a long time.

That's very helpful. And then just one quick follow-up, I think, for Edel. Another dealer question. Is there any -- as you do this $2 billion -- as they do -- as dealers do the $2 billion of investing, are there any things being put in place as part of that process that reduces the HDMC expenses.

Yes. And to say this is largely a program that our dealers will undertake. We have already, and they're included in our Hardwire II projections. A lot of the things that we need to do on our end to ensure that we support that experience in a more integrated digital approach, some of those end-to-end supply chain, including that replenishment model, being able to also support through all of the brand activities, how the brand then shows up in the broader social context. So that is sort of our side of the bargain as our dealers partner with us in this evolution over the next few years. So we're both -- we're in this together to deliver that improved customer experience.

But the bulk of the cost is with the dealer, right? We provide design support and implementation support, sometimes financing support, but the cost is with the dealer, and that's why, to Edel's point, dealer profitability is so important. 5 years ago, it would have been hard to push a program like that through. But now with the dealer profitability, not from a just percentage, but on absolute terms profitability, we believe it's a must. And when you look at some of the dealerships, it's time, too, right? So we will focus on those. And that will drive dealer consolidation as well. Where we need to be. What's critical is we want to be a broad network because that's unique, but it doesn't mean everybody does everything and everybody has to have a flashy dealership. So that segmentation is going to be critical. And the focus of where we tackle the transformation first and then later [indiscernible] because you can't do all dealers in 1 year. That's a program that will prioritize year 1, 2, 3, 4, 5.

Could we just go through the $400 million of cost productivity, the sequencing of that gross versus net, maybe how that splits across the 3 big buckets that you've outlined? Anything else to keep in mind there?

So that $400 million is a gross number. So obviously, we expect inflation to kick in -- be in the next 3 years. So to stay ahead of that inflation, that's where we have to get after that $400 million. From a sequencing standpoint, to your point, there are pieces that are near term in nature and easier to get after, and there are ones that are going to take us a few years. So the work on the manufacturing optimization and making sure we've got the right investments and the right to support the long-term growth. We've started that work. We will really start to see the benefit of that cost savings as we move into '24 and '25. As we think about '23 specifically, it's going to be more about the real-time changes that we can make within logistics, particularly as the supplier health improves and the expedited shipping costs start to come down as well as the work that we're doing across our supply base and create the right kind of value proposition with our suppliers. So as a -- from a front loaded, I think, logistics and supply and as we get into the back half of Hardwire, it becomes more about the manufacturing footprint and the optimization within.

And are there investments that offset the early part? I mean it sounds like this is all back half weighted, right?

Yes. Those are phased into kind of -- as we talk about the $250 million to $275 million, they're embedded in that guidance. So there'll be -- that $275 million happens later, I would say, in the-5-year window, in the 3-year window.

It's Craig from Baird again. Could you walk through the mechanics and the milestones of the LiveWire spin-off?

Sure. Do you want to get into that now or later when...

So we are actually going to talk about LiveWire later.

So no, Craig. We'll talk about it later.

Save that.

But if you're trying to get your report out, what I would tell you is that we are on track for a close here in the first half of the year, so which is Q2 for the year since Q1 is [indiscernible].

Okay. I think we have time for one more question. Hans?

Ivan Feinseth, Tigress Financial Partners. I actually have a couple of more dealer questions. On what areas of the U.S., for example, do you think are kind of overserved? And what areas are you looking to focus to open new dealerships? And one of the key parts is there is a shortage of techs. I mean like the dealership I go to a service becomes a more important part and bikes continue to become more complex. You're going to need more techs. And also, well, I believe Harley salesman are probably more enthused than most other auto industry salesman because they're more engaged. There still is, in my view, a big need for salesperson training to understand all the bikes. And again, especially as the bikes do become more complex and there's more ancillary services available for them.

Thank you for the question. So I wouldn't be ready to share yet some of the questions on horse specifically. We're thinking about the network optimization. It is something that we are studying in this quarter to be able to sort of fully inform the program as we continue to roll out this transformation. Your question on the tax is very fantastic. We hear this from our dealers all the time as we continue to push for more service and more engagement in aftersales in general with customers of both new and existing bikes, used. And I think there's a real recognition that there's an opportunity for more vocational training. Some of our dealers are being incredibly creative in where they're sourcing talent and building talent for their service department, and we certainly want to partner with them on that. One of the things, for an example of what we are doing, we recently launched a pilot program around service consultants. So these are highly trained Harley-Davidson specialists in service that will go into the dealership and spend an intensive period of time with the dealer on optimizing their service department, including, in some instances, finding ways to extract more productivity out of new scheduling practices, a different approach to the work, the work process so that they can really maximize the technician time that they do have. So we're supporting in our end because, again, this important -- it's very important for us to be able to grow service and after sales market -- aftermarket engagement in general. So those are some of the things that certainly over the next few years, we intend to continue to support. We are expanding that pilot program now and has gone now. We're going to do this nationally, and we hope to have the same results that we did with the pilot with many of the dealers.

And just to come back to your first question, I've heard early on that dealers are competing with each other. That makes no sense. We don't want Harley dealers to compete with other dealers -- we want Harley dealers to compete with others, but not Harley dealers. So making sure that they focus on bringing in new riders, focus on our competition rather than trying to chase away and then price all of a sudden becomes a selling argument, that's where consolidation also needs to happen. So if we see that happening, within the rules, we will also make sure that overlaps don't really help the business. They're -- actually can be a negative influence on focus on the right things for our business. So bear that in mind as well. That is usually more an urban phenomenon than it is elsewhere. Good. I think we are through the questions. Thank you so much again for coming, and please take time, go to the museum, look at our bikes. We have most of the senior management team here today. And for those I hope can stay around, we'll see you later for LiveWire. Thank you.

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 our latest filings with the SEC. Harley-Davidson disclaims any obligation to update information in this presentation. [Presentation]

Hello, everyone, and welcome to our LiveWire presentation coming to you live from the Harley-Davidson Museum in Milwaukee. Today, we're excited to present an update on LiveWire, the industry-leading, all-electric motorcycle brand. In December 2021, we announced a historic milestone in the LiveWire journey, with LiveWire set to become the first publicly-traded EV motorcycle company in the U.S. through a business combination with AEA Investors and Bridges Fund Management. We're pleased with the progress of the transaction, which looks to complete with the listing on the New York Stock Exchange in the first half of this year. We believe that this transaction will give LiveWire the freedom to fund new product development and accelerate its go-to-market model. On completion, LiveWire will be able to operate as an agile and innovative public company, while benefiting from the at-scale manufacturing and distribution capabilities of its strategic partners, Harley-Davidson and Kymco. Let's turn to the investment highlights of why we believe LiveWire is such a compelling opportunity as a result of this transaction and why it is well-positioned to lead in this space. First and foremost, this is an exciting and rapidly growing segment. Growth and demand for EV is accelerating dramatically, and we believe that there is a large global market opportunity and that we are at the inflection point in the market's development with significant acceleration expected. Second, LiveWire is already the leader in EV motorcycles with a successful leading product already in market today. Third, our core technology is proprietary and modular, developed in-house, our technology creates a unique driving experience that we believe is unmatched by other EV motorcycle manufacturers. As we'll discuss today, the work we've done with the Arrow architecture has created a modular, scalable system technology that will power LiveWire's product portfolio for years to come. Fourth, our tech forward approach extends to the way in which we interact with our customers and community. Leveraging our digital-first model, we've created a hybrid sales model, combining both digital and physical retail presences, allowing customers to engage with us on their terms and using their preferred purchasing path. Fifth, and importantly, LiveWire is poised for global expansion, with the beckoning of 2 industry leaders, Harley-Davidson and Kymco, bringing a competitive advantage that others can't match, including scale manufacturing, global distribution networks and decades of technical industry experience. Sixth, benefiting from a future and tech forward approach, LiveWire has a future product road map that we believe positions us to drive compelling long-term financial performance and future profitability. And finally, we've built a right mission-driven leadership team to execute our vision and to take LiveWire to the next stage in its journey as a stand-alone company. The partnership between Harley-Davidson, AEA, Bridges and Kymco creates a unique opportunity, and I'd like to go into that a little bit further. When we look specifically at the relationship between LiveWire and Harley-Davidson, there are unique benefits that will benefit both entities. From a LiveWire perspective, with the agility of an EV pure play, LiveWire benefits from immediate at-scale manufacturing and global expansion expertise through the complementary capability of its world-class partners. Harley-Davidson will provide LiveWire access to an established supply chain, a world-class dealer network of scale, technical services and access to financial insurance products through Harley-Davidson Financial Services. The LiveWire Group is more than just one brand. It also includes StaCyc, the leading balance bike brand for kids. Together, we believe the combination is a powerful accelerator for two-wheel EV for the future, bringing together best for adults and children alike, setting a path for the future of EV. And now I'd like to hand over to Ryan Morrissey, President of LiveWire.

Thank you, Jochen, and good afternoon, everybody. I'd like to start out by talking about StaCyc before spending the bulk of time on LiveWire. StaCyc was founded in 2016 by Ryan Ragland. Ryan now leads the brand as part of the LiveWire Group. He decided to focus the brand on kids, who he called the little rippers and their families that he called the pit crew. He built bikes that use electric as a way to get kids riding sooner and exploring further. If you look at the many different electric mobility products that have been released over the last decade, StaCyc is one of the few true category creators. While there are a dozen brands battling it out to sell electric bikes to adults, StaCyc built its brand prioritizing kids aged 3 to 8 years old. The company has built its foundation on 2 products: a 12-inch bike and a 16-inch bike. In 2016, an electric bike for kids was almost hard to imagine for many parents. By making the bikes lightweight and low to the ground and giving parents the ability to control the speed as the kid developed, StaCyc landed on a design that made perfect sense. With these 2 bikes, the company has now sold over 100,000 units, giving the brand an identity and growing a loyal following along the way. We've reached customers with an omnichannel strategy, selling direct on Stacyc.com, while partnering with a very strong network of brick-and-mortar retailers. Last month, we introduced the next 2 products in the StaCyc portfolio: the 18-inch e-drive and the 20-inch e-drive. These are important products for the brand and a natural extension of the existing portfolio. By taking inspiration from the track but designing specifically for kids, StaCyc is able to deliver a level of performance you wouldn't expect from a kid's bike while providing an easy on-ramp for new riders. Having been in the game for over 5 years, the team has evolved the designs and built the supply chain in a way that gives us a big lead over any imitators. The launch edition bikes come available later this month. We're excited to see what they do to broaden our customer base. You're going to see a group of kids upgrading as they age out of 12s and 16s and a new group of older kids coming in to join the StaCyc community. That expanding portfolio is one of 3 drivers behind StaCyc's future growth. The 18- and 20-inch bikes take us from an age range of 3 to 8 years old to a range of 3 to 12 years old, with more new product in development. Second, while the brand has a passionate and loyal following, it's still an unknown for many families. We're actively building the brand with 2 types of kids. First, what we call the Action segment, those kids that want to go big and really push the bike. And second, our Outdoor segment, those kids that want the freedom to explore their surroundings, taking their StaCyc to the park, around the neighborhood or keeping up with their parents on a run. As a relatively new brand, there's a lot of headroom in each of these segments. Third, while the brand is anchored in the U.S. today, we'll be growing our presence in other geographies over time. We're off to a strong start in Europe, with a plan to expand significantly as well in other markets like Australia. Bringing these 3 drivers together, we're positioned for continued acceleration in the growth of the StaCyc brand as we bring more products to more families. And we expect the continued growth in the popularity of e-bicycles will only further spur demand. From StaCyc, now let's move on to motorcycles and start with the progress that we're making on our go-to-market strategy with LiveWire. We expect LiveWire riders to have high expectations, not just of the product but also for how we interact with them as a customer. Motorcycles are a unique category. When people buy a LiveWire, it's not because they need a LiveWire, it's a lot more than transportation to the customer. So when we apply the principles of modern retail, we need to tailor the go-to-market model to a high dollar, highly-engineered, highly-discretionary product. That means we need the perfect blend of digital technologies and people expertise. Customers have high expectations of the digital experience, but with such a new technology, they also want an opportunity to test the bike and know there is a deep support capability to help them along. We start digital first with livewire.com, giving the customer the option to configure and buy their bike online. We match the digital experience with a physical presence through our network of retail partners or a LiveWire Experience Center. And we support the customer and the retail network with investment into a central team of experts we call the LiveWire Gurus. This team is matched to every customer and empowered to help them with every step of their journey, no matter where it takes them. It's the combination of all these components working together that make the experience of buying a LiveWire so unique in the motorcycle space. It gives the customers choices that they can't get anywhere else. Let's talk about what we're learning about those customers from the early days of LiveWire purchases. We're beginning to see our target customer segmentation show up in those early purchases. First, we've seen a broad range of ages. We're expecting to see our average buyer coming in several years younger than a comparable ICE buyer and early indications support that. We're also paying close attention to our ability to attract new riders. Of course, many of our buyers are experienced riders but the percentage of new riders should also be measurably higher than the industry average. Finally, we're following how the customers choose to buy and seeing the kind of mix you might expect when you give customers the option. Some follow a more traditional path, often starting by walking into a retailer. Many are getting well down the path digitally and then moving to retail for a test drive or to complete the purchase. Some choose to stay digital throughout using their phone as their channel and never visiting a store. Early purchases show a healthy fraction taking each path, reinforcing the value of offering the customer that choice. These are early indicators of exactly the kind of behaviors we've built the model to support. Our first point of interaction with the customer is often livewire.com. We've worked hard to make this property a rich experience for learning the product and understanding the brand, while also radically simplifying the purchase experience. While simple experiences are uncommon in the vehicle industry, we're aiming to be right there at the top with the best of modern retail across segments. We know the importance of continually scrubbing away the friction points to build the customers' confidence. In the path you see here, you'll see the customer going from Google to order confirmation in what might be less than a 5-minute session. While the digital path is preferred by some customers, LiveWire is still a new product and an entirely new riding experience. Many riders still haven't had the chance to ride a LiveWire and feel what it's like to ride a truly premium electric motorcycle. Every time we get a rider onto a LiveWire, we create a new advocate. It's such a different riding experience. We see long-time riders, where for decades, each new bike that came to market was an improvement, but a derivative on something they had rode before. They get on a LiveWire and they're blown away by how an electric powertrain completely transforms the experience. For that reason, we looked at every opportunity to bring our bike to riders. That could be at our first LiveWire Experience Center in Malibu. You see the photo there of our opening event that took place in February. That's an outstanding location right in the middle of some of the greatest riding in the world and a great place for riders to immerse themselves in the brand and understand the LiveWire proposition. We'll also be meeting customers through pop-up retail in major markets, where we can quickly create an environment similar to what the customer would experience at Malibu or it could be with our events team, taking the show on the road to industry events, or LiveWire-specific events. Of course, one of the best ways to introduce the customer to a LiveWire is through our retail partner network. We're now through our first wave, having contracted over 60 of the most capable EV partners in the country, covering every major market. Each of these partners are equipped with DC fast chargers and have built the expertise to sell and service electric motorcycles. These partners are also working closely with our central team on many of our online to offline transactions. They're evolving their own model to meet the needs of this new type of customer, including handling home delivery for customers that choose that path. We're now working to make sure each of these partners gets licensed for retail and gets that pipeline of inventory that they need. The two-step licensing process is done state by state through the state DMVs. Overall, we're very happy with the progress that we've made here and the forward thinking that we've seen out of these partners. We've chosen partners with leadership that's highly engaged and fully understands the importance of EV for the future of their business. They've each also established frontline experts to focus on EV and train alongside the LiveWire field team. That gives you an idea of the progress we've made in the U.S. with the retail network. In North America, we'll also be going to Canada in 2023, a market we're very excited about that is growing EV sales quickly and has ambitious targets. We'll, of course, make a big push into Europe, starting with a focus on our priority countries, where we know the opportunity is greatest. We see the growth they're experiencing in four-wheel EV, and we're anxious to get a premium two-wheel option in the mix. And we're beginning preparations for Asia Pacific and our short list of target markets in that region. So you'll continue to see extending the model to international markets as one of our top priorities over the next 12 to 24 months. The principles of the model will be universal, adapted to the local needs of each of those geographies. From there, let's turn to our other major growth driver, the expansion of the product portfolio. The strategy here is straightforward. We started with the LiveWire ONE. This bike is a real show of force. It's energized enthusiasts and immediately converted many skeptics. It's showing riders what they can expect from an electric motorcycle. We built all kinds of expertise across the organization, having developed, produced and commercialized this bike. We now take that expertise and apply it to a proprietary architecture that we've engineered from the ground up. We've chosen our System 2 platform as the first set of bikes on that new architecture. Over 5 years of development of S2, we've continued to build that expertise and the input technologies have continued to improve. That allows us to add a set of bikes that will expand our target market with a lower price point. And now we're working on our S3 platform that will open up lighter applications and hit price points to make LiveWire more attainable for more riders around the world. We believe that progression from the top down is the path to success for a premium brand in the EV space, continue -- combining our progress internally with a maturing market to grow the business over time. I'll now turn it over to Vance Strader, our CTO, who will speak about the architecture for future LiveWire products, and specifically, all -- one we're all very excited about, the S2 platform. Vance?

Thank you, Ryan. Good afternoon, everyone. It's absolutely my pleasure to introduce you today to the Arrow architecture. I'd like to first start with talking about LiveWire and what really matters to us. For us, the first priority is a great motorcycle. And what that means is a motorcycle that's lightweight, fits the rider well, is easy to handle and has great performance, while also being able to be built cost effectively. The Arrow architecture is actually a set of design principles and configurations that will be used eventually across the entire LiveWire portfolio. It builds upon a recently-granted patent for vehicle architecture that integrates the EV systems into the primary structure of the vehicle. The rear suspension is attached to and pivots on the motor axis. All of this is fully developed in-house, utilizing best-in-class cells, electronic subcomponents and software-best practices. It gives us the control and the speed that we need to fully optimize the riding and ownership experience and even more importantly, the ability to scale and adapt to the needs of each of our future platforms and even individual models. As you can see on the screen behind me, the S2 platform's structural battery and motor have nearly eliminated the need for a traditional motorcycle frame. In fact, we've significantly reduced the parts count on the motorcycle and it yields a very lightweight, small vehicle, one that's incredibly easy to assemble. In fact, I just got some information this afternoon that it's 44% less build time than today's LiveWire ONE. It's an indication of the level of optimization and improvement that continues to go into every new product that we produce. At the heart of the Arrow architecture is the battery pack. It uses 2170 cylindrical cells. It was designed from day 1 to be highly modular and highly scalable. On S2, this enables the development of a broad range of middleweight motorcycles to cover multiple segments and to drive economies of scale. This is a key differentiator for LiveWire. Whereas LiveWire ONE was conceived as a motorcycle, we now have a platform and even more so, the foundation of all future LiveWire vehicles. The next step is the power electronics. We've heavily integrated the inverter, motor controller and onboard charger for optimum system efficiency, which means range, and ideal vehicle integration. It results in fewer parts, less packaging space, and again, an efficiency that our designers and our engineers can leverage to focus on form and focus on unique applications because of the adaptability that the Arrow architecture enables. As I've described it, the Arrow architecture is modular and scalable. We are already working on scaling it down for the S3 platform, as Ryan mentioned, and then later up for S1 with, in each case, optimized performance, charging, range and size for each of those platforms, plus ongoing refinements in system efficiency and cost with every new introduction. This is not a static architecture. And each will continue to utilize common design practices, common assembly processes for shortened development times, reduced investment through equipment reuse and economies of scale. So beyond the introduction of the LiveWire or the Arrow architecture, we're also reimagining the connected experience for our portfolio, starting with the S2 platform. Again, by bringing the expertise in-house, we're developing class-leading experiences for our riders. The full color LED that you see and the new app provide a fresh interface to the LiveWire experience. Multiple ride modes allow the rider to customize the motorcycle's character to their preferences with 4 standard modes as well as a custom mode that allows them to further fine-tune power delivery and regenerative braking. LiveWire's new state-of-the-art cloud-native telematics system uses the latest technologies and is fast, scalable, very secure and economical to operate on a global basis. It provides riders with unobtrusive and intuitive remote monitoring of their motorcycle, diagnostics, as well as charge planning, analytics, while also equipping our dealers and our gurus to support these riders, even when they're out on the road using a new generation of always-online diagnostic tools. The big benefit of over-the-air or OTA is the unlock it creates for product and experience updates. This will enable us to update the motorcycle's performance, range and life and support rollout of valuable new features and functions through its ability to update any vehicle controller, including the battery management, electric powertrain and onboard charger, as well as things like antilock braking, hand controls, the display, telematics and all of the other low-voltage electronics on the motorcycle. Clearly, a big opportunity to continue to evolve the motorcycle throughout its life. So moving from just a motorcycle to an experience more akin to leading consumer electronics, the S2 riding experience will continue to get better over time. So now let's talk about our partners. At the beginning of today's presentation, Jochen mentioned the advantages of LiveWire's asset-light model and the manner with which we are able to selectively use the best assets and opportunities that Harley-Davidson can provide. I'd like to detail that out a bit more for you. I'll start with product development. Harley-Davidson's Wisconsin-based product development center and its labs cover 3 acres and are staffed by 130 test engineers and technicians. They support critical development in testing across the battery, powertrain, electrical systems, vehicle and system component structures, materials testing, sound, calibration, prototyping, vehicle build, a huge range of capabilities that LiveWire didn't have to go and build for itself. We use these world-class facilities, the equipment and the talented employees where necessary to keep the LiveWire staff focused on the path ahead. Being able to leverage these Harley-Davidson's hundreds of billions of dollars of investment in test equipment and facilities provides significant competitive advantage for us. An example of this might be the 2.8 million pound room-within-a-room indoor pass chamber, you see in the upper picture. This is used for rapid, super consistent year-round regulatory pass-by sound testing and sound quality development. This is the property in which we developed LiveWire ONE's signature sound, and it's where we're working on the next generation of LiveWire sound as well. Moving on to simulation. There too, we supplement LiveWire's capabilities with Harley-Davidson's industry-leading simulation capabilities for predictive design optimization and verification across a broad range of disciplines. This enables LiveWire to move large portions of its product development process from the physical to the virtual world and even to eliminate entire prototype and test cycles. This takes time and money. The next step is the proving grounds. Harley-Davidson's proving grounds in Yucca, Arizona, and Naples, Florida support year-round vehicle development and durability testing, replicating all types of LiveWire specific use cases and abuse. With dedicated labs there, 56 miles of on- and off-road courses covering more than 4,000 acres, we're able to ensure high-quality, reliable operation for LiveWire's customers. So let's talk about supply chain. Today, LiveWire's supply chain is able to leverage many long-standing Harley-Davidson partners, but it's also quickly growing to include additional suppliers with capabilities that are critical to the unique needs of EV as well as LiveWire's unique customer experience and business model. This Harley connection is critical in that it gives us a foot into the door that many true startups might never be able to achieve. So let's talk about manufacturing. LiveWire's powertrains. The new powertrains are manufactured and assembled with the same precision as more than 200,000 Harley-Davidson ICE engines today in Wisconsin's powertrain operations. With bare cells, castings and electronics coming in at one end of the facility, complete certified powertrains come out the other end. And last but certainly not least, LiveWire vehicle assembly is done on a dedicated line at the York, Pennsylvania operations that Harley-Davidson uses today. Their skilled craftsmen deliver high quality and fit and finish with every new LiveWire motorcycle. In the future, Kymco manufacturing and supply chain will also offer enhanced scale, and regional footprint to support high-quality vehicle and EV systems manufacturing at competitive costs. We believe that the sum of these actions and the use of the best services that Harley-Davidson has to offer, provide a real competitive advantage to LiveWire. Our strategic ambition for the LiveWire -- for the Arrow architecture and for LiveWire is simple, to create a soulful and exciting rider experience across multiple platforms and products, while remaining as efficient and agile as possible. We're very excited today to show you the first product using the new Arrow architecture. But before we do that, I'll hand it off to Gina for an update on our growth trajectory.

That's a bad teaser, before we show you the really cool thing, let's go through the numbers. All right. Thanks, Vance. So we have very big plans for the LiveWire business and are excited for the opportunities that we have ahead. In '21, we delivered about 500 units and $36 million of revenue, and we remain committed to driving significant unit and revenue growth over the next 5 years. As you heard the team talk about, there are really 4 main factors that help move us up the curve. First, it starts with the product and expanding from where we are today with one product at one price point to moving to many products at many price points that opens up different customer opportunities for us. Next, it's about international market expansion and moving outside of the U.S. with distribution plan for EMEA and APAC starting in 2023. And third, we will continue to expand our retail network within our priority geographies, leveraging the blend of our go-to-market business model. And finally, we will leverage our strategic business partnerships with Harley and Kymco to provide additional manufacturing expertise to expand our product offering further. We are 4 months into our fiscal year, and we remain on track to deliver our 2022 guidance. Year-to-date, we have shipped about 125 LiveWire units with units gaining momentum as we've gone deeper into the riding season. And we continue to expand our retail footprint in the U.S. Total revenue and operating income remains on track to our initial guidance. And as we look to grow the business this year, we remain very mindful of the current environment and remain flexible as we navigate the same supply chain and cost challenges that we're seeing on the Harley side as well. This includes appropriately managing our costs and taking offsetting action when needed. And it also includes managing part shortages and shipping challenges, which LiveWire is also facing. We are building a great team. We are off to a good start. We are picking up momentum in market. And as you've heard all of the presenters say, it really starts with the product. So with that, I'll now turn it back over to Jochen and Ryan and Vance. Why don't you guys come back on Page 2?

Thank you, Gina. And now I'd like to take a look to the future. Building on the success of LiveWire ONE, we are taking that electric focus and ambition of the LiveWire brand to the next level. Today marks the beginning of the new era for LiveWire with the introduction of our first product and the industry redefining Arrow platform that Vance talked about. Inspired by the lineage of Harley-Davidson and offering an experience that is distinctively LiveWire, I'm excited to introduce the S2 Del Mar Launch Edition. [Presentation]

Thank you, everyone. What you see in front of you today is the S2 Del Mar Launch Edition, a limited version of the Del Mar that we'll only produce 100 of. They will be built to order based on the color selection of our customers, and each will be numbered. Each Launch Edition will feature a highly-desirable custom paint job that requires 5 days to create and a special wheel set, neither of which will be available on the production version of the Del Mar. The Del Mar experience is one of performance, exhilarating acceleration and agility due to its light weight and short wheelbase. As you can see, we are targeting a 430-pound weight with a 0 to 60 time under 3.5 seconds. The Launch Edition will have an MSRP of $17,699, and is scheduled to deliver in spring of '23. Reservations for the Launch Edition opened online just now. And this evening in Los Angeles, we'll be hosting an event providing our growing community there the opportunity to see the bike and place reservations while working directly with our team. As for the production version of Del Mar, we are targeting delivery in the U.S. and Europe in the spring of '23 with a targeted price of $15,000, featuring the same targets for performance, range and weight. We can't wait for riders to experience the bike. It's truly amazing. Thank you for your time again this morning, and we are taking your questions now.

Okay. Great. Thanks, everyone. Same thing if you can say your name and the firm you're with. Okay. Let's start over here.

Craig Kennison from Baird. Just a follow-up to my earlier question. Could you share with us the key milestones for the spin-off into this VAC transaction, please?

Key milestones. So we are currently in the back and forth right now with the SEC. So we actually just submitted earlier this week, right, Paul Krause, we'll submit, earlier this week, we're about to submit kind of our -- hopefully, our final response back to the SEC. Once that comes back, then we move through the normal close process and work with the [ eVAC ] shareholders to get the deal approved and we work through the redemption process. And so we are still on track for a Q2 close. That was your thinking when you're asking that question. [indiscernible]

[indiscernible]

Got it. Do you want to talk about the media surrounding it?

About?

The media surrounding all the...

Oh, yes. So we're working now with the exchange right now on all the marketing events around it. A lot of those will be local in New York City, of course, and we'll also try to complement those with other things around the country. But that event is coming up relatively soon. So the market team is working hard on a whole portfolio of activity around that, some with the exchange and some on our own.

So expect a big splash.

Next question over here.

One of my questions is just how you're thinking about the LiveWire brand versus the Harley brand. And as you go to market, I would think you would want to lean on Harley-Davidson brand in some cases, but at the same time, separate it. Maybe help us understand how -- what the sort of guardrails are going to be on the approach to achieving the sort of numbers that you guys have given us for units?

Yes, why don't I start off? I mean from a LiveWire perspective, our mission is to build LiveWire as an independent brand with its own identity and with its own business model to support that and with its own set of customers. The benefit that I think we have when we do that is no matter how much we make that the primary mission, we'll always have the halo of the association with Harley-Davidson. So as hard as I work to stand up a completely stand-alone brand, you'll see in the media and otherwise that the opening line is going to tend to be the electric brand from the lineage of Harley-Davidson, LiveWire. But what me and the team focus on is building LiveWire as its own brand with its own identity, distinct from Harley-Davidson. And, of course, taking advantage of all the associations that we've talked about in the presentation, working with many of the same retailers, a subset of the Harley-Davidson network that's really focused on electric and aligned with the mission and a lot of what Vance talked about in terms of the capabilities. But in terms of our North Star as it relates to that, our mission is to build up a completely independent brand with its own identity.

And then just a quick follow-up, and I keep forgetting to say this is Robby Ohmes from BofA Securities. Can you give us sort of what the expectation is from a competitive response to LiveWire and how you're thinking the competitive landscape will play out in EV?

Yes. Well, I mean, first, I guess we're kind of happy to see the way we've rattled some people already. So I think if you take a look at really 2 segments of competitors, one sort of the big traditional global motorcycle OEMs, I think you've seen since we started moving more deliberately in this direction, people sort of rapidly changing their narrative around what they're up to. Fortunately, in this industry, it takes a while to develop an electric bike. And if you want to develop a good one, it takes even longer. So relative to those competitors, we certainly respect the capabilities that they have, the funding that they'll have to pour into it, obviously, global distribution networks and supply chains and otherwise. But we spent a lot of time getting these bikes where they are, and we know they've got a long road ahead. So we feel pretty comfortable. And our job is to take this lead that we've been given by the fact that Harley-Davidson started thinking about this 12 years ago now and make sure we run like hell over the next 4 or 5 years before some of those first entries come from some of those competitors. You're also seeing, obviously, a lot of activity with more pure-play companies, smaller companies. And some of those, I think, have some real creative ideas and something to really bring new and to offer to the industry. Of course, when they get to distribution and all the things going in the world with supply chain and otherwise, that can be difficult for a brand in that position to scale. And that's why we have the benefit of Harley and Kymco to help us get there.

But to understand the bike, you really have to ride it. So for those riders in the room, try it out, LiveWire ONE and the Del Mar are just -- have no comparison. I think the difference is that LiveWire ONE has been in the market for quite some time. It's always the leading product in the EV space, and we believe that Del Mar will do exactly that in the middleweight segment. So it's an extraordinary bike. You should experience this. In fact, we will be able to show it to you downstairs later on. But in order to really understand it, you need to experience it. And what made me sort of think about LiveWire as a separate brand is when I was riding my Harley-Davidson in Milwaukee, 1.5 years ago, everyone was like, "Wow, what is that? Is that a LiveWire?" They didn't say is it a Harley-Davidson, they said is this a LiveWire? So that made me to believe that we actually already successfully established a brand, and it was just the next logical step to say, let's set it up, being part of the lineage of Harley-Davidson, but give it its own identity in -- to Ryan's point, target a different consumer, different weight, different kind of innovative consumer that we want to get into the LiveWire brand. And we think that is a great opportunity to lead and innovate in a segment that we can grow and build over time with all the benefits that we talked about today.

Great. And please raise your hand for questions.

Brett Andress, KeyBanc. It looks like that bike shares a lot of the architecture with the original bike. And so I guess my question is how long did that take to develop? And I'm trying to figure out just maybe the cadence of new product from here and maybe how this could be quicker than the traditional motorcycle pipeline? And then just around any unit expectations for that particular bike?

Let me start with it. So first of all, the architecture is interesting that they look similar. But I think as you get closer to the bike and really start studying the details, what you'll find is there's very few similarities between the two. Very different architectures. The Del Mar, based on the Arrow architecture and S2 platform, was developed from the ground up. There were plenty of shortcuts that could have been taken, but we decided that this was the one that warranted deep investment. Starting back in 2018, where we really ramped up spending on developing this product, building our internal capabilities, including starting up our facility in Silicon Valley that we call LiveWire Labs and pulling in top EV talent from around the globe. What we found is that by taking this pure approach and starting from scratch, we were able to get to a level of refinement and control of every aspect of the hardware and software that will be a sustained competitive advantage. Nobody else in the EV industry today, in the motorcycle EVs, has this level of in-house development and control of all of the hardware and software. As I tell the team often, this is likely to be the largest, most complex program we will ever do because we're doing everything from scratch all at once. So what you're seeing in the Del Mar and the ONE that you will ride downstairs, is the culmination of a number of years of significant work. From this point on, everything gets much easier because everything else is now built upon that foundation that we wholly own at LiveWire.

And that is a huge competitive advantage because there's nobody out there that is actually doing that. And therefore, LiveWire ONE or the previous Harley-Davidson LiveWire, have really no comparison to what you see here. It's a totally different core competency that we've built in-house now and that will allow us to scale it much quicker than any competitor.

Did you have unit expectations? And also maybe I missed it, what's the price point on that?

Well, $17,699 for the limited edition, the 100, and then targeted $15,000.

In terms of unit expectations, we won't offer expectations specifically for that bike. But if you look at the units that are in the S4, particularly for the period from now until 2024, LiveWire ONE will continue to be a big contributor, but on balance, more will come from the S2 platform. Both this bike and to your -- I think it was your earlier point about how quickly can you develop future bikes? Because it is a modular architecture, we don't need to wait 5 years to see the next bike on the S2 platform. So within that time frame, you'll see not just this bike but others to contribute to that platform.

Great. Next question.

Joe Altobello, Raymond James. If you look at the original LiveWire, the MSRP was almost $30,000. This is about half of that. So maybe help us understand what the gross profit looks like from the original to S2?

Well, the product cost itself has come down a bit from the original. The other thing that is different is our go-to-market model. So as you think about the overall margin profile of these bikes moving forward, the way that we're going to market changes how we're interacting with the dealers and what we're kind of paying our dealers to sell these products. So as the cost itself relatively kind of stable we are able to make up for that price decline, given what is happening with the dealer network.

Okay. And then on Del Mar specifically, I mentioned earlier, a 44% reduction in time to assemble the bike. That's representative of the level of optimization and simplification that's gone into the design. So Del Mar cost is significantly below our LiveWire ONE cost.

Okay. That's helpful. And just a follow up with that. Any thoughts of going direct à la Tesla, for example, at some point?

Not direct in the same way that Tesla would, but the model that we described essentially as a customer, if you want the Tesla experience, the model today supports that. So what we've tried to do is say, we're going to have a certain amount of customers, they might want to go online, they might want to work entirely through their phone, maybe talk to a Guru to answer a few questions and they'd like the bike to show up in their driveway and a fair amount of our customers to date fit that category. So we want to make sure that that process is as seamless as possible. Equally, it's a very new product and a lot of people want to see it and get on it. And we've got a lot of dealers out there that have invested in the fast chargers. They've invested in building their team. They understand why EV is so important and understand why we're asking them to work under a different model than Harley-Davidson one, for example. So for the customers who wanted the Tesla experience, essentially already exists, but for those customers that want to make sure they have a service option nearby, want to have a dealer to bring the bike back to should they need to, want to test drive it before they buy it, you've got that sort of more traditional option as well. And then we talked a little bit about those Gurus are essentially the glue that sort of hold that all together. So we're bringing a lot of leads and intake through our digital engine. We work with that customer to understand their preferences and where they are in their journey and then have a very direct kind of handholding with the local retail partners to make sure that customer gets the transaction that they're looking for. But if you want to avoid all that and never go to a store, go online and get started this afternoon.

So look at it as a hybrid model, really, you get the best of both worlds. And I mean our quantities in comparison to auto are very different. So using the strength of the dealer network that Harley provides and picking the best dealers that are suitable for that customer and for that experience, I think it's a huge asset that nobody else brings to the table. But then to Ryan's point, give the choice to the consumer to say, "I want to go into dealership or I just want to ship at home," which the dealer will do. I think that's quite an extraordinary new model that I haven't seen in the market yet in the OEM world, really.

Great. If you can raise your hand if you have a question, please.

David MacGregor at Longbow Research. Can you just talk about the implied market size that you're assuming in some of these projections, whether it's in units or dollars, however you're comfortable if there's any point you can give us on that? And then secondly, with respect to the dealers, again, can you -- is there any way you can give us some sense of profile on who these dealers are? What's the typical experience? Are they existing HOG dealers that are just looking to participate with a separate retail venue? Just any kind of profile you can give us on those guys would be helpful.

Yes. On the TAM front, we included in our S4, our view of the look ahead, and we really built that up in a few different ways. One is obviously looking at the key markets that we're targeting. So North America, Europe and Asia. And then the second is thinking about how the product that will come to market will change over time. So we have a starting point in each of those markets to work from in terms of what bikes are being sold today. And in some cases, that's instructive and in some cases, it's less instructive. So in Asia, for example, there are quite a few two-wheel electric vehicles out there. They're pretty far cry from what we'll be selling in Asia as LiveWire. But we expect the market to grow quite helpfully. If we look at all the factors that you see influencing EVs more broadly, we would suggest that each of those factors applies either equally to motorcycles or in some cases, even more so. So in terms of the way that it transforms the experience probably more so than auto in terms of the serviceability and the cost of ownership of the bike over time, equal in terms of government support, they're going to tend to start with four-wheels who are sort of the bigger climate impactors, but almost always, you'll see two-wheel kind of come right behind that. So we like that side of the equation in terms of what are the market forces that will be there for electric. And then it's a little bit similar to what you see today in automotive, where finally in 2022, you're seeing enough entries to the market outside of just one player and more price points and sort of more applications to allow the market to sort of meet that demand with a more diverse set of supply. We're not at that point in 2022 the way auto is, but we expect in a few years here, we will be. So optimistic about that TAM. And obviously, for us, that means a couple of things. One, the product plan that we're talking about and the importance of continuing to push down to some of those price points that give us access to those broader parts of the market, but also spending more time in international markets on balance than you might expect from Harley or other OEMs. The second part of your question, sorry, I forgot.

On the dealers?

We've been focusing on Harley dealers that can service that customer profile with a more urban-centric consumer in mind. And then obviously, from a state perspective, we are looking at those states first that have the highest EV adoption rates in the four-wheel space, in the two-wheel space. And that would be California, Florida, Texas. And from there, we are taking on other markets. Europe, in particular, with Germany being the largest market, that will be important for us to go online in Germany and Europe next year because that's where the adoption actually happens faster than in the U.S. right now. But the focus right now is on those Harley dealers that have the interest, the passion, the energy and the ability to actually successfully help us launch the hybrid model, and that's where the focus has been.

Can I just add one point of color on the TAMs and where our unit projections leave us? I think it was in our original presentation that we had back in December, it's one of the appendix pages, if you want to flip back there. But it shows where our unit projections leave us in terms of share. And if you look across all of the markets, within the North American market, we're relatively in line with where Harley is today. So when you think about the position that we have the leadership, the head start that Ryan was talking about, us holding that and continuing to maintain as we move forward. Within Europe, our share there is going to be slightly ahead of where we are today. But that makes sense just given the product segmentation and where LiveWire is going to probably compare to where Harley plays within Europe. And the build-out of the infrastructure there and the pace with which it's going to go, we feel like us, again, having this head start in development gives us a good kind of leading edge to be able to gain that share. And within the APAC market, very, very low share. The TAM is huge. As Ryan said, that we're not going to be playing where those very, very low bikes. That's not where we're choosing to play. But our share will be representative of what we have today for Harley. So just to give it some sort of kind of sense check of where we get to at the end of this, you step back and you look at units versus share, it starts to hang together.

Great. One more opportunity for questions if there are any? Okay. Let me turn it back over to Jochen.

Great. Well, thank you very much again. And please come downstairs for those who want to see our Del Mar Edition racing, not really racing actually. But I've been riding this bike now first time, what was it fall of last year in a snowstorm. So it was late fall, rather winter, although winter turns quickly here in Milwaukee. And it's just a fabulous experience. It's like I didn't know what to expect really after being a loyal LiveWire ONE customer, but it's an exhilarating experience that delivers more than you could expect. I was blown away by this bike. And I think it's going to do great things once we get it out there for people to ride it and for the press to test it. So please stick around. And if you have any questions, we are here to answer. Thank you.

Just one more late-breaking word from John Beckathy, our Head of Marketing over here. You probably have about 2 or 3 minutes if you want a special edition. 90 of 100 of them have sold since we listed at 12:30. So it's working. Thanks, everybody.

Thank you.