HARLEY-DAVIDSON, INC. 2017 THIRD QUARTER UPDATE

October 17, 2017 | Conference Call Slide Presentation

HARLEY-DAVIDSON, INC.

2017 THIRD QUARTER UPDATE

OCTOBER 17, 2017


2017 THIRD QUARTER UPDATE

Introduction Amy Giuffre, Director, Investor Relations

Business Perspectives Matt Levatich, President and CEO

Financial Results John Olin, Senior Vice President and CFO

Q&A All

CONFERENCE CALL AGENDA

2

This presentation includes 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 earnings presentation and

filings with the SEC. Harley-Davidson disclaims any obligation to update information in this presentation. Additional

information and risk factors are included at the end of this presentation.

THIS PRESENTATION SUPPORTS THE AUDIO CONFERENCE CALL


2017 THIRD QUARTER BUSINESS PERSPECTIVES MATT LEVATICH, PRESIDENT & CEO, HARLEY-DAVIDSON, INC.


Q3 SNAPSHOT

U.S. motorcycle industry declined in the quarter, weakness expected

to continue

Harley-Davidson retail sales down

Managed supply in line with demand

Aggressively managed business cost structure

Invested in our long-term strategy

4


DELIVERING HIGH-IMPACT MOTORCYCLES

5

Fat Boy®

Fat Bob®

Eight new Softail® models feature an improved, significantly lighter frame built to

harness the new dual-counterbalanced Milwaukee-Eight® 107 and 114 engines


“La Fat Bob ainsi modifiée vient marcher sur les platebandes des gros roadsters - et remplacer feu la V-Rod de la marque américaine - dans un style tonitruant qui lui est propre.” – MotoMag.com

“The company says the machines are lighter and more powerful, and handle better, than the models they replace. I’ve ridden two of them, and I agree.” – Los Angeles Times

“For those who have been asking how H-D hopes to stay relevant as its core customer base gets too old to ride, here’s its answer.”– Lanesplitter “New technology with trademark heritage

style has long been Harley's recipe for success, and the 2018 Softail family looks like a great new dish from that cookbook.” – Maxim

WHAT THE MEDIA SAID

6

150M+ Impressions


DELIVERING HIGH-IMPACT MOTORCYCLES

7

14 new high-impact motorcycles for model year 2018

Street Glide® Special

CVO™ LIMITED


BUILDING 2 MILLION RIDERS IN U.S.

8

More than 19,000 riders were

trained through Harley-

Davidson® Riding Academy in the

quarter

Harley-Davidson and EagleRider

forged exclusive U.S. alliance to

deliver premium motorcycle rental

experiences


GROWING INTERNATIONAL REACH

9

Ingolstadt, Germany Hatyai, Thailand

15 new dealerships in nine countries opened in the quarter


FULL THROTTLE ON OUR STRATEGY

10


2017 THIRD QUARTER FINANCIAL RESULTS JOHN OLIN, SENIOR VICE PRESIDENT & CFO, HARLEY-DAVIDSON, INC.


Q3 2017 VS. Q3 2016 RESULTS

Motorcycles Segment operating income down $89.3 million

Revenue down 11.9% on 14.3% lower shipments

Gross margin percent of 28.8%, down 4.8 pts.

Slightly lower yr./yr. SG&A

Operating margin of 2.0%, down 8.0 pts.

Financial Services segment operating income up 11.0%

Lower effective tax rate

YTD cash from operations up despite lower net income

Earnings impacted by:

12

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REVENUE NET INCOME EPS

$1.15 $68.2 $0.40 Billion Million

(9.7)% (40.2)% (37.5)%


WORLDWIDE RETAIL SALES

U.S. new retail sales down in Q3

– Industry new motorcycle sales weakness for eighth consecutive quarter

– Aggressive supply management delivering intended results

International new retail sales remained soft

– Declines in Japan, Australia and Mexico

– Growth across most other markets

Positive response to MY 2018 motorcycles

Maintaining shipment guidance

13

vs. Prior Year

Q3 Motorcycles Q3 YTD

Worldwide 64,209 (6.9)% (6.1)%

U.S. 41,793 (8.1)% (8.0)%

International 22,416 (4.6)% (2.9)%

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Source: Dealer reported data


Q3 '16 Q3 '17 YTD '16 YTD '17

52.3% 53.1% 50.8% 50.7%

Q3 '16 Q3 '17 YTD '16 YTD '17

45.5 41.8

135.6 124.8

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s)

U.S. RETAIL SALES

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H-D U.S. NEW 601+CC RETAIL MARKET SHARE* H-D U.S. NEW RETAIL MOTORCYCLE SALES

RET

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Q3 retail sales impacted by:

Weak industry

– Soft used bike prices

– Hurricanes in Texas and the Southeast

Market Share gains

+ Strong demand for Cruisers

+ EagleRider initial fleet of new H-D rental

bikes

– Significantly constrained availability

YTD used H-D bike sales* & Q3 pricing

up vs. prior year

Q3 market share up despite significantly

constrained availability

Dealer inventory down approximately 12,200

motorcycles vs. prior year

Committed to aggressively manage supply in line with

demand. Expect year-end U.S. retail inventory will be

down significantly compared to year-end 2016

(0.1) pts.

(7.1)% (8.1)%

H-D U.S. NEW RETAIL MOTORCYCLE INVENTORY

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* Source: Motorcycle Industry Council

+0.8 pts. (4.7)%

(8.0)% +0.8 pts.

(0.1) pts.

* YTD through Aug.


YTD '16 YTD '17

10.2% 9.6% vs. Prior Year

Q3 YTD

International (4.6)% (2.9)%

- EMEA (1.4)% (1.2)%

Healthy demand for new models and

growth in Europe; Middle-East and

Africa down

- Asia Pacific (6.7)% (6.3)%

Japan and Australia down; emerging

markets up

- Latin America (11.5)% (0.9)%

Mexico down, Brazil up

- Canada (3.3)% (2.0)%

INTERNATIONAL RETAIL SALES

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INTERNATIONAL GROWTH

H-D EUROPE 601+CC MARKET SHARE*

RET

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Strategy: Grow reach and impact

- Expand dealer network - Plan to add 150 to 200 new dealerships between 2016 through 2020

- 15 opened in Q3, 35 YTD

- Target competitive riders

- Expand H-D Touring

- Build brand awareness through apparel

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H-D INTERNATIONAL NEW RETAIL

MOTORCYCLE SALES

Q3 share of 9.8% was up 0.3 pts.

YTD share down in a highly competitive environment

* Source: Association des Constructeurs Europeens de Motocycles (ACEM)

Objective: Grow international business to 50% of annual volume by 2027


Q3 vs. PY YTD vs. PY

Total 41,662 (14.3)% 194,300 (11.6)%

Touring 35.2% (12.7) pts. 41.4% 0.7 pts.

Cruiser* 41.5% 12.7 pts. 34.8% (0.9)pts.

Street /

Sportster®

23.3%

100.0%

- pts. 23.8%

100.0%

0.2 pts.

SHIPMENTS & MIX

Q3 shipments down 6,949 motorcycles yr./yr. as we aggressively managed supply in line with demand

‾ Within guidance range of 39,000 to 44,000 motorcycles

‾ 52.8% of motorcycle shipments were international

Q3 mix skewed to Cruisers reflecting MY 2018 all-new Softail motorcycles

SHIPMENTS MOTORCYCLES SEGMENT

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* YTD Includes Dyna, Softail, V-Rod and CVO platforms

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REVENUE

Motorcycles Segment revenue down 11.9% in Q3 behind a 14.3% decrease in motorcycle shipments

Average motorcycle revenue per unit yr./yr. decreased $546 in Q3 behind unfavorable mix, partially offset by higher pricing and favorable currency

MY 2018 weighted average pricing up approximately 3%; net of new content costs up approximately 1 pt. as a percent of revenue

REVENUE MOTORCYCLES SEGMENT

($ millions)

17

Q3 vs. PY YTD vs. PY

Motorcycle $ 653.3 (17.2)% $3,023.5 (12.0)%

P&A 229.7 (0.7) 636.2 (5.5)

General Merchandise 72.7 11.3 191.5 (9.5)

Other 6.4 3.0 16.8 1.8

Total Revenue $962.1 (11.9)% $3,868.0 (10.8)%

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GROSS MARGIN

Q3 YTD

2016 Gross Margin $367.0 $1,564.8

% of revenue 33.6% 36.1%

- Volume (49.6) (201.5)

- Pricing net of cost 6.5 38.9

- Mix (26.7) (25.9)

- Currency 4.5 2.5

- Raw materials (3.0) (12.8)

- Manufacturing / other (21.7) (35.9)

2017 Gross Margin $277.0 $1,330.1

% of revenue 28.8% 34.4%

GROSS MARGIN MOTORCYCLES SEGMENT

($ millions)

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Q3 Motorcycles segment gross margin % of revenue impacted by:

- Mix – unfavorable motorcycle family mix

- Currency – favorable due to weaker U.S. dollar

- Raw materials – higher steel and aluminum costs

- Manufacturing expense – up on lower fixed cost absorption and higher start-up costs

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OPERATING MARGIN

Q3 YTD

2016 Operating Income $108.9 $764.1

% of revenue 10.0% 17.6%

- Gross Margin (90.0) (234.8)

- SG&A 0.7 48.8


% of revenue 2.0% 14.9%

OPERATING MARGIN MOTORCYCLES SEGMENT

($ millions)

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Q3 Motorcycles segment operating margin was down 8.0 pts. compared to prior year

- Q3 SG&A reflected higher marketing and product development investment, offset by aggressive cost management in other areas

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October 17, 2017 | Conference Call Slide Presentation 20

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HDFS

Financial Services Q3 operating income was higher due to a lower

provision for retail loan losses

OPERATING INCOME FINANCIAL SERVICES SEGMENT

($ millions)

Q3 YTD


- Net interest income 0.2 -

- Gain on full securitization (Q2 2016) - (9.3)

- Provision for retail motorcycle loan losses 7.3 (0.6)

- Provision for wholesale loan losses 0.1 (0.5)

- Operating expenses (2.0) (2.2)

- All other 2.0 8.8


20


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HDFS

2017 FINANCIAL SERVICES SEGMENT

LIQUIDITY (Millions)

End of Quarter

Cash & equivalents $ 372.1

Availability

Bank Credit Facilities $ 705.1

Asset-Backed Conduits 619.7

Total Availability $ 1,324.8

Other

HDFS paid H-D, Inc. a dividend of $90

million in Q3

OPERATIONS

Originations

New and used H-D retail motorcycle loans

Q3 $817.5M (7.5)% vs. Q3 ‘16

YTD $2,515.0M (3.3)% vs. YTD ’16

YTD approximately 80% prime

Market share

U.S. H-D new retail motorcycle sales financed

Q3 58.6% (5.7) pts. vs. Q3 ‘16

YTD 61.4% (0.7) pts. vs. YTD ‘16

Finance receivables outstanding

End of Quarter

Retail $6.34B

Wholesale 0.96B

Total $7.30B (0.3)% vs. Q3 ’16

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2.04%

1.11%

0.65%0.88%

1.08%1.19%

1.59%1.73%

0%

1%

2%

3%

Q3 '10 Q3 '11 Q3 '12 Q3 '13 Q3 '14 Q3 '15 Q3 '16 Q3 '17

1.69%

∆

4.83%

3.73%

3.24%3.11% 3.00%

3.16%

3.61% 3.72%

2%

3%

4%

5%

Q3 '10 Q3 '11 Q3 '12 Q3 '13 Q3 '14 Q3 '15 Q3 '16 Q3 '17

HDFS

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30+ Day Delinquencies

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RETAIL MOTORCYCLE LOAN PERFORMANCE Q3 2017

30+ day delinquency 3.72% on-balance sheet

receivables 3.65% on a managed basis

(Including receivables sold in the Q2 ‘16 full securitization)

Q3 2017 Annual loss rate

1.73% on-balance sheet receivables

1.69% on a managed basis

(Including receivables sold in the Q2 ’16 full securitization)

Annualized Loss Experience

3.65%

∆

∆

3.49%

∆

1.57%


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Cash & marketable securities – $683.1 million vs. $795.3 million (Q3 quarter end)

Operating cash flow - $949.1 million vs. $927.8 million (YTD)

Capital spending - $114.0 million vs. $162.7 million (YTD)

Depreciation/amortization expense - $164.0 million vs. $154.6 million (YTD)

Tax rate – 33.2% vs. 32.9% (YTD)

2017 HARLEY-DAVIDSON, INC. VS. PY

23


$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

Q3 YTD

$104.6

$368.1

$222.0

$456.1

Mill

ion

s

2016 2017

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

Q3 YTD

$0.35

$1.05

$0.365

$1.095

2016 2017

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

2011 2012 2013 2014 2015 2016

$0.475

$0.62

$0.84

$1.10

$1.24

$1.40

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SHAREHOLDER RETURNS

CAGR 24%

Harley-Davidson has consistently returned cash to our shareholders

Y

ea

r-ove

r-ye

ar

Discretionary Share Repurchases Dividends Per Share

Mu

lti-Y

ea

r

*Funded by $750 million HDI debt issuance

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

2011 2012 2013 2014 2015 2016

$218 $300

$456 $604

$1,526*

$459

Mill

ion

s


Motorcycles and Related Products

segment

Motorcycle shipments 241,000 to 246,000 Q4: 46,700 to 51,700

Gross margin % Down yr./yr.

SG&A Down yr./yr. Flat as a percent of revenue

Operating margin % Down approx. 1 pt. yr./yr.

Financial Services segment

HDFS operating income Down yr./yr.

Harley-Davidson, Inc. Capital expenditures $200 million - $220 million

Effective tax rate Approximately 33.4%

as of October 17, 2017

25

GUIDANCE

2017 EXPECTATIONS


Focused investments,

strong returns

to sustain the company for the long-term


Disciplined to our strategies


FORWARD-LOOKING STATEMENTS

27

The company intends that certain matters discussed in this presentation are "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement will include words such as the company "believes," "anticipates," "expects," "plans," or "estimates" or words of similar meaning. Similarly, statements that describe future plans, objectives, outlooks, targets, guidance or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially, unfavorably or favorably, from those anticipated as of the date of this presentation. Certain of such risks and uncertainties are described below. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this presentation are only made as of the date of this presentation, and the company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. The company's ability to meet the targets and expectations noted depends upon, among other factors, the company's ability to (i) execute its business strategy, (ii) drive demand by executing its marketing strategy of appealing to and growing sales to multi-generational and multi-cultural customers worldwide in an increasingly competitive marketplace, (iii) develop and introduce products, services and experiences that are successful in the marketplace, (iv) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles, (v) balance production volumes for its new motorcycles with consumer demand, including in circumstances where competitors may be supplying new motorcycles to the market in excess of demand at reduced prices, (vi) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, and the changing political environment, (vii) manage risks that arise through expanding international manufacturing, operations and sales, (viii) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (ix) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio, (x) prevent and detect any issues with its motorcycles or any associated manufacturing processes to avoid delays in new model launches, recall campaigns, regulatory agency investigations, increased warranty costs or litigation and adverse effects on its reputation and brand strength, (xi) retain and attract talented employees, cont.


FORWARD-LOOKING STATEMENTS

28

(xii) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or company data and respond to evolving regulatory requirements regarding data security, (xiii) continue to develop the capabilities of its distributors and dealers and manage the risks that its independent dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand, (xiv) adjust to tax reform, healthcare inflation and reform and pension reform, (xv) manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles, (xvi) manage supply chain issues, including quality issues and any unexpected interruptions or price increases caused by raw material shortages or natural disasters, (xvii) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities, (xviii) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (xix) manage its exposure to product liability claims and commercial or contractual disputes, (xx) execute its flexible production strategy, (xxi) successfully access the capital and/or credit markets on terms (including interest rates) that are acceptable to the company and within its expectations, and (xxii) continue to manage the relationships and agreements that the company has with its labor unions to help drive long-term competitiveness. In addition, the company could experience delays or disruptions in its operations as a result of work stoppages, strikes, natural causes, terrorism or other factors. Other factors are described in risk factors that the company has disclosed in documents previously filed with the Securities and Exchange Commission. The company's ability to sell its motorcycles and related products and services and to meet its financial expectations also depends on the ability of the company's independent dealers to sell its motorcycles and related products and services to retail customers. The company depends on the capability and financial capacity of its independent dealers and distributors to develop and implement effective retail sales plans to create demand for the motorcycles and related products and services they purchase from the company. In addition, the company's independent dealers and distributors may experience difficulties in operating their businesses and selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions or other factors.

HARLEY-DAVIDSON, INC. 2017 THIRD QUARTER UPDATE

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