LVWR — LiveWire Group, Inc.

Summary of Harley-Davidson Q2 2025 Earnings Call

1. Key Financial Results and Metrics:

• Consolidated Revenue: Down 19% year-over-year, primarily due to a planned reduction in motorcycle shipments and soft demand.
• Operating Income: $112 million, a 69% decline at HDMC; HDFS operating income down 2% to $70 million.
• Earnings Per Share (EPS): $0.88.
• Global Motorcycle Retail Sales: Decreased 15% year-over-year; North America down 17%, international markets down 12%.
• Dealer Inventory: Reduced by 28% year-over-year.
• Cash and Cash Equivalents: $1.6 billion, down $261 million from Q2 2024.

2. Strategic Updates and Business Highlights:

• HDFS Transaction: Harley-Davidson entered partnerships with KKR and PIMCO, selling a minority stake in HDFS at approximately 1.75x book value. This transaction is expected to generate $1.25 billion in cash for Harley-Davidson, allowing for debt reduction and accelerated share buybacks.
• New Product Launches: Plans to introduce a small displacement motorcycle priced below $6,000 in 2026, targeting entry-level markets. A focus on profitability in this segment is emphasized.
• Racing Initiatives: Continued investment in racing heritage with new partnerships and product launches, including a new racing series with MotoGP starting in 2026.

3. Forward Guidance and Outlook:

• HDFS Operating Income for 2025: Expected to be between $525 million to $550 million, boosted by the recent transaction.
• Share Buyback Program: Plans to repurchase $500 million in shares in the second half of 2025 as part of a $1 billion commitment.
• Retail Sales Improvement: Anticipated positive retail sales in North America for the second half of 2025, driven by improved customer traffic and marketing initiatives.

4. Bad News, Challenges, or Points of Concern:

• Declining Sales and Revenue: Significant declines in motorcycle shipments and retail sales due to high interest rates and economic uncertainty.
• Operating Margin Pressure: Consolidated operating margin fell to 8.6% from 14.9% year-over-year, reflecting lower volumes and increased operating costs.
• Global Tariff Environment: Ongoing uncertainty and increased costs related to tariffs, with an estimated impact of $50 million to $85 million for the full year.
• LiveWire Performance: Continued operating losses with a reported loss of $19 million in Q2, and lower unit sales compared to the previous year.

5. Notable Q&A Insights:

• HDFS Transaction Details: Clarified that the 1.75x book value is based on the premium paid by KKR and PIMCO for their equity stake, with no guarantees on future growth tied to the transaction.
• Retail Performance Trends: Improvement in customer traffic noted in July, with expectations for continued positive trends in retail sales.
• Efficiency Program: A new efficiency initiative is in development, leveraging technology and AI for cost savings, with details to be shared in future calls.

Overall, while Harley-Davidson faces significant challenges in the current economic environment, strategic actions such as the HDFS transaction and new product launches aim to position the company for future growth and profitability.