Harley-Davidson, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Dealer Focus: Accelerate inventory management (reduce touring/CVO inventory), introduce market-responsive promotions, assess e-commerce approaches, and review fuel facility guidelines with 12-month suspended noncompliance penalties.
• Strengths: Brand/community passion, strong product portfolio, exclusive dealer network, and HDFS as a significant asset.
• Opportunities: Focus on affordability, improve speed to market, and enhance cost/capital efficiency.
• HDFS Transaction: Completed sale of residual interest, forward flow agreement, and equity interest, unlocking $1.2B-$1.25B in discretionary cash by Q1 2026.

Segment Performance

• HDMC (Harley-Davidson Motor Company): Q3 revenue increased 23% ($198 million), with motorcycle shipments up 33% to 36,500 units. Gross margin was 26.4% vs. 30.1% prior year. Operating income down 2% year-over-year. Year-to-date gross margin 28.0% vs. 31.3% prior year.
• HDFS (Harley-Davidson Financial Services): Q3 revenue down 3% to $261 million. Operating income increased $362 million (472%) vs. prior year due to HDFS transaction. Total finance receivables at end of Q3 2025 were $6 billion, down 24% vs. prior year.
• LiveWire: Q3 revenue up 16%. Operating loss expected between $72M and $77M. Unit sales rose to 184 units in Q3 from 99 units prior year, driven by Twist & Go promotion.

Guidance

• Withheld full year 2025 financial outlook for HDMC and HDI. Expected HDFS operating income 2025: ~$525M-$550M. Plan to use proceeds from HDFS transaction for debt reduction, HDMC investment, and share repurchases (e.g., $200M accelerated share repurchase agreement).

Risks

• Uncertain global tariff environment impacting costs.
• Continued soft demand in some markets due to consumer confidence, high interest rates, and inflation.

Question and Answer

• **Q: Thoughts on demographic headwinds and attracting more riders?

A: Artie discussed making the brand more fun, lighter/more affordable product like the Sprint bike, and reinvigorating brand imagery to appeal to younger riders.**

• **Q: Elaboration on market-responsive promotions?

A: Arthur and Jonathan discussed addressing high inventory levels, especially touring models, with lower APR programs and localized promotions to drive dealer traffic.**

• **Q: Shipments and inventory for 2026?

A: Jonathan discussed year-to-date inventory reductions and Artie mentioned focus on inventory support for 2025 models to set up 2026 success with new models like the Sprint bike.**

• **Q: HDFS normalized operating income?

A: Jonathan noted working through timing elements of the HDFS transaction but remains excited about the transaction's long-term benefits.**

• **Q: Sales growth and margin expansion?

A: Jonathan discussed margin expansion through price point experimentation, marketing development fund, and product portfolio dynamics.**