LiveWire Group, Inc. Q1 FY2025 earnings call

Key Sections

• Product and Financials: HDMC operating income margin was 12.1% in Q1. Global retail sales down, with North America softer. HDFS operating income up 19%. Launched CVO Road Glide RR and plans to introduce entry-level and classic products. LiveWire facing EV market headwinds, evaluating options and focusing on cost savings.
• Operational Initiatives: Productivity cost program achieved $24 million in unlevered productivity in Q1, with plans to reach $400 million by 2025. Mitigating tariff impact through various short-term and long-term measures. Adjusted model year timing to fall for 2026 models to support dealers.

Harley-Davidson Motor Company (HDMC): Q1 revenue decreased by 27%. Operating income declined by 51%. Harley-Davidson Financial Services (HDFS): Q1 revenue was $245 million, a 2% decrease, but operating income was $64 million, up 19% compared to the prior year. LiveWire: Electric motorcycle revenue decreased, operating loss was $20 million, sales were 33 units in Q1 compared to 117 units in the prior Q1. HDMC revenue contribution was significant, HDFS contributed positively to operating income, and LiveWire faced challenges with lower sales and higher losses.

Harley-Davidson withdrew its 2025 financial guidance due to global economy and tariff landscape uncertainty. Evaluating investment into HDFS if win-win for stakeholders. Harley-Davidson does not plan to provide additional investments into LiveWire beyond the $100 million line of credit agreement entered in Q1 2024. Focus on capital allocation for profitable growth of Hardwire initiatives, with capital expenditures range from $200 million to $225 million.

Macro-economic uncertainty affecting consumer confidence in discretionary purchases. Tariff environment fluid with potential significant impact on operations. EV segment facing slower adoption, lack of incentives, and unfavorable regulatory environment affecting LiveWire's business.

Q: Regarding HDFS, what might the economics of a long-term strategic partnership look like for Harley-Davidson?

A: Jonathan Root said they are in early stages, focusing on demonstrating premium value of HDFS, long-term strategic partnership, and long-term funding optionality. Expect to give more detailed answer next quarter.

Q: What has changed from prior conclusion that HDFS was strategic?

A: Jonathan Root said it's about ensuring a market-based view on HDFS's value, still envisioning participation and good governance.

Q: Can you speak to tariff sources and sentiment?

A: Jochen Zeitz said 100% core products manufactured in US, 75% components sourced in US. Exposure to China due to tariffs. Sentiment not a significant issue as people differentiate between Harley-Davidson and tariffs.

Q: What led to decision to bring back entry-level bikes?

A: Jochen Zeitz said part of Hardwire strategy, aiming for competitive, profitable entry-level products after investing in core business. Karim Donnez talked about model year timing shift for 2026 models, extending selling season and benefiting dealers.

Q: How are you thinking about annual cost savings for LiveWire?

A: Jonathan Root said LiveWire projecting operating loss of $59 million and cash burn of $49 million, reducing from previous guidance. Karim Donnez mentioned progress in cost savings and looking at addressable EV markets.