LiveWire Group, Inc. Q2 FY2025 earnings call

HDFS Transaction: Entered into strategic partnerships with KKR and PIMCO after a rigorous selection process. The transaction reflects the significant value of HDFS, creates long-term value with strategic partners, allows maintaining/lowering funding cost, and has no negative impact on customers/dealers. Expected to boost HDFS earnings by $275 million to $300 million in 2025. ### HDMC: Faced a challenging commercial environment with consolidated revenue down 19% in Q2. Global motorcycle retail sales were down 15%. Dealer inventory was down 28% compared to Q2 '24. Touring faced headwinds, while the Softail lineup performed better and the RevMAX platform grew 16% in North America. ### Racing: Leaned into racing heritage, introduced the CVO Road Glide RR. Announced a partnership with MotoGP to launch a new racing series in 2026. Investing in the historic headquarters. ### LiveWire: Committed to reducing cash burn, with a 34% improvement in consolidated operating loss compared to Q2 '24. Intends to launch production versions of concept models showcased at Harley-Davidson Homecoming.

HDMC: In the second quarter, revenue decreased by 23%. Motorcycle shipments were down 28% to 36,000 units. Gross margin was 28.6% compared to 32.1% in the prior year. ### HDFS: Q2 revenue was $257 million, a decrease of only 2%. Operating income was $70 million, down less than $2 million or 2% compared to the prior year. Annualized retail credit loss ratio was 3.25%. ### LiveWire: Electric motorcycles revenue decreased in the second quarter due to lower unit sales. Operating loss was $19 million. Selling, administrative and engineering expenses were $8 million lower than the prior year.

HDFS: Expected to have operating income of approximately $525 million to $550 million in 2025. Plan to increase the pace of share buybacks, reduce debt by $450 million, and have flexibility to invest up to $300 million in future growth opportunities. ### HDMC: Due to the uncertain global tariff environment, full year 2025 financial outlook for HDMC and HDI is withheld. ### LiveWire: Full year operating loss is expected to be between $59 million and $69 million.

Global tariff environment remains uncertain, impacting costs. ### Consumer purchasing behavior is affected by elevated interest rates and economic uncertainty. ### Intense competition in the lightweight and smaller motorcycle segments poses challenges.

Q: Just a quick clarification, Jochen. I think you said that you expected retail to be positive in the second half. Just maybe clarify that and how do we get there. But my bigger picture question, the small displacement bike, right? There was some discussion of that in the prepared remarks. There's a lot that you guys are working through today. That seems like a really big deal, particularly as we think about what's been elusive to Harley historically, right? An entry-level bike that's both popular and profitable. And so if you're successful with that, that could really move the needle, but maybe speak a little bit more about how that's possible, whereas previous generations of Harley management has not and what that profitability should look like going forward?

A: We expect retail sales certainly in North America to be positive with the given reasons mentioned. The small displacement bike is a big step for the company. It's been in development since '21. We believe we can make money on it with a price point starting at $6,000 and additional price points in future years, playing in a segment that shows growth due to affordability issues of core customers. We've worked hard over time and are confident in its profitability.

Q: The $300 million that's going into HDFS, should we dump that into 3Q or 4Q? Because it's going to swing the earnings significantly whenever it goes in, I suppose. And the other thing you guys talked about that wasn't mentioned was a new efficiency program. Is there any intel on the magnitude of that impact? Are you in the early stages? And what might you be focusing on?

A: The $300 million upside from HDFS will likely have some tranches closing in Q3 and some in Q4 as they work with partners KKR and PIMCO on settlement. Regarding the new efficiency program, we have a $400 million productivity gain commitment and are overachieving by about 10%. There are new opportunities to further productivities, and technology including AI will drive cost savings, with details to be outlined in future earnings calls.