LiveWire Group, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Dealer Network: Resetting the relationship with dealers through roundtable discussions, aiming for healthier inventory, improved product mix, and rider engagement. Emphasized mutual trust, respect, and shared success with dealers.
• Inventory Management: Aggressively addressing inventory by reducing touring inventory in North America. Dealer inventory globally was down 17% by end of Q4 2025, exceeding the 10% target.
• Brand and Customer: Reorienting around dealers as customer number one, focusing on customization, brand storytelling, and aligning the product portfolio to meet customer and dealer needs. Highlighted improvements in parts and accessories and brand messaging to be more joyful.
• Team and Org Structure: Made leadership changes, re-opened Juneau Avenue headquarters to improve decision-making, collaboration, and accountability.
• Financial Actions: Conducting a cost review with $150 million annual run rate savings expected by 2027. Renegotiated term loan with LiveWire, reducing principal to $75 million, and HDFS transaction provided capital benefits.

Segment Performance

• HDMC (Harley-Davidson Motor Company): Q4 revenue decreased by 10% to $379 million, with full-year 2025 revenue down 13% to $3.6 billion. Q4 gross profit was a loss of $30 million (vs prior year's $3 million loss). Full-year 2025 gross margin was 24.2% (vs 28% in 2024). Wholesale shipments were down 16% in 2025.
• HDFS (Harley-Davidson Financial Services): Q4 revenue was $106 million (vs $257 million in prior year). Full-year 2025 revenue was $869 million, down 16% from prior year. The HDFS transaction included selling loan receivables and equity interest, leading to discrete liability management costs.
• LiveWire: Full-year 2025 electric motorcycle units increased by 7%, Stasic units by 15%, but consolidated revenue was down 3% due to incentives. 2026 focus includes launching the Honcho motorcycle and network expansion.

Guidance

• 2026 Outlook: HTMC expects retail and wholesale units to be 130,000-135,000. HTMC operating income forecast is $10 million to -$40 million. HDFS operating income forecast is $45 million to $60 million. LiveWire operating loss forecast is $70 million to $80 million. Tariff costs for 2026 are forecasted to be $75 million to $105 million, up from $67 million in 2025.
• 2026 Strategy: Focus on resetting the business with balanced inventory, new model launches (e.g., redesigned trike), and aligning wholesale activity with retail demand.

Risks

• Tariff Uncertainty: Volatile tariff environment with $67 million in tariff costs in 2025, and forecasted $75 million to $105 million in 2026, impacting financial results.
• Inventory and Retail Volatility: Dealer inventory and retail sales remain uneven, requiring continued focus on aligning wholesale activity with retail demand to ensure sustainable performance.

Question and Answer

Q: How does the profitability math for HDFS work, given the guidance for 2026?

A: For HDFS, 2026 operating income is guided to $45 million to $60 million. Long-term, HDFS is expected to triple the midpoint of this range, influenced by retail asset flow and wholesale levels. Short-term factors include cautious volume outlook and lower wholesale assets.

Q: What is the cadence for wholesale guidance in 2026?

A: Q1 2026 wholesale shipments are expected to be down, Q2 up, Q3 lower, and Q4 more measured. Focus is on selling down '25 model year touring inventory and launching new models like the redesigned trike.

Q: How are LiveWire's losses expected to play out in 2026?

A: LiveWire has an operating loss forecast of $70 million to $80 million in 2026. Harley-Davidson extended a $75 million loan to LiveWire and is willing to continue investment with other capital sources being pursued by LiveWire.

Q: When will the $150 million annual run rate savings be realized?

A: The $150 million annual run rate savings are expected to be realized in the back half of 2026. No restructuring charge is included in the 2026 guidance, with savings coming from cost review across the motor company and HDFS.

Q: What is the outlook for motor company operating margin beyond 2026?

A: Details will be provided in May during the strategic plan announcement. Current results do not reflect the full potential of the company, with upside expected as the business is reset.

Q: How is the used vs new pricing spread being impacted?

A: Promotional activity is helping narrow the spread between new and used motorcycles. Used values are stabilizing and improving, which is informing product development and dealer strategies.