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01/11 16:19
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights several negative aspects: a decline in gross margin and operating margin, a 23% drop in consolidated revenue, and a mixed Q&A session with unclear management responses. While there are positive elements like increased operating income in HDFS and cost savings, the overall sentiment is overshadowed by weak financial performance and lack of clarity on strategic issues. Given the company's small-cap status, these factors are likely to result in a negative stock price movement in the short term.
Operating Income Margin 12.1% (down from 15.2% year-over-year, a decline of 310 basis points due to lower volume and dealer inventory management)
Global Retail Sales Down 21% in Q1, with a 24% decline in North America, attributed to low consumer confidence and macroeconomic uncertainty.
Wholesale Shipments Down 33% year-over-year, with 39,000 units shipped compared to 58,000 units in the prior year.
HDMC Revenue Decreased by 27% in Q1, driven by decreased wholesale volume and unfavorable foreign exchange impacts.
Gross Margin 29.1% (down from 31.2% year-over-year, a decline of 210 basis points due to lower revenue and operating leverage)
Operating Expenses $199 million (down $24 million year-over-year) resulting in an operating margin of 10.8% (down from 16.2% year-over-year)
Consolidated Revenue Down 23% in Q1, largely in line with expectations across HDMC and HDFS.
Consolidated Operating Income $160 million (down 51% at HDMC, partially offset by a 19% increase in HDFS operating income)
Earnings Per Share $1.07 for Q1.
HDFS Revenue $245 million (decrease of 2% year-over-year due to lower retail and commercial receivables)
HDFS Operating Income $64 million (up $10 million or 19% year-over-year, driven by lower provision for credit losses and lower operating expenses)
LiveWire Operating Loss $20 million (compared to an operating loss of $29 million in the prior Q1)
LiveWire Revenue Decreased due to lower unit sales of electric motorcycles and STACYC electric balance bikes.
Operating Cash Flow $142 million (up $38 million year-over-year due to lower net cash outflows for wholesale financing)
Total Cash and Cash Equivalents $1.9 billion (up $467 million year-over-year)
Share Repurchases 3.4 million shares bought back at a value of $87 million in Q1.
Retail Credit Loss Ratio 3.8% (compared to 3.7% in the year-ago period, with retail credit losses driven by macroeconomic factors)
Total Financing Receivables $7.4 billion (down 6% year-over-year)
Total Retail Loan Originations Down 22% in Q1.
Commercial Financing Activities Decreased 14% to $1.3 billion.
Net Cash Used by LiveWire $18 million in Q1, $9 million less than Q1 of 2024.
Unit Sales for LiveWire 33 units sold in Q1 compared to 117 units in the prior Q1.
New Product Launch: In early March, Harley-Davidson launched the CVO Road Glide RR, a limited production motorcycle that sets a new benchmark for performance, with only 131 units available.
Entry-Level Product Expansion: Harley-Davidson plans to introduce new entry-level products in smaller displacements and an iconic classic for U.S. and international markets starting next year.
Touring and Trike Innovations: The company plans to introduce more innovations in their Touring and Trike motorcycle platforms as part of their Hardwire strategy.
Market Expansion Strategy: Harley-Davidson is shifting model year timing to fall to create additional selling opportunities and is focusing on dealer health through revised financial incentives.
Global Retail Sales Performance: Global retail sales were down 21% in Q1, with a 24% decline in North America, attributed to low consumer confidence.
Operational Efficiency: Harley-Davidson achieved $24 million in unlevered productivity savings in Q1, primarily from logistics and supply chain initiatives.
Cost Control Measures: The company is managing wholesale shipments to maintain reduced dealer inventory, with global wholesale shipments down 33%.
Strategic Shift in LiveWire Investment: Harley-Davidson is evaluating options for its investment in LiveWire, with no additional investments planned beyond a $100 million line of credit.
Withdrawal of 2025 Guidance: Due to macroeconomic uncertainty, Harley-Davidson has withdrawn its previous 2025 financial guidance.
Global Retail Sales: Global retail sales were down 21% in Q1 and down 24% in North America, primarily due to historically low levels of consumer confidence in an uncertain macro environment.
Supply Chain Challenges: Despite tight cost control in logistics and supply chain, the company is facing challenges with reduced wholesale shipments down 33% and dealer inventory down 19%.
Economic Factors: The uncertain macroeconomic environment is affecting consumer discretionary spending, leading to a withdrawal of previous 2025 guidance until more clarity on the global economy is achieved.
Tariff and Trade Issues: The fluid tariff environment poses a risk, with an estimated impact from new tariffs in 2025 ranging from $130 million to $175 million, complicating predictions on customer impact.
LiveWire Investment Risks: LiveWire is facing headwinds in the EV segment, with slower than anticipated EV adoption and plans to seek external capital if needed, while Harley-Davidson does not plan to provide additional investments beyond a $100 million line of credit.
Operating Losses: LiveWire expects operating losses of approximately $59 million, a reduction from previous guidance, but still indicative of ongoing financial challenges.
Operating Income Margin: HDI operating income margin for the quarter came in at 12.1%.
Marketing Development Fund: The marketing development fund is the most significant co-marketing investment made in the company’s history, aimed at supporting dealer sales.
Product Launches: Plans to introduce new entry-level products in smaller displacements and an iconic classic for U.S. and international markets starting next year.
Cost Savings Initiatives: LiveWire plans to drive additional significant cost savings to reduce cash burn and operating losses.
Productivity Improvement: Expecting to achieve $100 million in productivity improvement in 2025 as part of the Hardwire strategy.
Capital Expenditures: Capital expenditures are now projected to be in the range of $200 million to $225 million.
Revenue Guidance: Withdrawing previous 2025 guidance due to macroeconomic uncertainty.
Operating Losses for LiveWire: LiveWire now expects operating losses of approximately $59 million, down from previous guidance of $70 million to $80 million.
Cash Flow and Share Repurchases: Plans to deliver on $1 billion in share repurchases by the end of 2026.
Tariff Impact: Estimated 2025 impact from new tariffs to be in the range of $130 million to $175 million.
Share Buyback Program: In Q1 of 2025, Harley-Davidson bought back 3.4 million shares of its stock at a value of $87 million.
Shareholder Return Commitment: Harley-Davidson has committed to a $1 billion share repurchase program by the end of 2026, announced in July 2024.
Total Capital Returned to Shareholders: From 2022 to current, Harley-Davidson has returned $1.5 billion in capital to shareholders, including $1.2 billion in share repurchases, which is equivalent to 22% of shares outstanding at the beginning of this period.
Total Shareholder Return Performance: As of mid-April, Harley-Davidson's stock has outperformed its peer group by 10 percentage points over the past five years, 3 percentage points over the last three years, and 7 percentage points over the last year.
The earnings report shows significant declines in key metrics, including a 28% drop in motorcycle shipments, decreased margins, and lower operating income. Although there are some improvements, such as reduced operating losses for LiveWire and positive trends in retail sales, the overall financial health is concerning. The Q&A reveals a cautious outlook with uncertainties in dealer inventories and incomplete information on new initiatives. The withdrawal of 2025 guidance and tariff impacts further dampen sentiment, leading to a negative outlook for the stock price.
The earnings call highlights several negative aspects: a decline in gross margin and operating margin, a 23% drop in consolidated revenue, and a mixed Q&A session with unclear management responses. While there are positive elements like increased operating income in HDFS and cost savings, the overall sentiment is overshadowed by weak financial performance and lack of clarity on strategic issues. Given the company's small-cap status, these factors are likely to result in a negative stock price movement in the short term.
The earnings call reflects several negative indicators: substantial declines in global retail and wholesale sales, reduced operating margins, and a drop in consolidated revenue. Despite positive elements like share repurchases and improved cash flow, the weak financial performance and unclear guidance on strategic partnerships and tariff impacts outweigh these. The market cap indicates a moderate reaction, leading to a negative sentiment prediction (-2% to -8%).
Despite the share repurchase program, the financial performance was weak with significant revenue decline and operating losses. The guidance was revised downward, and there are concerns about future profitability, especially in the LiveWire segment. The Q&A highlighted inventory and margin issues, and management's vague responses on LiveWire's profitability timeline add uncertainty. The market cap suggests moderate reaction, leading to an expected negative stock price movement of -2% to -8%.
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