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01/11 16:22
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
HDFS operating income Expected to boost by $275 million to $300 million in fiscal year 2025 due to the sale of consumer loan receivables at a premium to par value and the release of loan loss reserves.
Consolidated revenue Declined 19% year-over-year in Q2 2025, primarily due to a planned reduction in motorcycle shipments and soft demand.
Global motorcycle retail sales Down 15% year-over-year in Q2 2025, attributed to elevated interest rates, broader demand softness, and economic uncertainty.
Dealer inventory Reduced by 28% year-over-year in Q2 2025, aligning with the company's commitment to rightsize inventory and better match demand.
HDMC revenue Decreased by 23% in Q2 2025, driven by a 28% decline in motorcycle shipments and modest cost inflation.
HDMC gross margin Decreased to 28.6% in Q2 2025 from 32.1% in Q2 2024, due to lower operating leverage and incremental tariff costs.
HDFS revenue Decreased by 2% in Q2 2025, driven by modestly lower retail and commercial receivables.
HDFS operating income Decreased by 2% in Q2 2025, impacted by lower net interest income and higher operating expenses.
LiveWire operating loss Improved by 34% year-over-year in Q2 2025, reflecting reduced operating expenses and cash burn.
LiveWire unit sales Declined to 55 units in Q2 2025 from 158 units in Q2 2024, due to macroeconomic uncertainty and lack of incentives.
Consolidated operating income margin Declined to 8.6% in Q2 2025 from 14.9% in Q2 2024, primarily due to lower volume and reduced dealer inventories.
Operating cash flow Decreased by $68 million year-over-year in Q2 2025, due to lower net income and working capital activity.
New entry-level products: Harley-Davidson plans to introduce new entry-level motorcycles, including a small displacement model inspired by the Harley-Davidson Sprint, targeting an entry price below $6,000. This is aimed at driving future profitable growth and opening new market segments.
Racing-inspired offerings: The company introduced the CVO Road Glide RR, a limited production race replica priced at $110,000, which has generated an oversubscribed waitlist and preorders.
LiveWire's new models: LiveWire plans to launch production versions of two new concept models targeting lightweight, off-road, and urban-friendly mobility solutions, aligning with broader EV adoption trends.
Global market performance: Global motorcycle retail sales declined 15% year-over-year, with North America down 17% and international markets down 12%, reflecting economic uncertainty and elevated interest rates.
Market share changes: In the U.S., Harley-Davidson gained 3 points of share in the Total Cruiser segment, growing to 53% market share in Q2 2025 from 50% in Q2 2024.
New tax incentives: The U.S. government introduced a tax deduction for interest paid on loans for new U.S.-built motorcycle purchases up to $10,000 annually, expected to stimulate demand.
HDFS transaction: Harley-Davidson entered into strategic partnerships with KKR and PIMCO, selling a minority stake in HDFS at 1.75x book value. This transaction is expected to generate $1.25 billion in cash for Harley-Davidson and boost HDFS operating income by $275-$300 million in 2025.
Dealer inventory reduction: Global dealer motorcycle inventories were reduced by 28% compared to Q2 2024, aligning with the company's commitment to better match demand.
Cost-saving initiatives: The company is introducing a new efficiency program leveraging AI to deliver substantial cost savings and productivity gains.
Racing initiatives: Harley-Davidson announced a new racing series in partnership with MotoGP, featuring Harley-Davidson Bagger motorcycles, to launch in 2026. This aims to enhance brand visibility and innovation.
LiveWire's strategic pivot: LiveWire is focusing on reducing cash burn and operating losses while maintaining market presence and aligning its product portfolio with evolving customer expectations.
Global motorcycle retail sales: Sales were down 15% year-over-year, reflecting the impact of elevated interest rates, broader demand softness, and overall economic uncertainty.
North American market: Lower customer traffic in dealerships due to higher interest rates and macroeconomic uncertainty. Traffic trends improved slightly in Q2 but remain a concern.
Asia Pacific market: Retail sales were down 21% due to intense competition in lightweight and smaller motorcycle segments, and economic uncertainty in key markets like Japan and China.
Global tariff environment: Uncertainty and increased tariffs resulted in $17 million of incremental costs in the first half of 2025, with expected full-year costs between $50 million and $85 million.
Dealer inventory: Global dealer motorcycle inventories were down 28% year-over-year, reflecting efforts to rightsize inventory but also indicating potential supply chain challenges.
LiveWire segment: Electric motorcycle sales decreased significantly, with only 55 units sold in Q2 compared to 158 units in the prior year. Operating losses remain high, though slightly improved.
HDFS retail loan originations: Loan originations were down 15%, reflecting reduced consumer financing activity amid higher interest rates and economic pressures.
Operating income margin: Consolidated operating income margin declined to 8.6% from 14.9% year-over-year, driven by lower volumes, higher fixed costs, and tariff impacts.
Economic uncertainty: Broader economic challenges, including inflationary pressures and higher interest rates, are impacting customer purchasing behavior and financing activities.
HDFS Transaction and Future Projections: The company expects the HDFS transaction to boost operating income by $275 million to $300 million in 2025. Post-transaction, HDFS aims to grow operating income to pre-transaction levels through new fee streams, organic growth, and partnerships. The transaction will also generate $1.25 billion in cash for Harley-Davidson, enabling debt reduction, share buybacks, and investments in growth opportunities.
Efficiency and Productivity Initiatives: The company plans to introduce a new efficiency program leveraging AI to deliver cost savings and productivity gains. It expects to achieve $100 million in productivity improvements in 2025 and 2026, exceeding its Hardwire target by over 10%.
New Product Launches: Harley-Davidson will launch a small displacement motorcycle priced below $6,000 in the first half of 2026, targeting profitable growth and new market segments. An additional entry-level cruiser motorcycle will follow. LiveWire plans to launch production versions of two new EV models in November 2025, focusing on lightweight, urban-friendly mobility solutions.
Market and Revenue Expectations: The company anticipates a challenging market environment due to elevated interest rates and economic uncertainty. It expects global tariff costs to range between $50 million and $85 million in 2025, down from earlier estimates. HDFS is projected to achieve $525 million to $550 million in operating income for 2025.
Racing and Brand Initiatives: Harley-Davidson will launch a new racing series in 2026 featuring Bagger motorcycles, aiming to enhance brand visibility and innovation. The company is also investing in its headquarters to support workforce readiness by year-end 2025.
Share Buyback Program: With the cash generated from the HDFS transaction, Harley-Davidson plans to accelerate its $1 billion share buyback program announced last year. The company intends to purchase $500 million in shares during the second half of 2025.
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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