HARLEY-DAVIDSON, INC. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Product Performance: Launched new model year 2024 Street Glide and Road Glide touring motorcycles, which contributed to growth in the US Touring segment. The 2025 model year lineup includes six new cruiser models, an updated Sportster S, four CVO models, the Street Glide Ultra, and the Pan America 1250 ST Adventure Sport motorcycle.
• Dealer and Customer Initiatives: Launched the Marketing Development Fund to drive leads and foot traffic to dealers. Held the second annual homecoming event in Milwaukee with over 60,000 attendees. The Harley-Davidson Riding Academy (HDIA) hit one million riders trained in 2024.
• Cost Productivity: Total headcount decreased by 7% from Q4 2023 to Q4 2024. Achieved $257 million in productivity savings in 2024 and expects an additional $100 million in savings in 2025. Operating cash flow for Harley-Davidson was well over $1 billion in 2024, a nearly 40% increase from the prior year.
• LiveWire Updates: Focused on reducing cash burn, with plans to launch an electric maxi scooter in Europe in the first half of 2026, leveraging the S2 platform and partnership with Kymco.

Segment Performance

• HDMC (Harley-Davidson Motor Company): In Q4 2024, global retail sales of new motorcycles declined 15%, with North America down 13% and international regions (excluding Canada) down 17%. For the full year 2024, global retail sales of new motorcycles declined 7%. Revenue for HDMC in 2024 was $4.1 billion, a 15% decrease. The launch of the 2024 Street Glide and Road Glide touring motorcycles contributed to nearly 5% growth in the US Touring segment, driving Harley-Davidson's share to almost 75%.
• HDFS (Harley-Davidson Financial Services): Q4 revenue was $257 million, up 4% compared to the prior year. Full year 2024 revenue was $1 billion, up 9%. Operating income in Q4 was $46 million, and for the full year, it was $248 million, up 6%. The annualized retail credit loss ratio at the end of 2024 was 3.3%, up from 3% at the end of 2023.
• LiveWire: In 2024, LiveWire had an operating loss of $110 million. Global retail performance grew 46% year over year, with a 65% market share in the US 50+ horsepower on-road EV segment. For 2025, LiveWire expects unit sales between 1,000 to 1,500 units and an operating loss in the range of $70 million to $80 million, with total cash used by operating and investing activities expected to be reduced by approximately 40% to $60 million or less.

Guidance

• HDMC: Expect retail units to be flat in 2025 with positive performance skewed towards the second half. Wholesale units are expected to be flat to down 5%. Revenue is expected to be flat to down 5%, and operating income margin is projected to be between 7% and 8%.
• HDFS: Operating income is expected to be down 10% to 15% in 2025 due to higher borrowing costs and a stable loss rate.
• LiveWire: Unit sales are expected to be between 1,000 to 1,500 units, with an operating loss in the range of $70 million to $80 million. Total cash used by operating and investing activities is expected to be reduced by approximately 40% to $60 million or less in 2025.

Risks

• Macro Environment: Continued cyclical headwinds for discretionary products, including high interest rates affecting consumer confidence and affordability.
• Tariffs: Uncertainty regarding tariffs, with no clear view on their impact and potential mitigation measures needed.
• LiveWire Challenges: Dependence on electric motorcycle adoption and demand, with challenges in achieving profitability and market traction in the electric motorcycle segment.

Question and Answer

Q: Megan Alexander asked about inventory reduction expectations for 2025.

A: Jonathan Root responded that global inventory levels are expected to come down by more than 10% by the end of 2025, with a more pronounced decrease in the first half (over 30%) and a smaller decrease in the second half.

Q: Joseph Altobello inquired about the margin surprise in Q4 and the retail outlook for 2025.

A: Jonathan Root discussed margin impacts from volume, manufacturing, and productivity, while Jochen Zeitz noted a better performance in the second half of 2025 compared to the first half due to macroeconomic factors and potential growth in the touring segment.

Q: James Hardiman asked about margin growth guidance for 2025.

A: Jonathan Root explained that margin growth is expected due to pricing favorability, offsetting some negatives like FX and mix, leading to an operating income margin of 7%-8%.

Q: Alex Perry asked about LiveWire's long-term management and operating losses.

A: Jochen Zeitz stated that LiveWire is being evaluated for performance, with efforts to reduce operating losses and cash burn, and focus on electrification benefits.

Q: David MacGregor asked about international market outlooks.

A: Jonathan Root mentioned international markets are expected to be flat in 2025, with some regions showing resilience and others facing challenges.

Q: Noah Zatzkin inquired about HDFS book health and expected credit loss.

A: Jonathan Root noted HDFS book health is positive with high credit quality originations, but affected by wholesale inventory and market normalization.

Q: Tristan Thomas Martin asked about HDMC operating income margin target and CECL in HDFS.

A: Jochen Zeitz reaffirmed the 15% margin target is achievable with product launches, and Jonathan Root mentioned a small CECL reserve adjustment in HDFS.

Q: Brandon Rollé asked about LiveWire's path to profit.

A: Karim Donnez and Jochen Zeitz discussed LiveWire's efforts to reduce losses and cash burn, with focus on cost reduction and market adoption.

Q: Jaime Katz asked about LiveWire's new product launch strategy.

A: Karim Donnez explained the strategic rationale for the electric maxi scooter launch in 2026, leveraging the S2 platform and Kymco partnership.