LiveWire Group, Inc. Q1 FY2024 earnings call

Pillar 1 profit focus: new touring models like Street Glide and Road Glide well received, CVO lineup expanded. Pillar 3 leading in electric: LiveWire launched S2 Mulholland, market leader in US on-road EV motorcycles. Pillar 4 growth beyond bikes: launched Harley-Davidson Flex Financing. Pillar 5 customer experience: second annual homecoming event in July. Pillar 6 inclusive stakeholder management: new community park to be unveiled in June.

HDMC revenue decreased by 5% in Q1. Key drivers: 7 points from decreased wholesale volume, 3 points from pricing, 4 points from mix. HDMC gross margin 31.2% vs 35.8% prior year. HDFS revenue up 12%, operating income down 8%. LiveWire revenue down due to product mix and retail partner strategy change, operating loss $29 million. North America retail up 6%, EMEA down 11%, APAC down 12%, Latin America modest growth. Dealer inventory up ~26% vs prior year.

HDMC expects retail units flat to up 9%, wholesale unit shipments down 1%-10% vs prior year, revenue flat to down 9%, operating income margin 12.6%-13.6%. HDFS expects operating income up 5%. LiveWire revises operating loss guidance to $105M-$115M from $115M-$125M. Plan to return excess free cash flow to shareholders via share repurchases and dividends.

Higher interest rate environment impacts consumer confidence and affordability. Regional macroeconomic conditions affect international regions. Foreign currency headwind for HDMC. Manufacturing costs related to new model production. Macroeconomic conditions affecting dealer health and credit losses for HDFS. Impact of weather on retail in some regions.

Q: Health of dealer network?

A: Enthusiasm for new products, concern on interest rates and floor plan.

Q: North America retail growth breakdown?

A: January heavy on '23, increasing '24 as quarter progresses.

Q: '23 vs '24 MSRP?

A: In line with target.

Q: HDMC gross margin?

A: Played out as expected, expect improvement.

Q: Retail quarterly cadence?

A: First quarter impacted by international '24 launch, second half expected better.

Q: Flex financing adoption?

A: Muted impact, take time to be fully embraced.

Q: HDFS book health?

A: Loss tracking normal seasonality.

Q: EPS related lines?

A: Tax favorability in Q1 not expected to continue.

Q: LiveWire operating loss improvement?

A: Centralizing operations to reduce costs.

Q: Union contract impact?

A: In line with plan, passed first round