Financial Data and Key Metrics Changes - Consolidated revenue in Q3 2025 increased by 17%, driven by a 23% increase in HDMC revenue, which rose by $198 million compared to the prior year [16][20] - Consolidated operating income for Q3 was $475 million, primarily influenced by HDFS operating income, which was positively impacted by the HDFS transaction [16][22] - Earnings per share for Q3 was $3.10, with global retail down 6% [17][30] - HDFS revenue decreased by 3%, while LiveWire revenue increased by 16% [16][30] Business Line Data and Key Metrics Changes - HDMC's operating income decreased by 2% year-over-year, while LiveWire reported an operating loss of $18 million [16][30] - HDMC gross margin was 26.4%, down from 30.1% in the prior year, due to unfavorable operating leverage and increased tariffs [21][22] - HDFS's operating income increased by 472% year-over-year, driven by a lower provision for credit losses and higher other income [26][28] Market Data and Key Metrics Changes - Global retail was down 6%, with North America down 5% and international markets down 9% [17][30] - In North America, the Softail family saw a 9% increase, while Adventure Touring bikes were up 4% [18][19] - EMEA retail was down 17%, but non-core segments like Adventure Touring and Nightster motorcycles showed strong growth [19][20] - In Latin America, retail was up 16%, marking the first quarter of growth since Q3 2024 [19][20] Company Strategy and Development Direction - The company is focused on improving dealer health and profitability, with immediate actions to enhance motorcycle inventory management and introduce market-responsive promotions [5][6] - The HDFS transaction aims to transform the business into a capital-light model, unlocking $1.2 to $1.25 billion in discretionary cash [14][15] - Future strategies include enhancing product accessibility, improving speed to market, and focusing on cost and capital efficiency [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment in Q3 results but highlighted the strategic value of the HDFS transaction [6][16] - The current macro environment is challenging, with high interest rates and inflation impacting consumer confidence [17][30] - Management is optimistic about future product launches and the potential to attract younger riders through new offerings [36][38] Other Important Information - The company plans to use proceeds from the HDFS transaction for debt reduction, share buybacks, and organic growth initiatives [32][31] - Total cash and cash equivalents at the end of Q3 were $1.8 billion, down $469 million from the previous year [31] Q&A Session Summary Question: Thoughts on demographic headwinds facing Harley-Davidson - Management acknowledged the need to attract younger riders and emphasized the importance of a fun and welcoming dealership experience [36][37] Question: Elaboration on market-responsive promotions - Management indicated that high dealer inventory levels necessitate promotional activities to drive sales, particularly for Touring models [39][40] Question: Impact of the HDFS transaction on operating income - Management confirmed that the transaction is expected to provide a $275-$300 million operating income benefit in the second half of the year [44][46] Question: Expectations for fourth quarter retail performance - Management noted improvements in dealer traffic but refrained from providing specific guidance due to market uncertainties [57][58] Question: Shipment expectations for 2026 - Management indicated that inventory levels are being managed carefully, with a focus on reducing Touring inventory while preparing for new model launches [52][54]

Core Insights - Reed's, Inc. reported a decline in net sales for Q2 2025, with net sales of $9.5 million compared to $11.9 million in Q2 2024, primarily due to lower order volumes from national customers [4][7] - The company experienced a significant drop in gross profit, reporting $0.8 million in Q2 2025 versus $3.8 million in the same period last year, resulting in a gross margin of 8% compared to 32% [5][8] - Management is focused on long-term growth strategies, including enhancing commercial execution, improving inventory management, and expanding distribution channels [3][7] Financial Performance - Net sales decreased to $9.5 million in Q2 2025 from $11.9 million in Q2 2024 [4][8] - Gross profit for Q2 2025 was $0.8 million, with a gross margin of 8%, impacted by $1.6 million in inventory write-offs [5][8] - Selling, general and administrative expenses rose to $5.0 million in Q2 2025 from $3.1 million in Q2 2024, driven by costs related to contract proceedings and investments in personnel and marketing [7][8] Cash Flow and Liquidity - The company used approximately $5.0 million in cash from operating activities in Q2 2025, compared to $0.9 million in the same period in 2024 [10] - As of June 30, 2025, Reed's had approximately $2.7 million in cash and $9.7 million in total debt, a decrease from $10.4 million in cash and $9.6 million in total debt at the end of 2024 [10][29] Management Strategy - The CEO emphasized the importance of rebuilding relationships with key retail partners and exploring growth opportunities in underpenetrated segments such as convenience and food service [3] - The company aims to drive sales growth within its core Reed's and Virgil's portfolios while improving margins and positioning for profitability [3][7]