LiveWire (LVWR) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated revenue in Q4 2025 was down 28%, with HDMC revenue down 10% and HDFS revenue down 59% [23] - Consolidated operating income for Q4 was a loss of $361 million, compared to a loss of $193 million in Q4 2024 [23] - For the full year 2025, consolidated revenue was $4.5 billion, a 14% decrease compared to the previous year, with earnings per share at $2.78, down from $3.44 in 2024 [25][44] Business Line Data and Key Metrics Changes - HDMC retail sales in Q4 increased by 5% in North America but decreased by 10% internationally, leading to a global retail sales decline of 1% [25] - For the full year 2025, North American retail sales were down 13%, while EMEA retail sales were down 11% [26][28] - HDMC revenue for the full year decreased by 13% to $3.6 billion, driven by a 16% decrease in wholesale volumes [32] Market Data and Key Metrics Changes - North American dealer inventory declined by 16% year-over-year, while global dealer inventory was down 17%, exceeding the 10% reduction target [10][30] - In Latin America, Q4 retail sales increased by 10%, with both Brazil and Mexico showing growth [29] - Asia Pacific retail sales were down 15% for the full year, with significant weakness in China [28] Company Strategy and Development Direction - The company is focused on stabilizing the business by restoring dealer confidence and aligning wholesale activity with retail demand [5] - Immediate priorities include improving dealer profitability, reigniting brand momentum, and reducing costs [6] - A strategic plan announcement is expected in May 2026, aiming for sustainable growth [4][21] Management's Comments on Operating Environment and Future Outlook - Management views 2026 as a transition year to reset the business and finalize the new strategy, with expectations of operating margin pressure due to lower production runs [11][48] - The company anticipates a cost of $75 million to $105 million in new or increased tariffs for 2026, compared to $67 million in 2025 [48] - Management is optimistic about the brand's potential and is committed to rebuilding trust and long-term earnings power [21] Other Important Information - The HDFS transaction is expected to transform the financial services model into a capital-light, de-risked business [22] - The company plans to conduct a rigorous review of its cost base and operating expenses, targeting at least $150 million in annual run rate savings starting in 2027 [18][73] - LiveWire is focusing on launching new products and expanding its network while managing costs [42] Q&A Session Summary Question: HDFS operating income expectations - Analyst inquired about the HDFS operating income expectations, which were lower than initially anticipated, and sought clarification on the long-term profitability of the business [52] - Management explained that HDFS is expected to stabilize and potentially triple its income over the next few years, but current volume levels are lower than expected [53][55] Question: Wholesale guidance and inventory levels - Analyst asked about the cadence of wholesale shipments and inventory levels for 2026 [58] - Management indicated that Q1 2026 wholesale shipments would be lower than the previous year, with an expected increase in Q2, while emphasizing the importance of healthy inventory levels [59][63] Question: Retail expectations and LiveWire investment - Analyst questioned the expectations for global retail sales and the willingness to invest in LiveWire despite potential losses [64] - Management expressed optimism about new product launches and the potential for retail sales growth, while confirming continued investment in LiveWire [66][70]