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% [25] - Consolidated operating income for Q4 was a loss of $361 million, compared to a loss of $193 million in Q4 2024 [25] - For the full year 2025, consolidated revenue was $4.5 billion, a 14% decrease compared to the previous year, and earnings per share was $2.78, down from $3.44 in 2024 [27] Business Line Data and Key Metrics Changes - HDMC retail sales in Q4 increased by 5% in North America, while international retail sales decreased by 10%, leading to a global retail sales decline of 1% [27] - For the full year 2025, North American retail sales were down 13%, while EMEA retail sales were down 11% [28][29] - HDFS revenue for Q4 was $106 million, down from $257 million in the prior year, primarily due to lower retail and wholesale finance receivables [39] Market Data and Key Metrics Changes - North American dealer inventory declined by 16% relative to year-end 2024 levels, while global dealer inventory was down 17%, exceeding the 10% reduction target [11][31] - In Latin America, Q4 retail sales increased by 10%, with both Brazil and Mexico showing growth [30] - Asia Pacific retail sales declined by 1% in Q4, with significant weakness in China [29] Company Strategy and Development Direction - The company is focused on stabilizing the business by restoring dealer confidence and aligning wholesale activity with retail demand [6][12] - Immediate priorities include improving dealer profitability, reigniting brand momentum, and reducing costs [7] - A strategic plan is expected to be announced in May 2026, with a focus on sustainable growth and optimizing inventory management [4][23] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that 2025 was a challenging year, with macro-driven pressures and internal challenges [4] - The company expects margins to be under pressure in the near term due to production levels running below wholesale [13] - 2026 is viewed as a transition year to reset the business and finalize the new strategy, with expectations for improved dealer health and financial results [12][16] Other Important Information - The HDFS transaction is expected to transform the business into a capital-light model, with a significant reduction in debt and improved financial flexibility [24][38] - 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 [20][21] Q&A Session Questions and Answers Question: Inquiry about HDFS operating income expectations - Management indicated that HDFS operating income is expected to be between $45 million and $60 million for 2026, with a long-term view of tripling that income over the next few years [55][56] Question: Wholesale guidance and inventory levels - Management noted that Q1 2026 wholesale shipments are expected to be down slightly compared to the previous year, with a gradual increase anticipated in Q2 [60][62] Question: Retail sales expectations and LiveWire investment - Management expressed optimism about retail sales growth in 2026, driven by new model introductions and a focus on supporting dealers [70][72]