10-Q: Harley-Davidson Q3 Net Income Soars on HDFS Deal

Harley-Davidson, Inc. reported a significant increase in Q3 2025 net income and EPS, primarily driven by strategic financial services transactions, despite declines in global retail motorcycle sales.

Summary

• Net income attributable to Harley-Davidson, Inc. for Q3 2025 surged to $377.4 million, up 217.0% from $119.0 million in Q3 2024.
• Diluted earnings per share (EPS) increased to $3.10 in Q3 2025, a 240.7% rise from $0.91 in the prior year's quarter.
• Total revenue for Q3 2025 grew by 16.5% to $1,340.7 million, with motorcycles and related products revenue up 22.5% to $1,079.5 million.
• Financial services revenue for Q3 2025 decreased by 3.1% to $261.2 million.
• Operating income for Q3 2025 dramatically increased by 348.7% to $474.8 million.
• Harley-Davidson Financial Services (HDFS) operating income soared by 471.8% to $438.8 million in Q3 2025, largely due to benefits from the HDFS Transaction and lower interest expense.
• The HDFS Transaction included a $301 million benefit in the provision for credit losses due to the reclassification of $4.1 billion of retail finance receivables as held-for-sale.
• Worldwide retail sales of new Harley-Davidson motorcycles declined by 6.0% in Q3 2025, with North America down 4.5%, EMEA down 16.9%, and Asia Pacific down 3.4%.
• Worldwide motorcycle shipments increased by 32.7% to 36,524 units in Q3 2025, compared to a lower base in Q3 2024 when dealers adjusted inventory.
• For the nine months ended September 30, 2025, net income attributable to Harley-Davidson, Inc. rose 8.0% to $618.0 million, and diluted EPS increased 17.8% to $5.03.
• Nine-month total revenue decreased by 11.6% to $3,977.0 million, with HDMC operating income down 52.9% to $231.7 million.
• LiveWire segment's operating loss improved, decreasing by $7.9 million in Q3 2025 and $26.9 million for the nine-month period, driven by cost reduction actions.
• Annualized credit losses on retail motorcycle loans increased to 3.34% at September 30, 2025, from 3.07% at September 30, 2024.
• The 30-day delinquency rate for retail motorcycle loans rose to 5.72% at September 30, 2025, from 4.61% at September 30, 2024.

Sentiment

Score: 7

Explanation: The significant increase in Q3 net income and EPS, driven by the HDFS transaction, is a strong positive. However, underlying retail sales declines and ongoing macroeconomic headwinds, coupled with the substantial potential recall costs and cautious outlook for LiveWire, temper overall sentiment. The financial restructuring provides a capital boost, but core business challenges remain.

Positives

• Net income attributable to Harley-Davidson, Inc. for Q3 2025 increased by 217.0% to $377.4 million.
• Diluted earnings per share (EPS) for Q3 2025 rose by 240.7% to $3.10.
• Total revenue for Q3 2025 increased by 16.5% to $1,340.7 million.
• Operating income for Q3 2025 significantly increased by 348.7% to $474.8 million.
• HDFS operating income surged by 471.8% to $438.8 million in Q3 2025, primarily due to the HDFS Transaction benefits and lower interest expense.
• The HDFS Transaction generated a $301 million benefit in the provision for credit losses due to reclassification of held-for-sale receivables.
• LiveWire segment's operating loss decreased by $7.9 million in Q3 2025 and $26.9 million for the nine-month period, reflecting successful cost reduction initiatives.
• Worldwide motorcycle shipments increased by 32.7% in Q3 2025, indicating a recovery in dealer inventory adjustments compared to the prior year.
• The company expects approximately $1 billion in cash to be available from the HDFS Transaction, which will be used for debt reduction and share repurchases.
• Productivity savings of $75 million were achieved in the first nine months of 2025, with a target of $100 million annually for 2025 and 2026.
• A $200 million accelerated share repurchase (ASR) program is expected to commence in Q4 2025, part of a $1 billion discretionary repurchase plan through 2026.

Negatives

• Worldwide retail sales of new Harley-Davidson motorcycles declined by 6.0% in Q3 2025 and 14.6% for the first nine months of 2025.
• North American retail sales were down 4.5% in Q3 2025, impacted by depressed consumer sentiment and high interest rates.
• EMEA retail sales decreased by 16.9% in Q3 2025, and Asia Pacific sales were down 3.4%.
• HDMC segment operating income decreased by 1.8% in Q3 2025 and 52.9% for the first nine months of 2025, driven by higher manufacturing and tariff costs, and lower shipment volumes.
• Financial services interest income was lower in Q3 2025 and for the nine-month period due to lower average outstanding finance receivables.
• Annualized credit losses on retail motorcycle loans increased to 3.34% at September 30, 2025, from 3.07% in the prior year.
• The 30-day delinquency rate for retail motorcycle loans increased to 5.72% at September 30, 2025, from 4.61% in the prior year.
• The company withdrew its forward-looking expectations for 2025 and beyond for several key metrics due to macroeconomic uncertainty and tariff impacts.
• LiveWire's revised operating loss expectation for 2025 is higher, now projected at $72 million to $77 million, up from a previous range of $59 million to $69 million.
• The company does not plan to make additional investments in LiveWire beyond the available $100 million Convertible Term Loan.

Risks

• The company's ability to execute its business plans and strategies.
• Managing supply chain and logistics issues, including quality, interruptions, price increases, raw material shortages, inflation, war, or natural disasters.
• Impact of new, reinstated, or adjusted tariffs on product costs and sales, with potential full-year 2025 impacts estimated between $55 million and $75 million.
• Accurately analyzing, predicting, and reacting to changing market conditions, interest rates, and geopolitical environments.
• Maintaining and enhancing the value of the Harley-Davidson brand, including mitigating activist collective actions.
• Successfully accessing capital and/or credit markets on acceptable terms.
• Developing and introducing market-accepted products, services, and experiences on a timely basis.
• Managing the impact of prices for and supply of used motorcycles on new motorcycle sales.
• Preventing, detecting, and remediating issues with motorcycles or manufacturing processes to avoid delays, recalls, regulatory investigations, increased warranty costs, or litigation.
• Potential material costs ranging from $140 million to $450 million related to Proterial Cable America brake hose assembly regulatory non-compliance, if a field action or recall is required.
• The company's ability to seek full recovery of recall costs from suppliers.
• Maintaining a productive relationship with Hero MotoCorp as a distributor and licensee.
• Managing operations in Europe, China, and ASEAN countries to avoid incremental tariffs.
• Retaining and attracting skilled employees, leadership, and qualified independent directors.
• Fluctuations in foreign currency exchange rates, interest rates, and commodity prices.
• Managing the credit quality, loan servicing, collection activities, and recovery rates of the HDFS loan portfolio.
• Cybersecurity incidents and data privacy breaches.
• Adjusting to tax reform, healthcare inflation, and pension reform.
• Impact of inconsistent and unpredictable weather patterns on retail sales.
• Implementing and managing enterprise-wide information technology systems.
• Evolving legislative and regulatory environments related to products, services, and operations.
• Managing exposure to product liability claims and commercial/contractual disputes.
• Managing relationships and agreements with labor unions.
• Managing third-party investment(s) in HDFS.
• Risks related to outsourced functions and use of artificial intelligence.
• Achieving anticipated results with respect to the pre-owned motorcycle program, H-D1 Marketplace, and Apparel and Licensing.
• Optimizing capital allocation in light of the company's priorities.
• Managing the company's share repurchase strategy.
• Managing issues related to climate change and related regulations.
• LiveWire's EV segment faces challenges including later adoption, lack of government incentives, less favorable regulatory environment, and slower charging infrastructure expansion.
• LiveWire's ability to seek external capital and drive significant cost savings to establish a sustainable business model.

Future Outlook

The company has withdrawn its specific forward-looking expectations for 2025 regarding motorcycle retail unit sales, EPS, HDMC shipments, revenue and operating income margin, LiveWire motorcycle unit sales, and HDFS's provision for credit losses, interest income, and borrowing costs due to macroeconomic uncertainty and tariff impacts. Longer-term expectations for HDMC operating income in 2026 and beyond have also been withdrawn. The company continues to expect a reduction of approximately 10% in 2025 year-end dealer inventory of new Harley-Davidson motorcycles. HDFS is projected to have operating income of $525 million to $550 million in 2025, including the HDFS Transaction benefit. LiveWire is now expected to incur an operating loss of $72 million to $77 million in 2025, with a net cash use of $50 million to $60 million. The company plans to achieve annual productivity savings of $100 million in 2025 and 2026, totaling $457 million by the end of 2026. Capital investments for 2025 are revised to $175 million to $200 million. The company remains committed to repurchasing approximately $1 billion of shares on a discretionary basis through the end of 2026, including a $200 million ASR program in Q4 2025.

Management Comments

• Net income attributable to Harley-Davidson, Inc. was $377.4 million, or $3.10 per diluted share, in the third quarter of 2025 compared to $119.0 million, or $0.91 per diluted share, in the third quarter of 2024.
• The decrease in operating income from the HDMC segment for the third quarter of 2025 was driven primarily by higher manufacturing and tariff costs as well as higher operating expenses, partially offset by an increase in motorcycle shipments.
• Operating loss from the LiveWire segment in the third quarter of 2025 was $18.2 million compared to an operating loss of $26.1 million in the prior year quarter due primarily to lower operating expenses from cost reduction actions taken in the second half of 2024.
• Operating income from the HDFS segment in the third quarter of 2025 was $438.8 million, up $362.1 million compared to the prior year quarter due primarily to benefits from the HDFS Transaction, as discussed in Key Factors, and lower interest expense, partially offset by lower interest income.
• Worldwide retail sales of new Harley-Davidson motorcycles in the third quarter of 2025 declined 6.0% compared to the third quarter of 2024. Retail sales were adversely impacted by depressed consumer sentiment, resulting from economic uncertainty, combined with high interest rates.
• The company believes its petitions (regarding brake hose assemblies) are closely comparable to inconsequentiality petitions that have resulted in successful inconsequentiality determinations in the past.
• The company is also confident that its position that the compliance issues are inconsequential to motor vehicle safety is strong and, therefore, no field action or recall will be necessary.
• The company estimates, based on its available information and assumptions, that the cost of a potential field action or recall in the aggregate, if any were to occur, could range from approximately $140 million to $450 million.
• The company believes headwinds facing the broader powersports and discretionary leisure industries are even more complicated in the electric vehicle (EV) segment of the market.
• The company believes indicators point to a much later EV adoption than originally anticipated given a lack of government incentives and a notably less favorable regulatory environment, combined with a slower expansion of charging infrastructure.
• The company does not plan to make additional investments in LiveWire beyond availability under the Convertible Term Loan of up to $100 million.

Industry Context

The company's performance reflects a mixed industry landscape. While the financial services segment (HDFS) benefited significantly from strategic transactions, the core motorcycle business (HDMC) faced headwinds from depressed consumer sentiment, high interest rates, and increased manufacturing/tariff costs, leading to a decline in retail sales. The electric vehicle (EV) segment, LiveWire, continues to face broader industry challenges such as slower EV adoption, lack of government incentives, and inadequate charging infrastructure, indicating a more cautious outlook for this emerging market. The overall powersports and discretionary leisure industries are experiencing complicated headwinds, impacting consumer spending on high-value items like motorcycles.

Comparison to Industry Standards

• The decline in worldwide retail sales of new Harley-Davidson motorcycles by 6.0% in Q3 2025 and 14.6% for the first nine months of 2025 suggests underperformance relative to a healthy discretionary consumer market, which is generally experiencing growth or stability in favorable economic conditions.
• The increase in annualized credit losses on retail motorcycle loans to 3.34% and the 30-day delinquency rate to 5.72% at September 30, 2025, compared to prior year, indicates a deterioration in loan portfolio quality, potentially worse than industry averages for prime lending, reflecting challenging macroeconomic conditions and consumer financial stress.
• The LiveWire segment's continued operating losses and the company's decision not to make additional investments beyond the Convertible Term Loan suggest that LiveWire's performance is below the growth and profitability benchmarks seen in more successful or established EV startups, which often require substantial ongoing capital infusions to scale.
• The estimated potential recall costs of $140 million to $450 million for brake hose assemblies, if realized, would represent a significant financial burden, potentially higher than typical product liability provisions for a company of this size, indicating a substantial quality control or supplier management issue.

Corporate Governance

Legal Proceedings

• A product liability lawsuit, which previously resulted in a jury award of $288 million (later reduced to $81 million), was settled and fully resolved during Q3 2025, with no remaining liability.
• The company is engaged in a regulatory compliance matter with the National Highway Traffic Safety Administration (NHTSA) regarding potential non-compliant brake hose assemblies from a Tier 2 supplier, Proterial Cable America, Inc. The company believes the issues are inconsequential to motor vehicle safety and expects no field action or recall, but estimates potential costs of $140 million to $450 million if a recall is required, which it would seek to recover from suppliers.
• Harley-Davidson Japan KK is under investigation by the Japan Fair Trade Commission for alleged improper activity, including setting excessive sales quotas for motorcycle dealers. The company is cooperating and does not expect material costs from this matter.

Related Party Transactions

• Harley-Davidson Credit Corp. (Seller) entered into a Back Book Purchase and Sale Agreement and a Master Purchase and Sale Agreement with KKR Morrow Trust (Purchaser) as of July 30, 2025, for the sale and purchase of motorcycle promissory notes and security agreements.
• Harley-Davidson Credit Corp. (Seller) also entered into a Back Book Purchase and Sale Agreement and a Master Purchase and Sale Agreement with Cavendish LLC (Purchaser) as of July 30, 2025, for similar transactions.
• Harley-Davidson Financial Services, Inc. (Company) entered into Subscription Agreements with KKR Morrow OpCo Aggregator LLC and Cavendish LLC as of July 30, 2025, for the sale of 4.9% each (total 9.8%) of its Class A Common Stock to these investors in Q4 2025.
• Servicing Agreements were established between KKR Morrow Trust and Harley-Davidson Credit Corp., and between Cavendish LLC and Harley-Davidson Credit Corp., as of July 30, 2025, for the servicing of purchased contracts.
• The HDFS Transaction involves the sale of existing retail finance receivables and future retail loan originations to these counterparties, with HDFS continuing to service the loans for a fee.
• Harley-Davidson, Inc. has a support agreement with Harley-Davidson Financial Services Inc. to maintain its fixed-charge coverage and minimum net worth, though no amount has ever been provided under this agreement.
• Harley-Davidson, Inc. entered into a Convertible Delayed Draw Term Loan Agreement with LiveWire Group, Inc. for up to $100.0 million, with no draws as of September 30, 2025.

Stakeholder Impact

• Shareholders: Benefited from increased net income and EPS in Q3, and a planned $200 million accelerated share repurchase program. However, underlying retail sales declines and potential recall costs could impact future share value.
• Employees: Impacted by cost reduction actions in the LiveWire segment. The company's ability to attract and retain skilled employees is a key risk factor.
• Customers: Affected by higher interest rates impacting discretionary purchases. Potential product recalls related to brake hose assemblies could impact safety and brand perception, though the company believes the issues are inconsequential.
• Dealers: Experienced lower retail sales due to depressed consumer sentiment and high interest rates. Dealer inventory levels are being reduced by approximately 10% by year-end 2025.
• Suppliers: One Tier 2 supplier, Proterial Cable America, Inc., is involved in a regulatory compliance matter regarding brake hose assemblies, with the company potentially seeking full recovery of recall costs from suppliers if incurred.
• Creditors: The HDFS transaction is expected to reduce HDFS's debt and provide approximately $1 billion in cash, which will be used to pay down a term loan, improving the company's liquidity and capital structure.

Next Steps

• Complete the sale of reclassified retail finance receivables in Q4 2025.
• Counterparties will begin purchasing approximately two-thirds of HDFS's new retail loan originations under the Forward Flow Agreement starting in Q4 2025.
• HDFS will continue to service future retail loan originations sold to counterparties, earning loan servicing fees.
• Each counterparty will have the right to exchange its HDFS ownership interest for Harley-Davidson common stock seven years after closing the transaction or in the event of a change of control of HDI or HDFS.
• The company has the right to repurchase the counterparties' ownership interest in HDFS three years after closing the transaction, using cash that would otherwise be available as a dividend from HDFS.
• Utilize the approximately $1 billion in cash from the HDFS Transaction to pay down the $450 million term loan, execute discretionary share repurchases (including a $200 million ASR program in Q4 2025), and for general corporate purposes.
• Continue multi-year cost productivity initiatives to achieve $100 million in annual savings for 2025 and 2026, targeting $457 million in total savings by the end of 2026.
• Invest $175 million to $200 million in capital expenditures in 2025, focusing on product development and capability enhancements.
• Continue to monitor future economic trends and conditions, as expectations surrounding economic forecasts may change.
• LiveWire will continue evaluating all options for its business, including seeking external capital, and driving additional significant cost savings.
• The company will continue efforts to mitigate the impact of tariffs, including engaging with governments, moving inventory, evaluating sourcing, and managing costs.
• The company will continue to cooperate with the Japan FTC in its investigation into Harley-Davidson Japan KK.

Key Dates

Recommendation

The Q3 2025 results show a significant boost in net income and EPS, primarily driven by the strategic HDFS transaction, which provides a substantial cash infusion and reduces debt. This financial maneuver is a strong positive for liquidity and capital allocation, including planned share repurchases. However, the core motorcycle business faces persistent headwinds, with declining retail sales across key markets due to macroeconomic pressures and high interest rates. The HDMC segment's operating income is down significantly year-to-date. Furthermore, the LiveWire segment continues to incur losses, and the company has a cautious outlook for EV adoption, limiting further investment. The unresolved brake hose assembly issue presents a material contingent liability, with potential recall costs ranging from $140 million to $450 million. While the HDFS transaction provides a much-needed financial uplift, the underlying operational challenges in the core business and the significant contingent risks warrant a 'hold' recommendation. Investors should monitor the execution of the capital allocation plan, the resolution of the recall matter, and any signs of stabilization or recovery in retail motorcycle sales.

Keywords

Harley-Davidson, HOG, SEC Filing, 10-Q, Financial Results, Motorcycles, Financial Services, HDFS Transaction, KKR Morrow Trust, Cavendish LLC, Retail Sales, Motorcycle Shipments, Operating Income, Net Income, EPS, Credit Losses, Tariffs, LiveWire, Electric Vehicles, Share Repurchase, Capital Allocation, Corporate Governance, Risk Factors, Supply Chain, Interest Rates, Consumer Sentiment