HOG.NYSEHarley-davidson, INC
10-Q: Harley-Davidson Reports Q1 2025 Results, Withdraws Guidance Amid Tariff Uncertainty
Sentiment:
Quarterly Report
Harley-Davidson's Q1 2025 net income declined significantly year-over-year, leading to a withdrawal of 2025 guidance due to ongoing tariff uncertainties.
Capital raiseThe Company is evaluating all options for its investment in LiveWire while LiveWire will continue evaluating all options for its business, including seeking external capital if and when needed.
Worse than expectedNet income attributable to Harley-Davidson, Inc. decreased significantly in Q1 2025.HDMC segment operating income fell due to lower motorcycle shipments.Worldwide retail sales of new Harley-Davidson motorcycles declined by 21.3% in Q1 2025.The company has withdrawn its 2025 guidance due to uncertainty related to tariffs and macroeconomic conditions.
Summary
- Harley-Davidson's net income attributable to Harley-Davidson, Inc. decreased to $133.1 million, or $1.07 per diluted share, in Q1 2025 from $234.9 million, or $1.72 per diluted share, in Q1 2024.
- HDMC segment operating income fell to $116.3 million, a $122.2 million decrease from the prior year, primarily due to lower motorcycle shipments.
- LiveWire's operating loss improved to $19.8 million from $29.2 million in the prior year due to cost reduction actions.
- HDFS segment operating income increased to $64.0 million, up $10.2 million year-over-year, driven by a lower provision for credit losses and reduced operating expenses.
- Worldwide retail sales of new Harley-Davidson motorcycles declined by 21.3% in Q1 2025.
- The company has withdrawn its 2025 guidance due to uncertainty related to tariffs and macroeconomic conditions.
- The company expects a 10% reduction in year-end dealer inventory of new Harley-Davidson motorcycles as compared to the end of 2024.
- LiveWire now expects an operating loss of approximately $59 million and a total use of cash of approximately $50 million in 2025.
- The company expects to achieve annual productivity savings of $100 million in 2025 and 2026, resulting in $457 million in total productivity savings by the end of 2026.
- Capital investments in 2025 are now expected to be in the range of $200 million to $225 million.
- The company plans to repurchase approximately $1 billion of shares on a discretionary basis in aggregate from the third quarter of 2024 through the end of 2026, including $350 million of discretionary share repurchases in 2025.
Sentiment
Score: 4
Explanation: The document presents a mixed sentiment. While there are some positive aspects, such as improved performance in the LiveWire and HDFS segments, the overall tone is negative due to the significant decline in net income, the withdrawal of guidance, and the various risks and uncertainties facing the company.
Positives
- LiveWire's operating loss improved due to cost reduction actions.
- HDFS segment operating income increased due to a lower provision for credit losses and reduced operating expenses.
- The company expects to achieve annual productivity savings of $100 million in 2025 and 2026.
- The company is committed to supporting reduced dealer inventory levels and continues to expect a reduction of approximately 10% in 2025 year-end dealer inventory of new Harley-Davidson motorcycles as compared to the end of 2024.
Negatives
- Net income attributable to Harley-Davidson, Inc. decreased significantly in Q1 2025.
- HDMC segment operating income fell due to lower motorcycle shipments.
- Worldwide retail sales of new Harley-Davidson motorcycles declined by 21.3% in Q1 2025.
- The company has withdrawn its 2025 guidance due to uncertainty related to tariffs and macroeconomic conditions.
Risks
- The company has withdrawn its 2025 guidance due to uncertainty related to tariffs and macroeconomic conditions.
- The company is facing potential incremental U.S. and foreign tariffs that could impact the cost of raw materials, components, and finished motorcycles.
- Higher interest rates are impacting HDFS' interest income margin and consumer discretionary purchases.
- The company is facing a product liability matter with a potential loss in excess of the liability recorded to date.
- The company is facing supply matters related to PCA's brake hose assemblies, which could result in material costs.
- The company is facing an activist campaign by H Partners, which could cause the company to incur substantial costs and hinder the execution of the company's strategy.
Future Outlook
Due to uncertainty related to the potential impact of tariffs, the company has withdrawn its forward-looking expectations for 2025 related to Harley-Davidson motorcycle retail unit sales; earnings per share; HDMC motorcycle shipments, revenue and operating income margin; and HDFS operating income, provision for credit losses, interest income and borrowing costs. The company has also withdrawn its longer-term expectations for HDMC operating income in 2026 and beyond.
Management Comments
- The company is evaluating a potential investment into HDFS if the following objectives are met: The investment demonstrates the class-leading returns of HDFS as a driver of value for Harley-Davidson shareholders, including a premium valuation as compared to HDFS's book value; It establishes a value-enhancing long-term strategic partnership; It secures a long-term funding option that would maintain and possibly lower the overall cost of funding and improve the competitiveness of HDFS; It supports the Company's commitment to maintain and improve service and support across the range of HDFS products.
- The Company believes indicators points 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 is evaluating all options for its investment in LiveWire while LiveWire will continue evaluating all options for its business, including seeking external capital if and when needed.
- In addition, LiveWire plans to continue to drive additional significant cost savings to reduce cash usage and operating losses with the intention to get to a sustainable business model with the existing funds available.
Industry Context
The report indicates a challenging macroeconomic environment impacting consumer sentiment and discretionary spending, particularly affecting the powersports and EV segments. The company is facing headwinds similar to other manufacturers in the industry, including supply chain disruptions, tariffs, and changing consumer preferences.
Comparison to Industry Standards
- The report mentions a decline in U.S. market share of new 601+cc motorcycles, indicating underperformance compared to competitors in the domestic market.
- The report also mentions a decline in European market share of new 601+cc motorcycles, indicating underperformance compared to competitors in the European market.
- The report mentions that the company is facing headwinds similar to other manufacturers in the industry, including supply chain disruptions, tariffs, and changing consumer preferences.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Chief Accounting Officer | Mark Kornetzke | Bryan Beck | June 16, 2025 | Retirement |
Legal Proceedings
- The Company is subject to lawsuits and other claims related to product, commercial, employee, environmental and other matters.
- In August 2024, a jury awarded approximately $288 million in damages to the plaintiffs in a product lawsuit against the Company. In November 2024, the award for damages was reduced to $81 million.
- The Fair Trade Commission in Japan has an on-going investigation into Harley-Davidson Japan KK, a subsidiary of the Company.
Stakeholder Impact
- Shareholders are impacted by the decline in net income and the withdrawal of guidance.
- Employees are impacted by the potential for reorganization actions and the need to attract and retain talented personnel.
- Dealers are impacted by the need to adjust inventory levels and the potential for difficulties in operating their businesses.
- Customers are impacted by the potential for higher prices due to tariffs and the potential for product recalls.
Next Steps
- The company plans to continue its efforts to mitigate the impact of tariffs including engaging with governments to advocate for consideration of motorcycles in trade negotiations; moving inventory into markets ahead of tariff effective dates; evaluating sourcing options and pricing for its products; and prudently managing cost.
- The company plans to continue its multi-year cost productivity initiative to eliminate incremental cost.
- The company plans to continue its discretionary share repurchases.
Key Dates
| Date | Description |
|---|---|
| April 9, 1992 | Date before which no amendment or other document filed affecting the Articles of Incorporation of HDFS. |
| December 8, 1999 | Date of Consent Action By the Sole Stockholder |
| December, 2007 | Date of Amendment to By-laws |
| July 2015 | Issuance of senior notes |
| June 2020 | Issuance of medium-term notes due in 2025 |
| February 2022 | Issuance of medium-term notes due in 2027 |
| Second quarter of 2022 | Company received information from a Tier 2 supplier, Proterial Cable America, Inc. (PCA) concerning a potential regulatory compliance matter relating to PCA's brake hose assemblies. |
| April 2023 | Issuance of medium-term notes due in 2026 |
| March 2023 | Issuance of medium-term notes due in 2028 |
| June 2023 | Company received a letter from PCA advising that PCA was investigating a new, separate potential quality issue with brake hose assemblies produced by PCA after the Company's 2022 production suspension. |
| June 2024 | Renewal and amendment of revolving facility agreement (Canadian Conduit) with a Canadian bank-sponsored asset-backed commercial paper conduit. |
| June 2024 | Issuance of medium-term notes due in 2029 |
| July 18, 2024 | The Company's Board of Directors authorized the Company to repurchase up to 24.4 million additional shares of its common stock on a discretionary basis. |
| August 2024 | A jury awarded approximately $288 million in damages to the plaintiffs in a product lawsuit against the Company. |
| November 2024 | The award for damages was reduced to $81 million. |
| November 2024 | The Company renewed its $1.50 billion revolving facility agreement (the U.S. Conduit Facility) with third-party banks and their asset-backed U.S. commercial paper conduits. |
| January 2025 | The global tariff landscape began to quickly change with the U.S. implementing tariffs on goods from various foreign countries. |
| March 12, 2025 | Date of fiscal agency agreement |
| March 12, 2025 | Date of deed of guarantee |
| March 12, 2025 | Date of deed of covenant |
| March 12, 2025 | Date of Officers' Certificate |
| March 18, 2025 | Date of Unanimous Written Consent of the Board of Directors |
| March 31, 2025 | End of the quarterly period |
| April 29, 2025 | Date shares of common stock outstanding |
| May 1, 2025 | Date of forward-looking statements in the Key Factors Impacting the Company and the Guidance sections |
| May 6, 2025 | Date of remaining forward-looking statements in the report |
| June 15, 2025 | Mark Kornetzke to retire from the position of Chief Accounting Officer |
| June 16, 2025 | Bryan Beck to serve as Chief Accounting Officer |
| June 30, 2025 | Expiration date of Canadian Conduit |
| July 2025 | Maturity of $450.0 million of senior notes |
| July 14, 2025 | Suspension of incremental rebalancing tariffs on motorcycles imported into the EU from its manufacturing facilities in the U.S. and Thailand is further suspended until July 14, 2025. |
| November 21, 2025 | Expiration date of the U.S. Conduit Facility |
| February 2027 | Maturity of medium-term notes |
| April 2027 | Maturity of five-year credit facility |
| March 2028 | Maturity of medium-term notes |
| April 2029 | Maturity of five-year credit facility |
| June 2029 | Maturity of medium-term notes |
| March 2030 | Maturity of medium-term notes |
| July 2045 | Maturity of $300.0 million of senior notes |
Keywords
Harley-Davidson, Financial Results, Q1 2025, Tariffs, Motorcycles, HDFS, LiveWire, Retail Sales, Shipments, Guidance, Credit Losses, Operating Income, Net Income
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