Q4 2024 LiveWire Group Inc Earnings Call

Thanks for watching!

Speaker Change: Thank you for standing by and welcome to the Harley-Davidson 2024 fourth quarter investor and analyst conference call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Shawn Collins. Thank you, please go ahead sir.

Speaker Change: Thank you. Good morning. This is Shawn Collins, the Director of Investor Relations at Harney-Davidson.

Speaker Change: You can access the slides supporting today's call on the internet at the Harley-Davidson investor relations website

Speaker Change: As you might expect, our comments will include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted in today's earnings release and in our latest filings with the SEC.

Speaker Change: Joining me for this morning's call are Harley Davidson Chief Executive Officer Jochen Zeitz.

Speaker Change: also Chief Financial Officer Jonathan Root and we have Live Wire's Chief Executive Officer Karim Donnez.

Speaker Change: With that, let me turn it over to our CEO Jochen Zeitz. Jochen?

Speaker Change: Thank you, Shawn. Good morning, everyone, and thank you for joining today's call.

Speaker Change: In the fourth year of our hardwired strategy, we saw our performance being significantly impacted by continued cyclical headwinds for discretionary products, including the high interest rate and environment affecting consumer confidence and creating affordability issues for our customers.

Speaker Change: While we were unable to achieve our original guidance of 24, given the overall environment, we continue to make progress in the execution of the key elements of our strategic plan that we believe will set the business at best for future profitable growth when the market turns.

Speaker Change: That said, in the fourth quarter, the macro environment contributed to a decline of 15% in global retail sales, our seasonally lowest quarter of the year, with North America posting a 13% decline, and our other international regions declining a combined 17%.

Speaker Change: For the full year, we ended 24, with a global retail sales decline of 7%.

Speaker Change: In the face of industry headwinds, the launch of our new model year 24 street glide and road glide touring motorcycles contributed to near five percent growth in the U.S. touring segment and drove Harley-Davidson's share to almost 75 percent, an increase of 3.5 percent since 2023.

Speaker Change: It's worth noting that over the year Harley-Davidson was the only manufacturer to gain meaningful touring segment market share in the US With our share of the overall 601 plus CC market being slightly up based on the segment that we competed

Speaker Change: Nearly 12 months after the launch of our model year 24 touring motorcycles, we continue to receive very positive feedback from customers, media and dealers.

Speaker Change: In December, Cycleworld voted the CBO Road Glide ST the best cruiser of 24. Also in December, Motorcycle.com voted the Street Glide as the best bag of 24.

Speaker Change: The launch of these touring motorcycles was one of the primary product strategies within our profit-focused pillar of hardwire, and our volume and financial results would have been dramatically impacted negatively without them.

Speaker Change: Through the fourth quarter, we continue to trim inventory by reducing the motorcycle production wholesale significantly, ending the year slightly below 23 year-end levels.

Speaker Change: We believe this has set us up well for further significant inventory reduction, especially in the first half of the year that Jonathan will walk you through in a little bit.

Jonathan: Providing more detail on our delivery against our hardware pillars for the year. Our end-to-profit focus, we've continued to emphasize our core products while investing in key product segments for the future.

Jonathan: These actions are underpinned by our belief that focusing on our most profitable categories and geographies, emphasizing innovation and evolving the customer experience with our dealers, will continue to yield benefits to the business and set the business up for long-term value creation.

Twenty-four can be seen as a year of two halves.

Jonathan: Retail sales of the touring segment was up 18% in the first half of the year, led by the redesigned touring platform in North America.

Jonathan: Despite a decline of 4% for overall retail sales in North America for the full year, retail sales of the touring segment finished the year up more than 8%.

Jonathan: As mentioned earlier, we've taken share within Turing, with Harley-Davidson achieving 74.5% market share in the Turing segment in the U.S., the highest number since 2019.

Jonathan: Turing is the heart of Harley-Davidson and our mission of the timeless pursuit of adventure. Remember, back in 2020 there was no plan for Turing nor for any other core product segment.

Jonathan: We quickly took the decision to change that, with Turin becoming part of the first pillar of our Hardware Strategic Plan.

Jonathan: Through 24, we continue to invest in our strongest and most profitable motorcycle segments, and we are planning for more impactful and new products to hit the market every year from here on that were originated as part of our strategy.

Jonathan: It's important to recognize that the decisions we've taken as part of our hardwired strategy have allowed us to re-establish our profitability while ensuring we have the right product pipeline for years to come.

Jonathan: Without the hardwire and its priorities, we would currently be faced with a portfolio of uncompetitive products, with a vast majority of our motorcycles achieving negative operating income margins, with the motor company likely having little to no profitability.

Jonathan: Selective expansion and redefinition underpins our desire to win in attractive markets and motorcycle segments where we are focused on building our leadership.

Jonathan: We are investing and have ambitions for our entry-level motorcycle offering in select markets and the small cruiser segment starting next year.

Jonathan: Adventure Touring was also a new segment for the company, aligned to this strategic initiative.

Jonathan: We believe the segment has future growth potential for us and we are committed to continue to innovate with the platform.

Jonathan: A proof point being the recently launched Pan America ST that will be landing in dealerships shortly ahead of its debut in the Marvel Studios Thunderbolts film premiering May 2nd.

Jonathan: Turning to growth beyond bites, we are committed to creating products, services and experiences that inspire our customers to discover adventure and live the Harley-Davidson lifestyle.

Jonathan: 24, so build out of capabilities for custom built apparel, ensuring that our dealers are able to access the best in custom apparel from Harley-Davidson.

Jonathan: Looking ahead, we expect for these capabilities to reach our international network this year.

Jonathan: Leveraging the power of the Harley-Davidson brand, in 24 we are also proud to partner with Champion for the second time in the company's history.

Jonathan: Looking forward, we will continue to look for brand collaborations that will connect with our customers and communities, while at the same time expanding on our licensing opportunities globally as a brand.

Jonathan: Creating integrated customer experiences ensures our customers have a seamless experience with our brand.

Jonathan: In 2024, we've continued our digital investments, adding more impact to features and benefits on new models, combined with an all-new digital experience on HD.com, focused on improving engagement, lead capture, and ultimately with the intention of driving more traffic to our dealers.

Jonathan: These efforts led to a 177 percent increase in the number of engagements with motorcycle patients for the Model Year 25 launch.

Jonathan: Turning to the physical experience that is integral to the brand, we've continued to invest in our experience as an offering by strengthening our events across the globe and better aligning our efforts with those of our dealers.

Jonathan: Twenty-four, we held our second annual homecoming event in Milwaukee, with over 60,000 riders, fans, and motor enthusiasts joining us to celebrate the Harley-Davidson brand.

Jonathan: We are looking forward to Homecoming 25th of July with an incredible talent line-up.

Jonathan: The Harley-Davidson Riding Academy, or HDRA, is an important initiative for the company, operating in 225 dealerships across 43 states, making it the largest rider training network in the U.S., and the only nationwide rider licensing program sponsored by a motorcycle manufacturer.

Jonathan: Twenty-four, we were proud to hit one million riders trained, celebrating the 25th anniversary this year.

Jonathan: Promoting rider education and training for both experienced and new riders is an important part of the overall riding ecosystem.

Jonathan: Harley-Davidson, we are committed to building ridership and deepening our connection with customers, ultimately reinforcing our position as the most desirable motorcycle brand in the world.

Jonathan: Turning to cost productivity, as we covered with Q3 earnings, we've taken further steps to tighten OPEX across the organization without negatively impacting demand-driving initiatives for our core segments.

Jonathan: One example of this is difficult choices we've made in headcount.

Jonathan: Comparing end of Q4'24 to the end of Q4'23, accelerate headcount is down by 7%.

Jonathan: While 24 includes employee severance expense, this run rate favorability will display itself more fully in 25.

Jonathan: In addition, Jonathan will cover our cost productivity performance for the year, and we continue to execute very well in that area.

Jonathan: Since announcing that focus, we achieved $257 million in productivity savings.

Jonathan: Cost productivity continued to be a positive contributor to cash flow. We remain pleased with the cash flow generation of Harley-Davidson delivering operating cash flow well over $1 billion in 2024, nearly a 40% increase from prior year.

Jonathan: 25, we plan to display further progress across the P&L. We believe OPEX productivity will allow us to run with flats to slightly down OPEX, even after an increased focus on marketing, continued product investment.

Jonathan: Additionally, we expect our cost productivity target to deliver approximately $100 million of additional savings in 2025.

Jonathan: I would like to now comment on our new model year launch.

Jonathan: With the 25 model year campaign, we revealed all new and refreshed motorcycles for this year's lineup, with products released sitting squarely within our product focus and selective expansion strategic focus.

Jonathan: Harley-Davidson Cruiser motorcycle lineup includes six new models with significantly improved performance and technology.

Jonathan: Additionally, for 2025, we updated the powerful Sportster S model. For its 26th year, we introduced the collection of limited-production CVO motorcycles that includes four models.

Jonathan: Lastly, new for this year are the Streetlight Ultra, a fully equipped long-haul touring model, complementing our new touring line-up, as well as the previously mentioned Panamerica 1250ST Venture Sport motorcycle.

Jonathan: Both incredible machines with visor down, suggesting that the Harley-Davidson Streetlight Ultra might be the most capable American tourer on the market.

Jonathan: Also continue to be excited about the adventure sport category and its application to racing.

Jonathan: This win is a groundbreaking moment that showcases the Harley-Davidson Pan America capability and versatility in a class of its own.

Jonathan: Additionally, we were pleased to see Team Settlement Harley-Davidson rider Corey West take the 24 Super Hooligan Championship on his race-prepared Pan America 1250, showing the versatility of the platform.

Jonathan: Performance and racing continue to be key differentiators across our product portfolio and will continue to expand on our racing efforts in the US and beyond.

Jonathan: To support our model year launch, we've adapted our marketing approach specifically to drive dealership traffic and improve alignment on key messages within our dealer channel, rather than spending significant funds on teasing and pushing the global launch as we did before.

Jonathan: For this reason, we launched the Marketing Development Fund, a new initiative designed to drive leads, put traffic and customer transactions and conversions in our network.

Jonathan: Driven by a desire to complement dealer marketing spend, adding additional financial support from the motor company, we believe the Marketing Development Fund will not only strengthen collaboration between the motor company and the dealer network, but also foster effective change management to drive growth.

Jonathan: This commitment by Harley-Davidson represents the single largest marketing investment on behalf of the company on a per unit and absolute basis in our history.

Jonathan: While it has only just been launched, we've seen strong uptake through the network.

Jonathan: As we have said previously, the health of the dealer network remains critical. We have taken many steps through our 24 to support the network through this challenging environment. We are taking further actions into 25 to continue our support for the network.

Jonathan: Jonathan will provide more detail on guidance. We are realistic and cautious not having reliable signals yet in either direction as we start the year. Hence, our guidance to flat retail sales for the year, positive performance skewed towards the second half.

Jonathan: I know that the decisions we've made and the bold actions we have taken as part of our hardwired strategy are continuing to strengthen our foundation for the future.

Jonathan: We believe we are best positioned to take advantage of any uptick in consumption.

Jonathan: Additionally, we will continue to explore any and all opportunities for transformational change and we are committed to achieving our hardwired profit targets over time, soon as we are seeing tailwinds in consumption of discretionary products in the two-wheel and overall power sports industry.

Jonathan: Assuming a slightly improved outlook in 2026, we expect to deliver solid improvement in margin performance.

Jonathan: The actions that we've taken in 24, coupled with expectations for 25, in 26 we expect to balance retail, production and wholesale.

Jonathan: We now expect that this will allow us to deliver a double-digit margin in 2026, climbing to our 15% target in the years following, due to a combination of factors, including expected slight volume growth, supported through exciting product portfolio launches every year.

Lastly, tariffs are on everybody's minds.

Jonathan: Without having a clear view of what is to come, when, and for how long, we've not yet incorporated any new tariffs in our outlook.

Jonathan: We believe we have and are continuing to take all possible actions to mitigate the impact of terrorists and will continue to take precautionary measures where possible.

Jonathan: That said, we have neither production in Canada nor Mexico, and 100% of our bikes and our core product segments are manufactured in the U.S.

Jonathan: Those motorcycles manufactured in our U.S. plants and in partnership with our skilled union workforce account for the vast majority of our profits in the U.S. business and most of our sourcing also being U.S. centric.

Jonathan: We'll provide more detail once we have a more complete tariff picture.

Speaker Change: Any discriminatory terrorist against Harley-Davidson, a great American icon, returning in Europe, we plan to fight aggressively, with all means available, and call for reciprocal treatment for all motorcycles imported into the US.

Jonathan: Thank you and I now hand it over to Karim for more detail on Lightwire.

Thanks, Jochen. Good morning, everyone.

Speaker Change: SideWire concluded 24 with an operating loss of $110 million and 612 revenue units, both within the range of our revised guidance.

in the electric motorcycle segment.

Speaker Change: LiveWire's global retail performance grew by 46% year-over-year, with LiveWire maintaining its leadership position with a 65% market share in the U.S. 50-plus horsepower on-road EV segment.

Turning to our basic segment.

Speaker Change: Despite the decrease in stasic total unit sales in 2004, driven largely by reduced sales to third-party distributors.

The U.S. market saw significant growth.

Speaker Change: Stasek recorded a 21% increase in U.S. data sales and a 20% increase in U.S. online sales.

Speaker Change: Strategy initially implemented during the year enabled the company to achieve a cash burn below target for 24.

Speaker Change: We expect these efforts to reduce 2025 total cash used by operating and investing activities by about 40% which we expect to be 60 million or less.

Speaker Change: Looking ahead to 2025, LiveWire entered the year with four models in the market, including three built on our S2 platform.

Speaker Change: and, as announced at ECMA in 2004, plans for an electric maxi-scooter in the first half of 2026, with a primary focus on the European market.

Speaker Change: The company's commitment to innovation and market expansion will be evidenced by planned new products on both the electric motorcycles and stasic segments, designed to appeal to a broader global customer base.

Speaker Change: We believe these initiatives position the company to enter a new market segment and enhance its competitive edge.

Now, I hand it over to Jonathan.

Jonathan: Thank you, Karim, and good morning to all. I plan to start on page 4 of the presentation, where I will briefly summarize the financial results for the fourth quarter and full year of 2024.

Jonathan: Let me start with consolidated financial results for the fourth quarter of 2024. Consolidated revenue in Q4 was down 35%, driven mainly by HDMC revenue being down 47%, and partially offset by HDFS revenue growth of 4%.

Jonathan: Consolidated operating loss in Q4 was $193 million, which compares to an operating loss of $21 million in Q4 of 2023.

Jonathan: This was driven by an operating loss of $214 million at HDMC, while HDFS operating income of $46 million was unfavorable by $12 million relative to a year ago.

Jonathan: The operating loss at Livewire was $26 million, which was in line with our expectations and $9 million favorable relative to a year ago.

Jonathan: As a reminder, we expected the fourth quarter to be a reduced quarter from a profit standpoint at the Harley-Davidson Motor Company segment.

Jonathan: This is a result of the intentional reduced wholesale shipments in Q4 as part of preparation for the new model year product launch in January of this year, and our commitment to not blow dealer inventory year-over-year.

Jonathan: Again, I plan to go into further detail on each business segment's profit and loss drivers in the next section.

Jonathan: In Q4, earnings per share was a loss of $0.93, which is down from a profit of $0.18 in Q4 of 2023.

Turning to full year 2024 financial results on page 5.

Jonathan: Consolidated revenue of $5.2 billion was 11% lower compared to last year, while consolidated operating income of $417 million was 47% lower than last year.

Jonathan: Full Year 2024 Consolidated Revenue Performance was as follows. At HDMC, revenue decreased by 15%, at HDFS, revenue increased by 9%, and at LiveWire, revenue declined by 31%.

Jonathan: Full Year 2024 Consolidated Operating Income of $417 million, compares to $779 million of Consolidated Operating Income in 2023.

Business Segment Performance was as follows.

Jonathan: At HDMC, operating income of $278 million was 58% lower than prior year. At HDFS, operating income of $248 million was 6% higher than prior year.

Jonathan: And at Livewire, an operating loss of $110 million was 6% favorable to prior year.

Jonathan: For the full year 2024 earnings per share was $3.44 and compares to $4.87 in 2023.

Now, turning to page 6 in HTMC Retail Performance.

Jonathan: As Jochen already mentioned, in Q4, global retail sales of new motorcycles were down 15% versus the prior year.

Jonathan: This is a continuation of the trend that began at the start of Q3 and continued to play out through the second half of 2024, where we saw an increasingly difficult global market environment in our, and other, big-ticket discretionary sectors.

Macroeconomic Uncertainty

Jonathan: continued inflationary pressures and the pressure of high interest rates affected both our industry and our customers, especially in our core markets.

Jonathan: In North America, Q4 retail sales declined by 13%, while international retail sales, excluding Canada, declined by 17% year-over-year.

Jonathan: In EMEA, Q4 retail sales declined by 7%, driven by weakness in Germany and the surrounding region.

Jonathan: It may have continued to be adversely impacted by overall macroeconomic conditions.

Jonathan: For the full year 2024, EMEA retail sales were down 11%, where a majority of the retail weakness was in non-core motorcycles.

The Touring category was up 10% on the year.

Jonathan: In Asia-Pacific, Q4 retail sales declined by 26% as the region has remained weak since the second half of 2023.

Jonathan: The Q4 retail sales decline was driven by weakness in Japan and China, with Australia and New Zealand turning in a positive Q4.

Jonathan: For the full year 2024, Asia-Pacific retail sales were down 18%, with market characteristics broadly consistent with that seen in Q4.

Jonathan: The softness was most acute in Japan and China, whereas both Australia and New Zealand, as well as India, were up modestly.

Jonathan: In Latin America, Q4 retail sales declined by 7%, where both Brazil, our largest Latin American market, and Mexico were down, while other Latin American countries were up year-over-year in Q4.

Jonathan: For the full year 2024, Latin American retail sales were slapped where Brazil was down marginally and Mexico was up marginally.

Jonathan: Dealer inventory at the end of Q4 was down by 19% sequentially relative to the end of Q3 as we executed our plan to reduce inventory levels in the second half of 2024 both domestically and internationally.

Jonathan: dealer inventory globally was at a level where we ended prior year

Specifically, Harley-Davidson dealer inventory levels were down over 4% year-over-year.

Jonathan: We continue to prioritize support for our dealers as we start 2025 and the upcoming spring riding season and work to balance dealer inventory at healthy and appropriate levels.

Jonathan: We are investing in our grassroots marketing activations, which we expect will reap benefits in improved dealer and motor company profitability, beginning in 2025 and lasting beyond.

Jonathan: Also, as Jochen mentioned, we are pleased with the initial reaction to the redesigned soft-tail motorcycles.

Jonathan: We will talk further about our expectations for both retail and wholesale motorcycles for the full year of 2025 in just a few minutes.

Now, turning to page 7 in HCMC Revenue Performance.

Jonathan: In Q4, HDMC revenue decreased by 47%, coming in at $420 million, which was driven largely by a 53% decrease in wholesale unit shift.

Looking closer at the key drivers for Q4.

Jonathan: 43 points of decline was as a result of decreased wholesale volume at HTMC, where motorcycle shipments were down meaningfully when compared with retail sale of motorcycles.

Jonathan: Specifically, we shipped less than half the motorcycles we did in Q4 prior year.

Jonathan: We delivered 14,000 motorcycles in Q4-24 relative to 30,000 in Q4-2023.

Jonathan: In Q4, our wholesale shipment decrease was even more pronounced than the typical impact as we worked to reduce dealer inventory levels by the event.

Jonathan: Five points of growth came from pricing, which includes the net impact of pricing actions on 2024 model year motorcycles and overall sales incentives.

Jonathan: Nine points of decline came from mix as we were more focused on touring shipments in the first half of the year, and we rounded out the rest of the motorcycle portfolio shipments in the second half of the year. And finally, foreign exchange was largely flat in Q4.

Jonathan: For the full year of 2024, HDMC revenue decreased by 15%, coming in at $4.1 billion.

Jonathan: One point of decline, which came from pricing, net of incentives, reflecting difficult year-over-year comparisons in the first half, and actions to help support retail in the 2024 calendar year for the remaining 2023 model year dealer inventories.

Jonathan: Nix contributed a little more than one point of growth as we continue to prioritize our most profitable models and markets, especially in the first half of 2024. And finally, foreign exchange, which resulted in an $18 million headwind, or less than 50 basis points in decline, as the dollar strengthened for the full year.

Now, turning to page 8 in HDMC Margin Performance.

Jonathan: In Q4, HGMC gross profit came in at a loss of $3 million, compared to a gross profit of $181 million, or 22.9% gross margin in Q4 of 2023.

Jonathan: Again, Q4 is typically our lowest gross margin quarter of the year.

Jonathan: The year-over-year decrease was driven by the negative impacts from significantly lower volumes, unfavorable mix, unfavorable foreign exchange, including hedging, and negative operating leverage.

Jonathan: favorable net pricing, and lower raw material and supply chain management costs.

In Q4, operating expenses totaled $210 million.

Jonathan: which was $15 million lower compared to prior year, or 7% lower, as we continued to maintain overall cost discipline and increase our efforts to manage OPEX productivity at HDMC.

Jonathan: In Q4, HDMC had an operating loss of $214 million, which compares to an operating loss of $44 million in the prior year period.

Turning our attention to full year 2024 margins.

Jonathan: For the full year 2024, HDMC gross margin was 28%, which compares to 32.3% in the prior year.

Jonathan: The decrease of 430 basis points was driven by the negative impacts of lower volumes, unfavorable net pricing, unfavorable mix, which was largely driven by increased costs related to all new touring motorcycles, and A&L more than offsetting favorable family mix.

Jonathan: Additionally, we experienced a benefit in the first half of the year from shipping higher margin CVO products in 2024, which reversed in the second half as we lapped the introduction of our touring CVOs in 2023.

Jonathan: Our Hardwire 2 profit focus has produced meaningful mixed margin expansion since 2020, but was muted in 2024 as we invested behind our core product segments and lapped higher comparison periods.

Unfavorable foreign exchange, including hedging and negative operating leverage.

Jonathan: These impacts were partially offset by the positive impacts from lower raw material costs and lower logistics expenses as we executed well against our cost productivity targets, which helped offset the 2% rate of inflation seen during the full year of 2024.

Jonathan: Lastly, for the full year of 2024, operating expenses came in at $877 million, which were lower by $28 million as we maintained overall cost discipline due to actions that we began to take in the late Q2 of 2024.

Jonathan: Full year 2024 HDMC operating income was $278 million, which was $383 million lower than prior year due to the factors mentioned previously.

Jonathan: For the full year 2024, HDMC operating margin was 6.7%, which compares to 13.6% for the full year 2023.

Jonathan: Before we turn to the next slide, as I did in October, let me give a brief update on our Productivity Task Program, one of the initiatives identified as part of the Hard Wire Strategy, where we were expecting to drive $400 million of improvement in productivity by 2025.

Jonathan: As a reminder, we are now excluding the impact of leverage while holding our previously communicated multi-year target of $400 million.

Jonathan: Excluding the impact of leverage, we delivered approximately $24 million in 2022 and $123 million in 2023.

Jonathan: In 2024, we delivered a further $110 million for the full year.

Jonathan: This is a total of $257 million to date. We expect to achieve another $100 million in 2025 and again in 2026, exceeding our hardwired dollar target by over 10%, but doing so one year later than anticipated.

Jonathan: Now, turning to slide 9 and 10 in the Financial Services section.

Jonathan: At Harley-Davidson Financial Services, Q4 revenue came in at $257 million, an increase of $11 million, or 4% compared to last year.

Jonathan: The Q4 increase was driven by lower retail finance receivables at higher average yields as the portfolio continued to reset over time with higher interest rates driving higher interest income.

Jonathan: The Q4 decline was driven by a higher provision for credit losses and higher borrowing costs, which were partially offset by higher interest income.

Operating expenses were largely flat.

Jonathan: The provision for credit loss expense was $16 million higher, primarily as a result of an unfavorable reserve change and slightly higher realized credit losses.

Jonathan: The reserve change was $13 million unfavorable as compared to Q4 of 2023, primarily on an increase in the retail reserve rate to ensure we are well positioned for subsequent periods.

Jonathan: Total interest expense was up $6 million or up 7% versus the prior year.

Jonathan: The increase was driven by a higher cost of funds as lower interest rate debt matured and was replaced with current market rate debt.

Jonathan: For the full year of 2024, HDFS revenue is $1 billion, up 9% from prior years.

Jonathan: While HCFS operating income was $248 million, up 6% from prior year.

The full year 2024 operating income margin was 24%.

Jonathan: Now, turning to slide 11. At the end of 2024, HDFS's annualized retail credit loss ratio was 3.3%, which compares to an annualized retail credit loss ratio of 3% at the end of 2023.

Jonathan: The increase in retail credit losses was driven by several factors connected to the macroeconomic environment and related to customer and industry dynamics.

Jonathan: Across the portfolio, we have seen that more loans have become delinquent as customers have been impacted by higher bike payments and general inflationary pressures.

Jonathan: The average loss increased due to higher loan balances and continuing normalization of used bike prices, which have led to lower recovery values at auction.

Jonathan: That said, we believe we have begun to see stabilization in used outages after many quarters of decline following a rapid value escalation in the period immediately following COVID.

Jonathan: The retail allowance for credit losses for Q4 2024 ticked up to 5.7%. This is up from 5.5% in Q3 2024, and up from 5.4% at year-end of 2023.

Jonathan: This reflects our best estimate of the current and future retail lending environment.

Jonathan: Total retail loan originations in Q4 were down 16% while commercial financing activities were down 5% to $1 billion.

Jonathan: Total quarter-end net financing receivables, including both retail loans and commercial financing, was $7.3 billion, a 3% decline versus prior year-end.

Now, turning to slide 13.

Jonathan: For the live wire segment, electric motorcycles revenue decreased in the fourth quarter of 2024 compared to the prior year period due to lower unit sales of EV motorcycles in the quarter.

Jonathan: At SpaceX, the electric balance business, revenue was up modestly compared to the prior year.

Jonathan: Telling, administrative, and engineering expenses were down $9 million or down 31% in Q4 compared to prior years.

Jonathan: Fourth quarter LiveWire operating loss of $26 million, $9 million less than a year ago, was in line with our expectations as LiveWire continues to invest in new motorcycle models and continues to action initiatives to reduce the overall cost of sales for EV motorcycles.

Jonathan: For the full year 2024 results of the LiveWIRE segment, revenue is $26 million, down 31% from the prior year.

Jonathan: For the period, live wire operating loss was $110 million, which was in line with our expectations.

Now, turning to slide 14.

Jonathan: Wrapping up with Consolidated Harley-Davidson, Inc. financial results, we delivered $1.1 billion of operating cash flow in 2024, which was an increase of $309 million and up from $755 million in 2023.

Jonathan: The increase in operating cash flow was influenced by a favorable change in wholesale finance receivables.

Jonathan: and by positive changes in working capital as we continue to focus on cost productivity and tight inventory management, including over a 20% reduction in finished goods inventory.

Jonathan: Total cash and cash equivalents ended at $1.6 billion, which was $56 million higher than a year ago. This consolidated cash number includes $64 million at LiveWire.

Jonathan: Additionally, as part of our capital allocation strategy, and in line with our commitment to return capital to our shareholders, in Q4, we bought back 3 million shares of our stock at a cost of $100 million.

Jonathan: This brings our total amount of shares brought back in full year of 2024 to 12.5 million shares of Harley-Davidson common stock at a total value of $450 million, which is 9% of shares outstanding at the beginning of 2024.

Jonathan: Since the company announced a $1 billion share repurchase plan on July 25, 2024, we have repurchased 7.1 million shares at a cost of $250 million.

Now, turning to slide 16.

Jonathan: As we look to our financial outlook for 2025, we remain pleased with our leading market share position in the U.S., new model year 2025 launch, including an important new entrant in the Pan American family, all coupled with our still new and redesigned touring lineup.

Jonathan: Yet, as Jochen already mentioned, we are mindful of overall macroeconomic uncertainty and softness in high-ticket consumer discretionary spend, particularly after the second half of 2014's slowdown.

Jonathan: At HTMC, we expect retail units to be flat in 2025, with positive performance skewed toward the second half, as Jochen mentioned.

Jonathan: We expect wholesale units to be flat to down 5% in 2025 as we continue to be mindful of dealer inventory management.

Jonathan: We expect global inventory levels to come down by more than 10% by the end of 2025.

Jonathan: The impact of this will be most evident in the first half, where we expect a reduction of more than 30 percent.

Jonathan: As a result, we expect HTMC revenue to be flat to down 5%, we expect revenue to align with the timing of wholesale shipments, and year-over-year revenue comparisons will exhibit a different seasonal cadence versus prior year if we are not building dealer inventory for all new touring, as was done in 2024.

Jonathan: We expect operating income margin to come in between 7% and 8%.

Jonathan: The drivers of our margin performance expectations include slightly negative operating leverage due to lower volumes.

Jonathan: FX Headwind from unfavorable shifts in foreign currencies, Mix which we expect to be slightly unfavorable due to higher overall portfolio makeup of the new soft sales

Jonathan: This slide shows the pricing up as we continue to fine-tune our pricing strategy and operating expense down due to the full year benefit of lower headcount and anticipated warranty savings.

Jonathan: In addition, at the earnings per share level, we expect EPS to be flat to down 5% relative to $3.44 reported in 2024.

Jonathan: The drivers of this include tax rate, which was unusually low in 2024 due to one-time impacts from tax credits and reduced withholding taxes on earnings we expect to be repatriated.

Jonathan: Interest income, down year over year as we lap higher short-term interest rates. Other income, lower pension income and lapping gains on changes in live owner warrant values in 2024. And EPS will benefit from lower rated average shares outstanding as well.

Jonathan: At HDFS, we expect operating income to be down 10% to 15% in 2025.

Jonathan: This forecast is based on higher borrowing costs year-over-year as we refinance a portion of the portfolio in a higher interest rate environment.

Jonathan: A stable loss rate as consumers settle into the existing macroeconomic backdrop where lower-tiered credits continue to experience some stress but offset with recent levels of higher prime mix originations.

Jonathan: and Lower Athens as we reduce dealer inventory wholesale levels driving lower commercial balances.

Jonathan: and as retail levels decreased due to lower origination volumes in recent years.

Jonathan: At LiveWire, LiveWire is forecasting unit sales of between 1,000 to 1,500 units and an operating loss in the range of $70 million to $80 million.

Jonathan: Actions were taken in 2024 to reduce 2025 total cash used by operating and investing activities.

Jonathan: For 2025, we expect this will be a reduction of approximately 40% and a spend of $60 million or less.

Jonathan: And lastly, for total HDI, we expect capital investments in the range of $225 to $250 million.

Jonathan: This is the same forecast as in 2024 and 2023, where we plan to continue to invest in product development and capability enhancements.

Jonathan: Our investment focus remains driven by core product innovation, investments in manufacturing to automate and reduce costs as part of our productivity journey, as well as planned investment for LiveWIRE.

Jonathan: As a reminder, our capital allocation priorities remain to fund profitable growth of the hardwire initiatives, which includes the capital expenditures.

paying dividends, and continuing to execute discretionary share repurchases.

Jonathan: As covered previously, in the three-year period from 2022 through 2024, we returned $1.4 billion in capital to our shareholders, including $1.1 billion of shares repurchased.

Jonathan: As we begin 2025, we are planning to buy back $350 million of our common shares, demonstrating our ongoing commitment to delivering $1 billion in share repurchases as announced in July.

And with that, we will open it up to Q&A.

Speaker Change: Thank you. As a reminder, to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. We also ask that you limit yourself to one question and return to the queue for additional questions. Thank you.

Speaker Change: Our first question will come from Megan Clapp from Morgan Stanley. Please go ahead, your line is open.

Megan Clapp: Hi, thanks very much. Good morning, thanks for taking our question. Jonathan, a lot of helpful detail there, so thank you, appreciate it. Wanted to just follow up on your commentary around

Megan Clapp: from a revenue comparison perspective, you're not going to be building dealer inventory for touring as you did in 24. So maybe a hard comparison on touring plus still taking some shipments out of the channel. So can you just maybe put a finer point on what that means for your expectations for the first quarter?

Speaker Change: Sure, so we'll probably talk more I think in in sort of front half and back half of the year rather than get into quarters specifically, but Megan your question is

Speaker Change: dealer inventory globally kind of lands across 2025. We expect to end the year down

Speaker Change: 10% or a little bit over from a total dealer inventory perspective. As we think about what that looks like across the quarters, again, front half would be down a little over 30%.

Speaker Change: And so, obviously, as we as we flow through that and think about some of the dealer impacts related to that, we have dealers who run the year down probably about thirty five, you know, call it a thirty five ish percent average across the entire year.

Speaker Change: So with that, you see a more pronounced decrease in inventory in the front half than the back half, so 30% plus and then 10% plus kind of year-end.

you know

Speaker Change: double-digit kind of double-digit range from a percentage standpoint and then as we move toward the back half of the year up quite a bit in the back half in order to make sure that we end the year appropriately positioned from an inventory standpoint.

Speaker Change: Our next question comes from Joel Altobello from Raymond James. Please go ahead, your line is open.

Joel Altobello: Thanks. Hey, guys. Good morning. I guess I try to squeeze in a couple of questions if I could. I guess first on the on the quarter.

Joel Altobello: You know, where was the big margin surprise? Because revenue was in line.

Joel Altobello: shipments were maybe slightly below expectations. So, first question is where the big margin surprise was in Q4, and then maybe to follow up on that, the retail outlook for flat in 2025, maybe you're thinking there, given that you're lapping a touring refresh this year. Thanks.

Speaker Change: All right. Thanks, Joe. I can start with, I'll start with the sort of margin piece from a Q4 perspective, and then, and then between Jochen and I will cover the retail piece.

Joel Altobello: So, on the, on the Q4 margin. We have a, we have a margin walk that I think was page 8 of the deck. And as you take a look at that from a full year perspective.

Joel Altobello: You can see the impacts associated with volume as well as sort of manufacturing and other related expense.

Speaker Change: So we're pretty pleased in terms of some of the positives that we delivered on. I think you heard Jochen's commentary and my commentary around productivity.

and the productivity that we drove in 2024.

Speaker Change: I think that overall was a good news. But as we think about some of the things from a 2024 perspective, obviously we were a little bit off from an overall retail perspective.

Speaker Change: We made the commitment that we would manage retail and wholesale in alignment with each other throughout the year. So, as we got to the back part of 2024, there were a number of down days that we that we use to manage inventory and make sure that we were managing production in the right way.

Speaker Change: We also had a little bit of cost associated with retooling for new soft tail and kind of getting everything aligned from an overall line rate design perspective within there. And then, obviously, the volume that I just talked about that hits from an absorption or deleverage perspective.

Speaker Change: So as we add up those elements, that kind of creates the challenge in terms of the overall myth from an operating income margin standpoint.

Speaker Change: Not just because or only because of the touring launch, but in general we've seen a drop-off in the second half Which is pretty much in line with what you know other industries or related industries have seen so therefore we expect a better performance in the second half versus the first half

Speaker Change: We also think from a macroeconomic point of view, it's probably going to be more choppy in the first half than the second half.

Speaker Change: You mentioned the touring launch. I think what's important to notice that we have beyond touring

Speaker Change: A lot of innovation in our product lineup, which is reflected in our guidance.

Speaker Change: And then the touring product that we've launched is still very new to many of our customers. We have 1.6 million touring riders just across the United States.

Speaker Change: With last year's sales of new touring bikes, you know, we still have a customer base of 95% that haven't looked or purchased our product. This means that's 1.5 million that can potentially upgrade to the new product platform.

Speaker Change: And if you look at previous launches that were not as comprehensive in terms of remodel as our touring launch now is, that benefit came over several years not just the first year.

Speaker Change: And data shows that 30% of our customers are very aware of our new touring product features, but that makes 70% that are not fully aware yet. So there's definitely a lot of potential for in the coming years to convince customers and some are just holding off.

Speaker Change: and don't want to buy the first generation and want to familiarize themselves more. So we still think Turing has opportunity for growth in the future for sure and this platform should run for many years given that it's all new compared to our Rushmore products in the past.

Speaker Change: But in terms of comms, certainly we believe the first half is going to be slower than the second half.

Speaker Change: Our next question comes from James Hardiman from Citi. Please go ahead, your line is open.

Maybe help with

the sort of margin bridge you're guiding.

and it looks like on the OPEX front.

Speaker Change: 2025. Now, you gave us a lot of the negatives, right? FX is going to be a negative. It sounds like Mix is going to be a negative.

Speaker Change: I guess, how do we get to that motor company margin growth that you're guiding to? Thanks.

Speaker Change: All right, James, so I can, I can start. So, I think as we go through and we take a look from an overall volume perspective, obviously, as you talked about, we're, we're pretty flat. So, as we think about walking off of 6.7% for 2024.

Speaker Change: We end up with, you know, a relatively flat guide from a volume perspective. From a pricing standpoint, we expect a little bit of favorability that's in there as we look at the actions that we've taken across the portfolio.

Speaker Change: There's a little bit of a negative impact in 2025 from FX. So, probably a little bit greater than the negative impact that you saw in in the 23 to 24 walk.

Speaker Change: A little bit of a challenge from a mix standpoint because we have the new soft tails that are hitting. Obviously, the two-ringer higher margin.

Speaker Change: motorcycles, so there's a little bit of a mixed dynamic in there.

Speaker Change: We don't think that we're going to see sort of the same level of unfavorability from manufacturing and others. And then we think we have a little bit of favorability that falls in there from an OPEX perspective. Those are for the reasons that Jochen talked about in his remarks.

Speaker Change: And so with that, you kind of add up to the seven to eight percent guide that we provided.

Speaker Change: Our next question comes from Robin Farley from UBS. Please go ahead, your line is open.

Robin Farley: Great, thanks. I wanted to just clarify, with your guidance for motorcycle revenue flat to down 5%, I think you said price would be positive for the year. So does that imply percent of units down a bit more than that flat to 5%?

Robin Farley: And then just on retail, I know you gave some color to the first half versus second half. Assuming that if you're trying to clear inventory, you're shipping.

Robin Farley: below your retail expectations, what should we kind of think about as the rough range of your retail expectation for the year, just so we can kind of, as we move through the year, kind of see how it's tracking versus your guidance and, you know, maybe kind of adjust our expectations accordingly. Thanks.

Speaker Change: Okay, thank you Robin. So I'll start with, I think from a wholesale perspective, we probably think, you know, flat to down a little bit.

Speaker Change: So as we as we look at that that's a little bit of the volume

Speaker Change: There will be a little bit of volume challenge in there that is offset by the pricing piece that I talked about.

Speaker Change: And then I think relative to your question on retail, overall, for right now, from the commentary that we talked about, we think of retail as being flat in

Speaker Change: 2025, so certainly a little bit difficult to predict as we think about macroeconomic situation and where we are, but overall, we are thinking about an environment globally.

Speaker Change: that gets us to flat retail, wholesale maybe off a little bit, and then pricing a little bit favorable, and hopefully that answers your question around how we manage through that.

Speaker Change: Our next question comes from Fred Whiteman from Wolf Research. Please go ahead. Your line is open.

Speaker Change: Hey guys, good morning. I was hoping you could just give us a sense for where the mix of current versus non current product that dealers have on lots today stands. If we look back last year, you'd called out some incremental dealer support to clear through non currents. I think there was a $40 million number initially, and then you upsized that down the road. So are you assuming incremental dealer support year over year? Does that wind up being favorable? How do you sort of think about that?

Thanks.

Speaker Change: It's kind of the same period a year ago. As we look at how we're managing through inventory in 2025, we've covered sort of the conservatism that we expect in the first half of the year.

Speaker Change: How we're shipping pretty carefully from that standpoint. So, we think that dealers are pretty well positioned from an overall inventory perspective. The other thing that is a tremendous difference in.

Speaker Change: 2025 calendar year versus 2024 calendar year is the way that I would define it as kind of quality of inventory, right? So, as we think about the mix of touring bikes that dealers have on their floor, they have redesigned the redesigned.

Speaker Change: touring bikes that are out there. Jochen talked about market receptivity and market reaction to those, which were positive in 2024.

Speaker Change: So overall with that, we think the health of the dealer inventory is better. We think the quality of the dealer inventory is better.

Speaker Change: The piece that I think we are doing that's a little bit different in 2025 versus 2024 is being more surgical in where we look for dealer support.

Speaker Change: So, rather than sort of applying support across the family, like we did a year ago.

Speaker Change: We actually now kind of look at specific models within that family and provide the support a little bit more carefully from that standpoint. Again, something that we think we're able to do because of the, because of the mix of dealer inventory.

That's out there in the network

Speaker Change: Just to add one point, also please look at pricing. We've strategically priced our products going into 25 versus 24, so I think that is an important factor and has been received very positively.

Thank you for watching. Bye.

Speaker Change: Our next question comes from Alex Perry from Bank of America. Please go ahead, your line is open.

Thank you. Bye-bye.

Speaker Change: Hi, thanks for taking my questions here. I actually wanted to ask about LiveWire. So, thinking about LiveWire, you know, more longer term,

Speaker Change: How do you think about managing that business and sort of managing the operating losses there? I guess, you know, if demand and adoption of electric does not materialize meaningfully over the next few years, how are you thinking about live wire longer term would be great. Thanks. Bye.

Speaker Change: Yeah, Alex, good question. I think, you know, we are continuously evaluating, you know, from a Harley-Davidson perspective, you know, how to achieve the best performance for Harley-Davidson and for LiveWire. And we are obviously considering mid and long-term perspectives.

Speaker Change: in this evaluation. Beyond what we've said today, there's little to nothing that I want to comment on, but the first significant step Karim has already mentioned.

Speaker Change: portfolio and ensure that the cash burn and the operating losses are being reduced. So that is an indication of how we are, you know, streamlining the business in light of the new realities. Beyond that, I can't really comment, but rest assured that we are continuously evaluating.

Speaker Change: Our next question comes from David McGregor from Longbow Research. Please go ahead, your line is open.

Hi, good morning. This is Joe Nolan, I'm for David.

Speaker Change: China and Japan proved a little bit of a challenge as we look back. Australia and New Zealand exhibited some nice strength in the

Speaker Change: In the Asia-Pacific region, as we think about Europe, Germany, and the surrounding markets there, we're a little bit challenged. There were, there were, you know, a couple of specific markets.

Speaker Change: That we've had some strength for a while, Spain, Portugal, Italy in particular, over time have been have been solid and performing really nicely.

Speaker Change: As we move forward and really take a look at where we think 2025 is going, overall, globally, we kind of view it as pretty flat. So, as we think about international markets in

2025

Speaker Change: pretty flat. So in the prior periods, Joe, we've kind of walked through and covered what we've seen from Asia Pacific and the way that that market has performed over time.

Speaker Change: We feel like that, for example, is overall split growth in 2025. But for the most part, again, we're guiding to a flat global environment from a retail standpoint.

Thank you.

Speaker Change: Our next question comes from Noah Zatzken from KeyBank. Please go ahead, your line is open.

Noah Zatzken: Hi, thanks for taking my question. Maybe just a couple on HDFS. I guess first, how are you feeling about the health of the book?

Noah Zatzken: And then in light of SOFR declining, I know you guys have variable rate debt, but what are kind of the big moving pieces on the expense or the income side that's driving the decline in the guide? And then, you know, is there some expected credit loss baked in there, conservatism, just trying to better understand that. Thank you.

Noah Zatzken: Okay, great. Thank you, Noah. So as we look at HDFS, I think overall health of the book, a couple of things. So as we think through some of the, some of the sort of historical originations, there's a little bit of pressure as we think about some of the

Noah Zatzken: So as we look toward the final quarter of 2024 and forward, we feel like, you know, if you remember, there was a tremendous rise up in youth values in the period following COVID. There's a little bit of normalization.

Noah Zatzken: From a consumer perspective, again, with recent originations, we've been originating at very, very high credit quality. So the overall kind of mix of the portfolio is looking pretty strong and pretty healthy.

Noah Zatzken: So that's a big part of what you're seeing on a year-over-year basis relative to what we guide is wholesale asset levels from a year-over-year standpoint that come down.

Noah Zatzken: or years immediately following COVID. That puts a little bit of pressure on asset levels as those customers continue to pay down their loans. So, overall, I would say that we're pretty pleased with the health of the book. We feel like it's being managed in a way that's pretty positive.

Noah Zatzken: Percentages can throw things off a little bit just because of numerator denominator effect and then when we think about

Noah Zatzken: FEDRATE. As we look at the parts of our portfolio that are actually tied to a variable rate. That's the wholesale business so our dealers will continue to see savings.

Noah Zatzken: in wholesale rate between units that aren't being delivered at the same level and where Fed rates are going. But that does put a little bit of pressure on HDFS. So, for the most part, it's a story of kind of assets, a story of

Noah Zatzken: Some benefit that accrues to the dealers rather than the HDFS business

Noah Zatzken: And then the other piece that we always consistently work to manage is that as we bring on any new debt, that's at a higher debt level than where we were three, you know, three, four years ago. So, we just have a little bit of sort of short term normalization around that.

that. But overall, continue to be very pleased with that.

Speaker Change: Our next question comes from Tristan Thomas-Martin from BMO Capital Markets. Please go ahead, your line is open.

Tristan Thomas-Martin: Hey, good morning. Two kind of housekeeping questions. I believe you mentioned growing to a HGMC operating income margin target in the future. Is that still 15 percent? And just quickly following up on Noah's questions, was there any CECL accounting change embedded in the HDFS guidance? Thanks.

Tristan Thomas-Martin: Yes Tristan, as I've mentioned we continue to believe the 15% target is achievable.

Tristan Thomas-Martin: and if we assume you know 26 balanced retail production and wholesale business or shipments and then think about achieving a double-digit margin in 26 if we can achieve that with this year's outlook.

Tristan Thomas-Martin: The 15% target is still achievable, but obviously that requires us.

Tristan Thomas-Martin: get a slight volume growth that is support but and that we believe is actually support is going to be supported through exciting new products that we are launching I've mentioned

Tristan Thomas-Martin: In my opening remarks that we are also entering, having an entry-level motorcycle in select markets.

Tristan Thomas-Martin: starting off next year and a small cruiser segment in the following year. So, supported with product launches, we believe the 50% is possible. But it's hard to give you a timeline on that.

Tristan Thomas-Martin: other than the double-digit operating profit that we believe is achievable assuming that we achieve this year's levels.

Tristan Thomas-Martin: So yes, we feel comfortable. I think we are positioned well, but obviously we need some tailwinds and a slightly improved retail environment and power sports industry, which we haven't seen now for two years in a row.

Tristan Thomas-Martin: So I think that has to happen. We need some tailwinds overall, not significant but certainly not a depressed market as we've seen in all of power sports, RVs, marine, pretty much anything that's discretionary. So that that will have to happen for us to achieve those.

The 15% Operating Margin

Thank you. Bye-bye.

Tristan Thomas-Martin: And then really quickly just on Tristan's CECL change question. So from an HDFS perspective, we did adjust reserves up a little bit as we think about, again to your point, CECL lifetime loss evaluation. We did add

Tristan Thomas-Martin: a small amount to make sure that we are covered from that standpoint.

and Shawn Collins. Thank you.

Speaker Change: Our next question comes from Brandon Rolay from D.A. Davidson. Please go ahead, your line is open.

Speaker Change: on the LiveWire business. It's been a headwind to earnings for years now and I guess I'm wondering, clients are wondering, is there anything that would change your mind about continuing down this path with LiveWire and how committed are you to this business? Thank you.

Speaker Change: Well, I think the first part is the outlook and then I'm going to comment from a Harley perspective.

Speaker Change: Yeah, thank you. Thanks. Brandon from the library perspective, as you saw, we, we are reducing our expenses quite significantly year over year. We do work on accelerating our path to profitability. We have an internal program, very aggressive on reducing a bump cost. We do see actually be an opportunity to have.

Speaker Change: contribution margin positive by the end of the year between all of the work we've done on bond costs, on conversion costs, etc. That would be the first step before we actually break even the business. Obviously,

Thank you.

Speaker Change: It was mentioned before, I think by Alex, that it's a demand adoption challenge right now, but those segments and markets were easy.

Speaker Change: Is having some traction, especially you look at Europe, the maxi scooters, the other type of mobility segment, which we announced.

Speaker Change: back at ECMA. And we really believe that we're working towards where the market is putting when EVs bring additional value.

Speaker Change: So we'll keep working on this. We do have a plan to accelerate our path to profitability. You start seeing some very significant improvement this year, and you should expect to continue seeing some improvement. For the second part of your question, let Jochen comment.

Jochen Zeitz: Yes, Brandon, as I said, you know, we are evaluating the business performance of LIFAR very carefully. There are a lot of benefits that LIFAR brings beyond electrification to Harley as well, but obviously

Jochen Zeitz: We are not achieving the targets that we've set out for many different reasons, EV adoption being or a slower pace of EV adoption obviously being a contributing factor.

Jochen Zeitz: So we will watch this very carefully. LiveWire needs to perform and we've invested a significant amount of money and that performance needs to happen. Otherwise we'll obviously have to look at some optionalities here but we are committed to the business at this point but we need to see improvement in the business performance.

Jochen Zeitz: Based on Karim, what he's mentioned, I think losing the losses continuously and really focusing hard and reducing the cash flow is critical and And then adoption and sales obviously need to show up and this year will need to prove that

Speaker Change: Our last question comes from Jamie Katz from Morningstar. Please go ahead, your line is open.

I guess.

Jamie Katz: What was the strategic purpose of rolling out a new product where there's low demand in the segment?

Jamie Katz: Where does the incremental investment lie with that, and what does the profit margin opportunity look like for that new unit? Just trying to think about that profit progression. Thanks.

Speaker Change: Thank you. Just to clarify, are you talking about the Alpenista lounge that we just had on the S2 platform?

Speaker Change: the maxi scooter that I assume is going into the P&L of Livewire.

Speaker Change: Yes, it is correct. Okay. Thank you for clarifying. So that scooter is expected to hit market in 2026. We are right now working diligently on the development of it.

Speaker Change: There is a strategic rationale for it, which is pretty strong for us. It does leverage two key things. The first one is the S2 platform, which is fully developed in market right now. And know-how and expertise of our second largest shareholder, Kimco, who are already in this market segment. So when you take the combination of the two, we feel like we have everything it takes to come and have a value proposition for this specific segment.

Speaker Change: that would be extremely competing, not only in terms of performance, but in terms of market positioning as well. There is a push and there is actually growth in this maxi scooter segment, EV, right now in Europe in particular. So we are clearly targeting this segment next year.

Speaker Change: If I just may add from a Harley-Davidson perspective, the LiveWire has not invested into a new platform but it's using the existing S2 platform to launch Linux extensions and that is

Speaker Change: which is the reason why LifeWire is able to reduce the operating loss significantly to between 70 and 80 million and the cash burn as well, and therefore the focus right now is really getting pump costs out.

Speaker Change: Reducing cost of sales and reducing the loss per bike, but as I said, we will have to watch, we are watching this very carefully with a mid to long term perspective in mind and look at the risk and rewards going forward to decide how the business is going to be positioned in the future.

Thank you very much.

Speaker Change: There are no further questions at this time. This concludes today's conference call. Thank you all for joining. You may now disconnect.