#United States #Harley-Davidson #Milwaukee #KKR #HDFS

Harley-Davidson's Financial Overview and Strategic Moves for Q2 2025

Introduction

On July 30, 2025, Harley-Davidson, Inc. released its second-quarter financial results alongside a noteworthy transaction involving its subsidiary, Harley-Davidson Financial Services (HDFS). This quarter's outcomes reflect ongoing challenges in the discretionary product market and an unpredictable tariff landscape. However, the announcement of a collaboration with KKR and PIMCO signals a strategic effort to enhance the company's financial stability and growth trajectory.

Q2 2025 Financial Highlights

• - Earnings Per Share (EPS): The diluted EPS for the quarter stood at $0.88, down from $1.63 in the same period last year.
• - Revenue: The company's revenue dropped by 19%, totaling $1.307 billion compared to $1.619 billion in Q2 2024. A significant factor contributing to this decrease was the 23% decline in revenue from Harley-Davidson Motor Company (HDMC).
• - Operating Income: The operating income plummeted to $112 million, marking a 53% decrease from the previous year, largely due to a hefty 69% drop at HDMC.

Market Dynamics

Despite ongoing efforts to reduce dealer inventory and general soft demand for motorcycles, the company faced a 28% decrease in global motorcycle shipments. This figure indicates a proactive strategy to align production with market demand. Additionally, retail sales figures showed a 15% overall decline year-over-year, influenced by a high-interest rate environment and less favorable consumer sentiment.

Strategic Partnership with KKR and PIMCO

In a bold move designed to fortify its financial position, Harley-Davidson announced a strategic partnership for HDFS with KKR and PIMCO, affirming the valuation of HDFS at approximately 1.75 times post-transaction book value. This collaboration is expected to unlock $1.25 billion in cash, totaling about 40% of Harley-Davidson’s current market capitalization.

The terms of the partnership are impactful: HDFS will sell a 4.9% common equity interest to KKR and PIMCO and also plan to sell approximately two-thirds of its future retail loan originations at an annual premium over five years. The implications of this partnership extend beyond immediate cash influx; Harley-Davidson anticipates utilizing this capital to:

• - Reduce its debt load by $450 million
• - Accelerate a $1 billion share buyback initiative
• - Allocate up to $300 million for future growth prospects

Detailed Examination of Q2 Results

Harley-Davidson Motor Company (HDMC)

• - Motorcycle Shipments: Total shipments fell to 35,800 units from 49,700 in Q2 2024, leading to a significant revenue reduction in motorcycles.
• - Revenue Breakdown:

- Motorcycles: $778 million (down 27%)
- Parts & Accessories: $187 million (down 4%)
- Apparel: $55 million (down 13%)

The decline in gross profit margin was attributed to lower operating leverage amid decreasing sales volumes and the impact of increased tariffs, which amounted to $13 million this quarter.

Harley-Davidson Financial Services (HDFS)

HDFS generated an operating income margin of 27.1%, reporting $70 million in income, a slight decrease from last year. Overall revenues for HDFS were about $257 million, reflecting a 2% dip, largely influenced by low interest income but mitigated by other income streams.

LiveWire Segment

The electric motorcycle segment, LiveWire, reported an operating loss of $19 million, though this was an improvement compared to the $28 million loss from the year prior. LiveWire's total unit sales also fell significantly by 65% year-over-year.

Outlook and Future Initiatives

Given the unpredictability surrounding global tariffs and the economic outlook, Harley-Davidson has prudently decided to withdraw its full-year 2025 financial outlook provided earlier in the year. The company plans to refine its guidance for the LiveWire segment operational losses to between $59 million and $69 million.

Moreover, Harley-Davidson is looking to leverage the recent HDFS transaction as a catalyst for future growth. Briefly highlighting the key promotional spirit behind the developments, Harley-Davidson aims to maintain its iconic status and lead in motorcycle culture while adopting adaptive strategies to navigate market challenges.

Conclusion

Although Harley-Davidson faced substantial challenges in the second quarter of 2025, the strategic partnership announced lays the groundwork for recovery and future growth. Focusing on reducing debt and bolstering its market position will be integral in safeguarding the legendary motorcycle brand’s legacy and addressing the evolving demands of the consumer market.