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SEC filingMD&A highlights a challenging 2025 with net income down 26% due to HDMC operating loss, partially offset by HDFS gains from a strategic transaction.
For fiscal year 2025, Harley-Davidson reported consolidated revenue of $3.58 billion, down 13.2% from $4.12 billion in 2024. Gross profit fell 25.0% to $866.6 million, with gross margin contracting to 24.2% from 28.0%. Operating income decreased 7.2% to $386.6 million, though operating margin improved to 10.8% from 10.1% due to the HDFS segment's outsized contribution. Net income attributable to Harley-Davidson was $338.7 million ($2.78 per diluted share), down from $455.4 million ($3.44 per diluted share) in 2024.
The decline was primarily driven by a $306.6 million swing to an operating loss at the HDMC segment, which reported a $28.7 million loss versus $277.8 million income in 2024. Key headwinds included a 16.4% drop in wholesale motorcycle shipments (to 124,477 units), unfavorable manufacturing leverage from lower production volumes, and $67 million in costs from new or increased tariffs. These were partially offset by favorable pricing, shipment mix, and foreign currency effects. The effective tax rate rose to 28.2% from 13.9%, unfavorably impacted by valuation allowances.
HDMC: Revenue fell 13.2% to $3.58 billion, with motorcycle revenue down 15.3% to $2.66 billion. Parts & accessories (-5.8%) and apparel (-9.1%) also declined. Gross profit dropped 25.0% to $866.6 million, with gross margin falling to 24.2% from 28.0%. Operating margin turned negative at -0.8% versus 6.7% in 2024. The volume decline contributed $189.2 million to gross profit erosion, while manufacturing and other costs added $149.4 million in headwinds. Worldwide retail sales fell 12.4%, with U.S. down 12.9% and international down 11.5%.
LiveWire: Revenue was essentially flat at $25.7 million (-2.6%), but the operating loss narrowed 31.6% to $75.0 million from $109.6 million, driven by $26.5 million in lower selling, administrative, and engineering expenses from cost reduction initiatives. Unit shipments increased 6.7% to 653 units.
HDFS: Operating income surged 97.4% to $490.4 million from $248.4 million. This was driven by a $191.4 million benefit in the provision for credit losses (from the release of allowance on sold receivables) and a $27.9 million gain on sale of residual interests, both part of the HDFS Transaction. Interest income fell 25.0% to $668.5 million due to lower average receivables, while interest expense rose 4.5% to $388.6 million, including $72.6 million in debt extinguishment costs.
Management provided 2026 guidance excluding the impact of a new strategic plan expected in Q2 2026. The Company expects wholesale shipments and worldwide retail sales of 130,000–135,000 units. HDMC operating results are forecasted in a range of a $40 million loss to $10 million income, reflecting continued unfavorable manufacturing leverage and a full year of tariff costs. LiveWire expects an operating loss of $70–$80 million. HDFS operating income is projected at $45–$60 million, sharply lower than 2025's $490.4 million, as the HDFS Transaction reduced the retail finance receivable base. The Company expects HDFS operating income to reach approximately three times the 2026 level by 2029. Capital investments are planned at $175–$200 million. The Company is pausing near-term discretionary share repurchases pending the new strategic plan.
Cash and cash equivalents nearly doubled to $3.09B from $1.59B, driven by the HDFS Transaction which generated $3.69B in proceeds from sale of finance receivables and $125M from sale of securitization beneficial interests. Total debt was slashed to $2.97B from $6.96B, as the company repaid $1.82B of medium-term notes, $450M of senior notes, and fully extinguished $1.67B of asset-backed securitization debt through deconsolidation. The company also redeemed $399.5M of U.S. conduit facility debt and $49.6M of Canadian conduit debt, recognizing $72.6M in total loss on debt extinguishment. Shareholders' equity remained relatively flat at $3.14B, with retained earnings increasing to $3.72B offset by $2.11B in treasury stock.
The Notes did not disclose any material purchase commitments or contractual obligations beyond the debt maturities and lease obligations already captured. Operating lease liabilities totaled $86.7M, with future payments of $118.8M discounted at 6.1%. The company has $1.20B in unused wholesale lines of credit extended to dealers and $156.7M in approved but unfunded retail loans. The Global Credit Facilities provide $1.42B in committed capacity, and the U.S. Conduit Facility provides $1.50B in revolving capacity (expiring October 2026).
Share repurchases totaled $347.5M (13.1M shares) in 2025, including a $200M accelerated share repurchase (ASR) with Goldman Sachs that settled in February 2026 for 9.44M shares. Dividends increased 4.3% to $0.72 per share ($86.4M total). Capital expenditures fell to $153.7M (3.4% of sales) from $196.6M. Debt reduction was the primary use of cash, with net debt decreasing by $3.99B. The company issued $647M in medium-term notes (including €610M at 5.61% due 2030) and drew $450M on a term loan (repaid in November 2025).
HDMC revenue fell 13.2% to $3.58B, driven by a 15.3% decline in motorcycle revenue to $2.66B. Parts & accessories declined 5.8% to $614M, and apparel fell 9.1% to $216M. LiveWire revenue was essentially flat at $25.7M. HDFS revenue dropped 16.3% to $869M, with interest income falling 25.0% to $668M due to the sale of $4.2B of retail receivables. Other income rose 35.9% to $201M, boosted by $20.3M in servicing fees and a $27.9M gain on sale of securitization beneficial interests. Geographic mix was not explicitly disclosed at the segment level, but approximately 10% of retail receivables were originated in Texas.
The filing emphasizes rapidly changing tariff landscapes. The US imposed new tariffs in January 2025, and foreign countries retaliated. Specifically, the EU rebalancing tariff of 25% on non-electric motorcycles from the US and Thailand (suspended until August 2025) could be reinstated, raising total duty to 31%. Trade tensions also impact raw material costs. Geopolitical conflicts (Russia-Ukraine, Israel-Hamas, China-Taiwan) create supply chain uncertainty and demand risks, especially given the EU is the second-largest sales region.
Supply disruptions remain a key theme. A major supplier, First Brands Group, filed for Chapter 11 in September 2025. The company relies on single-source suppliers for some components, and raw material shortages (including rare earth elements) persist. Inflation and logistics instability (Panama Canal tensions) add pressure. Unionized labor: the Pennsylvania CBA expires in 2027, Wisconsin in 2029; failure to renew could lead to work stoppages.
New CEO Artie Starrs (effective October 2025) initiated a strategic review, creating uncertainty about future direction. The LiveWire segment continues to face significant challenges: it expects losses for several years, depends on the traditional dealer network for sales, and confronts slower EV adoption. Competition is intense from diversified players and new EV entrants. The company's premium pricing strategy is vulnerable if price becomes more important to consumers.
Credit risk in HDFS (retail and wholesale) is influenced by economic conditions and used motorcycle market dynamics. High interest rates reduce affordability. Foreign currency fluctuations and commodity price volatility impact margins. The company's credit rating is crucial for accessing capital markets at favorable rates.
Cybersecurity threats are evolving, with the company experiencing prior attacks (not material). AI usage introduces risks to proprietary information and potential legal liability. Regulatory compliance costs are increasing, especially in emissions, safety (NHTSA), and financial services (CFPB). The company faces potential product recalls (e.g., brake hose issues) that could result in material costs.
The provided document excerpt does not contain the actual cash flow statement data. No analysis possible.