Business Context and Reporting Period
Company: Harley-Davidson, Inc. (HOG)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Three months ended March 31, 2026
Segments: Harley-Davidson Motor Company (HDMC), LiveWire, and Harley-Davidson Financial Services (HDFS).
The Company is executing a new strategic plan, "Back to the Bricks," announced in Q2 2026, following the appointment of a new CEO in October 2025. The plan targets cost reductions of at least $150 million and aims to restore profitability through improved product mix and dealer network support.
Key Financial Metrics
| Metric (in thousands, except per share) | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Revenue | $1,172,531 | $1,329,209 |
| Operating Income | $23,494 | $160,499 |
| Net Income (Attributable to H-D) | $24,773 | $133,104 |
| Diluted EPS | $0.22 | $1.07 |
| Operating Cash Flow | $(228,021) | $141,534 |
| Cash and Cash Equivalents | $1,805,068 | $1,931,175 |
| Total Debt (Short & Long Term) | $2,131,796 | $7,300,861 |
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased 11.8% year-over-year. HDMC revenue fell 2.4% due to lower motorcycle shipments and increased incentives. HDFS revenue dropped 54.3% primarily due to a significantly lower retail finance receivable portfolio following the sale of assets in 2025.
- Profitability Compression: Operating income plummeted 85.4% to $23.5 million. HDMC operating income fell 83.7% to $18.9 million, driven by higher operating expenses, tariff costs (~$45 million in Q1), and unfavorable manufacturing leverage. HDFS operating income decreased 65.3% to $22.2 million.
- LiveWire Performance: LiveWire reported an operating loss of $17.7 million, an improvement of $2.1 million from the prior year, driven by higher unit volumes and lower operating expenses.
- Debt Reduction: Total outstanding debt decreased significantly from $7.3 billion in Q1 2025 to $2.1 billion in Q1 2026, largely due to the sale of retail finance receivables and the redemption of €700 million in medium-term notes.
- Cash Flow: Operating cash flow turned negative ($228 million outflow) compared to a $141.5 million inflow in Q1 2025, primarily due to the classification of retail finance receivable originations as operating activities and lower operating income.
Guidance, Outlook, and Risks
- 2026 Outlook:
- Shipments: Expected wholesale shipments of 130,000 to 135,000 units.
- HDMC Operating Results: Projected range of $40 million operating loss to $10 million operating income, impacted by reduced production volumes and tariffs.
- LiveWire: Expected operating loss of $70 million to $80 million.
- HDFS: Expected operating income of $45 million to $60 million, with a long-term target of $125 million to $150 million by 2029 as the portfolio rebuilds.
- Tariffs: Estimated full-year 2026 tariff cost range of $75 million to $90 million.
- Capital Allocation: The Company discontinued its $1 billion share repurchase target to align with the "Back to the Bricks" strategy. Capital expenditures for 2026 are expected to be between $175 million and $200 million.
- Key Risks:
- Supply Chain & Tariffs: Ongoing exposure to U.S. and foreign tariffs and supply chain disruptions.
- Regulatory Matters: Potential material costs ($140 million to $450 million) related to a brake hose assembly compliance issue with supplier Proterial Cable America, Inc., though the Company expects an inconsequentiality determination from NHTSA.
- LiveWire Funding: Reliance on external capital and the At-The-Market program to sustain operations; the Company does not plan additional investments beyond the existing $75 million term loan.
Investor Verification Checklist
- Tariff Impact: Verify the actual realization of the estimated $75M-$90M tariff cost for 2026 and the status of court challenges regarding existing tariffs.
- Brake Hose Recall: Monitor NHTSA's decision on the "Inconsequentiality Determination" for the Proterial Cable brake hose assemblies to assess potential recall costs.
- HDFS Portfolio Rebuild: Track the growth rate of the retail finance receivable portfolio to validate the path to the 2029 operating income target.
- LiveWire Liquidity: Review LiveWire's progress in securing external capital via its At-The-Market program to ensure it can meet its $75 million term loan obligations.
- Cost Reduction Execution: Assess the Company's ability to achieve the targeted $150 million in cost reductions and the $225 million in additional profitability benefits under the new strategic plan.