LiveWire Group, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; filed May 6, 2024. LiveWire designs and sells electric motorcycles, electric balance bikes for children, and related products through its Electric Motorcycles and STACYC segments.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $4.978 million | $7.762 million | Down 35.9% |
| Cost of goods sold | $9.105 million | $6.498 million | Up $2.607 million |
| Gross profit (loss) | $(4.127) million | $1.264 million | Gross margin: (82.9%) vs. 16.3% |
| Operating loss | $(30.422) million | $(24.907) million | Loss widened 22.1% |
| Net loss | $(23.644) million | $(21.147) million | Loss widened $2.497 million |
| Basic and diluted loss per share | $(0.12) | $(0.10) | |
| Cash used in operating activities | $(22.926) million | $(24.550) million | |
| Capital expenditures | $(3.239) million | $(4.648) million |
Revenue fell in both segments. Electric Motorcycles revenue decreased 16.1% to $1.244 million, while segment operating loss widened to $29.007 million from $24.769 million. STACYC revenue fell 40.5% to $3.734 million, and its operating loss increased to $1.415 million from $0.138 million.
Electric motorcycle unit sales rose: total LiveWire motorcycle sales were 117 versus 63, and reported retail sales were 171 versus 52. However, lower-priced S2 models and new retail-partner incentives weighed on recognized revenue; the filing cites a $688,000 product-mix impact and a $498,000 impact from new incentives. STACYC electric balance bike unit sales declined to 2,932 from 8,228, mainly reflecting lower distributor shipments.
Balance sheet and liquidity
- Cash and cash equivalents were $141.033 million at March 31, 2024, down from $167.904 million at December 31, 2023. The company held $135 million in money market funds.
- Current assets were $182.404 million and current liabilities were $44.133 million. Total liabilities were $53.311 million; these included lease liabilities and warrant liabilities. The filing reports no funded borrowings under the H-D term loan at quarter-end.
- LiveWire has access to a convertible delayed-draw term loan from Harley-Davidson (H-D) of up to $100 million. It bears interest at a six-month SOFR-based rate plus 4.00%; if not repaid in cash at maturity, it may convert to equity at 90% of the applicable 30-trading-day VWAP. The facility contains negative covenants.
- Cash decreased by $26.871 million in the quarter. Management does not expect positive operating cash flow over the next 12 months, but believes cash on hand and the available H-D facility will cover projected obligations for at least that period.
- Management estimates 2024 capital expenditures of $10 million to $20 million. The company does not expect to rely on warrant exercises for funding; the common-stock price was $7.23 at March 31, below the $11.50 warrant exercise price.
Changes, outlook, and risks
- Cost of goods sold included a $2.522 million inventory write-down, compared with $0.673 million in Q1 2023. Management also cited higher depreciation and manufacturing costs in the Electric Motorcycles segment.
- Warrant fair-value changes generated $4.758 million of non-operating income, versus $1.068 million a year earlier. Interest income fell to $2.016 million from $2.692 million as money-market balances declined. These items partly offset the larger operating loss.
- For 2024, management plans to invest in product development, S2-platform models, market expansion—particularly priority European markets—and cost improvements. It provided no revenue or earnings guidance.
- On April 24, 2024, LiveWire announced plans to move LiveWire Labs from Mountain View, California, to Milwaukee and streamline headcount. It expects $1.0–$1.5 million in relocation costs and $2.0–$3.5 million in termination-benefit costs, mostly cash, with completion expected by the end of September 2024.
- Material risks include continued losses and cash use, product and market acceptance, competition, supply constraints for batteries and semiconductor chips, reliance on contract manufacturing and services from H-D, and the need to grow retail distribution. Minimum-purchase-related payments under the H-D manufacturing agreement may apply beginning in 2025.
- The company reported no product-liability claims at quarter-end and said it believed accruals and insurance were adequate, with no material exposure beyond accrued and insured amounts. The warranty and recall liability was $0.882 million, including $0.078 million for recall campaigns.
- Management reported effective disclosure controls and no material changes to internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether motorcycle demand, pricing, incentives, and retail-partner expansion can improve recognized revenue and gross margins.
- Whether the sharp decline in STACYC bike shipments is temporary and how distributor demand develops.
- Cash burn, 2024 capital spending, restructuring cash costs, and the assumptions supporting management’s stated 12-month liquidity outlook.
- Terms, availability, covenant compliance, and potential dilution under the H-D convertible loan; also the H-D manufacturing and service dependencies and 2025 purchase commitments.
- Inventory valuation and write-downs, as well as the status of warranty and recall costs and any new claims or contingencies.
- Reported independent-retailer motorcycle sales rely on partner-provided data that LiveWire does not regularly verify and may be revised.