LiveWire Group, Inc. — 2023 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2023, not a standalone fourth-quarter report. LiveWire designs and sells electric motorcycles and related products through its Electric Motorcycles segment, and electric balance bikes for children through STACYC. The company is an early-stage, H-D-controlled public company that relies on partners, including H-D, for manufacturing and services.
Financial performance and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $38.0 million | $46.8 million |
| Gross profit (loss) | $(5.8) million | $2.9 million |
| Operating loss | $(116.0) million | $(85.0) million |
| Net loss | $(109.6) million | $(78.9) million |
| Net loss per share | $(0.54) | $(0.46) |
| Cash used in operating activities | $(83.5) million | $(89.7) million |
| Capital expenditures | $13.5 million | $14.1 million |
| Cash and cash equivalents at year-end | $167.9 million | $265.2 million |
Revenue declined 18.8% and consolidated gross margin fell from approximately 6.2% to negative 15.2%. Operating loss was approximately 305% of revenue in 2023. Interest income of $10.5 million partly offset operating losses; a $4.0 million warrant fair-value loss also affected results. There was no conventional debt reported at year-end; lease liabilities were $1.9 million and warrant liabilities were $12.3 million. Total assets were $266.1 million, total liabilities $60.3 million, and shareholders’ equity $205.9 million.
Segment results: Electric Motorcycles revenue was $11.5 million, down 17.5%, with an operating loss of $116.6 million. Unit sales rose 11% to 660, but lower-priced Del Mar mix reduced revenue; costs included a $6.7 million provision related to excess H-D-held inventory components and increased development and organizational expenses. STACYC revenue was $26.5 million, down 19.4%, and operating income fell to $0.6 million from $4.2 million, mainly on lower bike shipments and higher personnel and marketing expenses.
Material changes, outlook and risks
- Cash declined $97.3 million during 2023. Operating cash use improved by $6.2 million year over year, but the company says it does not expect positive operating cash flow over the next 12 months.
- On February 14, 2024, H-D agreed to provide a delayed-draw convertible term loan of up to $100 million. Interest is based on six-month term SOFR plus 4.00%; maturity is the earlier of 24 months after the first draw or October 31, 2026. If not repaid in cash at maturity, it may convert at 90% of the preceding 30-trading-day VWAP. Management says cash on hand and this facility should fund projected obligations for at least 12 months.
- Management’s 2024 priorities are product development and innovation, additional S2 models, European introduction of the S2 platform, market expansion and cost improvements. Planned 2024 capital expenditures are $15–$20 million. The filing gives no specific revenue, unit-sales or profitability guidance.
- H-D’s manufacturing exclusivity was extended from five to six years in February 2024. Minimum annual product-volume commitments and potential deficit fees under the manufacturing agreement begin in 2025. A $6.3 million year-end liability for excess H-D inventory remains subject to final discussions with H-D.
- Principal risks include continuing losses and funding needs; limited product range and uncertain demand; competition and execution risks in a developing market; reliance on H-D, KYMCO, suppliers and retail partners; battery and semiconductor supply constraints; and potential customer concentration in STACYC. One customer represented approximately 44% of STACYC revenue, and the KTM customer group accounted for 31% of consolidated revenue.
- The company reported that its disclosure controls and management’s internal control over financial reporting were effective as of year-end. The auditor did not attest to internal control effectiveness because LiveWire is an emerging growth company. The financial statement audit opinion was unqualified.
Key investor verification points
- Track cash burn, the timing and conditions of any H-D loan draws, and whether the stated 12-month liquidity outlook remains adequate.
- Verify progress on S2 production and European distribution, sales volumes, product mix, margins and inventory levels.
- Monitor resolution and payment of the H-D excess-inventory liability, manufacturing costs, and the 2025 minimum-volume commitments and deficit-fee exposure.
- Assess STACYC’s dependence on major customers and distributors, including whether the 44% customer concentration changes.
- Review the terms and potential dilution of the convertible loan, H-D’s control and related-party arrangements, and any changes in warrant liabilities or potential warrant proceeds.