LiveWire Group, Inc. (LVWR) - Q2 2024 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2024. LiveWire Group, Inc. is an emerging growth company operating in two segments: Electric Motorcycles (design and sale of electric motorcycles, parts, and accessories) and STACYC (electric balance bikes for children). The company operates as a standalone entity following its separation from Harley-Davidson, Inc. (H-D) in September 2022.
Key Financial Metrics
| Metric | Q2 2024 (3 Months) | Q2 2023 (3 Months) | YTD 2024 (6 Months) | YTD 2023 (6 Months) |
|---|---|---|---|---|
| Revenue, Net | $6.45 million | $7.03 million | $11.43 million | $14.79 million |
| Operating Loss | $(28.17) million | $(31.98) million | $(58.59) million | $(56.89) million |
| Net Loss | $(24.81) million | $(40.73) million | $(48.47) million | $(61.88) million |
| Net Loss Per Share (Basic/Diluted) | $(0.12) | $(0.20) | $(0.24) | $(0.31) |
| Cash and Cash Equivalents | $113.01 million | $215.87 million (YTD 2023 end) | $113.01 million | $215.87 million (YTD 2023 end) |
| Net Cash Used in Operating Activities | Not provided for Q2 | Not provided for Q2 | $(48.89) million | $(41.20) million |
| Warrant Liability | $5.77 million | $12.32 million (Dec 31, 2023) | $5.77 million | $12.32 million (Dec 31, 2023) |
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased 8.2% in Q2 2024 compared to Q2 2023. This was driven by a 35.8% drop in STACYC revenue due to lower shipment volumes, partially offset by a 218.9% increase in Electric Motorcycle revenue due to higher unit sales (158 units vs. 33 units) and the launch of the S2 Mulholland model.
- Improved Net Loss: Net loss improved significantly by 39.1% in Q2 2024 compared to the prior year. This improvement was largely driven by a $13.23 million swing in non-operating income related to the change in fair value of warrant liabilities (income of $1.79 million in 2024 vs. expense of $11.44 million in 2023).
- Segment Performance:
- Electric Motorcycles: Operating loss narrowed by 16.0% to $26.80 million. Gross loss improved due to higher unit sales, though offset by product mix shifts to lower-priced models and new retail incentives.
- STACYC: Operating loss widened significantly to $1.37 million from $0.09 million in the prior year, primarily due to revenue declines and increased operating expenses.
- Restructuring: The company recorded $2.54 million in restructuring expenses in Q2 2024 related to the relocation of LiveWire Labs from Mountain View, CA, to Milwaukee, WI, and headcount streamlining.
Guidance, Outlook, and Risks
- Outlook: Management expects to continue focusing on cost improvements, product innovation (S2 platform), and global expansion, particularly in Europe. The company does not expect to generate positive cash flow from operations over the next twelve months.
- Liquidity: As of June 30, 2024, the company held $113.01 million in cash. Management believes this, combined with a $100 million Convertible Delayed Draw Term Loan agreement with H-D (undrawn as of June 30), is sufficient to fund operations for at least the next 12 months.
- Key Risks:
- Capital Requirements: Significant future capital needs and the ability to obtain funding.
- Supply Chain: Dependency on single-source suppliers for critical components like batteries and semiconductors.
- Harley-Davidson Relationship: Risks related to the termination of service agreements with H-D or H-D making decisions that negatively impact LiveWire.
- Warrant Exercise: Warrants are currently out-of-the-money (stock price $7.66 vs. $11.50 exercise price); the company does not expect to rely on warrant proceeds for liquidity.
Investor Verification Checklist
- Cash Burn Rate: Verify the sustainability of the $113 million cash balance against the $48.9 million operating cash burn for the first half of 2024.
- STACYC Demand: Investigate the causes of the 44.6% revenue decline in the STACYC segment and the impact of distributor relationships.
- Restructuring Costs: Confirm the total expected cost of the LiveWire Labs relocation and headcount reduction, noting that $1.99 million in liabilities remain as of June 30, 2024.
- Warrant Liability Volatility: Monitor the fair value of warrant liabilities, as fluctuations significantly impact reported net income/loss without affecting cash flow.
- Related Party Transactions: Review the $18.4 million payable to H-D and the terms of the Contract Manufacturing Agreement regarding potential future obligations.