LiveWire Group, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023; comparisons are to periods ended September 25, 2022. LiveWire designs and sells electric motorcycles and STACYC electric balance bikes. It became a standalone public company on September 26, 2022, so prior-period results include pre-separation carve-out accounting and are not fully comparable.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $8.1m | $14.7m | $22.9m | $37.6m |
| Gross profit (loss) | $1.1m | $1.0m | ($0.6m) | $0.6m |
| Operating loss | ($25.3m) | ($21.0m) | ($82.2m) | ($56.1m) |
| Net loss | ($14.6m) | ($20.9m) | ($76.5m) | ($56.5m) |
| Net loss per share, diluted | ($0.07) | ($0.13) | ($0.38) | ($0.35) |
| Operating cash used | — | ($55.9m) | ($64.2m) | |
| Capital expenditures | — | $11.0m | $8.9m |
Q3 gross margin was approximately 13.4%, compared with 6.6%; nine-month gross margin was approximately negative 2.5%, versus 1.7%. These are calculated from reported revenue and cost of goods sold.
Financial position and liquidity
- Cash and cash equivalents were $199.9m at September 30, 2023, down from $265.2m at December 31, 2022. Total assets were $295.9m and shareholders’ equity was $238.5m.
- Total liabilities were $57.4m, including $2.3m of lease liabilities and $10.6m of warrant liabilities. The filing reports no conventional borrowings outstanding at quarter-end.
- Nine-month cash used in operations was $55.9m; investing used $11.0m, primarily capital expenditures. Financing provided $1.6m, including warrant exercise proceeds.
- Management expects cash on hand to cover projected obligations for at least 12 months, but does not expect positive operating cash flow over the next 12 months.
Changes, outlook, and commentary
- Q3 revenue fell 44.6% year over year. Electric Motorcycles revenue declined 72.9% to $1.3m; STACYC revenue declined 30.4% to $6.8m. For nine months, revenue decreased 39.0%.
- Q3 net loss narrowed, helped by $2.7m of interest income and an $8.0m noncash gain from a decline in warrant fair value. Operating loss widened to $25.3m. For nine months, net loss increased to $76.5m; the company recorded a $2.3m warrant fair-value expense.
- Electric Motorcycle operating losses increased, reflecting product and technology development, Del Mar launch preparation, and costs of building the standalone organization. STACYC remained profitable, but operating income fell to $0.4m in Q3 and $0.2m for the nine-month period, mainly with lower shipment volumes and higher personnel and marketing costs.
- Management said production and sales of the S2 Del Mar began in Q3 and LiveWire ONE was introduced in certain European markets. The company expects 2023 capital expenditures of $15m–$20m and continued investment in product development, manufacturing, and distribution.
- Key risks include continued losses and cash use, uncertain adoption and sales of electric vehicles, competition, reliance on H-D and third-party manufacturing and services, supplier concentration (including batteries and semiconductor chips), and potential increases in costs. Management noted possible minimum-purchase payments under the H-D manufacturing agreement beginning in 2024 if commitments are not met.
- The company recorded a $3.8m liability for excess inventory components held by H-D and disclosed estimated payments under a separate long-term inventory-component commitment of approximately $5.9m through 2026. No material product-liability claims or recall liability were reported at quarter-end.
- Disclosure controls were assessed as effective; the filing reports no material change in internal control over financial reporting during the quarter. No material changes to previously disclosed principal risk factors were reported.
Important facts for investors to verify
- Whether motorcycle sales and deliveries, particularly S2 Del Mar, improve after the sharp decline in LiveWire motorcycle unit sales and revenue.
- Whether cash burn, planned capital spending, and working-capital needs remain within management’s liquidity expectations.
- How much of reported earnings reflects noncash warrant remeasurement rather than operating performance; warrants had an $11.50 exercise price and the common stock was $6.93 at September 30, 2023.
- Exposure to H-D, including the $21.1m payable to H-D, the excess-inventory obligation, manufacturing commitments, and ongoing service arrangements.
- Whether STACYC shipment volumes and profitability recover, and whether announced international expansion translates into sustained demand.