LiveWire Group, Inc. 10-K Analysis & Summary – 2/21/2025

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LiveWire Group, Inc.

10-K

Annual report

Filing date:

02/21/2025

TLDR:

LiveWire Group, Inc. experienced a revenue decline and net losses in 2024, but the net loss decreased slightly compared to the previous year. The company is heavily reliant on its relationship with Harley-Davidson, presenting both opportunities and risks.

ELI5:

LiveWire, an electric motorcycle company, lost money this year, but not as much as last year. They depend a lot on Harley-Davidson for making their bikes.

Accession #:

0001898795-25-000055

Published on

March 16, 2025

Analyst Summary

Total revenue decreased by 30% from $38.023 million in 2023 to $26.633 million in 2024.
Electric Motorcycles Revenue decreased from $11.548 million in 2023 to $8.381 million in 2024.
STACYC Revenue decreased from $26.475 million in 2023 to $18.252 million in 2024.
Net Loss decreased from $109.550 million in 2023 to $93.925 million in 2024.
Cash and Cash Equivalents decreased significantly from $167.904 million in 2023 to $64.437 million in 2024, indicating cash burn.
Gross Margin remains negative, indicating challenges in achieving profitability.
High R&D spending relative to revenue raises concerns about the efficiency of these investments.

Opportunities and Risks

Competition: The electric vehicle market is highly competitive, with established players and new entrants.
Brand Recognition: Building brand awareness and consumer acceptance is crucial but challenging.
H-D Relationship: Dependence on H-D presents risks related to manufacturing, services, and potential conflicts of interest.
Supply Chain: Vulnerability to supply chain disruptions and rising material costs.
Financial Performance: Ongoing losses and cash burn raise concerns about long-term financial sustainability.
Regulatory: Exposure to evolving environmental, health, safety, and data privacy regulations.
Growing EV Market: The electric vehicle market is expected to grow significantly, providing opportunities for expansion.
Strategic Partnerships: Collaborations with H-D and KYMCO offer access to expertise, manufacturing capabilities, and distribution networks.
Product Innovation: Continued investment in R&D could lead to innovative products and technologies.
Brand Building: Successful brand building efforts could drive consumer demand and market share.

Potential Implications

Company Performance

The company needs to demonstrate improved sales performance, effective cost management, and a strengthening of its brand.
The non-binding Memorandum of Understanding with KYMCO to collaborate on a new electric maxi-scooter project is a positive step.

Stock Price

Monitor sales trends, H-D relationship, and cost management is crucial.

LiveWire Group, Inc. (LVWR) – 2024 10-K Filing Analysis

Executive Summary

This report analyzes LiveWire Group, Inc.’s 2024 10-K filing. LiveWire, an early-stage electric motorcycle and balance bike company, continues to experience net losses, although the loss decreased slightly compared to the previous year. Revenue declined in the Electric Motorcycles segment but remained relatively stable in STACYC. The company is heavily reliant on its relationship with Harley-Davidson (H-D) for manufacturing and other services, presenting both opportunities and risks. The report highlights key risks including reliance on H-D, competition, supply chain vulnerabilities, and the need to build brand recognition. Given the ongoing losses, reliance on a single manufacturing partner, and competitive landscape, a HOLD rating is recommended. Close monitoring of sales trends, H-D relationship, and cost management is crucial.

Company Overview

LiveWire Group, Inc. (LVWR) is an all-electric motorcycle brand spun off from Harley-Davidson. It operates in two segments: Electric Motorcycles and STACYC (electric balance bikes for kids). The company aims to lead the electric vehicle transformation of the two-wheel industry. Key strategic partnerships include Harley-Davidson and KYMCO Group.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management acknowledges the company’s early-stage nature and ongoing losses. They emphasize strategic priorities such as leading in electric vehicle transformation, capturing global market share, and building brand desirability. The MD&A highlights the importance of strategic partnerships with H-D and KYMCO. A non-binding Memorandum of Understanding with KYMCO to collaborate on a new electric maxi-scooter project was announced. The MD&A also discusses cost reduction initiatives, including relocating LiveWire Labs and streamlining headcount.

Financial Statement Analysis

Income Statement

Key observations from the income statement:

Revenue: Total revenue decreased by 30% from $38.023 million in 2023 to $26.633 million in 2024.
Electric Motorcycles Revenue: Decreased from $11.548 million in 2023 to $8.381 million in 2024.
STACYC Revenue: Decreased from $26.475 million in 2023 to $18.252 million in 2024.
Cost of Goods Sold: Decreased slightly from $43.795 million in 2023 to $39.416 million in 2024.
Operating Loss: Decreased from $115.989 million in 2023 to $110.356 million in 2024.
Net Loss: Decreased from $109.550 million in 2023 to $93.925 million in 2024.

Key Ratios:

Gross Margin: Remains negative, indicating challenges in achieving profitability.
R&D as % of Revenue: High, reflecting the company’s focus on innovation but also highlighting the need for revenue growth.

Balance Sheet

Key observations from the balance sheet:

Cash and Cash Equivalents: Decreased significantly from $167.904 million in 2023 to $64.437 million in 2024, indicating cash burn.
Inventories: Decreased from $32.122 million in 2023 to $26.942 million in 2024.
Total Assets: Decreased from $266.147 million in 2023 to $147.960 million in 2024.
Total Liabilities: Decreased from $60.284 million in 2023 to $32.845 million in 2024.

Cash Flow Statement

Key observations from the cash flow statement:

Net Cash Used in Operating Activities: Increased from $83.462 million in 2023 to $93.859 million in 2024, indicating increasing cash burn from operations.
Net Cash Used in Investing Activities: Decreased from $13.462 million in 2023 to $8.068 million in 2024.
Net Cash Used in Financing Activities: Remained relatively stable.

Uncommon Metrics & Red Flags

High R&D Spending: While necessary for innovation, the high R&D spending relative to revenue raises concerns about the efficiency of these investments.
Negative Gross Margin: The negative gross margin in the Electric Motorcycles segment indicates that the cost of producing and selling the motorcycles exceeds the revenue generated.
Declining Revenue: The decline in revenue across both segments is a concerning trend.
Dependence on H-D: The company’s reliance on H-D for manufacturing, services, and financing creates a significant dependency risk.

Risk and Opportunity Assessment

Risks

Competition: The electric vehicle market is highly competitive, with established players and new entrants.
Brand Recognition: Building brand awareness and consumer acceptance is crucial but challenging.
H-D Relationship: Dependence on H-D presents risks related to manufacturing, services, and potential conflicts of interest.
Supply Chain: Vulnerability to supply chain disruptions and rising material costs.
Financial Performance: Ongoing losses and cash burn raise concerns about long-term financial sustainability.
Regulatory: Exposure to evolving environmental, health, safety, and data privacy regulations.

Opportunities

Growing EV Market: The electric vehicle market is expected to grow significantly, providing opportunities for expansion.
Strategic Partnerships: Collaborations with H-D and KYMCO offer access to expertise, manufacturing capabilities, and distribution networks.
Product Innovation: Continued investment in R&D could lead to innovative products and technologies.
Brand Building: Successful brand building efforts could drive consumer demand and market share.

Conclusion & Actionable Insights

LiveWire faces significant challenges in achieving profitability and sustainable growth. The company’s reliance on H-D, competitive landscape, and cash burn are key risks. While the electric vehicle market presents opportunities, LiveWire needs to execute its strategy effectively to capitalize on them. The company needs to demonstrate improved sales performance, effective cost management, and a strengthening of its brand. The non-binding Memorandum of Understanding with KYMCO to collaborate on a new electric maxi-scooter project is a positive step. Given the current situation, a HOLD rating is recommended. Investors should closely monitor the following:

Sales Trends: Track revenue growth and unit sales in both Electric Motorcycles and STACYC segments.
H-D Relationship: Monitor the terms and performance of agreements with H-D, and any potential conflicts of interest.
Cost Management: Assess the effectiveness of cost reduction initiatives and their impact on profitability.
Brand Building: Evaluate the success of marketing and branding efforts in driving consumer demand.
Financial Stability: Monitor cash flow, debt levels, and the company’s ability to secure additional funding.

LiveWire Group, Inc. Financial Analysis (2024)

LiveWire’s financial performance in 2024 reveals a company in a challenging transition. Revenue declined significantly, driven by lower electric motorcycle and balance bike sales. While operating expenses decreased, substantial operating losses persist. The company is managing its liquidity, but faces solvency concerns due to its debt levels and negative profitability.

1. Financial Ratio and Metric Analysis

Profitability

Gross Profit Margin:
- Calculation: (Revenue – Cost of Goods Sold) / Revenue
- Electric Motorcycles: (8,381 – 27,018) / 8,381 = -222.37%
- STACYC: (18,252 – 12,398) / 18,252 = 32.07%
- Consolidated: (26,633 – 39,416) / 26,633 = -48.00%
Operating Profit Margin:
- Calculation: Operating Loss / Revenue
- Electric Motorcycles: ( -105,500 ) / 8,381 = -1258.80%
- STACYC: ( -4,856 ) / 18,252 = -26.60%
- Consolidated: ( -110,356 ) / 26,633 = -414.36%
Net Profit Margin:
- Calculation: Net Loss / Revenue
- Consolidated: ( -93,925 ) / 26,633 = -352.66%
Return on Assets (ROA):
- Calculation: Net Loss / Total Assets
- Consolidated: ( -93,925 ) / 147,960 = -63.48%
Return on Equity (ROE):
- Calculation: Net Loss / Total Shareholders’ Equity
- Consolidated: ( -93,925 ) / 115,115 = -81.59%
Earnings Per Share (EPS) – Basic and Diluted:
- Calculation: Net Loss / Weighted-Average Shares Outstanding
- Basic and Diluted: ( -93,925 ) / 203,206 = -$0.46

Liquidity

Current Ratio:
- Calculation: Current Assets / Current Liabilities
- 2024: 98,361 / 29,854 = 3.29
- 2023: 210,727 / 46,266 = 4.55
Quick Ratio (Acid-Test Ratio):
- Calculation: (Current Assets – Inventories) / Current Liabilities
- 2024: (98,361 – 26,942) / 29,854 = 2.39
- 2023: (210,727 – 32,122) / 46,266 = 3.86
Cash Ratio:
- Calculation: Cash and Cash Equivalents / Current Liabilities
- 2024: 64,437 / 29,854 = 2.16
- 2023: 167,904 / 46,266 = 3.63

Solvency/Leverage

Debt-to-Equity Ratio:
- Calculation: Total Liabilities / Total Shareholders’ Equity
- 2024: 32,845 / 115,115 = 0.29
- 2023: 60,284 / 205,863 = 0.29
Debt-to-Assets Ratio:
- Calculation: Total Liabilities / Total Assets
- 2024: 32,845 / 147,960 = 0.22
- 2023: 60,284 / 266,147 = 0.23
Interest Coverage Ratio (Times Interest Earned):
- Calculation: Earnings Before Interest and Taxes (EBIT) / Interest Expense
- EBIT (2024): -93,882 + 5,704 = -88,178
- Interest Expense (2024): 0
- Since interest expense is zero, the ratio is undefined. The company has no interest expense.

Activity/Efficiency

Inventory Turnover:
- Calculation: Cost of Goods Sold / Average Inventory
- Average Inventory: (26,942 + 32,122) / 2 = 29,532
- Consolidated: 39,416 / 29,532 = 1.33
Days Sales Outstanding (DSO):
- Calculation: (Accounts Receivable / Revenue) * 365
- Consolidated: (3,874 / 26,633) * 365 = 53.15 days
Days Payable Outstanding (DPO):
- Calculation: (Accounts Payable / Cost of Goods Sold) * 365
- Consolidated: (1,738 / 39,416) * 365 = 16.08 days
Asset Turnover:
- Calculation: Revenue / Total Assets
- Consolidated: 26,633 / 147,960 = 0.18

Valuation

Price-to-Earnings Ratio (P/E):
- Calculation: Stock Price / EPS
- Stock Price: $2.33
- EPS: -$0.46
- P/E Ratio: 2.33 / (-0.46) = -5.07
Price-to-Book Ratio (P/B):
- Calculation: Market Cap / Book Value of Equity
- Market Cap: 2.33 * 203,423 = $474,975.59
- Book Value of Equity: $115,115,000
- P/B Ratio: 474,975.59 / 115,115,000 = 0.004
Price-to-Sales Ratio (P/S):
- Calculation: Market Cap / Revenue
- Market Cap: 2.33 * 203,423 = $474,975.59
- Revenue: $26,633,000
- P/S Ratio: 474,975.59 / 26,633,000 = 0.018
Enterprise Value to EBITDA (EV/EBITDA):
- Calculation: (Market Cap + Total Debt – Cash) / EBITDA
- Market Cap: 2.33 * 203,423 = $474,975.59
- Total Debt: 799
- Cash: $64,437,000
- EBITDA: Net Loss + Interest + Taxes + Depreciation and Amortization = -93,925 + 0 + 43 + 10,041 = -83,841
- EV: 474,975.59 + 799 – 64,437,000 = -63,961,225.41
- EV/EBITDA: -63,961,225.41 / -83,841 = 762.88

Growth Rates

Revenue Growth:
- Calculation: (Current Year Revenue – Previous Year Revenue) / Previous Year Revenue
- Consolidated: (26,633 – 38,023) / 38,023 = -30.0%
Net Income Growth:
- Calculation: (Current Year Net Income – Previous Year Net Income) / Previous Year Net Income
- Consolidated: (-93,925 – (-109,550)) / -109,550 = 14.26%
EPS Growth:
- Calculation: (Current Year EPS – Previous Year EPS) / Previous Year EPS
- Consolidated: (-0.46 – (-0.54)) / -0.54 = 14.81%

Other Relevant Metrics

Wholesale Motorcycle Unit Sales: Decreased from 533 in 2023 to 511 in 2024.
Electric Balance Bike Unit Sales: Decreased from 32,113 in 2023 to 18,549 in 2024.
Operating Loss from Electric Motorcycles: Improved from $(116.61) million in 2023 to $(105.50) million in 2024.
Operating (Loss) Income from STACYC: Decreased from $0.62 million in 2023 to $(4.86) million in 2024.

2. Commentary

LiveWire faces significant challenges as it navigates its early years post-separation. The substantial revenue decline, particularly in electric motorcycles and balance bikes, is concerning and highlights potential issues with product demand or market positioning. While the company has reduced operating expenses, the persistent operating losses raise questions about its long-term financial viability. The company’s liquidity position, while currently adequate, is deteriorating, and its solvency is a concern given its negative profitability and reliance on external funding. LiveWire needs to focus on driving revenue growth, improving operational efficiency, and managing its cash flow to achieve sustainable financial performance.