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FINANCE
Powersports Business • December 2023 • 9
JOCHEN ZEITZ
President and CEO , Harley-Davidson
FINANCIAL SERVICES HDFS revenue was up $ 32 million in Q3 , an increase of 15 % versus the prior year , driven primarily by higher interest income , says the company . HDFS operating income decline was down 27 percent , driven by an increased provision for credit losses and higher interest expense . The increase in the provision for credit losses was driven by several factors relating to the current macroeconomic environment . Total quarterending net finance receivables were $ 7.7 billion , up 4 percent versus the prior year , driven primarily by increased wholesale commercial lending receivables .
LIVEWIRE With most Del Mar shipments landing in Q4 , LiveWire revenue for the third quarter was down versus the prior year . LiveWire ’ s operating loss of $ 25 million in the third quarter is in-line with expectations and was driven by product development and other spending associated with the launch of the Del Mar electric motorcycle , according to the company .
“ Harley-Davidson remains committed to its Hardwire strategy with a focus on both desirability and profitability , and we will do everything possible to achieve our goals while being realistic that current market conditions are complex . We are gearing up for ’ 24 and will ensure that we are fully aligned and ready as we close out the year with Q4 ,” Zeitz adds .
For the full year 2023 , the Harley- Davidson reaffirms its most recent
With the discontinuation of the Sportster in ’ 22 and challenging economic headwinds , demand was stagnant for Harley as it had lower profits and fewer shipments in Q3 . The Motor Company reported a decline in Q3 profit of 24 %, as customers cut back on discretionary spending .
guidance and continues to expect :
HDMC : Revenue growth of flat to 3 percent and operating income margin of 13.9 percent to 14.3 percent .
HDFS : Operating income decline of 20 percent to 25 percent . LiveWire : Motorcycle unit sales of 600 –
1,000 and operating loss of $ 115 to $ 125 million . Harley-Davidson , Inc .: Capital investments of $ 225 to $ 250 million .
Polaris reports sales down 4 percent in Q3
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Polaris reported worldwide sales of $ 2.2 billion in Q3 , down four percent versus Q3 of 2022 . Sales in North America were $ 1.98 billion , representing 88 percent of total sales , which decreased four percent from 2022 . International sales of $ 263 million represented 12 percent of total sales for Polaris , a drop of three percent versus Q3 of 2022 . The company says lower shipment volumes and higher finance interest negatively impacted sales in Q3 .
As reported , Q3 net income from continuing operations attributable to Polaris of $ 152 million decreased 20 percent compared to 2022 . Adjusted net income from continuing operations attributable to Polaris for the quarter was $ 157 million , down 20 percent .
The adjusted gross profit margin of 22.6 percent decreased 127 basis points , primarily driven by economic headwinds and higher finance interest , and an unfavorable product
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mix . Operating expenses were $ 328 million in the third quarter of 2023 compared to $ 317 million in Q3 of 2022 due to higher selling and marketing expenses . Operating expenses , as a percentage of sales , of 14.6 percent were up 105 basis points in Q3 2023 compared to Q3 of 2022 .
Off-Road segment results were primarily driven by these factors :
Sales were driven by higher snowmobile volume , partially offset by higher finance interest .
Parts , Garments and Accessories ( PG & A ) sales increased 15 percent .
Gross profit margin performance was driven by an unfavorable product mix .
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Polaris North America ORV unit retail sales were up five percent . Estimated North America industry ORV unit retail sales were up low-single digits percent .
On-road segment results were primarily driven by these factors : Sales were driven by lower volumes . PG & A sales decreased six percent . Gross profit margin performance was driven by a favorable product mix .
North America unit retail sales for Indian Motorcycle were down low-teens . Estimated North America unit retail sales for the comparable motorcycle industry were down mid-teens percent .
Marine segment results were primarily driven by these factors :
Sales results were driven by lower volumes .
Gross profit margin performance was
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largely driven by a decrease in sales volumes , resulting in decreased leverage of manufacturing costs , partially offset by higher net pricing .
OUTLOOK FOR THE REST OF 2023 Polaris updated its 2023 sales outlook from three percent to five percent versus its previous outlook of up three percent to up six percent versus 2022 .
Polaris announced in 2017 that it was making changes to its network to consolidate production and distribution of like products and better leverage plant capacity and embarked on a multi-phase supply chain transformation initiative to continue to leverage its supply chain as a strategic asset .
The company says it realized certain acquisition-related costs associated with acquiring the Walker Evans business during Q3 of 2023 .
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Volcon reports Q3 results , Stag delivery set for Q1 2024
Volcon Inc . reported its operational highlights and financial results for Q3 of 2023 . The company announced the Stag trim packages , including pricing , that includes four models with the Stag LTD being the first model , will begin dealer deliveries in Q1 of 2024 at the recent Powersports Business Accelerate Conference in Dallas , Texas .
As of September 2023 , Volcon says it has delivered the first Grunt EVOs to customers and will continue to fulfill orders to dealers and distributors in the fourth quarter of 2023 . The Runt LT launch will be delayed until 2024 . The electric powersports manufacturer says 133 dealers have signed on and it has obtained an accounts receivable factoring agreement .
Volcon has completed all regulatory and safety tests for the Stag and continues to put test miles on the validation units . Jordan Davis , CEO , notes , “ Based on earlier regulatory and safety tests , we knew we were developing not only a great performance vehicle , but also one that will be safe for customers . The test results validate that the automotive grade components , although more expensive than UTV grade components , have proven to be the right choice for the Stag given the level of performance , without compromising safety , we have been working towards . Although this has resulted in higher vehicle cost requiring us to raise prices , we believe that this vehicle is at the top of its class .”
The company has asked that dealers , distributors , and consumers who placed pre-orders return to Volcon ’ s website or work with their regional sales managers to adjust their orders based on the new trim packages and pricing structure . Although the company expected to begin delivery of the Stag in October 2023 , the launch is now anticipated to be late Q4 2023 or Q1 of 2024 , due to a delay in certain parts .
Delivery of the Grunt EVO started in late September 2023 . As of the date of this press release , Volcon says it has shipped over 50 Grunt EVOs to customers from its U . S . warehouse in Round Rock , Texas , and they have additional orders to fulfill both domestically as well as to LATAM distributors .
“ Although we expected that the Runt LT would launch in the fourth quarter of 2023 , we
have deferred the launch to focus on the distribution of the Grunt EVO and start shipping the Stag ,” the company said in a statement .
Volcon ’ s U . S . dealer count has declined by 10 dealers since June 2023 , as some dealers have terminated their dealer agreements due to higher prices on the Stag or due to credit terms not being extended . The company says it has entered into an accounts receivable factoring arrangement with Prestige Capital Finance , LLC to enable it to factor U . S . dealer accounts receivables , allowing Volcon to reinvest proceeds into additional inventory purchases to fulfill customer orders . The company also reports that it has deferred the signing of Canadian dealers until 2024 due to delays in product availability and requirements to homologate all products that will be sold in Canada .
Revenue : The company ’ s revenue for the third quarter of 2023 was $ 0.5 million , consistent with the revenue for the second quarter 2023 . Revenue for both quarters is primarily related to the sale of Brats , with approximately $ 37,000 of sales of Grunt EVOs in the third quarter of 2023 compared to zero in the second quarter of 2023 . Revenue in the first quarter of 2023 primarily related to Brats sold to U . S . dealers and LATAM distributor initial orders being fulfilled in the first quarter of 2023 .
Net loss : The company ’ s net loss was $ 11.3 million for the third quarter of 2023 compared to a net loss of $ 23.0 million for the second quarter of 2023 and $ 7.3 million for the first quarter of 2023 . Net loss in the third quarter of 2023 includes a write-down of $ 1.6 million related to Volcon Youth motorcycles to reduce the inventory to its estimated net realizable value , a $ 0.7 million loss on the change in derivative liabilities related to the adjustable conversion features of convertible notes .
The conversion feature and warrants are no longer derivative liabilities as of August , and have been reclassified to equity as of September 2023 . In addition , in the third quarter of 2023 , the company incurred higher prototype vehicle and part costs of $ 1.6 million over the second quarter of 2023 as the company received additional validation units in anticipation of a fourth quarter 2023 product launch .