In a strategic business move, LiveWire Group, Inc., a manufacturer of motorcycles and related parts, announced on Monday that it has entered into a comprehensive services agreement with Harley-Davidson (NYSE:HOG), Inc. The announcement comes as LiveWire's stock trades near its 52-week low of $4.74, having declined over 59% in the past year.
According to InvestingPro analysis, the company faces profitability challenges with negative EBITDA of $102.58 million in the last twelve months. This agreement is set to take effect on January 1, 2025, marking the end of the previous agreement dated September 22, 2022.
Under the terms of the new Master Services Agreement, Harley-Davidson will provide a broad range of services to LiveWire. These services encompass testing and development, regulatory support, and other essential functions such as warehousing, safety investigation, and customer support. The collaboration is designed to leverage Harley-Davidson's expertise in areas that LiveWire has identified as more efficiently outsourced.
The partnership, which was formalized on December 23, 2024, stipulates an initial seven-year term with the option for renewal upon mutual agreement. The agreement outlines that Harley-Davidson may terminate the contract in the event of an uncured material breach by LiveWire, or if LiveWire experiences a change of control.
Additionally, termination rights are granted to Harley-Davidson if LiveWire fails to meet a specified production engagement threshold with Harley-Davidson.
Financial terms of the deal include a flat monthly fee for services, with a joint steering committee established to oversee service delivery and resolve any disputes. The committee will also be responsible for annual planning and fee adjustments based on LiveWire's service requirements. Despite challenging market conditions, LiveWire maintains a strong liquidity position with a current ratio of 3.54, indicating solid short-term financial stability.
Intellectual property rights for deliverables created by Harley-Davidson for LiveWire will be owned by LiveWire, excluding Harley-Davidson's pre-existing intellectual property, which will be licensed to LiveWire on a non-exclusive, royalty-free basis.
Both parties have agreed to indemnification clauses to protect against third-party claims related to the agreement, including those pertaining to intellectual property infringement.
This strategic alliance is reflected in the SEC filing made by LiveWire Group. The detailed Master Services Agreement was attached as Exhibit 10.1 to the Current Report on Form 8-K filed by LiveWire Group, Inc. on Thursday. The company's shares are listed on the New York Stock Exchange under the ticker symbols NYSE:LVWR for its common stock and NYSE:LVWR WS for its warrants.
InvestingPro data reveals the company faces operational challenges with a negative gross profit margin of -40.75%. Investors seeking deeper insights into LiveWire's financial health and growth prospects can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, along with 13 additional key ProTips for informed decision-making.
In other recent news, LiveWire, known for its electric motorcycles, and KYMCO, a leader in powersports, are expanding their strategic partnership to develop LiveWire's first electric maxi-scooter.
This development is expected to launch in the first half of 2026, targeting the European market. The partnership aims to extend LiveWire's S2 product line into the maxi-scooter segment, combining performance and range with a new design tailored to the electric scooter market.
On the financial front, Harley-Davidson reported a downturn in its Q3 2024 earnings. This includes a 13% drop in global retail sales of new motorcycles and a 26% decrease in consolidated revenue. Despite these challenges, Harley-Davidson's financial services saw a 10% increase in revenue. The company has revised its full-year outlook due to these recent developments.
Furthermore, Harley-Davidson's electric vehicle division, LiveWire, adjusted its yearly unit expectations to 600-1,000 motorcycles in response to market difficulties. The company's operating income fell by 49% to $106 million, and earnings per share were down 34% to $0.91. In light of these results, the company anticipates a decrease in dealer inventory by 20% by the end of 2024 and a decline in HDMC revenue of 14% to 16%.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.