lvwr-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-41511

LiveWire Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware

87-4730333

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

3700 West Juneau Avenue

(650) 447-8424

Milwaukee, Wisconsin 53208

(Address of principal executive office)

(Issuer’s Telephone Number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	LVWR	New York Stock Exchange
Warrants to purchase common stock	LVWR WS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Emerging growth company

☒

Non-accelerated filer

☒

Smaller reporting company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Number of shares of the registrant’s common stock outstanding at August 5, 2024: 203,250,248 shares

LiveWire Group, Inc.

Form 10-Q

For The Quarter Ended June 30, 2024


Part I	Financial Information	5
Item 1.	Financial Statements	5
	Consolidated Statements of Operations and Comprehensive Loss	5
	Consolidated Balance Sheets	6
	Consolidated Statements of Cash Flows	7
	Consolidated Statements of Shareholders’ Equity	8
	Notes to Consolidated Financial Statements	9
	1. Description of Business and Basis of Presentation	9
	2. New Accounting Standards	9
	3. Revenue	10
	4. Income Taxes	12
	5. Earnings Per Share	12
	6. Additional Balance Sheet Information	13
	7. Warrant Liabilities	13
	8. Fair Value	14
	9. Product Warranty and Recall Campaigns	16
	10. Commitments and Contingencies	16
	11. Related Party Transactions	17
	12. Reportable Segments	19
	13. Restructuring	19
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32
Item 4.	Controls and Procedures	33
Part II	Other Information	33
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Issuer Purchases of Equity Securities	33
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
Signatures		36

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report include, but are not limited to statements regarding future results of operations and financial position, industry and business trends, equity compensation, business strategy, plans, market growth, plans and objectives relating to the Company’s climate commitment, and the Company’s objectives for future operations.

The forward-looking statements in this Quarterly Report are only predictions. The Company has based these forward-looking statements largely on current expectations and projections about future events and financial trends that the Company believes may affect the Company’s business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the Company’s history of losses and expectation to incur significant expenses and continuing losses for the foreseeable future; the Company’s future capital requirements and sources and uses of cash; the Company’s ability to obtain funding for its operations and manage costs; risks related to retail partners being unwilling to participate in the Company’s go-to-market business model or its inability to establish or maintain relationships with customers for the Company’ electric vehicles; the Company’s business, expansion plans and opportunities, including its ability to scale its operations and manage its future growth effectively; the effects on the Company’s future business of competition, the pace and depth of electric vehicle adoption generally and its ability to achieve planned competitive advantages with respect to its electric vehicles and products, including with respect to reliability, safety and efficiency; the Company’ ability to execute its business model, including market acceptance of its planned electric vehicles; risks related to the Company’s limited operating history, the rollout of its business and the timing of expected business milestones, including the Company’s ability to develop and sell electric vehicles of sufficient quality and appeal to customers on schedule and on a large scale; the Company’s financial and business performance, including financial projections and business metrics and any underlying assumptions thereunder; changes in the Company’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans; the Company’s ability to attract and retain a large number of customers; risks related to challenges the Company faces as a pioneer into the highly-competitive and rapidly-evolving electric vehicle industry; risks related to Harley Davidson, Inc. (“H-D”) making decisions for its overall benefit that could negatively impact the Company’s overall business; risks related to the Company’s relationship with H-D and its impact on the Company’s other business relationships; the Company’s ability to leverage contract manufacturers, including H-D and Kwang Yang Motor Co., Ltd., KYMCO Capital Fund I Co., Ltd., SunBright Investment Co., Ltd., CycleLoop Co., Ltd. and Kwang Yang Holdings Limited (collectively, the “KYMCO Group”), to contract manufacture its electric vehicles; risks related to potential delays in the design, manufacture, financing, regulatory approval, launch and delivery of the Company’s electric vehicles; risks related to building out the Company’s supply chain, including the Company’s dependency on its existing suppliers and the Company’s ability to source suppliers, in each case many of which are single-sourced or limited-source suppliers, for its critical components such as batteries and semiconductor chips; the Company’s ability to rely on third-party and public charging networks; the Company’s ability to attract and retain key personnel; risks related to the Company’s business and H-D’s business overlapping and being perceived as competitors; the Company’s inability to maintain a strong relationship with H-D or to resolve favorably any disputes that may arise between the Company and H-D; the Company’s dependency on H-D for a number of services, including services relating to quality and safety testing, and if those service arrangements terminate, it may require significant investment for the Company to build its own safety and testing facilities, or the Company may be required to obtain such services from another third-party at increased costs; risks related to any decision by the Company to electrify H-D products, or the products of any other company; the Company’s expectations regarding its ability to obtain and maintain intellectual property protection and not infringe on the rights of others; potential harm caused by misappropriation of the Company’s data and compromises in cybersecurity; changes in laws, regulatory requirements, governmental incentives and fuel and energy prices; the impact of health epidemics on the Company’s business, the other risks it face and the actions it may take in response thereto; litigation, regulatory proceedings, complaints, product liability claims and/or adverse; the possibility that the Company may be adversely affected by other economic, business and/or competitive factor publicity; and; the other important factors discussed in Part II, “Item 1A. Risk Factors” in this Quarterly Report, as well as in Item “1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The forward-looking statements are made as of the date of the filing of this report August 7, 2024, and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. The forward-looking statements in this Quarterly Report are based upon information available to the Company as of the date of this Quarterly Report, and while the Company believes such information forms a

reasonable basis for such statements, such information may be limited or incomplete, and the Company’s statements should not be read to indicate that the Company has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report and the documents that the Company references in this Quarterly Report and have filed as exhibits to this Quarterly Report with the understanding that actual future results, performance and achievements may be materially different from what the Company expects. The Company qualifies all of the forward-looking statements by these cautionary statements. The forward-looking statements in this report speak only as of the date of this Quarterly Report. Except as required by applicable law, the Company does not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of any new information, future events or otherwise.

As used in this Quarterly Report, unless otherwise stated or the context requires otherwise, references to “LiveWire,” the “Company,” “we,” “us,” and “our,” refer to LiveWire Group, Inc. and its consolidated subsidiaries.

PART I

Item 1. Financial Statements

LIVEWIRE GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share amounts)

(Unaudited)


	Three months ended				Six months ended
	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Revenue, net	$	6,449	$	7,026	$	11,427	$	14,788
Costs and expenses:
Cost of goods sold (including related party amounts of $4,363 and $9,539 for three and six months ended June 30, 2024, respectively, and $5,443 and $7,491 for three and six months ended June 30, 2023, respectively; see Note 11)	8,231		9,966		17,336		16,464
Selling, administrative and engineering expense (including related party amounts of $2,539 and $5,487 for three and six months ended June 30, 2024, respectively, and $3,957 and $8,189 for three and six months ended June 30, 2023, respectively; see Note 11)	26,383		29,044		52,678		55,215
Total operating costs and expenses	34,614		39,010		70,014		71,679
Operating loss	(28,165)		(31,984)		(58,587)		(56,891)


Interest income	1,596		2,754		3,612		5,446
Change in fair value of warrant liabilities	1,792		(11,438)		6,550		(10,370)
Loss before income taxes	(24,777)		(40,668)		(48,425)		(61,815)
Income tax provision	28		64		24		64
Net loss	(24,805)		(40,732)		(48,449)		(61,879)
Other comprehensive loss:
Foreign currency translation adjustments	(6)		—		(24)		—
Comprehensive loss	$	(24,811)	$	(40,732)	$	(48,473)	$	(61,879)

Net loss per share, basic and diluted (Note 5)	$	(0.12)	$	(0.20)	$	(0.24)	$	(0.31)

The accompanying notes are integral to the consolidated financial statements.

LIVEWIRE GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)


	(Unaudited)
	June 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	113,011	$	167,904
Accounts receivable, net	1,911		4,295
Accounts receivable from related party	468		3,402
Inventories, net	34,062		32,122
Other current assets	2,035		3,004
Total current assets	151,487		210,727
Property, plant and equipment, net	36,818		37,682
Goodwill	8,327		8,327
Deferred tax assets	6		4
Lease assets	1,197		1,868
Intangible assets, net	1,185		1,347
Other long-term assets	5,896		6,192
Total assets	$	204,916	$	266,147
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,392	$	3,554
Accounts payable to related party	18,399		20,371
Accrued liabilities	18,291		21,189
Current portion of lease liabilities	688		1,152
Total current liabilities	38,770		46,266
Long-term portion of lease liabilities	561		792
Deferred tax liabilities	105		93
Warrant liabilities	5,769		12,319
Other long-term liabilities	685		814
Total liabilities	45,890		60,284
Commitments and contingencies (Note 10)
Shareholders' equity:
Preferred Stock, $0.0001 par value; 20,000 shares authorized; no shares issued and outstanding as of June 30, 2024 and December 31, 2023	—		—
Common Stock, $0.0001 par value; 800,000 shares authorized; 203,526 issued and 203,250 outstanding as of June 30, 2024 and 203,210 issued and 203,030 outstanding as of December 31, 2023	20		20
Treasury Stock, at cost: June 30, 2024 - 276 shares and December 31, 2023 - 180 shares	(2,896)		(1,969)
Additional paid-in-capital	342,346		339,783
Accumulated deficit	(180,437)		(131,988)
Accumulated other comprehensive (loss) income	(7)		17
Total shareholders' equity	159,026		205,863
Total liabilities and shareholders' equity	$	204,916	$	266,147

The accompanying notes are integral to the consolidated financial statements.

LIVEWIRE GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six months ended
	June 30, 2024		June 30, 2023
Cash flows from operating activities:
Net loss	$	(48,449)	$	(61,879)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	5,042		1,372
Change in fair value of warrant liabilities	(6,550)		10,370
Stock compensation expense	2,563		4,202
Provision for doubtful accounts	22		55
Deferred income taxes	10		63
Inventory write-down	3,249		1,626
Cloud computing arrangements development costs	—		(640)
Other, net	(573)		(629)
Changes in current assets and liabilities:
Accounts receivable, net	2,362		(2,407)
Accounts receivable from related party	2,934		118
Inventories	(5,189)		(4,585)
Other current assets	1,215		1,905
Accounts payable and accrued liabilities	(3,550)		(1,357)
Accounts payable to related party	(1,972)		10,591
Net cash used by operating activities	(48,886)		(41,195)
Cash flows from investing activities:
Capital expenditures	(5,080)		(8,175)
Net cash used by investing activities	(5,080)		(8,175)
Cash flows from financing activities:
Proceeds received from exercise of warrants (Note 7)	—		2
Repurchase of common stock	(927)		—
Net cash provided (used) by financing activities	(927)		2
Net decrease in cash and cash equivalents	$	(54,893)	$	(49,368)

Cash and cash equivalents:
Cash and cash equivalents—beginning of period	$	167,904	$	265,240
Net decrease in cash and cash equivalents	(54,893)		(49,368)
Cash and cash equivalents—end of period	$	113,011	$	215,872

The accompanying notes are integral to the consolidated financial statements.

LIVEWIRE GROUP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Common Stock			Additional paid-in capital		Accumulated Deficit		Accumulated other comprehensive income (loss)		Treasury Stock		Total
	Issued shares	Balance
Balance, December 31, 2023	203,210	$	20	$	339,783	$	(131,988)	$	17	$	(1,969)	$	205,863
Net loss	—	—		—		(23,644)		—		—		(23,644)
Other comprehensive loss, net of tax	—	—		—		—		(18)		—		(18)
Share-based compensation expense	200	—		2,282		—		—		—		2,282

Repurchase of common stock	—	—		—		—		—		(706)		(706)
Balance, March 31, 2024	203,410	20		342,065		(155,632)		(1)		(2,675)		183,777
Net loss	—	—		—		(24,805)		—		—		(24,805)
Other comprehensive loss, net of tax	—	—		—		—		(6)		—		(6)
Share-based compensation expense	116	—		281		—		—		—		281
Repurchase of common stock	—	—		—		—		—		(221)		(221)

Balance, June 30, 2024	203,526	$	20	$	342,346	$	(180,437)	$	(7)	$	(2,896)	$	159,026


	Common Stock			Additional paid-in capital		Accumulated Deficit		Accumulated other comprehensive income (loss)		Treasury Stock		Total
	Issued shares	Balance
Balance, December 31, 2022	202,403	$	20	$	329,218	$	(22,438)	$	—	$	—	$	306,800
Net loss	—	—		—		(21,147)		—		—		(21,147)

Share-based compensation expense	6	—		1,824		—		—		—		1,824
Balance, March 31, 2023	202,409	20		331,042		(43,585)		—		—		287,477
Net loss	—	—		—		(40,732)		—		—		(40,732)

Share-based compensation expense	—	—		2,378		—		—		—		2,378
Shareholder warrants exercised	—	—		6		—		—		—		6
Balance, June 30, 2023	202,409	$	20	$	333,426	$	(84,317)	$	—	$	—	$	249,129

The accompanying notes are integral to the consolidated financial statements.

LIVEWIRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business and Basis of Presentation

LiveWire Group, Inc., a Delaware corporation, and its consolidated subsidiaries are referred to in these consolidated financial statements and notes as “we,” “our,” “us,” the “Company,” or “LiveWire.” The Company designs and sells electric motorcycles and electric balance bikes for kids with related electric motorcycle parts, accessories, and apparel. The Company operates in two segments: Electric Motorcycles and STACYC.

On September 26, 2022, the Company consummated a previously announced business combination and related financing transactions (collectively the “Business Combination”) pursuant to a business combination agreement, dated as of December 12, 2021 (the “Business Combination Agreement”), by and among AEA-Bridges Impact Corp (“ABIC”), LiveWire Group Inc., (formerly known as LW EV Holdings, Inc.), LW EV Merger Sub, Inc., a Delaware corporation (“Merger Sub”), Harley-Davidson, Inc., a Wisconsin corporation (“H-D”), and LiveWire EV, LLC (“Legacy LiveWire”), a wholly-owned subsidiary of H-D. The Business combination was accounted for as a reverse recapitalization. Under this method of accounting, ABIC was treated as the “acquired” company for financial reporting purposes. The net assets of ABIC were stated at historical cost, with no goodwill or other intangible assets recorded. The Business Combination resulted in net proceeds of approximately $293.7 million. The Company also assumed the Public Warrants and Private Warrants upon consummation of the Business Combination. See further detail in Note 7, Warrant Liabilities.

In connection with the Business Combination, H-D has the right to receive up to an additional 12,500,000 shares of the Company’s common stock in the future (the “Earn-Out Shares”) upon the occurrence of certain triggering events: (i) a one-time issuance of 6,250,000 Earn Out Shares if the volume-weighted average price (“VWAP”) of Common Stock is greater than or equal to $14.00 over any 20 trading days within any 30 consecutive trading day period; and (ii) a one-time issuance of 6,250,000 Earn Out Shares if the VWAP of Common Stock is greater than or equal to $18.00 over any 20 trading days within any 30 consecutive trading-day period, in each case, during a period beginning 18 months from September 26, 2022, the closing date of the Business Combination, and expiring five years thereafter.

Basis of Presentation

In the opinion of the Company’s management, the accompanying unaudited interim consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the consolidated balance sheet as of June 30, 2024, the consolidated statements of operations and comprehensive loss and the consolidated statements of shareholders’ equity for the three and six month periods ended June 30, 2024 and 2023, and the consolidated statements of cash flows for the six month periods ended June 30, 2024 and 2023.

Certain information and disclosures normally included in complete financial statements have been condensed or omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and generally accepted accounting principles in the United States of America (“GAAP”) for interim financial reporting. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. All intercompany transactions within the Company have been eliminated in preparing the consolidated financial statements.

2. New Accounting Standards

Accounting Standards Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07). ASU 2023-07 is intended to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. The main provisions of ASU 2023-07 require a public entity to disclose on an annual and interim basis: (i) significant segment expenses provided to the chief operating decision maker, (ii) an amount representing the difference between segment revenue less segment expenses disclosed under the significant segment expense principle and each reported measure of segment profit or loss and a description of its composition, (iii) provide all annual disclosures about a reportable segment's profit or loss and assets currently required under Topic 280 in interim periods, (iv) clarify that if the chief operating decision maker uses more than one measure of a segment's profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit, (v) the title and position of the chief operating decision maker and an explanation of how the chief operating decision maker uses the reported measure of segment profit or loss in assessing segment performance and deciding how to allocate resources, and (vi) all disclosures required by ASU 2023-07 and all existing segment disclosures under Topic 280 for an entity with a single reportable segment. The new guidance is effective for the fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is still evaluating the impact ASU 2023-07 will have on the Company's consolidated financial statement disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to enhance the transparency and decision usefulness of income tax disclosures. The main provisions of ASU 2023-09 require a public entity to disclose on an annual basis (i) specific prescribed categories in the rate reconciliation, (ii) provide additional information for reconciling items that meet a quantitative threshold, (iii) the amount of income taxes paid, net of refunds received, disaggregated by federal, state, and foreign taxes, (iv) the amount of income taxes paid, net of refunds received, disaggregated by individual jurisdictions in which income taxes paid is equal to greater than 5 percent of total income taxes paid, (v) income or loss from continuing operations before income tax expense or benefit disaggregated between domestic and foreign, and (vi) income tax expense or benefit from continuing operations disaggregated by federal, state, and foreign. ASU 2023-09 also removes certain disclosure requirements related to unrecognized tax benefits and cumulative unrecognized temporary differences. The new guidance is effective for the fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is still evaluating the impact ASU 2023-09 will have on the Company's consolidated financial

statement disclosures.

3. Revenue

The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or service to a customer. Revenue is measured based on the consideration that the Company expects to be entitled to in exchange for the goods or services transferred. Taxes that are collected from a customer concurrent with revenue-producing activities are excluded from revenue.

Disaggregated revenue, net by major source was as follows (in thousands):


	Three months ended				Six months ended
	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Electric Motorcycles
Electric motorcycles	$	2,367	$	681	$	3,374	$	2,092
Parts, accessories and apparel	63		81		300		152
	$	2,430	$	762	$	3,674	$	2,244
STACYC
Electric balance bikes	$	2,924	$	5,276	$	5,540	$	10,784
Parts, accessories and apparel	1,095		988		2,213		1,760
	$	4,019	$	6,264	$	7,753	$	12,544
Total Revenue, net	$	6,449	$	7,026	$	11,427	$	14,788

Revenue from the sale of LiveWire One electric motorcycles, electric balance bikes, as well as parts and accessories and apparel are recorded when control is transferred to the customer, generally at the time of shipment to independent dealers and distributors or at the time of delivery to retail customers. S2 electric motorcycles, being motorcycles produced from LiveWire’s S2 platform using the Arrow Architecture model, contain two performance obligations, which is the sale of the electric motorcycle and a stand ready obligation to transfer Firmware Over The Air (“FOTA”) software updates to the electric motorcycle, when-and-if available, to the customer. Revenue on the sale of the S2 electric motorcycles is recorded at a point-in-time when control is transferred to the customer. As the unspecified FOTA software updates to S2 electric motorcycles are provided when-and-if they become available, revenue related to these updates is recognized ratably over the period the updates will be provided, estimated by management to be five years, commencing when control of the electric motorcycle is transferred to the customer. The standalone selling prices of performance obligations are estimated by considering costs to develop and deliver the good or service, third-party pricing of similar goods or services and other information that may be available. The Company allocates the transaction price among the performance obligations in proportion to the standalone selling price of the Company’s performance obligations.

The Company offers sales incentive programs to independent dealers, distributors and retail customers designed to promote the sale of its products. The Company estimates its variable consideration related to its sales incentive programs using the expected value method. The Company accounts for consideration payable as part of its sales incentives as a reduction of revenue, which is accrued at the later of the date the related sale is recorded or the date the incentive program is both approved and communicated. Variable consideration related to sales incentives and rights to return is adjusted at the earliest of when the amount of consideration the Company expects to receive changes, or the consideration becomes fixed. During the first quarter of 2024, the Company revised its retail partner strategy and introduced new incentives with its retail partners. As a result, for the three and six months ended June 30, 2024, the Company recorded $5 thousand and $425 thousand of adjustments, respectively, for variable consideration related to previously recognized sales. Adjustments for variable consideration related to previously recognized sales as a result of promotions introduced in the second quarter of 2023 were $250 thousand for the three and six months ended June 30, 2023.

The Company offers the right to return eligible parts and accessories and apparel, electric balance bikes, and, in limited circumstances, on electric motorcycles. The Company estimates returns based on an analysis of historical trends and probability of returns and records revenue on the initial sale only in the amount that it expects to be entitled. The remaining consideration is deferred in a refund liability account. The refund liability is remeasured for changes in the estimate at each reporting date with a corresponding adjustment to revenue. The Company records a refund asset at the carrying amount of the goods at the time of sale, less any expected costs to recover the goods and any expected reduction in value as a reduction to cost of goods sold. This amount is monitored and adjusted for impairment as necessary. The refund asset of $153 thousand and $299 thousand were included in Other current assets and the refund liability of $181 thousand and $327 thousand were included in Accrued liabilities in the Company’s consolidated balance sheets as of June 30, 2024 and December 31, 2023, respectively.

Shipping and handling costs associated with freight after control of a product has transferred to a customer are accounted for as fulfillment costs in Cost of goods sold. The Company accrues for the shipping and handling in the same period that the related revenue is recognized.

The Company offers standard, limited warranties on its electric motorcycles, electric balance bikes, and parts and accessories. These warranties provide assurance that the product will function as expected and are not separate performance obligations. The Company accounts for estimated warranty costs as a liability when control of the product transfers to the customer.

Contract Liabilities

The Company maintains certain contract liability balances related to payments received at contract inception in advance of the Company’s performance under the contract that generally relates to customer deposits for electric balance bikes and electric motorcycles and consideration received upon transfer of control of the S2 motorcycles for FOTA software updates. Contract liabilities are recognized as revenue once the Company performs under the contract. The current portion of contract liabilities of $183 thousand and $214 thousand were included in Accrued liabilities and the long-term portion of contract liabilities of $341 thousand and $245 thousand were included in Other long-term liabilities in the Company's Consolidated balance sheets as of June 30, 2024 and December 31, 2023, respectively. The Company expects to recognize $183 thousand included in Accrued Liabilities as of June 30, 2024 over the next twelve months. The Company expects to recognize $341 thousand included in Other long-term liabilities at June 30, 2024 over the next five years.

Previously deferred revenue recognized as revenue in the three months ended June 30, 2024 and 2023 was $15 thousand and $85 thousand, respectively, and $85 thousand and $163 thousand in the six months ended June 30, 2024 and 2023, respectively.

4. Income Taxes

The Company’s effective income tax rate was 0.1% for the six months ended June 30, 2024 and 2023.

The Company’s effective tax rate for each period differs from the U.S. statutory rate of 21% as the Company is not recognizing an income tax benefit related to the losses generated as there is not sufficient positive evidence regarding the ability to realize the benefit of these losses.

5. Earnings Per Share

The Company computes earnings per share (“EPS”) in accordance with ASC 260, Earnings per Share. Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding. Diluted EPS is computed using the weighted-average number of shares of common stock, plus the effect of potentially dilutive securities. The Company applies the treasury method to calculate the dilution impact of share-based awards- restricted stock, performance share units, and warrants. Because the Company has reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share as all of the potentially dilutive shares were anti-dilutive in those periods.

Computation of basic and diluted earnings per share was as follows (in thousands, except per share amounts):


	Three months ended				Six months ended
	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Net loss	$	(24,805)	$	(40,732)	$	(48,449)	$	(61,879)

Basic weighted-average shares outstanding	203,184		202,409		203,136		202,407
Effect of dilutive securities – warrants	—		—		—		—
Effect of dilutive securities – employee stock compensation awards	—		—		—		—
Diluted weighted-average shares outstanding	203,184		202,409		203,136		202,407
Earnings per share (1):
Basic	$	(0.12)	$	(0.20)	$	(0.24)	$	(0.31)
Diluted	$	(0.12)	$	(0.20)	$	(0.24)	$	(0.31)

(1) Earnings per share amounts are calculated discretely and, therefore, may not add up to the total due to rounding

Diluted net loss per share is computed by giving effect to all potential shares of common stock, to the extent dilutive, including unvested restricted stock units (“RSUs”), unvested performance share units (“PSUs”), and Warrants (as defined in Note 7, Warrant Liabilities). Potential shares of common stock are excluded from the computation of diluted net loss per share if their effect would have been anti-dilutive for the periods presented or if the issuance of shares is contingent upon events that did not occur by the end of the period. For the three and six months ended June 30, 2024, 2,119 thousand employee stock compensation plan awards were excluded from the computation of diluted net loss per share because the effect would have been anti-dilutive. For the three and six months ended June 30, 2023, 3,408 thousand employee stock compensation plan awards were excluded from the computation of diluted net loss per share because the effect would have been anti-dilutive. For the six months ended June 30, 2024, 30,365 thousand warrants were excluded from the computation of diluted net loss per share because the effect would have been anti-dilutive. For the three and six months ended June 30, 2023, 30,499 thousand warrants were excluded from the computation of diluted net loss per share because the effect would have been anti-dilutive. Additionally, the Company has not included the impact of the Earn-Out Shares, discussed in Note 1, Description of Business and Basis of Presentation, in the calculation of EPS as the triggering events have not occurred.

6. Additional Balance Sheet Information

Inventories are valued at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method for electric motorcycles and related products and average costing method for electric balance bikes. Inventories, net consisted of the following (in thousands):


	June 30, 2024		December 31, 2023
Raw materials and work in process	$	—	$	486
Electric motorcycles and electric balance bikes	31,443		28,205
Parts and accessories and apparel	2,619		3,431
Inventories, net	$	34,062	$	32,122

Accrued liabilities primarily include accrued capital expenditures of $3,424 thousand, accrued payroll and employee benefits of $4,249 thousand, accrued engineering costs of $3,356 thousand, and accrued restructuring of $1,990 thousand as of June 30, 2024. Accrued liabilities primarily include accrued capital expenditures of $4,933 thousand, accrued payroll and employee benefits of $7,077 thousand, and accrued engineering costs of $5,215 thousand as of December 31, 2023.

7. Warrant Liabilities

Upon consummation of the Business Combination, the Company assumed 30,499,990 Warrants to purchase the Company’s Common Stock, comprised of 19,999,990 public warrants, originally issued by ABIC as part of ABIC’s IPO of units (the “Public Warrants”) and 10,500,000 of outstanding warrants originally issued in a private placement in connection with the IPO of ABIC (the “Private Placement Warrants”, collectively with the Public Warrants, the “Warrants”). The Warrants expire five years from the completion of the Business Combination. There were 19,865,207 Public Warrants outstanding as of June 30, 2024 and December 31, 2023, respectively, and 10,500,000 Private Warrants outstanding as of June 30, 2024 and December 31, 2023.

Each Warrant entitles the registered holder to purchase one share of Common Stock at a price of $11.50 per share. A Warrant holder may exercise its Warrants only for a whole number of shares of Common Stock. This means only a whole Warrant may be exercised at a given time by a Warrant holder. No fractional Warrants were issued upon separation of the units and only whole warrants trade. The Company will receive the proceeds from the exercise of any warrants in cash. The Warrants will expire five years after the completion of the Business Combination, or earlier upon redemption or liquidation.

Public Warrants

Redemption of Warrants when the price per Common Stock share equals or exceeds $18.00: The Company may redeem the outstanding Warrants (except as described with respect to the Private Placement Warrants):

•in whole and not in part;

•at a price of $0.01 per Warrant;

•upon not less than 30 days’ prior written notice of redemption; and

•if, and only if, the reported last sales price of the Company’s Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the Warrant holders.

Redemption of Warrants when the price per Common Stock share equals or exceeds $10.00: Once the Warrants become exercisable, the Company may redeem the outstanding Warrants:

•in whole and not in part;

•at $0.10 per Warrant upon a minimum 30 days’ prior written notice of redemption provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the agreed table, based on the redemption date and the “fair market value” of Common Stock;

•if, and only if, the closing price of the shares of Common Stock equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a Warrant) for any 20 trading days within the 30-trading day period ending three trading days before we send the notice of redemption to the Warrant holders; and

•if the closing price of the shares of Common Stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the Warrant holders is less than $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a Warrant), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Warrants, as described above.

Private Placement Warrants

The Private Placement Warrants have terms and provisions that are similar to those of the Public Warrants, including as to the exercise price, exercisability and exercise period. The Private Placement Warrants will not be redeemable by the Company so long as they are (i) held by the initial purchasers of the Private Placement Warrants or its permitted transferees and (ii) the reference value exceeds $18.00 per share. The initial Private Placement Warrant purchasers, or its permitted transferees, have the option to exercise the Private Placement Warrants on a cashless basis if the reference value is between $10.00 and $18.00. If the Private Placement Warrants are held by holders other than AEA-Bridges Impact Sponsor, LLC (the “Sponsor”) or its permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by the holders on the same basis as the Public Warrants.

During the three and six months ended June 30, 2024, there were no redemptions or exercises of the Public Warrants or Private Warrants. There were no redemptions and a de minimis amount of exercises of the Public Warrants during the three and six months ended June 30, 2023. There were no exercises or redemptions of the Private Warrants during the three and six months ended June 30, 2023.

During the three and six months ended June 30, 2024, the Company recognized income of $1,792 thousand and $6,550 thousand respectively, as a change in fair value of warrant liabilities in the consolidated statements of operations and comprehensive loss. During the three and six months ended June 30, 2023, the Company recognized expense of $11,438 thousand and $10,370 thousand, respectively, as a change in fair value of warrant liabilities in the consolidated statements of operations and comprehensive loss. The Company determined the Public Warrants and Private Placement Warrants do not meet the criteria to be classified in stockholders’ equity and the fair value of the warrants should be classified as a liability. The Company’s Warrant liability was $5,769 thousand and $12,319 thousand as of June 30, 2024 and December 31, 2023, respectively.

8. Fair Value

The Company assesses the inputs used to measure fair value using a three-tier hierarchy.

•Level 1 inputs include quoted prices for identical instruments and are the most observable.

•Level 2 inputs include quoted prices for similar assets and observable inputs.

•Level 3 inputs are not observable in the market and include the Company’s judgments about the assumptions market participants would use in pricing the asset or liability.

The Company’s assets and liabilities measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows (in thousands):

June 30, 2024

Level 1

Level 2

Level 3

Total

Assets:

Money market funds

SEC Form 10-Q filed by LiveWire Group Inc.