Harley-Davidson (HOG) Status update summary

Business Overview and Strategic Transformation

• HDFS is the captive finance arm, providing retail and dealer financing, insurance, and branded card products, mainly in the US and Canada.

• In 2025, HDFS entered a strategic partnership with KKR and PIMCO, selling $6B in retail loan assets and a 9.8% equity interest for $50M, and will sell about two-thirds of future retail loans to these partners for five years.

• The transaction unlocked a $1B dividend to the parent, reduced capital intensity, and shifted credit risk on sold loans to KKR and PIMCO.

• HDFS retains full control and majority ownership, with no significant operational changes for dealers or customers, maintaining all strategic touchpoints.

• The partnership structure allows for flexibility, periodic re-pricing, and options for alternative funding if partnerships end.

Financial Performance and Guidance

• 2024 saw $3B in loan originations and a return on equity of 18%; five-year average ROE was 21%.

• 2025 HDFS revenue was $869M, down 16% year-over-year, with operating income of $490M and a margin of 56.4%.

• 2026 operating income is projected at $45M–$60M, with expectations to triple by 2029 as the retail finance receivable base grows.

• Non-lending activities generated $148M–$152M in annual revenue in 2023–2024 and will continue post-transaction.

• HDFS expects to maintain high ROE due to fee and servicing income from loan sales.

Capital Structure and Balance Sheet Impact

• The transaction enabled a $1B dividend to the parent and reduced consolidated net debt from $5.9B at end-2024 to $412M at end-2025.

• HDFS reduced gross retail finance receivables held for investment from $6.7B at end-2024 to $0.8B at end-2025.

• Total HDFS debt dropped from $6.8B to $3.2B over the same period.

• HDMC ended 2025 with a net cash position of $935M after paying down $450M in debt.

• HDFS continues to refine its capital structure, with net debt levels aligned to expectations and a focus on growing finance receivables.