Holley (HLLY) Q4 2024 Earnings Call March 11, 2025 05:46 PM ET Company Participants Anthony Rozmus - Managing DirectorMatthew Stevenson - President & Chief Executive OfficerJesse Weaver - CFO & Head of Information TechnologyChristian Carlino - Equity Research AssociateBret Jordan - Managing Director Conference Call Participants Joseph Altobello - MD & Senior AnalystBrian McNamara - MD & Senior Analyst - ConsumerPhillip Blee - Equity Research Analyst Operator Good morning, ladies and gentlemen, and welcome t ...

Holley Inc. (NYSE:HLLY) Q4 2024 Earnings Conference Call March 11, 2025 8:30 AM ET Company Participants Anthony Rozmus - IR Matt Stevenson - President and CEO Jesse Weaver - CFO Conference Call Participants Christian Carlino - JPMorgan Joe Altobello - Raymond James Brian McNamara - Canaccord Genuity Bret Jordan - Jefferies Phillip Blee - William Blair Operator Good morning, ladies and gentlemen. And welcome to the conference call to discuss Holley's Fourth Quarter and Full Year 2024 Earnings Results. At thi ...

分组1 - Holley Inc. reported quarterly earnings of $0.11 per share, exceeding the Zacks Consensus Estimate of $0.02 per share, representing an earnings surprise of 450% [1] - The company posted revenues of $140.05 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 2.42%, but down from $155.71 million year-over-year [2] - Holley has surpassed consensus revenue estimates two times over the last four quarters [2] 分组2 - The stock has underperformed, losing about 20.5% since the beginning of the year compared to the S&P 500's decline of -4.5% [3] - The current consensus EPS estimate for the coming quarter is $0.06 on revenues of $160.6 million, and $0.24 on revenues of $619.96 million for the current fiscal year [7] - The Zacks Industry Rank for Automotive - Original Equipment is in the bottom 46% of over 250 Zacks industries, indicating potential underperformance compared to higher-ranked industries [8]

Financial Performance - Net Sales for Q4 2024 decreased by 10.1% to $140.1 million compared to $155.7 million in Q4 2023[6] - Full Year 2024 Net Sales decreased by 8.7% to $602.2 million compared to $659.7 million in 2023[6] - Net Loss for Q4 2024 was $(37.8) million, or $(0.32) per diluted share, compared to Net Income of $1.2 million, or $0.01 per diluted share in Q4 2023[6] - Adjusted Net Income for Q4 2024 was $12.6 million compared to an Adjusted Net Loss of $(0.5) million in Q4 2023[6] - Net loss for the thirteen weeks ended December 31, 2024, was $37,782 thousand, compared to a net income of $1,202 thousand for the same period in 2023[32] - Adjusted EBITDA for the year ended December 31, 2024, was $110,493 thousand, down from $130,885 thousand in 2023, reflecting a decrease of approximately 15.6%[32] - The Adjusted EBITDA Margin for the year ended December 31, 2024, was 18.3%, compared to 19.8% in 2023, indicating a decline in operational efficiency[32] - The net income margin for the year ended December 31, 2024, was -3.9%, compared to a positive margin of 2.9% in 2023[32] - Adjusted Net Income for the year ended December 31, 2024, was $24,838 thousand, compared to $25,040 thousand in 2023, showing a slight decrease[36] Cash Flow and Assets - The company reported a net cash provided by operating activities of $4.126 million for the thirteen weeks ended December 31, 2024, compared to $31.229 million in the prior year[27] - Net cash provided by operating activities for the year ended December 31, 2024, was $46,899 thousand, down from $88,092 thousand in 2023[38] - Cash and cash equivalents increased to $56.087 million as of December 31, 2024, compared to $41.081 million at the end of 2023[25] - Total assets decreased to $1,133.320 million as of December 31, 2024, down from $1,203.343 million as of December 31, 2023[25] - Total liabilities decreased to $712.168 million as of December 31, 2024, from $762.192 million as of December 31, 2023[25] Operational Metrics - Adjusted EBITDA for Full Year 2024 was $110.5 million, down from $130.9 million in 2023[11] - Free Cash Flow for the year ended December 31, 2024, was $41,821 thousand, a decrease from $83,639 thousand in 2023, representing a decline of approximately 50%[38] - The Bank-adjusted EBITDA Leverage Ratio as of December 31, 2024, was 4.17x, indicating a significant level of debt relative to earnings[34] - Research and development costs for the year ended December 31, 2024, were $18.710 million, a decrease of 21.5% from $23.844 million in 2023[23] - Inventory turns improved to 2.0x compared to 1.9x last year[13] Strategic Developments - A perpetual exclusive license agreement with Cataclean for the North American market was announced for a total purchase price of $23.8 million[13] - Full Year 2025 revenue guidance indicates expected growth of 0.8% to 4.3%, with projected Net Sales of $580 - $600 million[12] - Direct-to-Consumer (DTC) and National Retailer growth was 8% and 12%, respectively, in 2024[5] - Revenue per SKU for new product launches increased by 75%, with eCommerce sales surpassing $100 million[5] Impairments and Restructuring - The company reported an impairment of goodwill amounting to $40,906 thousand for the year ended December 31, 2024[34] - The company incurred restructuring costs of $1,372 thousand for the year ended December 31, 2024[34] Income and Loss Analysis - Operating income for the thirteen weeks ended December 31, 2024, was a loss of $28.981 million, a decline of 254.2% from an operating income of $18.790 million in 2023[23] - Gross profit increased by 6.0% to $63.886 million for the thirteen weeks ended December 31, 2024, compared to $60.254 million in the prior year[23]

Core Insights - The article discusses the mixed outcomes of companies going public, highlighting that while some achieve significant success, others, like Holley (NYSE: HLLY), have underperformed [1]. Group 1 - The public offering is a significant milestone for companies, with varying results in terms of shareholder wealth creation [1].

Financial Data and Key Metrics Changes - Net sales decreased by 14.4% to $134 million compared to $156.5 million in the same period last year [20][65] - Adjusted gross margins increased by 170 basis points year-over-year to 39% [20][67] - Free cash flow for the quarter was negative $2.1 million, a decrease of $23.8 million compared to the prior year [21] - Net loss for the third quarter was $6.3 million compared to net income of $800,000 in the same period last year [69] Business Line Data and Key Metrics Changes - Direct-to-consumer sales saw a remarkable 110% lift during the third quarter due to effective marketing efforts [14] - B2B sales capabilities improved, with national retailer sales up 12% year-over-year [37] - New product revenue increased by 25% this year through better product adoption with distributors [38] Market Data and Key Metrics Changes - Overall consumer demand in the industry remains soft, with the performance aftermarket estimated to have declined by roughly 4% to 5% year-to-date [63][64] - Out-the-door sales of Holley Performance Brands at distribution partners were only down 3%, indicating market share gains [64] Company Strategy and Development Direction - The company is focused on becoming a multibillion-dollar enthusiast platform by enhancing consumer experiences and supporting distribution partners [8][10] - Strategic pricing initiatives and MAP enforcement have been implemented to build trust with distributors and optimize pricing [34][88] - The company aims to maintain rigorous financial discipline while driving growth through innovative products and improved operational performance [11][39] Management's Comments on Operating Environment and Future Outlook - Management noted that inflation concerns and economic volatility are impacting consumer confidence, leading to cautious spending [13][61] - The company expects to see organic growth starting in Q1 of 2025, driven by improved market conditions and effective partnerships with distributors [94][115] - Management remains optimistic about stabilizing revenue trends as distributor inventories normalize [17][73] Other Important Information - The company achieved a 55% year-over-year reduction in past due metrics and saved $2.5 million in costs this quarter [18] - The company has received credit upgrades from Moody's and S&P, reflecting improved financial health [60][76] Q&A Session Summary Question: Could you speak to your direct and indirect exposure to China and tariffs? - Management indicated they have been working on reducing tariffs and do not foresee significant impacts going forward [82] Question: How much of the national retailer sales increase is due to better brand positioning? - Management believes there is significant growth potential in partnering with national retailers and improving product placement [84] Question: What is the expected impact of pricing initiatives? - Management confirmed that pricing initiatives are positive and have built trust with distribution partners [88] Question: What are the expected savings from cost to serve initiatives? - Management expects total savings from cost to serve initiatives to be around $7 million to $8 million for the year [90] Question: Will distributor inventory normalization be completed by year-end? - Management anticipates that most inventory adjustments will be completed by the end of the year [93] Question: How will the election results impact the business? - Management believes the election results will create a more favorable environment for their industry [100] Question: What was the feedback from the recent SEMA event? - Management reported positive feedback from distributors and noted a significant presence at the event [102] Question: What is the health of the distributor channel? - Management indicated that the industry remains stable and optimistic for 2025 [104] Question: How does the company plan to drive growth in 2025? - Management stated that all consumer verticals are being focused on for growth, with a balanced approach [110]

PERFORMANCE BRANDS 1 Third Quarter 2024 Financial Results Call Disclaimer Certain statements in this presentation may be considered "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to future events or Holley's future financial or operating performance. For example, projections of future revenue and adjusted EBITDA and other metrics, along with statements regarding ...

Company Performance - Holley Inc. reported a quarterly loss of $0.01 per share, missing the Zacks Consensus Estimate of $0.02, and down from earnings of $0.03 per share a year ago, representing an earnings surprise of -150% [1] - The company posted revenues of $134.04 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 6.17%, and down from $156.53 million in the same quarter last year [2] - Holley has not surpassed consensus EPS estimates over the last four quarters, although it has topped consensus revenue estimates twice during that period [2] Stock Performance - Holley shares have declined approximately 43.3% since the beginning of the year, contrasting with the S&P 500's gain of 25.2% [3] - The current Zacks Rank for Holley is 3 (Hold), indicating that shares are expected to perform in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.05 on revenues of $154.11 million, and for the current fiscal year, it is $0.19 on revenues of $625.08 million [7] - The outlook for the Automotive - Original Equipment industry, to which Holley belongs, is currently in the bottom 32% of over 250 Zacks industries, suggesting potential challenges ahead [8]

Financial Data and Key Metrics Changes - Net sales decreased by 3.3% in Q2 2024, an improvement from nearly 8% decline in Q1 2024 [9] - Adjusted gross margins increased by 170 basis points year-over-year to 41% [9] - Adjusted EBITDA margins rose by 50 basis points to 22.1% [9] - Free cash flow for the quarter was robust at $24.4 million, with year-to-date free cash flow improving by $10 million compared to the previous year [9][33] - Inventory levels were reduced by $44 million year-over-year, improving inventory turns from 1.9x to 2.2x [8][28] Business Line Data and Key Metrics Changes - The performance aftermarket remains soft due to reduced consumer spending, but the company is confident in gaining market share through strategic initiatives [6][7] - Direct-to-consumer sales have shown significant growth year-over-year, driven by improved promotional strategies and product launches [7][11] - New product revenue increased by over 25% compared to 2023, reflecting successful product management and innovation processes [19] Market Data and Key Metrics Changes - The overall market for performance aftermarket is estimated to have declined by 5% year-to-date, while the company's direct-to-consumer and B2B sales figures showed a smaller decline of 2.8% [30] - Economic factors such as high inflation, slow wage growth, and increased debt are impacting consumer spending [29] Company Strategy and Development Direction - The company aims to enhance its organizational capabilities by recruiting top-tier talent and streamlining operations to strengthen cash flow [5][4] - Strategic initiatives include improving digital capabilities, refining promotional strategies, and launching innovative products [7][8] - The company is focused on optimizing its acquisitions and enhancing customer experience across all channels [12][13] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by the current economic environment but remains optimistic about the company's ability to gain market share [6][29] - The company has adjusted its full-year guidance for net sales to a range of $605 million to $645 million, reflecting cautious optimism amid market conditions [35] - Management emphasizes the importance of maintaining strong free cash flow and reducing debt while navigating the current consumer landscape [28][34] Other Important Information - The company ended the quarter with over $53 million in cash after paying down an additional $10 million in debt [8] - S&P upgraded the company's credit rating in June, indicating improved financial stability [9] Q&A Session Summary Question: What was the price realization in Q2 and expectations for the year? - Price realization in Q2 was about 3%, consistent with Q1, with ongoing strategic price increases planned for the back half of the year [38] Question: What were the drivers of gross margin expansion in Q2? - Gross margin expansion was driven by pricing, cost to serve initiatives, and some fixed cost leverage despite lower sales [39] Question: Are there signs of worsening trends in July and August? - Both consumer demand and distributor inventory management are contributing to a cautious outlook, with observed slowdowns in sales [41] Question: Will R&D spending increase in the second half? - R&D spending is expected to remain efficient, with no significant increase anticipated, as new product revenue is up 25% year-over-year [42] Question: What factors are influencing the wide range in guidance? - The guidance range reflects macroeconomic impacts and consumer health, with the bottom and top ends depending on industry trends and distributor responses [43] Question: How is the health of distribution partners? - Overall, distribution partners remain strong, but there is some softness in certain areas, with a focus on monitoring receivables [46] Question: Are there outperforming sectors within the verticals? - The safety and racing vertical is showing strength, driven by lifestyle engagement and product innovations [47] Question: How might interest rates impact the business? - A 100 basis point decline in interest rates could benefit free cash flow by $5 million to $6 million, but consumer sensitivity remains a concern [49][51] Question: What is the current state of distribution partner inventory? - Distribution partner inventory levels are elevated, with destocking expected as they prepare for consumer behavior changes [64]

Company Performance - Holley Inc. reported quarterly earnings of $0.10 per share, matching the Zacks Consensus Estimate, but down from $0.14 per share a year ago [1] - The company posted revenues of $169.5 million for the quarter ended June 2024, missing the Zacks Consensus Estimate by 0.49% and down from $175.26 million year-over-year [2] - Holley has not surpassed consensus EPS estimates in the last four quarters and has experienced a 29.8% decline in share price since the beginning of the year [3][6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.07 on revenues of $161.34 million, and for the current fiscal year, it is $0.25 on revenues of $654.7 million [7] - The trend for earnings estimate revisions for Holley is currently unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - Holley operates within the Automotive - Original Equipment industry, which is currently ranked in the bottom 14% of over 250 Zacks industries, suggesting a challenging environment [8] - The performance of Holley’s stock may be influenced by the overall outlook for the industry, as top-ranked industries tend to outperform lower-ranked ones significantly [8]