Core Business Performance - Holley Performance Brands reported a core business net sales growth of 3.9% in the second quarter of 2025 compared to the same period in 2024, marking the second consecutive quarter of growth [9][8] - The company's net sales decreased by 1.7% to $166.7 million from $169.5 million year-over-year [8][19] - New product launches contributed approximately $8 million in revenue during the second quarter [5] Financial Highlights - Net income for the second quarter was $10.9 million, or $0.09 per diluted share, down from $17.1 million, or $0.14 per diluted share, in the prior year [8][20] - Adjusted EBITDA for the quarter was $36.4 million, compared to $38.3 million in the previous year [8] - Free cash flow reached $35.7 million, the highest level in the company's history, compared to $24.4 million last year [8][15] Strategic Initiatives - The company successfully mitigated tariff impacts through strategic sourcing and pricing actions, leading to increased guidance visibility [6][15] - Holley has refined its full-year guidance for 2025, projecting net sales between $580 million and $595 million, reflecting a year-over-year growth of 0.8% to 3.4% [10] - The company achieved approximately 6.5% growth in its B2B channel and over 8.6% growth in direct-to-consumer orders during the second quarter [15] Operational Efficiency - Net cash provided by operating activities was $40.5 million, significantly higher than $25.7 million in the prior year [8][25] - The company reported a gross profit of $69.6 million, a slight decrease from $70.3 million year-over-year, but an increase in gross profit margin was noted [19] - Operating income for the second quarter was $27.5 million, compared to $27.9 million in the previous year [19]

Company Overview - Holley Inc. (HLLY) is experiencing significant attention from investors due to high implied volatility in its options market, particularly the Aug 15, 2025 $7.50 Call option [1] - The company currently holds a Zacks Rank 3 (Hold) in the Automotive - Original Equipment industry, which ranks in the top 29% of the Zacks Industry Rank [3] Analyst Insights - Over the past 60 days, there has been a mixed sentiment among analysts regarding Holley's earnings estimates; one analyst has increased estimates while five have decreased them, resulting in a consensus estimate drop from 11 cents to 10 cents per share for the current quarter [3] Options Market Dynamics - The high implied volatility suggests that options traders are anticipating a significant price movement for Holley shares, which could indicate an upcoming event that may lead to a substantial rally or sell-off [2][4] - Seasoned options traders often seek to sell premium on options with high implied volatility, aiming to benefit from the decay of the option's value if the underlying stock does not move as much as expected [4]

Summary of Holley (HLLY) FY Conference Call - June 04, 2025 Company Overview - Holley specializes in automotive aftermarket products, enhancing vehicle performance and enjoyment for car enthusiasts [2][3] - The company has a history of over 120 years, focusing on iconic brands in the automotive sector [6][27] Market Insights - The automotive enthusiast market in the U.S. comprises approximately 70 million individuals, surpassing other hobbies like golf and fishing [5] - The market for trucks, SUVs, and CUVs is valued at $26 billion, representing 80% of new vehicle sales in the U.S. [10] - Holley operates in four main verticals: domestic muscle cars, trucks/SUVs, import vehicles, and safety/racing [10][11] Financial Performance - In Q1, Holley reported a 3.3% year-over-year growth in core business, marking the first growth in five quarters [12][13] - Direct-to-consumer sales grew over 10%, while third-party marketplace sales increased by 50% [15] - The company achieved $8.1 million in product innovation and strategic pricing during the quarter [15] - Free cash flow was negatively impacted by timing issues, with expectations of recovery in Q2 [17] Operational Efficiency - Holley has cut operational inefficiencies by over $30 million in the past two and a half years, with a target of an additional $5-10 million this year [29][30] - The company reduced its SKU count by 45%, improving inventory management [32] - Past dues were reduced by 20%, and the company is focused on freeing up cash by eliminating unproductive inventory [18] Strategic Initiatives - Holley aims to enhance the consumer experience and improve its direct-to-consumer model, which has grown from 15% to 20-25% of sales [42] - The company is exploring transformational M&A opportunities to further strengthen its market position [23] - Holley is expanding into new markets, including Mexico, and is looking to enter additional international markets [22] Challenges and Risks - The automotive aftermarket industry has faced softness over the past three years, with market conditions being challenging [20] - Tariff impacts remain a concern, but Holley has managed to mitigate some effects through supplier consolidation and moderate pricing actions [49][50] Consumer Engagement - Holley has a strong social media presence with 8 million followers and hosts events that attract over 50,000 attendees [38][40] - The company emphasizes the importance of brand recognition and consumer loyalty in the automotive aftermarket [42] Future Outlook - Holley maintains a guidance of approximately $120 million in EBITDA for the year, with expectations of generating $40-50 million in free cash flow [36] - The company is focused on deleveraging and improving its balance sheet through strategic financial management [36][37] Conclusion - Holley is positioned for growth in the automotive aftermarket, leveraging its strong brand portfolio and operational improvements while navigating market challenges and consumer trends [37][42]

Company Performance - Holley Inc. reported quarterly earnings of $0.02 per share, missing the Zacks Consensus Estimate of $0.05 per share, compared to break-even earnings per share a year ago, representing an earnings surprise of -60% [1] - The company posted revenues of $153.04 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 3.05%, but down from year-ago revenues of $158.64 million [2] - Over the last four quarters, Holley has surpassed consensus EPS estimates just once and topped consensus revenue estimates two times [2] Stock Performance - Holley shares have lost about 31.5% since the beginning of the year, while the S&P 500 has declined by -4.7% [3] - The current consensus EPS estimate for the coming quarter is $0.11 on $162.13 million in revenues, and $0.26 on $592.26 million in revenues for the current fiscal year [7] Industry Outlook - The Automotive - Original Equipment industry, to which Holley belongs, is currently in the bottom 25% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Holley's stock performance [5]

Financial Data and Key Metrics Changes - The company achieved net sales of $153 million, representing a 3.3% increase in the core business compared to the prior year [13][45] - Gross margins improved to 41.9%, an increase of 910 basis points from 32.8% in the prior year [14][46] - Free cash flow for the quarter was negative $10.8 million, a decrease of $28.6 million compared to the prior year [15][48] - Adjusted EBITDA margin improved to 17.8%, an increase of 460 basis points from the prior year [16][48] Business Line Data and Key Metrics Changes - The direct-to-consumer channel saw significant growth with more than a 10% increase, while third-party platforms like Amazon and eBay experienced growth of over 50% [12][21] - The B2B channel strengthened relationships with partners, resulting in over 2.5% growth [11][21] - The domestic muscle vertical experienced a 3% year-over-year growth, with power brands averaging an impressive 11% growth [21] Market Data and Key Metrics Changes - The company is gaining market share despite a challenging macroeconomic environment, with no material pre-buy observed from customers in the second quarter [9][10] - The overall consumer sentiment has declined, indicating growing concerns regarding inflation and economic viability, which could moderate spending in the near term [50] Company Strategy and Development Direction - The company is focused on operational excellence and cash flow optimization, with a strategic framework that includes enhancing customer relationships and product innovation [22][43] - The company is actively managing costs to offset tariff impacts, including spend optimization and operational improvements [30][36] - The strategic initiatives have driven $15 million in revenue across key areas and achieved $3.1 million in cost reductions [29] Management's Comments on Operating Environment and Future Outlook - Management noted that the financial health of consumers shows signs of strain, which could impact discretionary spending [50][51] - The company is maintaining its revenue guidance for 2025, expecting $580 million to $600 million, implying approximately 2.5% growth at the midpoint [52] Other Important Information - The company launched several new products across various divisions, contributing approximately $8.1 million in revenue for the quarter [12][17] - The company is on track with its Mexico market expansion, having signed up 15 distributors [27] Q&A Session Summary Question: How does Holley's sourcing mix and capabilities to respond differ from peers? - Management highlighted that Holley's breadth and depth of product across various categories positions it well to gain market share, especially with most production costs based in the U.S. [55] Question: What has been the feedback to the price increase announced in early April? - Overall feedback has been positive, with distribution partners appreciating the blended approach across the portfolio compared to competitors who have implemented larger price increases [58] Question: Can you elaborate on the moderation in demand witnessed through the first quarter? - Management noted that while January and February were slow due to weather conditions, March saw strong performance, and there have been no significant changes in demand trends since then [65] Question: How much exposure does the company have to China regarding tariffs? - Management stated that while most production costs are U.S.-based, the situation is fluid, and the company is actively working to mitigate tariff impacts [90] Question: Can you provide more details on the changes to Holly events? - The company is optimizing events to enhance customer experiences and increase revenue through VIP experiences and improved merchandising [94]

Financial Data and Key Metrics Changes - The company achieved net sales of $153 million, representing a 3.3% increase in core business compared to the prior year [14][48] - Gross margins improved to 41.9%, an increase of 910 basis points from 32.8% in the prior year [15][49] - Free cash flow for the quarter was negative $10.8 million, a decrease of $28.6 million compared to the prior year [15][51] - Adjusted EBITDA margin improved to 17.8%, an increase of 460 basis points from the prior year [16][50] Business Line Data and Key Metrics Changes - The direct-to-consumer channel saw significant growth with more than a 10% increase, while third-party platforms like Amazon and eBay experienced growth of over 50% [13][12] - The B2B channel strengthened relationships with partners, resulting in over 2.5% growth [12][22] - The domestic muscle vertical experienced a 3% year-over-year growth, while the Euro and import division recorded the highest growth at 17% [22] Market Data and Key Metrics Changes - The company is gaining market share despite a challenging macroeconomic environment, with no material pre-buy observed from customers in the second quarter [10][11] - The overall consumer sentiment has declined, indicating growing concerns regarding inflation and economic viability, which could moderate spending in the near term [53] Company Strategy and Development Direction - The company is focused on operational excellence and cash flow optimization, with a strategic framework that includes enhancing customer relationships and product innovation [23][54] - The company is implementing proactive cost reductions and strategic sourcing initiatives to mitigate tariff impacts [14][30] - The strategic initiatives have driven $15 million in revenue across key areas and achieved $3.1 million in cost reductions [30] Management's Comments on Operating Environment and Future Outlook - Management noted that the financial health of consumers shows signs of strain, which could impact discretionary spending [53] - The company is maintaining its revenue guidance for 2025 of $580 million to $600 million, implying approximately 2.5% growth at the midpoint [55] - Management expressed confidence in the company's ability to navigate near-term challenges while preserving free cash flow [54] Other Important Information - The company launched several new products across various divisions, contributing approximately $8.1 million in revenue for the quarter [14][19] - The company has made significant progress in reducing inventory levels, achieving a reduction of over $3 million since year-end 2024 [20][47] Q&A Session Summary Question: How does Holley's sourcing mix and capabilities to respond differ from peers? - Management highlighted that Holley's breadth and depth of product across various categories positions the company to take market share, especially with most production costs based in the U.S. [58][60] Question: What has been the feedback on the price increase from distribution partners? - Overall feedback has been positive, with distribution partners appreciating the blended approach across the portfolio, contrasting with competitors who have implemented larger price increases [61][63] Question: Can you elaborate on the moderation in demand witnessed in the first quarter? - Management noted that January and February saw slow sales due to weather conditions, but March was strong, and current demand trends remain stable [67][69] Question: What is the approach to pricing in light of tariffs? - The company is implementing a blended price increase across its portfolio, with a focus on maintaining competitive pricing relative to peers [70][72] Question: How much exposure does the company have to China regarding tariffs? - Management indicated that while most production is U.S.-based, the evolving tariff situation requires ongoing analysis and mitigation efforts [90][92] Question: How are Holley events being optimized for revenue generation? - The company is enhancing event structures to increase attendance and merchandise sales, providing more opportunities for engagement with enthusiasts [93][95]

Q1 2025 Financial Performance - Net sales reached $153.0 million, a 3.3% increase compared to the previous year, after adjusting for divestitures and strategic product rationalization[9] - Gross margin improved significantly to 41.9%, a 910 basis points increase year-over-year[9] - Adjusted EBITDA margin increased to 17.8%, a 460 basis points improvement compared to the previous year[9] - Free cash flow was negative at ($10.8) million, a decrease of ($28.6) million compared to the previous year[9] Growth Initiatives and Strategies - B2B channel experienced growth of approximately 2.5%[8] - DTC orders increased by over 10%, with third-party platforms like Amazon and eBay growing by more than 50%[8] - Product innovation and strategic pricing initiatives contributed $8.1 million in revenue[8] - The company is implementing proactive cost reductions and strategic sourcing initiatives to mitigate tariff impacts[8] Key Operational Improvements - In-stock percentage of the top 2,500 products increased by 2% year-over-year[9] - Operational efficiency improved by over $1 million year-over-year[9] - Past dues were reduced by 20% year-over-year[9] Financial Outlook - The company reaffirms its full-year 2025 net sales guidance of $580 million to $600 million, excluding the impact of tariffs, representing a year-over-year growth of 0.8% to 4.3%[39, 40] - Adjusted EBITDA for the full year 2025 is projected to be between $113 million and $130 million[39]

[First Quarter Highlights](index=1&type=section&id=First%20Quarter%20Highlights) Holley's Q1 2025 net sales decreased **3.5%** to **$153.0 million**, but core sales grew **3.3%**, with Adjusted EBITDA up **30.0%** to **$27.3 million** Q1 2025 Financial Highlights vs. Q1 2024 | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $153.0 million | $158.6 million | -3.5% | | Core Business Net Sales¹ | N/A | N/A | +3.3% | | Net Income | $2.8 million | $3.7 million | -24.3% | | Diluted EPS | $0.02 | $0.03 | -33.3% | | Adjusted Net Income² | $2.6 million | $0.1 million | +2500% | | Adjusted EBITDA² | $27.3 million | $21.0 million | +30.0% | | Net Cash Used in Operating Activities | ($7.8) million | $18.8 million | -141.4% | | Free Cash Flow² | ($10.8) million | $17.8 million | -160.8% | [Management Commentary](index=1&type=section&id=Management%20Commentary) Management attributes strong Q1 to DTC/B2B growth, **$8 million** from innovation, and **$3.0 million** cost savings, maintaining 2025 guidance - The company achieved significant growth in both its direct-to-consumer (DTC) and business-to-business (B2B) channels. DTC orders grew over **10%**, driven by a third-party marketplace strategy, while the B2B channel saw growth in its Top 50 accounts[4](index=4&type=chunk) - Product innovation generated approximately **$4 million** in new revenue, and portfolio management initiatives focused on product elasticity added another **$4 million**[5](index=5&type=chunk) - The company reduced non-value-added costs by **$3.0 million** through purchasing savings and operational improvements[6](index=6&type=chunk) - Full-year 2025 guidance is maintained due to strong Q1 core sales growth, but it does not account for potential tariff impacts, which the company is working to mitigate through strategic sourcing and pricing actions[6](index=6&type=chunk) [Strategic Business Highlights](index=2&type=section&id=Strategic%20Business%20Highlights) Holley achieved **3.3%** core sales growth, expanded DTC and B2B channels, with **10%** DTC order growth, while managing interest rate and tariff risks - Achieved core business net sales growth of **3.3%** year-over-year, excluding divestitures and product rationalization[14](index=14&type=chunk) - DTC orders grew over **10%**, with sales on third-party platforms like Amazon and eBay increasing by more than **50%**[14](index=14&type=chunk) - Product innovation and strategic pricing initiatives contributed a combined **$8 million** in revenue for the quarter[14](index=14&type=chunk) - The company entered into a cash-less collar to reduce interest rate exposure on its Term Loan through its maturity in November 2028[14](index=14&type=chunk) [2025 Outlook](index=2&type=section&id=2025%20Outlook) Holley reaffirms 2025 guidance: net sales **$580-600 million** and Adjusted EBITDA **$113-130 million**, excluding tariff impacts Full Year 2025 Outlook | Metric | Full Year 2025 Outlook | | :--- | :--- | | Net Sales | $580 - $600 million | | %YOY* vs. Core Business | 0.8% to 4.3% | | Adjusted EBITDA | $113 - $130 million | | Capital Expenditures | $12 - $16 million | | Depreciation and Amortization Expense | $22 - $24 million | | Interest Expense (excl. collar revaluation) | $47 - $52 million | - The guidance and year-over-year comparison exclude **$12.8 million** from divested non-core businesses and **$14.0 million** in clearance sales from strategic product rationalization in the prior year[9](index=9&type=chunk) - The company is not providing reconciliations for its forward-looking Adjusted EBITDA outlook due to the uncertainty and difficulty of predicting certain items needed for the comparable GAAP measure[9](index=9&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Q1 2025, covering Income, Balance Sheet, and Cash Flows [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Q1 2025 Income Statement (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Sales | $153,044 | $158,636 | | Gross Profit | $64,088 | $52,059 | | Operating Income | $19,343 | $10,208 | | Income Before Income Taxes | $3,893 | $2,839 | | Net Income (Loss) | $2,817 | $3,730 | | Diluted Net Income (Loss) per Share | $0.02 | $0.03 | [Condensed Consolidated Balance Sheet](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEET) Balance Sheet Highlights (in thousands) | Metric | March 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $39,068 | $56,087 | | Inventory | $189,143 | $192,523 | | Total Assets | $1,144,161 | $1,133,320 | | Long-Term Debt, Net | $544,194 | $545,385 | | Total Liabilities | $719,576 | $712,168 | | Total Stockholders' Equity | $424,585 | $421,152 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Q1 Cash Flow Summary (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash Provided by (Used in) Operating Activities | $(7,850) | $18,843 | | Net Cash Provided by (Used in) Investing Activities | $(7,740) | $(1,091) | | Net Cash Used in Financing Activities | $(2,370) | $(17,669) | | Net Change in Cash and Cash Equivalents | $(17,019) | $46 | | Cash and Cash Equivalents, End of Period | $39,068 | $41,127 | [Use and Reconciliation of Non-GAAP Financial Measures](index=7&type=section&id=Use%20and%20Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section explains Holley's non-GAAP measures (Adjusted EBITDA, Free Cash Flow) and their GAAP reconciliations for performance evaluation - The company uses non-GAAP measures like Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow to evaluate financial performance, establish internal budgets, and manage the business, as they are believed to better represent underlying performance[24](index=24&type=chunk) [Reconciliation of Net Income to Adjusted EBITDA](index=7&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBITDA) Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income (Loss) | $2,817 | $3,730 | | Interest Expense, Net | $15,708 | $11,004 | | Income Tax Expense (Benefit) | $1,076 | $(891) | | Depreciation & Amortization | $5,831 | $5,900 | | EBITDA | $25,432 | $19,743 | | Other Adjustments | $1,858 | $1,213 | | **Adjusted EBITDA** | **$27,290** | **$20,956** | | Adjusted EBITDA Margin | 17.8% | 13.2% | [Reconciliation for Bank-adjusted EBITDA Leverage Ratio](index=8&type=section&id=Reconciliation%20for%20Bank-adjusted%20EBITDA%20Leverage%20Ratio) Bank-adjusted EBITDA Leverage Ratio Calculation | Metric | March 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Adjusted EBITDA (TTM) | $116,827 | $110,493 | | Adjusted EBITDA per Credit Agreement (TTM) | $120,420 | $122,754 | | Net Indebtedness per Credit Agreement | $520,719 | $511,840 | | **Bank-adjusted EBITDA Leverage Ratio** | **4.32x** | **4.17x** | [Reconciliation of Net Income to Adjusted Net Income and EPS](index=9&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20Net%20Income%20and%20EPS) Reconciliation to Adjusted Net Income & EPS (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income (Loss) | $2,817 | $3,730 | | Adjustments (Fair Value Changes, etc.) | $(258) | $(3,665) | | **Adjusted Net Income (Loss)** | **$2,559** | **$65** | | Diluted Net Income (Loss) per Share | $0.02 | $0.03 | | **Adjusted Diluted EPS** | **$0.02** | **$0.00** | [Reconciliation for Free Cash Flow](index=10&type=section&id=Reconciliation%20for%20Free%20Cash%20Flow) Free Cash Flow Calculation (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $(7,850) | $18,843 | | Capital Expenditures, Net of Dispositions | $(2,980) | $(1,091) | | **Free Cash Flow** | **$(10,830)** | **$17,752** |

Core Viewpoint - Holley Inc. (HLLY) has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][2]. Earnings Estimates and Stock Price Impact - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with near-term stock price movements [3][5]. - Institutional investors utilize earnings estimates to determine the fair value of stocks, leading to buying or selling actions that affect stock prices [3]. Business Improvement Indicators - The upgrade in Holley's rating reflects an improvement in the company's underlying business, suggesting that investors may respond positively by driving the stock price higher [4][9]. - Holley is projected to earn $0.26 per share for the fiscal year ending December 2025, representing a year-over-year increase of 30% [7]. Analyst Sentiment and Consensus - Over the past three months, the Zacks Consensus Estimate for Holley has increased by 7.7%, indicating a positive trend in analyst sentiment [7]. - The Zacks Rank system maintains a balanced distribution of ratings, with only the top 20% of stocks receiving a 'Strong Buy' or 'Buy' rating, positioning Holley favorably for potential market-beating returns [8][9].

Core Viewpoint - Kaskela Law LLC is investigating Holley Inc. for potential securities fraud on behalf of long-term shareholders, following a complaint that alleges misleading statements made by the company during a specified class period [1][2]. Summary by Sections Investigation Details - A securities fraud complaint was filed against Holley for misleading investors about its business and growth prospects between July 21, 2021, and February 6, 2023 [2]. - The complaint highlights that Holley excluded resellers from promotions, leading them to promote competitors' products, and failed to enforce minimum advertised pricing on most products [3]. Financial Impact - Following disclosures of the alleged misconduct, Holley's stock price fell from over $12.50 per share in July 2022 to below $3.00 per share by February 2023 [3]. Legal Rights and Options - Holley shareholders who acquired shares before May 12, 2022, are encouraged to contact Kaskela Law LLC for information regarding their legal rights and options [4].