Holley (US:HLLY)2024-08-07 20:06Financial Performance - Net sales for the 13-week period ended June 30, 2024 decreased by $5.8 million, or 3.3%, to $169.5 million compared to $175.3 million for the same period in 2023[101] - Net sales for the 26-week period ended June 30, 2024 decreased by $19.3 million, or 5.6%, to $328.1 million compared to $347.4 million for the same period in 2023[117] - Gross profit increased by $0.6 million, or 0.8%, to $70.3 million, with a gross margin of 41.5%, up from 39.8% in the prior year[104] - Gross profit for the 26-week period ended June 30, 2024 decreased by $15.1 million, or 11.0%, to $122.4 million, with a gross margin of 37.3% compared to 39.6% in the prior year[121] - Operating income for the period decreased by $2.1 million, or 6.9%, to $27.9 million compared to $30.0 million in the prior year[109] - Operating income for the 26-week period ended June 30, 2024 decreased by $17.8 million, or 31.9%, to $38.1 million compared to $55.9 million for the same period in 2023[126] - Net income for the period was $17.1 million, compared to $13.0 million for the same period in 2023, marking a 31.8% increase[116] - Net income for the 26-week period ended June 30, 2024 increased by $3.6 million, or 21.0%, to $20.8 million compared to $17.2 million for the same period in 2023[132] Costs and Expenses - Cost of goods sold for the same period decreased by $6.3 million, or 6.0%, to $99.2 million, influenced by lower freight costs and product mix[103] - Selling, general, and administrative costs rose by $5.5 million, or 18.8%, to $34.6 million, representing 20.4% of sales compared to 16.6% in the previous year[105] - Research and development costs decreased to $4.3 million, down from $6.2 million, primarily due to headcount reductions[106] - Research and development costs for the 26-week period ended June 30, 2024 decreased to $9.1 million from $12.8 million in the prior year, primarily due to headcount reductions[123] - Selling, general, and administrative costs increased by $8.4 million, or 14.3%, to $67.6 million, with costs as a percentage of sales rising to 20.6% from 17.0%[122] Interest and Debt - Interest expense increased by $3.3 million, or 33.1%, to $13.2 million, reflecting a higher effective interest rate on outstanding debt[113] - Interest expense for the 26-week period ended June 30, 2024 decreased by $4.0 million, or 14.2%, to $24.2 million compared to $28.2 million in the prior year[129] - As of June 30, 2024, the company had $564.2 million in term loan and revolver borrowings subject to variable interest rates, with a weighted average borrowing rate of 9.2%[152] - A hypothetical 100 basis point increase in interest rates would result in an approximately $0.7 million increase in annual interest expense, while a decrease would lead to a $3.9 million reduction in annual interest expense[152] Cash Flow and Liquidity - Free Cash Flow for the 13-week period ended June 30, 2024, was $24,353, down from $29,045 in the same period of 2023, a decrease of 16.5%[141] - Net cash provided by operating activities for the 26-week period ended June 30, 2024, was $44.5 million, an increase of 29.3% compared to $34.4 million for the same period in 2023[147] - Cash used in investing activities remained stable at $2.4 million for both the 26-week periods ended June 30, 2024, and July 2, 2023, primarily due to capital expenditures[148] - Cash used in financing activities increased to $30.0 million for the 26-week period ended June 30, 2024, compared to $15.6 million for the same period in 2023, mainly due to $28.6 million in principal payments on long-term debt[148] - As of June 30, 2024, the company had cash of $53.1 million and availability of $122.9 million under its revolving credit facility[143] - The company had $2.2 million in letters of credit outstanding under its revolving credit facility as of June 30, 2024[143] Strategic Outlook - The company plans to continue evaluating opportunities for strategic acquisitions to complement its current business and expand its addressable market[93] - The company expects capital expenditures in the range of $6 million to $8 million for fiscal year 2024[144] Comprehensive Income - Total comprehensive income for the period was $17.2 million, up from $13.3 million in the prior year, including foreign currency translation adjustments[116] - Total comprehensive income for the 26-week period ended June 30, 2024 was $20.7 million, an increase of $3.4 million, or 19.6%, from $17.3 million in the prior year[132] Adjusted Metrics - Adjusted Gross Margin for the 26-week period ended June 30, 2024 was 40.0%, up from 39.3% in the prior year after adjusting for product rationalization initiatives[121] - Adjusted Gross Profit for the 13-week period ended June 30, 2024, was $69,415, compared to $68,948 in the same period of 2023, reflecting a 0.7% increase[138] - Adjusted EBITDA for the 13-week period ended June 30, 2024, was $37,418, slightly down from $37,923 in the same period of 2023, indicating a decrease of 1.3%[137] Risk Factors - The company is exposed to credit risk associated with cash and cash equivalents and trade receivables, with significant customers increasing potential credit risk during economic downturns[153] - The company is exposed to foreign currency exchange rate fluctuations, primarily related to transactions in Euros and Canadian dollars, although most sales and expenses are in U.S. Dollars[154] - The company does not currently hedge foreign currency exposure but may consider strategies to mitigate this risk in the future if necessary[154] Other Financial Metrics - The company’s net income margin for the 13-week period ended June 30, 2024, was 10.1%, up from 7.4% in the same period of 2023[137] - The company successfully exited the Covenant Relief Period after June 30, 2024, following an amendment to its Credit Agreement[143] - The company recognized a gain of $6.5 million from the change in fair value of the warrant liability for the 26-week period ended June 30, 2024, compared to a loss of $3.5 million in the prior year[127]