Holley (HLLY) - 2025 Q1 - Quarterly Results

First Quarter Highlights 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 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] - Product innovation generated approximately $4 million in new revenue, and portfolio management initiatives focused on product elasticity added another $4 million[5] - The company reduced non-value-added costs by $3.0 million through purchasing savings and operational improvements[6] - 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] Strategic Business Highlights 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] - DTC orders grew over 10%, with sales on third-party platforms like Amazon and eBay increasing by more than 50%[14] - Product innovation and strategic pricing initiatives contributed a combined $8 million in revenue for the quarter[14] - The company entered into a cash-less collar to reduce interest rate exposure on its Term Loan through its maturity in November 2028[14] 2025 Outlook 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] - 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] Financial Statements 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 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 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 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 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] Reconciliation of Net Income to Adjusted EBITDA 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 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 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 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 |