Holley (US:HLLY)2022-05-15 16:56Financial Data and Key Metrics Changes - Holley reported net sales of $200.1 million in Q1 2022, an increase of $39.7 million or 24.8% from Q1 2021 [14] - Organic sales contributed $21.6 million or 13.5% of year-over-year growth, driven by improved price realization and higher unit sales volume [15] - Gross margin increased to 41.3% from 41.0% in Q1 2021, reflecting higher price realization that offset significant freight expense increases [16] - Net income for Q1 2022 was $16.9 million, with adjusted net income increasing to $21.5 million from $15.1 million in Q1 2021 [21] - Adjusted EBITDA rose to $46 million in Q1 2022, up from $43.8 million in 2021 [22] Business Line Data and Key Metrics Changes - Sales associated with acquisitions contributed $18.1 million or 11.3% of year-over-year growth, highlighting the strength of Holley's platform [13] - The electronic fuel injection and safety product categories drove higher unit sales volume, contributing to organic growth [15] Market Data and Key Metrics Changes - Supply chain challenges continue to limit the ability to fully satisfy consumer demand, but the company managed to capture growth despite these challenges [10] - Direct-to-consumer sales remained strong, outpacing organic growth [42] Company Strategy and Development Direction - M&A remains a pivotal piece of Holley's growth strategy, with a focus on attractive companies to expand market share and drive shareholder value [12] - The company is committed to developing innovative products for enthusiast consumers while managing supply chain and inflationary headwinds [11][25] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that supply chain and inflationary challenges are top of mind, but they remain focused on product development and consumer engagement [11][25] - The company reaffirmed its guidance for annual net sales in the range of $765 million to $790 million and adjusted EBITDA between $186 million and $194 million [23] Other Important Information - Total selling, general and administrative expenses increased by 43% in Q1 2022, driven by equity compensation and public company expenses [18] - Interest expense decreased by 27% to $7.4 million, benefiting from a $100 million paydown on debt [20] Q&A Session Summary Question: Impact of freight costs on growth and guidance - Management noted that freight costs have moderated but remain elevated, with expectations of continued high costs in Q2 before lapping begins [30] Question: Correlation between fuel prices and demand - Management indicated that while fuel prices can impact discretionary income, automotive enthusiasts are likely to continue pursuing their interests despite higher costs [35] Question: Changes in consumer demand - Direct-to-consumer sales remained strong, while some resellers reduced inventory in response to economic concerns [42][43] Question: Inventory position and ability to meet demand - Management expressed that current inventory levels are insufficient to meet consumer demand due to supply chain challenges [49] Question: Integration of recent acquisitions - Management confirmed that supply chain issues have not significantly impacted the integration of recent acquisitions, with a focus on completing the Simpson integration in Q2 [56]