Holley (HLLY)2024-11-08 17:31Financial Data and Key Metrics Changes - Net sales decreased by 14.4% 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 23.8 million compared to the prior year [21] - Net loss for the third quarter was 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]