Company reaffirms full year 2023
outlook
Sales leverage, operational improvements and
cost initiatives drive significant sequential profitability
increase
Holley Inc. (NYSE: HLLY), a leading platform serving performance
automotive enthusiasts, today announced financial results for its
first quarter ended April 2, 2023.
First Quarter Highlights vs. Prior Year
Period
- Net Sales decreased 13.9% to $172.2 million compared to $200.1
million in the prior year's first quarter
- Gross Profit decreased 18.1% to $67.7 million compared to $82.7
million in the prior year's first quarter
- Net Income of $4.3 million, or $0.04 per diluted share,
compared to Net Income of $16.9 million, or $0.15 per diluted
share, in the prior year's first quarter
- Adjusted Net Income1 of $6.1 million, compared to Adjusted Net
Income1 of $21.5 million in the prior year's first quarter
- Adjusted EBITDA1 of $33.9 million compared to $46.0 million in
the prior year's first quarter
1See "Use and Reconciliation of Non-GAAP Financial
Measures" below.
“Holley made strong progress on its operational improvement and
cost savings initiatives during the first quarter,” said Michelle
Gloeckler, Holley’s Interim President and Chief Executive Officer.
“Looking to the balance of 2023, we are strategically focused on
streamlining our operations, ongoing acquisition synergy capture,
and improving both supply chain and working capital management. We
have also not taken our foot off the gas in terms of inspiring our
large and loyal base of enthusiasts with new and exciting products
across our strong roster of brands, as indicated by our recent
Sniper 2.0 announcement. The Sniper 2.0 launch will be an extension
of one of our most popular fuel injection platforms and exemplifies
Holley’s commitment to innovation and unmatched go-to-market
capabilities.”
“I am confident we will continue to make Holley a much stronger
company in 2023, and I still expect to achieve our targeted level
of profitability, including a 40% gross margin and greater than 20%
EBITDA margin in the near term.”
Key Operating Metrics and Strategic
Highlights
- DTC sales growth of 6% compared to the prior year’s first
quarter
- Past due orders reduced during the first quarter but remain
elevated in our Electronics category
- $9.0 million of year-over-year savings in the first quarter of
2023 driven by operational improvements and cost initiatives
- Holley’s bank-adjusted EBITDA leverage ratio at quarter end was
well below the amended covenant ceiling of 7.25x for Q1 and Q2 of
2023
Full Year 2023 Outlook
Holley reaffirmed the following outlook for 2023:
- Net Sales in the range of $625-$675 million
- Adjusted EBITDA of $108-$122 million
- Capital Expenditures in the range of $10-$15 million
- Depreciation and Amortization Expense of $23-$25 million
- Interest Expense in the range of $60-$65 million
“Holley delivered significant sequential top and bottom-line
improvements relative to the fourth quarter of 2022, driven
primarily by a combination of sales leverage and our cost savings
initiatives beginning to benefit results,” said Jesse Weaver,
Holley’s Chief Financial Officer. “The stronger results, along with
our continued focus on our financial priorities, drove positive
free cash flow in the quarter. As we look to the balance of fiscal
2023, we remain fully committed to restoring Holley’s strong
profitability, improving free cash flow, optimizing working
capital, and de-levering the balance sheet.”
“On the back of a solid first quarter, we are reaffirming our
full year 2023 guidance ranges, which assume we will face continued
supply chain uncertainty, particularly a strained ability to
procure automotive grade microchips, as a well as a normalization
of demand for the remainder of the fiscal year. Despite these
headwinds, we expect year-over-year comparisons for both revenue
growth and EBITDA margins to improve throughout the year. We are
confident that Holley will get back to achieving its long-term
profitability targets, and we believe that our position as an
industry leader with ample runway for growth is unchanged.”
Conference Call
A conference call and audio webcast has been scheduled for 8:30
a.m. Eastern Time today to discuss these results. Investors,
analysts, and members of the media interested in listening to the
live presentation are encouraged to join a webcast of the call
available on the investor relations portion of the Company’s
website at investor.holley.com. For those that cannot join the
webcast, you can participate by dialing 877-407-4019 (Toll Free) or
201-689-8337 (Toll) using the access code of 13737887.
For those unable to participate, a telephone replay recording
will be available until Thursday, May 18, 2023. To access the
replay, please call 877-660-6853 (Toll Free) or 201-612-7415 (Toll)
and enter confirmation code 13737887. A web-based archive of the
conference call will also be available on the Company’s
website.
About Holley Inc.
Holley Inc. (NYSE: HLLY) is a leading designer, marketer, and
manufacturer of high-performance products for car and truck
enthusiasts. Holley offers a leading portfolio of iconic brands
that deliver innovation and inspiration to a large and diverse
community of millions of avid automotive enthusiasts who are
passionate about the performance and personalization of their
classic and modern cars. Holley has disrupted the performance
category by putting the enthusiast consumer first, developing
innovative new products, and building a robust M&A process that
has added meaningful scale and diversity to its platform. For more
information on Holley, visit https://www.holley.com.
Forward-Looking
Statements
Certain statements in this press release may be considered
“forward-looking statements” within the meaning of the “safe
harbor” provisions of the United States Private Securities
Litigation Reform Act of 1995. Forward-looking statements generally
relate to future events or Holley’s future financial or operating
performance. For example, projections of future revenue and
adjusted EBITDA and other metrics are forward-looking statements.
In some cases, you can identify forward-looking statements by
terminology such as “may,” “should,” “expect,” “intend,” “will,”
“estimate,” “anticipate,” “believe,” “predict,” “or” or the
negatives of these terms or variations of them or similar
terminology. Such forward-looking statements are subject to risks,
uncertainties, and other factors which could cause actual results
to differ materially from those expressed or implied by such
forward-looking statements. These forward-looking statements are
based upon estimates and assumptions that, while considered
reasonable by Holley and its management, are inherently uncertain.
Factors that may cause actual results to differ materially from
current expectations include, but are not limited to: 1) the
ability of Holley to grow and manage growth profitably which may be
affected by, among other things, competition; to maintain
relationships with customers and suppliers: and to retain its
management and key employees; 2) costs related to Holley being a
public company; 3) disruptions to Holley's operations, including as
a result of cybersecurity incidents; 4) changes in applicable laws
or regulations; 5) the outcome of any legal proceedings that may be
instituted against Holley; 6) general economic and political
conditions, including the current macroeconomic environment,
political tensions and war (such as the ongoing conflict in
Ukraine); 7) the possibility that Holley may be adversely affected
by other economic, business and/or competitive factors, including
recent events affecting the financial services industry (such as
the closures of Silicon Valley Bank and Signature Bank); 8)
Holley’s estimates of its financial performance; 9) our ability to
anticipate and manage through disruptions and higher costs in
manufacturing, supply chain, logistical operations, and shortages
of certain company products in distribution channels; and 10) other
risks and uncertainties set forth in the section entitled “Risk
Factors” and “Cautionary Note Regarding Forward-Looking Statements”
in the Annual Report on Form 10-K for the year ended December 31,
2022 filed with the U.S. Securities and Exchange Commission (“SEC”)
on March 15, 2023, and that are otherwise described or updated from
time to time in Holley’s filings with the SEC. Although Holley
believes the expectations reflected in the forward-looking
statements are reasonable, nothing in this press release should be
regarded as a representation by any person that the forward-looking
statements or projections set forth herein will be achieved or that
any of the contemplated results of such forward looking statements
or projections will be achieved. There may be additional risks that
Holley presently does not know or that Holley currently believes
are immaterial that could also cause actual results to differ from
those contained in the forward-looking statements. You should not
place undue reliance on forward-looking statements, which speak
only as of the date they are made. Holley undertakes no duty to
update these forward-looking statements, except as otherwise
required by law.
[Financial Tables to Follow]
HOLLEY INC. and
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
For the thirteen weeks
ended
April 2,
April 3,
Variance
Variance
2023
2022
($)
(%)
Net Sales
$
172,205
$
200,055
$
(27,850
)
-13.9%
Cost of Goods Sold
104,492
117,334
(12,842
)
-10.9%
Gross Profit
67,713
82,721
(15,008
)
-18.1%
Selling, General, and Administrative
30,017
34,342
(4,325
)
-12.6%
Research and Development Costs
6,653
8,161
(1,508
)
-18.5%
Amortization of Intangible Assets
3,679
3,661
18
0.5%
Acquisition and Restructuring Costs
1,339
290
1,049
361.7%
Other Operating Expense
51
222
(171
)
-77.0%
Operating Expense
41,739
46,676
(4,937
)
-10.6%
Operating Income
25,974
36,045
(10,071
)
-27.9%
Change in Fair Value of Warrant
Liability
1,435
2,227
(792
)
-35.6%
Change in Fair Value of Earn-Out
Liability
428
2,381
(1,953
)
-82.0%
Interest Expense
18,298
7,391
10,907
147.6%
Non-Operating Expense
20,161
11,999
8,162
68.0%
Income Before Income Taxes
5,813
24,046
(18,233
)
-75.8%
Income Tax Expense
1,566
7,188
(5,622
)
-78.2%
Net Income
$
4,247
$
16,858
$
(12,611
)
-74.8%
Comprehensive Income:
Foreign Currency Translation
Adjustment
(199
)
241
(440
)
nm
Total Comprehensive Income
$
4,048
$
17,099
$
(13,051
)
-76.3%
Common Share Data:
Basic Net Income per Share
$
0.04
$
0.15
$
(0.11
)
-73.3%
Diluted Net Income per Share
$
0.04
$
0.15
$
(0.11
)
-73.3%
Weighted Average Common Shares Outstanding
- Basic
117,154
115,876
1,278
1.1%
Weighted Average Common Shares Outstanding
- Diluted
117,245
116,049
1,196
1.0%
nm - not meaningful
HOLLEY INC. and
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEET
(In thousands)
(Unaudited)
As of
April 2,
December 31,
2023
2022
Assets
Total Current Assets
$
324,184
$
324,963
Property, Plant and Equipment, Net
50,621
52,181
Goodwill
418,121
418,121
Other Intangibles, Net
421,292
424,855
Right-of-Use Assets
28,099
29,522
Total Assets
$
1,242,317
$
1,249,642
Liabilities and Stockholders' Equity
Total Current Liabilities
$
95,565
$
101,259
Long-Term Debt, Net of Current Portion
636,151
643,563
Deferred Taxes
56,099
58,390
Other Noncurrent Liabilities
34,104
30,440
Total Liabilities
821,919
833,652
Common Stock
12
12
Additional Paid-In Capital
368,482
368,122
Accumulated Other Comprehensive Loss
(1,143
)
(944
)
Retained Earnings
53,047
48,800
Total Stockholders' Equity
420,398
415,990
Total Liabilities and Stockholders'
Equity
$
1,242,317
$
1,249,642
HOLLEY INC. and
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the thirteen weeks
ended
April 2,
April 3,
2023
2022
Operating
Activities
Net Income
$
4,247
$
16,858
Adjustments to Reconcile to Net Cash
13,874
14,000
Changes in Operating Assets and
Liabilities
(14,482
)
(12,509
)
Net Cash Provided by Operating
Activities
3,639
18,349
Investing
Activities
Capital Expenditures, Net of
Dispositions
(683
)
(5,587
)
Acquisitions / Divestitures, net
—
(1,617
)
Net Cash Used in Investing Activities
(683
)
(7,204
)
Financing
Activities
Net Change in Debt
(7,284
)
(3,288
)
Deferred financing fees
(1,117
)
—
Payments from Stock-Based Award
Activities
(34
)
—
Net Cash Used in Financing Activities
(8,435
)
(3,288
)
Effect of Foreign Currency Rate
Fluctuations on Cash
145
(101
)
Net Change in Cash and Cash
Equivalents
(5,334
)
7,756
Cash and Cash
Equivalents
Beginning of Period
26,150
36,325
End of Period
$
20,816
$
44,081
Holley believes EBITDA, Adjusted EBITDA, Adjusted Net Income,
and Organic Sales are useful to investors in evaluating the
Company’s financial performance and in comparing the Company’s
financial results between periods. In addition, Holley uses these
measures internally to establish forecasts, budgets and operational
goals to manage and monitor its business. Holley believes that
these non-GAAP and other financial measures help to depict a more
realistic representation of the performance of the underlying
business, enabling Holley to evaluate and plan more effectively for
the future.
HOLLEY INC. and
SUBSIDIARIES
USE AND RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
(In thousands)
(Unaudited)
For the thirteen weeks
ended
April 2,
April 3,
2023
2022
Net Income
$
4,247
$
16,858
Adjustments:
Interest Expense
18,298
7,391
Income Taxes
1,566
7,188
Depreciation
2,485
2,140
Amortization
3,679
3,661
EBITDA
30,275
37,238
Acquisition and Restructuring Costs
1,339
290
Change in Fair Value of Warrant
Liability
1,435
2,227
Change in Fair Value of Earn-Out
Liability
428
2,381
Equity-Based Compensation Expense
394
3,162
Notable Items
24
506
Other Expense
51
222
Adjusted EBITDA
$
33,946
$
46,026
For the thirteen weeks
ended
April 2,
April 3,
2023
2022
Net Income
$
4,247
$
16,858
Special items:
Adjust for: Change in Fair Value of
Warrant Liability
1,435
2,227
Adjust for: Change in Fair Value of
Earn-Out Liability
428
2,381
Adjusted Net Income (Loss)
$
6,110
$
21,466
13 Weeks Ended
April 2, 2023
Net Sales
172,205
Less: Sales from Acquisitions within 365
Days of Purchase (Non-Comparable to Prior Year)
(1,760
)
Organic Sales (Comparable to Prior Year
Period Net Sales)
$
170,445
2023 Forecast
Low Range
High Range
Net Sales
$
625,000
$
675,000
Adjusted EBITDA
108,000
122,000
Depreciation and Amortization
23,000
25,000
Interest Expense
60,000
65,000
Capital Expenditures
10,000
15,000
Holley defines EBITDA as earnings before (a) interest expense,
(b) income taxes and (c) depreciation and amortization. Holley
defines Adjusted EBITDA as EBITDA plus (i) acquisition and
restructuring costs, (ii) changes in the fair value of the warrant
liability, (iii) changes in the fair value of the earn-out
liability, (iv) compensation expense related to equity awards, (v)
notable items that in 2022 consist primarily of non-cash
adjustments related to the adoption of ASC 842, "Leases," and (vi)
other expenses, includes net losses from disposal of fixed assets
and foreign currency transactions. We have included within the
definition of Adjusted EBITDA changes in the fair value of warrant
liabilities, changes in the fair value of the earn-out liability,
as management believes such matters, when they occur, do not
directly reflect the performance of the underlying business.
Holley calculates Adjusted Net Income by excluding the after-tax
effect of items considered by management to be special items from
the earnings reported under U.S. GAAP. Management uses this measure
to focus on on-going operations and believes that it is useful to
investors because it enables them to perform meaningful comparisons
of past and present consolidated operating results. Holley believes
that using this information, along with net income, provides for a
more complete analysis of the results of operations.
Organic sales, or sales excluding the impact of acquisitions,
exclude the impact from sales from acquisitions within 365 days of
the consummation of such acquisition. Holley believes organic sales
provides investors with useful supplemental information regarding
Holley's underlying sales trends.
EBITDA, Adjusted EBITDA, Adjusted Net Income, and organic sales
are not prepared in accordance with accounting principles generally
accepted in the United States (“GAAP”) and may be different from
non-GAAP and other financial measures used by other companies.
These measures should not be considered as measures of financial
performance under GAAP, and the items excluded from or included in
these metrics are significant components in understanding and
assessing Holley’s financial performance. These metrics should not
be considered as alternatives to net income or any other
performance measures derived in accordance with GAAP.
A forecast for full year 2023 Adjusted EBITDA is provided on a
non-GAAP basis only because certain information necessary to
calculate the most comparable GAAP measure is unavailable due to
the uncertainty and inherent difficulty of predicting the
occurrence and the future financial statement impact of certain
items. Therefore, as a result of the uncertainty and variability of
the nature and amount of future adjustments, which could be
significant, Holley is unable to provide a reconciliation of these
measures without unreasonable effort.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230511005161/en/
Investor Relations: Ross Collins / Stephen Poe Alpha IR
Group 312-445-2870 HLLY@alpha-ir.com
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