Strong performance yields year-over-year
revenue growth while delivering meaningfully improved margins
through operational improvements
Solid cash flow generation and debt paydown
significantly reduces net leverage
Comprehensive business transformation
underway to unlock growth, improve margins, and become more
customer focused
Holley Inc. (NYSE: HLLY), the leading consumer platform for
automotive performance enthusiasts, today announced financial
results for its third quarter ended October 1, 2023.
Third Quarter Highlights vs. Prior Year
Period
- Net Sales increased 1.1% to $156.5 million compared to $154.8
million last year
- Gross Profit increased 20.6% to $58.4 million compared to $48.4
million last year, and gross margin was 37.3% compared to 31.3%
last year
- Net Income was $0.8 million, or $0.01 per diluted share,
compared to $31.6 million, or $0.27 per diluted share, last
year
- Net Income Margin of 0.5% compared to 20.4% last year1
- Adjusted Net Income1 was $3.5 million compared to an Adjusted
Net Loss of $(4.1) million last year
- Adjusted EBITDA1 was $29.7 million compared to $16.4 million
last year with a margin of 19.0% versus 10.6% last year
- Net Cash Provided by Operating Activities was $22.5 million
compared to $(8.7) million last year
- Free Cash Flow1 was $21.7 million compared to $(10.6) million
last year
1See “Use and Reconciliation of Non-GAAP Financial Measures”
below.
“Holley delivered strong third quarter results, highlighted by a
return to top-line growth and marked improvement in key
profitability metrics,” said Matthew Stevenson, Holley’s President
and Chief Executive Officer. “Our efforts to strengthen Holley’s
employee and customer relationships and optimize our operations are
taking hold, and we are highly confident in our ability to continue
delivering on our key strategic priorities and drive long-term
sustainable growth for our shareholders.”
“Consumer and customer engagement programs remain central to
Holley’s ongoing business transformation, and during the quarter we
were proud to celebrate a record-setting season of enthusiast
consumer events,” Stevenson continued. “Additionally, in an effort
to strategically align our brand and business portfolio with the
emerging needs of our customer, we established seven distinct
product category teams. This new organizational design is one of
many steps underway to further strengthen our customer focus and
drive growth.”
Stevenson concluded, “On behalf of our executive leadership
team, I would like to thank our employees for their personal
commitment and great teamwork as well as our customers and
distribution partners for their continued enthusiasm and trust in
our products.”
Key Operating Metrics and Strategic
Highlights
- Reduced past due orders sequentially by $8.1 million during the
third quarter, across all categories
- Reduced inventory sequentially by $10.3 million during the
third quarter
- $10.4 million of year-over-year savings in the third quarter of
2023 and tracking towards $35 million for the full year driven by
operational improvements and cost savings initiatives
- Completed $25 million in early debt paydown against the
Company’s first lien term loan facility, saving approximately $1
million annually in interest expense at current rates
- Holley’s bank-adjusted EBITDA leverage ratio at quarter end of
4.89x was well below the amended covenant ceiling of 6.50x for Q3
of 2023 and below the original covenant level of 5.0x
- Completed a record-setting season of consumer-focused Holley
events, encompassing five multi-day festivals
- Implemented a new organizational design, including seven
distinct product category teams, to drive growth through expansion
of Holley’s portfolio of brands and products into additional
consumer verticals
Full Year 2023 Outlook
Holley revised its outlook for 2023 for certain guidance in
comparison to the outlook provided by Holley in its earnings
release on August 10, 2023, as follows:
Full Year 2023 Metric
Previous Outlook
Revised Outlook
Net Sales
$635 - $675 million
$645 - $675 million
Adjusted EBITDA
$118 - $128 million
$123 - $128 million
Capital Expenditures
$5 - $10 million
$6 - $8 million
Depreciation and Amortization
Expense
$23 - $25 million
$24 - $26 million
Interest Expense
$58 - $62 million
$58 - $62 million
“We are pleased with our third quarter financial results, as
Holley delivered net sales growth and continued strong
year-over-year improvements in gross margin and Adjusted EBITDA,”
said Jesse Weaver, Holley’s Chief Financial Officer. “Our strong
overall performance benefited from continued progress on reducing
our past due orders and reducing inventory levels, both of which
contributed to strong free cash flow in the quarter, allowing us to
pay down $25 million in debt in September. As a result of this
strong performance, we are raising the lower end of both our net
sales and Adjusted EBITDA guidance ranges.”
“Going forward, we remain confident in our ability to restore
and maintain profitability, deliver strong free cash flow, optimize
working capital, and continue de-levering our balance sheet. We are
highly focused on driving growth by delivering value to our
enthusiast customers and increasing profitability through greater
efficiency,” Weaver concluded.
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 13741890.
For those unable to participate, a telephone replay recording
will be available until Wednesday, November 15, 2023. To access the
replay, please call 877-660-6853 (Toll Free) or 201-612-7415 (Toll)
and enter confirmation code 13741890. A web-based archive of the
conference call will also be available on the Company’s
website.
Additional Financial
Information
The Investor Relations page of Holley’s website,
investor.holley.com contains a significant amount of financial
information about Holley, including our earnings presentation,
which can be found under Events & Presentations. Holley
encourages investors to visit this website regularly, as
information is updated, and new information is posted.
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 (including the conflict in Ukraine, the
conflict in Israel and surrounding areas, and the possible
expansion of such conflicts and potential geopolitical
consequences); 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 certain regional banks); 8) Holley’s
estimates of its financial performance; 9) Holley’s 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/or disclosed in any subsequent 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
For the thirty-nine weeks
ended
October 1,
October 2,
Variance
Variance
October 1,
October 2,
Variance
Variance
2023
2022
($)
(%)
2023
2022
($)
(%)
Net Sales
$
156,530
$
154,775
$
1,755
1.1
%
$
503,997
$
534,250
$
(30,253
)
-5.7
%
Cost of Goods Sold
98,156
106,383
(8,227
)
-7.7
%
308,162
327,849
(19,687
)
-6.0
%
Gross Profit
58,374
48,392
9,982
20.6
%
195,835
206,401
(10,566
)
-5.1
%
Selling, General, and Administrative
28,880
31,921
(3,041
)
-9.5
%
87,998
102,532
(14,534
)
-14.2
%
Research and Development Costs
6,100
6,039
61
1.0
%
18,935
22,396
(3,461
)
-15.5
%
Amortization of Intangible Assets
3,687
3,662
25
0.7
%
11,040
10,985
55
0.5
%
Impairment of Indefinite-Lived Intangible
Assets
—
2,395
(2,395
)
-100.0
%
—
2,395
(2,395
)
-100.0
%
Acquisition and Restructuring Costs
415
1,266
(851
)
-67.2
%
2,106
3,247
(1,141
)
-35.1
%
Other Operating Expense (Benefit)
(28
)
47
(75
)
-159.6
%
508
594
(86
)
-14.5
%
Operating Expense
39,054
45,330
(6,276
)
-13.8
%
120,587
142,149
(21,562
)
-15.2
%
Operating Income
19,320
3,062
16,258
531.0
%
75,248
64,252
10,996
17.1
%
Change in Fair Value of Warrant
Liability
2,064
(30,171
)
32,235
nm
5,516
(51,112
)
56,628
nm
Change in Fair Value of Earn-Out
Liability
700
(7,429
)
8,129
nm
2,089
(9,282
)
11,371
nm
Interest Expense, Net
13,712
10,428
3,284
31.5
%
41,909
26,780
15,129
56.5
%
Non-Operating Expense
16,476
(27,172
)
43,648
nm
49,514
(33,614
)
83,128
nm
Income Before Income Taxes
2,844
30,234
(27,390
)
-90.6
%
25,734
97,866
(72,132
)
-73.7
%
Income Tax Expense (Benefit)
2,092
(1,345
)
3,437
nm
7,756
8,866
(1,110
)
-12.5
%
Net Income
$
752
$
31,579
$
(30,827
)
-97.6
%
$
17,978
$
89,000
$
(71,022
)
-79.8
%
Comprehensive Income:
Foreign Currency Translation
Adjustment
(176
)
516
(692
)
nm
(103
)
1,258
(1,361
)
nm
Total Comprehensive Income
$
576
$
32,095
$
(31,519
)
-98.2
%
$
17,875
$
90,258
$
(72,383
)
-80.2
%
Common Share Data:
Basic Net Income per Share
$
0.01
$
0.27
$
(0.26
)
-96.3
%
$
0.15
$
0.76
$
(0.61
)
-80.3
%
Diluted Net Income per Share
$
0.01
$
0.27
$
(0.26
)
-96.3
%
$
0.15
$
0.32
$
(0.17
)
-53.1
%
Weighted Average Common Shares Outstanding
- Basic
117,397
117,120
277
0.2
%
117,257
116,637
620
0.5
%
Weighted Average Common Shares Outstanding
- Diluted
119,246
117,138
2,108
1.8
%
118,120
117,274
846
0.7
%
nm - not meaningful
HOLLEY INC. and
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEET
(In thousands)
(Unaudited)
As of
October 1,
December 31,
2023
2022
Assets
Total Current Assets
$
304,667
$
324,963
Property, Plant and Equipment, Net
48,026
52,181
Goodwill
419,056
418,121
Other Intangibles, Net
413,774
424,855
Other Noncurrent Assets
33,600
29,522
Total Assets
$
1,219,123
$
1,249,642
Liabilities and Stockholders’ Equity
Total Current Liabilities
$
88,882
$
101,259
Long-Term Debt, Net of Current Portion
603,507
643,563
Deferred Taxes
49,774
58,390
Other Noncurrent Liabilities
39,059
30,440
Total Liabilities
781,222
833,652
Common Stock
12
12
Additional Paid-In Capital
372,158
368,122
Accumulated Other Comprehensive Loss
(1,047
)
(944
)
Retained Earnings
66,778
48,800
Total Stockholders’ Equity
437,901
415,990
Total Liabilities and Stockholders’
Equity
$
1,219,123
$
1,249,642
HOLLEY INC. and
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the thirteen weeks
ended
For the thirty-nine weeks
ended
October 1,
October 2,
October 1,
October 2,
2023
2022
2023
2022
Operating
Activities
Net Income
$
752
$
31,579
$
17,978
$
89,000
Adjustments to Reconcile to Net Cash
15,463
(23,955
)
29,446
(22,620
)
Changes in Operating Assets and
Liabilities
6,265
(16,291
)
9,439
(54,216
)
Net Cash Provided by Operating
Activities
22,480
(8,667
)
56,863
12,164
Investing
Activities
Capital Expenditures, Net of
Dispositions
(743
)
(1,907
)
(3,125
)
(11,272
)
Acquisitions / Divestitures, net
—
—
—
(14,077
)
Net Cash Used in Investing Activities
(743
)
(1,907
)
(3,125
)
(25,349
)
Financing
Activities
Net Change in Debt
(26,365
)
(1,691
)
(40,437
)
(4,790
)
Deferred financing fees
—
—
(1,427
)
—
Payments from Stock-Based Award
Activities
(1,061
)
(1,050
)
(1,134
)
(1,050
)
Proceeds from Issuance of Common Stock Due
to Exercise of Warrants
—
—
—
383
Net Cash Used in Financing Activities
(27,426
)
(2,741
)
(42,998
)
(5,457
)
Effect of Foreign Currency Rate
Fluctuations on Cash
(218
)
(634
)
(57
)
(1,077
)
Net Change in Cash and Cash
Equivalents
(5,907
)
(13,949
)
10,683
(19,719
)
Cash and Cash
Equivalents
Beginning of Period
42,740
30,555
26,150
36,325
End of Period
$
36,833
$
16,606
$
36,833
$
16,606
EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net
Income, and Free Cash Flow 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, net cash provided by operating activities, or any
other performance measures, as applicable, derived in accordance
with GAAP.
Holley believes EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin,
Adjusted Net Income, and Free Cash Flow are useful to investors in
evaluating the Company’s financial performance and in comparing the
Company’s financial results between periods because they exclude
the impact of certain items that we do not consider indicative of
our ongoing operating performance. 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
For the thirty-nine weeks
ended
October 1,
October 2,
October 1,
October 2,
2023
2022
2023
2022
Net Income
$
752
$
31,579
$
17,978
$
89,000
Adjustments:
Interest Expense, Net
13,712
10,428
41,909
26,780
Income Tax Expense (Benefit)
2,092
(1,345
)
7,756
8,866
Depreciation
2,785
2,837
7,738
7,500
Amortization
3,687
3,662
11,040
10,985
EBITDA
23,028
47,161
86,421
143,131
Acquisition and Restructuring Costs
415
1,266
2,106
3,247
Impairment of Indefinite-Lived Intangible
Assets
—
2,395
—
2,395
Change in Fair Value of Warrant
Liability
2,064
(30,171
)
5,516
(51,112
)
Change in Fair Value of Earn-Out
Liability
700
(7,429
)
2,089
(9,282
)
Product Rationalization
—
—
(800
)
—
Equity-Based Compensation Expense
2,970
2,873
5,170
9,518
Notable Items
556
213
564
1,097
Other Expense (Benefit)
(28
)
47
508
594
Adjusted EBITDA
$
29,705
$
16,355
$
101,574
$
99,588
Total Revenues
$
156,530
$
154,775
$
503,997
$
534,250
Net Income Margin
0.5
%
20.4
%
3.6
%
16.7
%
Adjusted EBITDA Margin
19.0
%
10.6
%
20.2
%
18.6
%
For the thirteen weeks
ended
For the thirty-nine weeks
ended
October 1,
October 2,
October 1,
October 2,
2023
2022
2023
2022
Net Income
$
752
$
31,579
$
17,978
$
89,000
Special items:
Impairment of Indefinite-Lived Intangible
Assets
—
1,892
—
1,892
Adjust for: Change in Fair Value of
Warrant Liability
2,064
(30,171
)
5,516
(51,112
)
Adjust for: Change in Fair Value of
Earn-Out Liability
700
(7,429
)
2,089
(9,282
)
Adjusted Net Income
$
3,516
$
(4,129
)
$
25,583
$
30,498
For the thirteen weeks
ended
October 1,
October 2,
2023
2022
Net Cash Provided by Operating
Activities
$
22,480
$
(8,667
)
Capital Expenditures, Net of
Dispositions
(743
)
(1,907
)
Free Cash Flow
$
21,737
$
(10,574
)
2023 Forecast
Low Range
High Range
Net Sales
$
645,000
$
675,000
Adjusted EBITDA
123,000
128,000
Depreciation and Amortization
24,000
26,000
Interest Expense
58,000
62,000
Capital Expenditures
6,000
8,000
Holley defines EBITDA as earnings before depreciation,
amortization of intangible assets, interest expense, and income tax
expense. Holley defines Adjusted EBITDA as EBITDA adjusted to
exclude, to the extent applicable, acquisition and restructuring
costs, which includes transaction fees and expenses, termination
related benefits, facilities relocation, and executive transition
costs; changes in the fair value of the warrant liability; changes
in the fair value of the earn-out liability; equity-based
compensation expense; impairment of intangible assets; gain or loss
on the early extinguishment of debt; non-cash charges due to a
product rationalization initiative aimed at eliminating
unprofitable or slow-moving stock keeping units, for which a
partial reversal of the initial reserve was recognized during the
thirty-nine weeks ended October 1, 2023; notable items that we do
not believe are reflective of our underlying operating performance,
which for the 39-week period ended October 1, 2023, includes
certain costs incurred for advisory services related to identifying
performance initiatives, and for the 39-week period ended October
2, 2022, includes a non-cash adjustment related to the adoption of
ASC Topic 842, “Leases,” and legal fees and costs related to a
settlement; and other expenses or gains, which includes gains or
losses from disposal of fixed assets, franchise taxes, and gains or
losses from foreign currency transactions. Adjusted EBITDA Margin
is calculated as Adjusted EBITDA divided by total revenues.
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.
Holley defines Free Cash Flow as net cash provided by operating
activities minus cash payments for capital expenditures, net of
dispositions. Management believes providing Free Cash Flow is
useful for investors to understand the Company's performance and
results of cash generation after making capital investments
required to support ongoing business operations.
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, net income, 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 its forecasted 2023 Adjusted EBITDA without unreasonable
effort.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231108763037/en/
Investor Relations: Ross Collins / Stephen Poe Alpha IR
Group 312-445-2870 HLLY@alpha-ir.com Media Relations
Contacts: Paul Oakley, poakley@tinymightyco.com / Rachel
Withers, rwithers@tinymightyco.com Tiny Mighty Communications
615-454-2913
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