Holley Inc. ((HLLY)) has held its Q4 earnings call. Read on for the main highlights of the call.
In the latest earnings call, Holley Inc. presented a mixed sentiment, highlighting significant operational improvements and digital growth, yet facing challenges such as a decline in sales and consumer confidence. The company reported a net loss due to impairment charges, reflecting both progress and ongoing macroeconomic hurdles.
Digital and Consumer Experience Growth
Holley Inc. reported an impressive 8% year-over-year growth in its direct-to-consumer business. This growth was attributed to capturing market share through enhanced consumer experiences and strengthened digital capabilities, positioning the company well in the competitive landscape.
Operational Improvements and Cost Reduction
The company achieved notable operational improvements, including a significant reduction in debt and a 22% year-over-year decrease in past dues. Cost savings amounted to $7.8 million for 2024, showcasing Holley’s commitment to financial efficiency.
B2B and National Retailer Channel Success
Holley experienced growth across 17 brands in all channels, with a 12% increase in the national retailer channel. Enhanced support now covers 80% of B2B volume, underscoring the company’s robust channel strategy.
Margin and EBITDA Improvements
Holley reported a substantial improvement in gross margins, which increased by 690 basis points year-over-year to 45.6% in Q4. Additionally, EBITDA margins rose by 250 basis points to 20.8%, reflecting strong financial performance.
Expansion into Mexico
The company expanded its reach into Mexico through direct distributor relationships, opening new market opportunities and diversifying its geographical footprint.
Product Innovation and Launches
Holley launched several key products in Q4, including engine swaps and new safety portfolio offerings. These innovations contributed to a 75% increase in new product revenue per SKU, highlighting the company’s focus on product development.
Free Cash Flow and Debt Reduction
The company generated $42 million in free cash flow for 2024 and prepaid $25 million on its term loan. This financial discipline led to credit upgrades from Moody’s and S&P, enhancing Holley’s financial standing.
Net Sales Decline
Holley faced a 10% decrease in net sales, totaling $140.1 million for Q4 compared to the previous year. This decline was driven by reseller destocking and macroeconomic challenges.
Consumer Confidence and Demand Challenges
The company expressed a cautious outlook due to softened consumer confidence and spending, influenced by high prices of household necessities and policy uncertainties.
Free Cash Flow Reduction
Free cash flow for Q4 was significantly reduced to $1.8 million, a decrease of $28.1 million from the prior year, impacted by lower volume and reduced inventory levels.
Net Loss Due to Impairment Charges
Holley reported a net loss of $37.8 million for Q4, primarily due to noncash goodwill and trademark impairment charges totaling $48.6 million, reflecting challenges in asset valuation.
Forward-Looking Guidance
Holley provided guidance for 2025, projecting net sales between $580 million and $600 million, implying a 2.5% growth at the midpoint. Adjusted EBITDA is expected to range from $113 million to $130 million. The guidance considers a $13 million revenue reduction from divestitures and a $14 million impact from discontinued products. Holley anticipates organic growth of 0.8% to 4.3% in its core business, with financial considerations including a $7 million expense increase and $8 million to $10 million in operational savings.
In conclusion, Holley Inc.’s earnings call reflected a balanced view of achievements and challenges. The company demonstrated strong operational improvements and digital growth but faced headwinds in sales and consumer confidence. Looking ahead, Holley remains cautiously optimistic, focusing on strategic growth and financial resilience.