Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Holley Inc (HLLY, Financial) has seen substantial year-over-year growth in its direct-to-consumer business, driven by improved digital and consumer experience capabilities.
- The company has achieved a 55% year-over-year reduction in past due, contributing to gross margin expansion.
- Holley Inc (HLLY) has successfully maintained its market share gains year-to-date despite softer market demand.
- The company has launched several innovative products across its consumer verticals, contributing to new product revenue growth.
- Holley Inc (HLLY) has made significant strides in reducing debt and improving its financial position, as evidenced by credit rating upgrades from Moody's and S&P.
Negative Points
- Net sales decreased by 14.4% to $134 million in the third quarter, reflecting challenges in the market.
- Free cash flow for the quarter was negative $2.1 million, a significant decrease compared to the prior year.
- The company faced headwinds from distributor inventory adjustments and reduced benefits from past due burn down.
- Adjusted EBITDA margins were reduced to 16.5% due to lower sales volume and fixed cost deleverage.
- Holley Inc (HLLY) anticipates continued softness in the overall performance aftermarket, impacting its full-year guidance.
Q & A Highlights
Q: Could you speak to your direct and indirect exposure to China and maybe what percentage of your causes are you currently paying tariffs on from the last round?
A: Matthew Stevenson, President and CEO: We've been focusing on inbound and outbound freight, including tariffs, as part of our cost to serve initiative for over a year. We've been working on resourcing and reducing tariffs, and we feel we're in good shape with no significant impacts expected going forward.
Q: Could you talk about national retailer sales up 12% and how much of that is due to increased shelf space versus expanding the number of doors and boxes you're selling to?
A: Matthew Stevenson, President and CEO: We see national retailers as a significant growth area. Previously, it wasn't a focus for us, but now there's a lot of interest in offering performance parts. We've seen growth in some of our products year-over-year, and we believe there's more opportunity for product placement in key categories.
Q: Is the pricing strategy you've implemented positive or negative for pricing?
A: Matthew Stevenson, President and CEO: It's definitely positive. We've been working on pricing discipline for over a year, including expanding our MAP policy. This builds confidence with distribution partners, ensuring a level playing field and preventing undercutting in the market.
Q: Are there any updated estimates on cost savings expected this year from actions taken, and are there opportunities for incremental cost savings in 2025?
A: Jesse Weaver, CFO: We guided $5 million to $10 million in savings at the beginning of the year and expect to be close to $7 million to $8 million. Furlough and 401-K actions should result in $3 million to $3.5 million in savings, with additional savings expected in Q4.
Q: How should we think about 2025 sales, and is your base case that sales would be up next year?
A: Matthew Stevenson, President and CEO: We expect to see organic growth starting in Q1 of next year. While it's early to give a full-year guide, we anticipate growth based on out-the-door sales and will provide more guidance at the end of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
