Holley (HLLY) Q3 2024 earnings summary

Executive summary

• Net sales for Q3 2024 declined 14.4% year-over-year to $134 million, with a net loss of $6.3 million, driven by lower volumes, distributor destocking, and a $7.5 million asset write-down.

• Direct-to-consumer sales grew 16% year-over-year, with new brand experience sites and strategic marketing events driving over 20% incremental lift.

• Operational improvements led to a 55% reduction in past due orders, $6.7 million in year-to-date cost-to-serve savings, and improved inventory turns to 2.2x.

• Moody’s and S&P upgraded credit ratings, reflecting improved financial health and leverage.

• The company continues to focus on omnichannel strategy, digital modernization, and portfolio transformation, including product rationalization and asset sales.

Financial highlights

• Q3 2024 net sales were $134 million, down 14.4% year-over-year; gross margin improved to 39.0% from 37.3% year-over-year.

• Adjusted EBITDA for the quarter was $22.1 million (16.5% margin), down from $29.7 million (19.0% margin) in Q3 2023.

• Free cash flow for Q3 was negative $2.1 million, but year-to-date free cash flow reached $40 million.

• Inventory reduced by $28 million year-over-year, with turns improving to 2.2x from 1.9x.

• Net leverage ratio at quarter end was 4.25x, below the 5.00x covenant.

Outlook and guidance

• Full-year 2024 net sales expected at $595–$605 million; adjusted EBITDA guidance revised to $115–$120 million.

• Q4 2024 guidance: net sales of $133–$143 million and adjusted EBITDA of $24–$29 million.

• Year-end leverage anticipated at 4.15x–4.35x.

• Organic growth expected to resume in Q1 2025 as inventory normalization completes.

• Capital expenditures for 2024 expected at $6–$8 million; liquidity sufficient for obligations.