Holley Reports Second Quarter 2021 Results

Rhea-AI Summary

Holley Inc. (NYSE: HLLY) reported robust financial results for Q2 2021, showcasing a 54% increase in net sales to $193 million. Gross profit rose by 48% to $81.2 million, while net income surged 85% to $23.1 million. Acquisitions, including AEM Performance Electronics, contributed significantly to growth. The company maintains a 2021 revenue outlook of $648-$663 million despite anticipated challenges from supply chain issues and inflation. Holley emphasizes strong consumer demand and direct-to-consumer growth as key drivers.

Positive

• Net sales increased 54% to $193 million year-over-year.
• Gross profit rose 48% to $81.2 million.
• Net income increased 85% to $23.1 million.
• Adjusted EBITDA grew 49% to $54.1 million.
• AEM acquisition expanded Holley's electronics offerings.

Negative

• Cost of goods sold increased 59% due to higher sales.
• Gross margin decreased from 43.8% to 42.1%.

Holley Inc. (NYSE: HLLY), the largest and fastest growing platform serving performance automotive enthusiasts, today announced financial results for its second quarter ended June 27, 2021.

Second Quarter Highlights vs. Prior Year Period

• Net Sales increased 54% to $193.0 million compared to $125.3 million in 2020
• Gross Profit increased 48% to $81.2 million compared to $54.8 million last year
• Operating Income increased 52% to $40.1 million compared to $26.3 million in 2020
• Net Income increased 85% to $23.1 million from $12.5 million last year
• Adjusted EBITDA¹ increased 49% to $54.1 million compared to $36.4 million in 2020
• Acquired AEM Performance Electronics (“AEM”) adding to Holley’s electronics offering
• Continued execution on direct-to-consumer channel growth strategy

2021 Outlook

• Company reiterates fiscal 2021 Net Sales expected to range between $648-$663 million, Pro Forma Net Sales¹ between $655-$670 million, and Pro Forma Adjusted EBITDA¹ between $165-170 million

¹ See “Use and Reconciliation of Non-GAAP Financial Measures” below.

Tom Tomlinson, Holley’s President and Chief Executive Officer, said, “Consumer demand for our products was strong in the second quarter and we continued to see excellent growth in our direct-to-consumer channel. Our team performed well, captured significant additional demand in the quarter, and delivered great overall results.”

Second Quarter 2021 Financial Results

Net sales increased 54% to $193.0 million in the second quarter of 2021, up from $125.3 million in the second quarter of 2020. Non-comparable sales associated with acquisitions, including the AEM acquisition completed in April and several completed in the fourth quarter of 2020, contributed $36.7 million of net sales growth in the quarter. Organic growth for comparable brands contributed the remaining $31.0 million of year-over-year net sales growth, representing slightly more than 25% growth over second quarter 2020 net sales. Consumer demand for electronic performance products drove the majority of the organic growth in the quarter.

Cost of goods sold increased $41.4 million, or 59%, to $111.8 million, as compared to $70.5 million for the second quarter of 2020 and is primarily attributable to the increase in product sales. Gross profit for the thirteen weeks ended June 27, 2021 increased $26.4 million, or 48.1%, to $81.2 million, as compared to $54.8 million for the second quarter of 2020. The increase in gross profit was driven by the increase in sales. Gross margin for the thirteen weeks ended June 27, 2021 was 42.1% compared to a gross margin of 43.8% for the thirteen weeks ended June 28, 2020.

Selling, general and administrative costs for the quarter increased $9.9 million to $26.2 million, representing an increase of 61% when compared to $16.3 million in 2020. Incremental SG&A from recent acquisitions were responsible for $5.3 million of the increase in the quarter. Additional cost drivers include a $1.6 million increase in shipping costs related to higher sales and global supply chain pressure, higher audit fees associated with the business combination with Empower, and increases in software licensing that support Holley’s growth.

R&D and other operating expenses provided leverage in the second quarter, as those expenses increased 26% and 20%, respectively, against the net sales increase of 54%. Increases in these other operating expense areas are primarily due to acquisitions.

Net income for the second quarter 2021 reflects higher sales volume and the leverage achieved on certain fixed expenses. Net income improved to $23.1 million in the second quarter compared to $12.5 million in 2020, an increase of 85%.

Adjusted EBITDA grew from $36.4 million in the second quarter last year to $54.1 million in the second quarter of 2021, representing 49% year-over-year growth. Reconciliation to GAAP Net Income is included in the “Use and Reconciliation of Non-GAAP Financial Measures” table below.

Significant Event Subsequent to Quarter End

On July 16, 2021, Holley completed the business combination with Empower LTD and became a publicly traded company on the New York Stock Exchange (NYSE: HLLY). Since the transaction closed in Holley’s third fiscal quarter, the 10-Q Holley will file with the Securities and Exchange Commission for the second quarter will reflect the pre-combination results of Empower LTD.

Fiscal 2021 Full Year Outlook

We reiterate our full-year expectations of recognized net sales in the range of $648 to $663 million for fiscal 2021. We expect pro forma net sales in the range of $655 to $670 million, and pro forma adjusted EBITDA between $165 and $170 million. Additional information regarding pro forma adjustments is included in the “Use and Reconciliation of Non-GAAP Financial Measures” table below.

Dominic Bardos, Holley’s Chief Financial Officer, added, “We continued to execute on our strategy in the second quarter, with both organic growth and recent acquisitions contributing to our strong revenue performance. We expect sales growth to moderate in the back half of 2021, largely due to lapping strong 2020 performance and the three acquisitions made during the fourth quarter last year. Our full-year guidance also contemplates the uncertainties surrounding global supply chain challenges and inflationary pressure on raw material costs. Our markets remain strong and our consumers continue to be highly engaged.”

Conference Call

A conference call and audio webcast has been scheduled for 10:00 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 1-844-200-6205 (United States Toll Free), 1-646-904-5544 (United States Local), or + 44-208-0682-558 (All Other Locations) using the access code of 472207.

For those unable to participate, a telephone replay recording will be available until Wednesday, September 1, 2021. To access the replay, please call 1-929-458-6194 (U.S.), 0204-525-0658 (U.K.), or + 44-204-525-0658 (All Other Locations) and enter confirmation code 986200. A web-based archive of the conference call will also be available at 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 the largest 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 to recognize the anticipated benefits of the business combination with Empower LTD, which may be affected by, among other things, competition, the ability of the combined company to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its management and key employees; 2) costs related to the business combination and Holley becoming a public company; 3) changes in applicable laws or regulations; 4) the outcome of any legal proceedings that may be instituted against Holley; 5) the possibility that Holley may be adversely affected by other economic, business and/or competitive factors; 6) Holley’s estimates of its financial performance; 7) the impact of the novel coronavirus disease pandemic and its effect on business and financial conditions; and 8) other risks and uncertainties set forth in the section entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in the Prospectus filed with the U.S. Securities and Exchange Commission (“SEC”) filed on July 28, 2021. Although Holley believe 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 any 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 twenty-six weeks ended
		27-Jun			June 28,						%		27-Jun			June 28,						%
		2021			2020			Variance			Variance		2021			2020			Variance			Variance
Net Sales		$	193,041		$	125,296		$	67,745		54.1%		$	353,373		$	232,453		$	120,920		52.0%
Cost of Goods Sold			111,841			70,468			41,373		58.7%			206,494			134,292			72,202		53.8%
Gross Profit			81,200			54,828			26,372		48.1%			146,879			98,161			48,718		49.6%
Operating Expenses			41,138			28,479			12,659		44.5%			94,036			54,138			39,898		73.7%
Operating Income			40,062			26,349			13,713		52.0%			52,843			44,023			8,820		20.0%
Interest Expense			11,174			11,013			161		1.5%			21,245			22,518			(1,273)		-5.7%
Income Before Income Taxes			28,888			15,336			13,552		88.4%			31,598			21,505			10,093		46.9%
Income Tax Expense (Benefit)			5,790			2,827			2,963		104.8%			10,556			4,144			6,412		154.7%
Net Income (Loss)			23,098			12,509			10,589		84.7%			21,042			17,361			3,681		21.2%
Comprehensive Income:
Foreign Currency Translation Adj.			35			-			35		-			19			-			19		-
Total Comprehensive Net Income:			23,133			12,509			10,624		84.9%			21,061			17,361			3,700		21.3%

HOLLEY INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
		For the thirteen weeks ended
		March 29,			June 28,			Sept. 27,			Dec. 31,			March 28,			27-Jun
		2020			2020			2020			2020			2021			2021
Net Sales		$	107,157		$	125,296		$	133,307		$	138,419		$	160,332		$	193,041
Cost of Goods Sold			63,824			70,468			77,778			83,865			94,653			111,841
Gross Profit			43,333			54,828			55,529			54,554			65,679			81,200
Operating Expenses			25,659			28,479			27,149			41,502			52,898			41,138
Operating Income			17,674			26,349			28,380			13,052			12,781			40,062
Interest Expense			11,505			11,013			9,325			11,929			10,071			11,174
Income Before Income Taxes			6,169			15,336			19,055			1,123			2,710			28,888
Income Tax Expense (Benefit)			1,317			2,827			5,512			(830)			4,766			5,790
Net Income (Loss)			4,852			12,509			13,543			1,953			(2,056)			23,098
Comprehensive Income:
Foreign Currency Translation Adj.			-			-			-			16			(16)			35
Total Comprehensive Net Income:			4,852			12,509			13,543			1,969			(2,072)			23,133

HOLLEY INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
		As of			As of			As of			As of			As of			As of
		March 29,			June 28,			Sept. 27,			Dec. 31,			March 28,			27-Jun
		2020			2020			2020			2020			2021			2021
Assets
Total Current Assets		$	200,825		$	221,873		$	190,361		$	257,980		$	275,832		$	261,207
Net Property, Plant & Equipment			32,752			32,929			34,131			43,729			44,581			49,692
Goodwill			297,607			297,607			297,607			359,099			359,099			377,368
Other Net Intangibles			330,807			328,157			325,459			404,522			401,186			425,423
Total Assets			861,991			880,566			847,558			1,065,330			1,080,698			1,113,690
Liabilities and Stockholder's Equity
Total Current Liabilities			46,980			53,046			54,463			82,009			98,175			107,428
Long-term Debt Net of Current Portion			531,078			530,857			482,636			649,458			650,123			649,874
Deferred Taxes			51,656			51,863			51,995			71,336			71,814			72,538
Other Noncurrent Liabilities			21,890			21,890			21,890			22,146			22,146			22,146
Total Liabilities			651,604			657,656			610,984			824,949			842,258			851,986
Common Stock			-			-			-			-			-			-
Additional Paid-In Capital			236,624			236,638			236,759			238,890			239,021			239,152
Accumulated Loss			(397)			(397)			(397)			(674)			(690)			(655)
Retained Earnings			(25,840)			(13,331)			212			2,165			109			23,207
Total Stockholder's Equity			210,387			222,910			236,574			240,381			238,440			261,704
Total Liabilities and Stockholder's Equity			861,991			880,566			847,558			1,065,330			1,080,698			1,113,690

HOLLEY INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
		For the thirteen weeks ended
		March 29,			June 28,			Sept. 27,			Dec. 31,			March 28,			27-Jun
		2020			2020			2020			2020			2021			2021
Operating Activities
Net Income		$	4,852		$	12,509		$	13,543		$	1,953		$	(2,056)		$	23,098
Adjustments to Reconcile to Net Cash			5,964			5,811			6,102			13,960			7,142			24,855
Changes in Operating Assets & Liabilities			6,764			7,549			12,510			(3,104)			13,870			(20,512)
Net Cash from Operating Activities			17,580			25,869			32,155			12,809			18,956			27,441
Investing Activities
Capital Expenditures, Net of Dispositions			(1,283)			(2,152)			(3,218)			(2,082)			(3,104)			(3,752)
Acquisitions			-			(50)			-			(156,833)			-			(54,011)
Net Cash from Investing Activities			(1,283)			(2,202)			(3,218)			(158,915)			(3,104)			(57,763)
Financing Activities
Net Change and Principal Payments in Debt			27,500			(1,050)			(48,950)			163,044			(64)			(1,475)
Net Change in Cash & Cash Equivalents			43,797			22,617			(20,013)			16,938			15,788			(31,797)
Cash and Cash Equivalents
Beginning of Period			8,335			52,132			74,749			54,736			71,674			87,462
End of Period			52,132			74,749			54,736			71,674			87,462			55,665

	HOLLEY INTERMEDIATE HOLDINGS, INC. and SUBSIDIARIES
USE AND RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands)
(Unaudited)
			For the thirteen weeks ended
			June 27,			June 28,
Description			2021			2020
Net Income (Loss)			$	23,098		$	12,509
Adjustments:
	Interest Expense			11,174			11,013
	Income Taxes			5,790			2,827
	Depreciation			2,201			1,988
	Amortization			3,502			2,701
EBITDA				45,765			31,038
	Acquisition Integration & Restructuring			2,676			3,118
	Unusual or Nonrecurring Expenses			3,993			1,435
	Related Party Acquisition and Management Fee Expenses			1,658			880
	Other Expense			47			(109)
Adjusted EBITDA				54,139			36,362
						13 Weeks Ended
Description						June 27, 2021
Net Sales							193,041
Adjustments:
	Sales from Acquisitions within 365 Days of Purchase (Non-Comparable to Prior Year)						(36,700)
Organic Sales (Comparable to Prior Year Period Net Sales)							156,341
			2021 Forecast			2021 Forecast
Description			Low Range			High Range
Net Sales			$	647,600		$	662,600
	Pre-Acquisition Net Sales (AEM Performance Electronics)			7,400			7,400
Pro Forma Net Sales				655,000			670,000
Adjusted EBITDA			$	163,400		$	168,400
	Pre-Acquisition Adjusted EBITDA (AEM Performance Electronics)			1,600			1,600
Pro Forma Adjusted EBITDA				165,000			170,000

Holley believes EBITDA and Adjusted EBITDA are useful to investors in evaluating the Company’s financial 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 financial measures help to depict a more realistic representation of the performance of the underlying business, enabling the Company to evaluate and plan more effectively for the future.

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) unusual or nonrecurring expenses that consist primarily of the addback of the amortization of the fair market value increase in inventory in 2019 and 2018 (for 2020, the addbacks consist of the amortization of the fair market value increase in inventory and legal settlement), (ii) acquisition and restructuring costs, (iii) related party acquisition and management fee costs, and (iv) other expenses, which includes losses from disposal of fixed assets and foreign currency transactions.

Organic sales excludes 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 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 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 (loss) or any other performance measures derived in accordance with GAAP.

A forecast for 2021 Adjusted EBITDA and Pro Forma 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/20210811005424/en/

FAQ

What were Holley Inc.'s Q2 2021 financial results?

Holley Inc. reported a 54% increase in net sales to $193 million, an 85% rise in net income to $23.1 million, and a 49% increase in adjusted EBITDA to $54.1 million.

What is Holley Inc.'s revenue outlook for 2021?

Holley Inc. anticipates net sales to range between $648 million to $663 million for fiscal 2021.

How did acquisitions impact Holley Inc.'s performance?

Acquisitions, especially the AEM Performance Electronics purchase, contributed significantly to Holley's sales growth, adding $36.7 million in net sales.

What challenges is Holley Inc. facing in the second half of 2021?

Holley expects sales growth to moderate due to strong previous year performance and ongoing global supply chain challenges.

What drove organic growth at Holley Inc. in Q2 2021?

Consumer demand for electronic performance products was the primary driver of organic growth for Holley in Q2 2021.