Operational improvements and cost
initiatives to drive 2023 margin and free cash flow
improvement
Company reaches covenant relief agreement
with financial partners and reduces interest rate risk
Provides outlook and guidance for full year
2023
Holley Inc. (NYSE: HLLY), the leading platform serving
performance automotive enthusiasts, today announced financial
results for its fourth quarter and full year ended December 31,
2022.
Full Year 2022 Highlights vs. Prior
Year Period
- Net Sales decreased 0.6% to $688.4 million in 2022 compared to
$692.9 million in 2021
- Gross Profit decreased 11.6% to $253.7 million in 2022 compared
to $286.8 million in 2021
- Net Income of $73.8 million, or $0.14 per diluted share, in
2022 compared to a Net Loss of $(27.1) million, or $(0.30) per
diluted share, in 2021
- Adjusted Net Income1 of $7.9 million, in 2022 compared to
Adjusted Net Income1 of $61.8 million reported in 2021
- Adjusted EBITDA1 of $114.7 million in 2022 compared to $169.5
million in 2021
Fourth Quarter Highlights vs. Prior
Year Period
- Net Sales decreased 14.3% to $154.2 million compared to $179.8
million in the prior year's fourth quarter
- Gross Profit decreased 36.8% to $47.3 million compared to $74.7
million in the prior year's fourth quarter
- Net Loss of $(15.2) million, or $(0.13) per diluted share,
compared to a Net Loss of $(18.0) million, or $(0.16) per diluted
share, in the prior year's fourth quarter
- Adjusted Net Loss1 of $(22.6) million, compared to Adjusted Net
Income1 of $9.0 million reported in the prior year's fourth
quarter
- Adjusted EBITDA1 of $15.1 million compared to $36.1 million in
the prior year's fourth quarter
1See "Use and Reconciliation of Non-GAAP Financial Measures"
below.
“Despite ongoing supply-chain disruptions and demand
normalization impacting financial results during the quarter, we
remain encouraged by the underlying strength of our core enthusiast
base and are confident that Holley remains a clear leader in the
performance enthusiast automotive space,” said Michelle Gloeckler,
Holley’s Interim President and Chief Executive Officer. “We are
intently focused on strategically aligning our cost structure,
delivering strong free cash flow, and returning the Company’s
growth and margin performance to historical levels.”
Key Operating Metrics and Strategic
Highlights
- Record DTC sales of $149 million in 2022, up 27% or $32 million
compared to 2021
- Holley event attendance of 106,000 individuals in 2022, an
increase of 16.9% year-over-year
- Past due orders reduced during the fourth quarter but remain
elevated in our Electronics category
- $30 million of savings in 2023 driven by operational
improvements and cost initiatives to help offset cost
headwinds
“2022 was a challenging year for Holley, and one that surfaced
many areas of improvement for the broader organization,” said
Matthew Rubel, Executive Chairman of the Board. “We are extremely
focused heading into 2023, with dedicated efforts to realize
additional cost savings and M&A synergy capture, prioritize key
product categories and platforms, and return to operational
excellence through the refinement of our organizational
structure.”
“I believe that we are well positioned to take this business to
the next level and that our team is highly capable of executing
Holley’s strategic vision, which is to inspire and enable
enthusiasts in their automotive adventures by bringing innovation,
discovery, and fun to motor life,” said Gloeckler. “New products
are our Company’s lifeblood, and we are positioned to capitalize on
many new opportunities such as the modification of electric
vehicles and electric powertrain conversions in the future. Our
superior engineering capabilities and unparalleled understanding of
the performance enthusiast consumer will benefit this effort and
position Holley to remain a leader in the attractive growth
market.”
Significant Subsequent
Events
The Company reached an agreement with its lending group to amend
the net leverage covenant applicable to the revolver. The terms of
the agreement now call for a net leverage ratio, as defined in the
credit agreement, of 7.25x in Q1 and Q2 of 2023, 6.50x in Q3 of
2023, 5.75x in Q4 of 2023 and Q1 of 2024 before returning to the
original agreement level of 5.0x in Q2 of 2024 and thereafter.
Additional covenant information is available in the Company’s
supplemental earnings materials and full details of the agreement
can be found in the Company’s Form 8-K filed on March 8, 2023.
In an effort to reduce exposure to floating interest rates,
Holley entered into a costless interest rate collar that hedged
$500 million in debt by capping 3-Month SOFR at 5.0%, subject to a
floor on 3-Month SOFR of 2.8%, through mid-February of 2026.
Full Year 2023 Outlook
Holley is providing the following outlook for the full-year
2023:
- Net Sales in the range of $625-$675 million
- Adjusted EBITDA of $108-$122 million
- Capital Expenditures in the range of $10-$15 million
- Depreciation and Amortization Expense of $23-$25 million
- Interest Expense in the range of $60-$65 million
“While 2022 results were challenged by multiple factors, the
management team at Holley is committed to making the necessary
changes to stabilize our Company and drive improved operating and
financial performance,” said Jesse Weaver, Holley’s Chief Financial
Officer. “Heading into 2023, we believe we are well-equipped to
execute our well-defined strategy. There is incredible depth in our
leadership, and we have the needed financial flexibility to align
our cost structure to current market demand. Despite a
normalization to pre-Covid trend growth levels, our end markets
remain strong, and Holley is an unquestioned leader across key
product categories. We’ve taken several steps to fully capture
acquisition synergies, improve our freight strategy, and right size
our operating structure. In total, we expect these efforts to
deliver approximately $30 million of year-over-year cost savings in
2023, with $15 million coming from SG&A as the result of a
recent reduction in force and expected synergy capture and $15
million in gross margin largely driven by improved shipping costs
as the result of a recently negotiated contract with a new 3rd
party logistics provider. The organization is laser-focused on
restoring profitability, optimizing inventories, driving
innovation, and de-leveraging our balance sheet in 2023 and
beyond.”
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 13736184.
For those unable to participate, a telephone replay recording
will be available until Thursday, March 16, 2023. To access the
replay, please call 877-660-6853 (Toll Free) or 201-612-7415 (Toll)
and enter confirmation code 13736184. 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 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 becoming 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 political tensions and war (such as the
ongoing conflict in Ukraine); 7) the possibility that Holley may be
adversely affected by other economic, business and/or competitive
factors; 8) Holley’s estimates of its financial performance; 9) the
impact of the novel coronavirus disease pandemic and its effect on
business and financial conditions; 10) our 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 11) 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, 2021
filed with the U.S. Securities and Exchange Commission (“SEC”) on
March 15, 2022, and that are otherwise described or updated from
time to time in Holley’s 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 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 year ended
December 31,
Variance
Variance
December 31,
Variance
Variance
2022
2021
($)
(%)
2022
2021
($)
(%)
Net Sales
$
154,165
$
179,801
$
(25,636
)
-14.3%
$
688,415
$
692,847
$
(4,432
)
-0.6%
Cost of Goods Sold
106,908
105,071
1,837
1.7%
434,757
406,040
28,717
7.1%
Gross Profit
47,257
74,730
(27,473
)
-36.8%
253,658
286,807
(33,149
)
-11.6%
Selling, General, and Administrative
48,196
37,700
10,496
27.8%
150,728
116,793
33,935
29.1%
Research and Development Costs
6,687
8,113
(1,426
)
-17.6%
29,083
28,280
803
2.8%
Amortization of Intangible Assets
3,698
3,608
90
2.5%
14,683
13,999
684
4.9%
Impairment of Indefinite-Lived Intangible
Assets
—
—
—
—
2,395
—
2,395
nm
Acquisition and Restructuring Costs
1,266
1,791
(525
)
-29.3%
4,513
23,668
(19,155
)
-80.9%
Related Party Acquisition and Management
Fee Costs
—
—
—
—
—
25,789
(25,789
)
-100.0%
Other Operating Expense
920
752
168
22.3%
1,514
755
759
100.5%
Operating Expense
60,767
51,964
8,803
16.9%
202,916
209,284
(6,368
)
-3.0%
Operating Income (Loss)
(13,510
)
22,766
(36,276
)
nm
50,742
77,523
(26,781
)
-34.5%
Change in Fair Value of Warrant
Liability
(5,909
)
15,307
(21,216
)
nm
(57,021
)
32,580
(89,601
)
nm
Change in Fair Value of Earn-Out
Liability
(1,449
)
2,009
(3,458
)
nm
(10,731
)
8,875
(19,606
)
nm
Loss on Early Extinguishment of Debt
—
12,225
(12,225
)
-100.0%
-
13,650
(13,650
)
-100.0%
Interest Expense
13,447
8,032
5,415
67.4%
40,227
39,128
1,099
2.8%
Non-Operating Expense (Income)
6,089
37,573
(31,484
)
-83.8%
(27,525
)
94,233
(121,758
)
nm
Income (Loss) Before Income Taxes
(19,599
)
(14,807
)
(4,792
)
32.4%
78,267
(16,710
)
94,977
nm
Income Tax Expense (Benefit)
(4,373
)
3,174
(7,547
)
nm
4,493
10,429
(5,936
)
-56.9%
Net Income (Loss)
$
(15,226
)
$
(17,981
)
$
2,755
-15.3%
$
73,774
$
(27,139
)
$
100,913
nm
Comprehensive Income (Loss):
Foreign Currency Translation
Adjustment
(2,248
)
42
(2,290
)
nm
(990
)
30
(1,020
)
nm
Pension Liability Gain
302
388
(86
)
-22.2%
302
388
(86
)
-22.2%
Total Comprehensive Income
(Loss)
$
(17,172
)
$
(17,551
)
$
379
-2.2%
$
73,086
$
(26,721
)
$
99,807
nm
Common Share Data:
Basic Net Income (Loss) per Share
$
(0.13
)
$
(0.16
)
$
0.03
-18.8%
$
0.63
$
(0.30
)
$
0.93
nm
Diluted Net Income (Loss) per Share
$
(0.13
)
$
(0.16
)
$
0.03
-18.8%
$
0.14
$
(0.30
)
$
0.44
nm
Weighted Average Common Shares Outstanding
- Basic
117,148
115,807
1,341
1.2%
116,763
89,960
26,803
29.8%
Weighted Average Common Shares Outstanding
- Diluted
117,179
115,807
1,372
1.2%
117,248
89,960
27,288
30.3%
nm - not meaningful
HOLLEY INC. and
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEET
(In thousands)
(Unaudited)
December 31,
2022
2021
Assets
Total Current Assets
$
324,963
$
291,717
Property, Plant and Equipment, Net
52,181
51,495
Goodwill
418,121
411,383
Other Intangibles, Net
424,855
438,461
Right-of-Use Assets
29,522
—
Total Assets
$
1,249,642
$
1,193,056
Liabilities and Stockholders' Equity
Total Current Liabilities
$
101,259
$
91,795
Long-Term Debt, Net of Current Portion
643,563
637,673
Deferred Taxes
58,390
70,045
Other Noncurrent Liabilities
30,440
89,056
Total Liabilities
833,652
888,569
Common Stock
12
12
Additional Paid-In Capital
368,122
329,705
Accumulated Other Comprehensive Loss
(944
)
(256
)
Retained Earnings (Accumulated
Deficit)
48,800
(24,974
)
Total Stockholders' Equity
415,990
304,487
Total Liabilities and Stockholders'
Equity
$
1,249,642
$
1,193,056
HOLLEY INC. and
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the thirteen weeks
ended
For the year ended
December 31,
December 31,
2022
2021
2022
2021
Operating
Activities
Net Income (Loss)
$
(15,226
)
$
(17,981
)
$
73,774
$
(27,139
)
Adjustments to Reconcile to Net Cash
17,465
21,300
(5,155
)
93,003
Changes in Operating Assets and
Liabilities
(2,091
)
(6,653
)
(56,307
)
(44,281
)
Net Cash provided by (used in) Operating
Activities
148
(3,334
)
12,312
21,583
Investing
Activities
Capital Expenditures, Net of
Dispositions
(1,430
)
(4,724
)
(12,702
)
(14,869
)
Acquisitions / Divestitures, net
1,742
(57,434
)
(12,335
)
(119,220
)
Net Cash provided by (used in) Investing
Activities
312
(62,158
)
(25,037
)
(134,089
)
Financing
Activities
Net Change in Debt
8,307
57,090
3,517
(45,942
)
Recapitalization
—
—
—
132,299
Payment of acquisition contingent
consideration
—
(9,200
)
—
(9,200
)
Payments from Stock-Based Award
Activities
—
—
(1,050
)
—
Proceeds from Issuance of Common Stock Due
to Exercise of Warrants
—
—
383
—
Net Cash provided by Financing
Activities
8,307
47,890
2,850
77,157
Effect of Foreign Currency Rate
Fluctuations on Cash
777
—
(300
)
—
Net Change in Cash and Cash
Equivalents
9,544
(17,602
)
(10,175
)
(35,349
)
Cash and Cash
Equivalents
Beginning of Period
16,606
53,927
36,325
71,674
End of Period
$
26,150
$
36,325
$
26,150
$
36,325
Holley believes EBITDA, Adjusted EBITDA, Adjusted Net Income,
and Organic Sales 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 and other 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 INC. and
SUBSIDIARIES
USE AND RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
(In thousands)
(Unaudited)
For the thirteen weeks
ended
For the year ended
December 31,
December 31,
2022
2021
2022
2021
Net Income (Loss)
$
(15,226
)
$
(17,981
)
$
73,774
$
(27,139
)
Adjustments:
Interest Expense
13,447
8,032
40,227
39,128
Income Taxes
(4,373
)
3,174
4,493
10,429
Depreciation
2,607
4,199
10,107
11,527
Amortization
3,698
3,608
14,683
13,999
EBITDA
153
1,032
143,284
47,944
Acquisition and Restructuring Costs
1,266
1,791
4,513
6,495
Earn-Out from Simpson Acquisition
—
—
—
17,173
Impairment of Indefinite-Lived Intangible
Assets
—
—
2,395
—
Change in Fair Value of Warrant
Liability
(5,909
)
15,307
(57,021
)
32,580
Change in Fair Value of Earn-Out
Liability
(1,449
)
2,009
(10,731
)
8,875
Loss on Early Extinguishment of Debt
—
12,225
—
13,650
Product Rationalization
4,519
—
4,519
—
Equity-Based Compensation Expense
14,877
2,215
24,395
4,963
Related Party Acquisition and Management
Fee Costs
—
—
—
25,789
Notable Items
741
757
1,838
11,270
Other Expense
920
752
1,514
755
Adjusted EBITDA
$
15,118
$
36,088
$
114,706
$
169,494
For the thirteen weeks
ended
For the year ended
December 31,
December 31,
2022
2021
2022
2021
Net Income (Loss)
$
(15,226
)
$
(17,981
)
$
73,774
$
(27,139
)
Special items:
—
—
1,892
—
Adjust for: Change in Fair Value of
Warrant Liability
(5,909
)
15,307
(57,021
)
32,580
Adjust for: Change in Fair Value of
Earn-Out Liability
(1,449
)
2,009
(10,731
)
8,875
Adjust for: Earn-Out from Simpson
Acquisition
—
—
—
17,173
Adjust for: Loss on Early Extinguishment
of Debt
—
9,658
—
10,784
Adjust for: Fees paid related to the
Business Combination
—
—
—
19,561
Adjusted Net Income (Loss)
$
(22,584
)
$
8,993
$
7,914
$
61,834
13 Weeks Ended
December 31, 2022
Net Sales
154,165
Less: Sales from Acquisitions within 365
Days of Purchase (Non-Comparable to Prior Year)
(7,322
)
Organic Sales (Comparable to Prior Year
Period Net Sales)
$
146,843
2023 Forecast
Low Range
High Range
Net Sales
$
625,000
$
675,000
Adjusted EBITDA
108,000
122,000
Depreciation and Amortization
23,000
25,000
Interest Expense
60,000
65,000
Capital Expenditures
10,000
15,000
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) acquisition integration
and restructuring costs, (ii) an adjustment in 2021 due to a change
in the fair value of the Simpson acquisition contingent
consideration payable, (iii) impairment of indefinite-lived
intangible assets (iv) changes in the fair value of the warrant
liability, (v) changes in the fair value of the earn-out liability,
(vi) loss on the early extinguishment of debt (vii) product
rationalization initiatives aimed at eliminating unprofitable or
slow-moving stock keeping units, (viii) compensation expense
related to equity awards, (ix) related party acquisition and
management fee costs, (x) notable items that in 2022 consist
primarily of non-cash adjustments related to the adoption of ASC
842, "Leases," and in 2021 consist primarily of the amortization of
the fair market value increase in inventory due to acquisitions,
and (xi) other expenses, which for 2022 includes a $1.0 million
loss on the sale of a business and for all periods includes net
losses from disposal of fixed assets and foreign currency
transactions. We have included within the definition of Adjusted
EBITDA impairment of indefinite-lived intangible assets, changes in
the fair value of warrant liabilities, changes in the fair value of
the earn-out liability, and losses from the early extinguishment of
debt, as management believes such matters, when they occur, do not
directly reflect the performance of the underlying business.
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.
Organic sales, or sales excluding the impact of acquisitions,
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, Adjusted Net Income, 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 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 or any other
performance measures derived in accordance with GAAP.
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 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/20230309005128/en/
Investor Relations: Ross Collins / Stephen Poe Alpha IR
Group 312-445-2870 HLLY@alpha-ir.com
Holley (NYSE:HLLY)
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