Holley Inc. Q1 FY2025 earnings call

• Strategic Framework: Includes fueling teammates, supercharging customer relationships (designing premier consumer journey, being a trusted B2B partner, launching innovative products), and accelerating profitable growth (expanding into new markets, M&A, operational improvements).
• B2B Sales Initiatives: Significant growth with national retailers, partnership with R&R for B2B sales support, launch of Holley Pros initiative contributing $2.5 million in revenue.
• Premier Consumer Journey: Ecommerce growth over 10% year-over-year, focused on third-party platforms like Amazon with over 15% growth, restructured events to enhance customer experiences.
• Product Innovation: Launched various new products across divisions, including Sniper 2 EFI HyperSpark bundles, NOS Octane Booster, inline tuning modules for BMW S58 engine, and HANS IV head and neck restraint.
• Tariff Mitigation: Implemented comprehensive strategies with dedicated work streams (governance, products, logistics and supply chain, regulatory and classifications, pricing and margin protection), including a 8.75% price increase announced on April 11 to be implemented on June 9, and ongoing efforts to optimize costs and sourcing.

In the first quarter of 2025, Holley's core business achieved 3.3% revenue growth. The Domestic Muscle vertical saw 3% year-over-year growth, with three power brands averaging 11% growth. The modern truck and off road division had an overall 2% growth. The Euro & Import division recorded the highest growth at 17%, driven by renewed focus, product innovation, and comprehensive platform packages. The Safety & Racing division experienced 3% growth. In the B2B channel, there was over 2.5% growth. The direct-to-consumer channel saw significant growth of over 10%, with third-party platforms like Amazon and eBay experiencing growth of over 50%. New products contributed $8.1 million to revenue for the quarter.

• 2025 revenue is expected to be $580 million to $600 million, implying approximately 2.5% growth at the midpoint over the core business base of ~$575 million in 2024.
• 2025 adjusted EBITDA is guided to be $113 million to $130 million. Guidance is maintained due to strong first-quarter performance and excluding potential tariff impacts, with ongoing assessment of macroeconomic conditions.

• Tariffs: Fluid nature of trade policies poses uncertainty, affecting costs and pricing. The team is actively mitigating impacts but exact effects are hard to model currently.
• Macroeconomic Environment: Consumer sentiment has declined, indicating growing concerns about inflation, interest rates, and economic viability, which could moderate discretionary spending in the near term.

Q: Good morning, thanks for taking our questions. Your response to the tariff you laid out in slides is really impressive. So, I’m curious how both your sourcing mix and maybe your broader capabilities to respond differs versus peers and spending on the category aside, would you expect share gains to accelerate and that the current tariff backdrop persists?

A: Good morning, Christian, and thank you for the question. One of the big differentiators for Holley is the breadth and depth of product that we have across various categories and so, for us, it’s really a category by category approach within, based on our competitive dynamic, based on our sourcing strategy. So, Christian, we’ve got to see how it ultimately plays out but we think Holley is poised to take share just based on the majority of our production cost and our cost of goods sold being in the US versus some of our competitors and other categories that are primarily sourced out of Asia.

Q: Got it, that’s helpful. And as a big segue to my follow-up, which is basically, what’s been the feedback to the price increase you announced in April from the distribution partners, and what are they saying about how this level compares to maybe what peers are requesting? And is this a broad increase across the portfolio and then you maybe sensitize it to product and categories later on? Just a bit more color on how you’re thinking about that and what the distinct back spend. Thanks.

A: Yeah, thanks, Christian. Overall, the feedback has been positive relative to our approach. I think our distribution partners appreciated our blending approach across portfolios versus just hitting harder in the impacted products. Now, in the marketplace, we have seen price increases well in excess of what we put out into the market. I mean, we’ve seen increases as high as 30% or more on some categories from some competitors. So overall, think our distribution partners understand the situation and appreciated our approach and, really, their skepticism and pushback is on competitors that have that north of double-digit increases.

Q: Hey, guys, good morning. Could you talk about the third-party platform strategy that more, I guess, real growth there, is the margin profile comparable to your core B2C and I guess, is there any channel conflict as you grow those businesses with Amazon or eBay? Do any of your legacy customers see them as a threat?

A: Yeah, hey, Bret, it’s Jesse. So, we haven’t seen a lot of strength there. The team has done a great job on the data and the output of the data work is continued improvement on the third-party. What we found, internally, is that it’s highly incremental. In 2023, when I was here, we were seeing changes in the algos, changes in what was happening with data and Amazon dropped off and it was being picked up in the other channels. So, that signaled to us that there really is very limited channel conflict and then that kind of gets into your question on the margin profile. There are different fee structures there. Obviously, we sell that at retail but then you have to pay other fees associated with it. But given the incrementality there, we view it as a viable growth channel that we will continue to lean into, just along our approach of what we want to be where the customers want to shop.

Q: Good morning, guys, thanks for the question. Just a quick point of clarification. Your guide does not include the impact of tariffs. So, does it exclude the impact of some of those, the pricing that consigned for early June and some of the other cost savings and mitigation efforts. Just trying to get a feel for the level of conservatism embedded here.

A: Thanks, Phillip, it’s Jesse. Yes, it excludes the impacts, obviously, of tariffs, as we made clear. There’re two potential impacts as it relates to tariffs. One is the obvious one that we all talk about, write about, know about. But then the other one is just like the general impact of the tariffs and the price increases across the economy and what it does to consumer sentiment. And so, with our guide, there’s certainly a bit of understanding that needs to be done as we kind of venture into the back half before I feel like we would feel confident enough to kind of quantify anything for you, at this time.

Q: Yeah, thanks, guys. Just again on the tariff thing, can you clarify how much exposure you do have to China? I know you keep saying there’s not a lot of exposure to tariffs and yet, there’s a lot of work being done to mitigate them. So, I’m just trying to reconcile those two comments that a majority of it is US based but you still have decent exposure. I mean, it would just help to kind of quantify, I think for some of us, what that would be.

A: Yeah, Joe, good morning, I appreciate the question. Yeah, a lot has changed since we reported on the last earnings call with the numerous changes in the administration regarding the tariffs and the new ones that have been implemented, as well as increase, over the last, roughly, two months. So, we spoke prior, the tariffs at the current state can be covered just with a pretty moderate price increase. Now, as those tariffs have escalated, they become meaningful for a business, hence, the work that is going into mitigate those, as well as the pricing action that we just took. But we remain optimistic, Joe. It’s a definitely fluid situation. The team is doing a ton of hard work and is finding opportunities to mitigate these, daily. As well, we’re optimistic in the changes in the administration, as the dust starts to settle and things get more permanence on what actually these tariffs will be. So, for us, to give you any insight really into the exact number right now, it just wouldn’t be accurate because it’s a fluid situation and the great work the team is doing every day is mitigating those tariffs. And we will know more when we come back to you in early August.

Q: Hey, good morning, guys, thanks for taking the question. So, first off, I think when you guys reported Q4, I think March 11, sales quarter-to-date were flattish. I know they ended up pretty nicely. You guys seem pretty confident that there’s no pre-buying. I guess, how do you know kind of thing because we saw auto sales jump towards the end of March and things like that. Just curious what gives you confidence there’s no pre-buying after all the tariff noise that we saw on Liberation Day on April 2.

A: Yeah, Brian, it’s the information we get from our B2B partners and, of course, with our direct consumer platform. January and February were so soft relative to the patterns that were driven in the weather. And so, the feeling from our distribution partners and from what we’re seeing in our business is just consumers didn’t get a chance to work on their cars. And so, when the weather started to break in March, a lot of that demand for people wanting to take on projects and get in their garage was a bit delayed. So, we really feel that was the driver in March. And as we sit here, today, the conversations from our distribution partners are more of a wait and see attitude, relative to seeing how things will play out, but again, it’s still early in the quarter, our pricing increase goes in on June 9, and we’ll see how that plays out for the rest of the quarter here in terms of the demand patterns.