Holley Inc. Q3 FY2025 earnings call

• Core business delivered strong growth for the third consecutive quarter, excluding divested operations.
• Omnichannel strategy remains central, with strong performance in B2B and direct-to-consumer channels.
• Product innovation with successful launches across divisions, including digital dashes, heavy-duty brake kits, at-home tuning solutions, and racing seats.
• Operational improvements: in-stock rates for top 2,500 products improved 2.2% Y/Y, efficiency up over $3M, past due orders down 20.7%.
• Event season engagement strong, though weather impacted LS Fest East attendance; digital audience growth with 8M+ followers.
• Strategic initiatives tracker showed B2B initiatives generating $13.5M, premier consumer journey pillar contributing nearly $2M Y/Y, global expansion in new markets generating $1.1M, and Fund the Growth pillar yielding $6.2M in cost savings.

Core business achieved 6.4% growth in Q3. Year-to-date core growth was 5% (4% volume increase and 1% pricing tailwind). Domestic Muscle division had 6.2% Y/Y growth. Modern Truck and Off-Road division saw 5.2% growth, led by Baer, Flowmaster, Range, and DiabloSport. Euro & Import division grew 16.6%, with Dinan and APR driving growth. Safety division distributors are ramping up ahead of Snell 2025 certification. Revenue contributions: B2B initiatives generated $13.5M in Q3, premier consumer journey pillar contributed nearly $2M Y/Y, global expansion in new markets generated $1.1M in Q3, and Fund the Growth pillar yielded $6.2M in cost savings.

• Raised full-year 2025 revenue guidance to a range of $590M to $605M (3.8% midpoint growth over 2024's core business base of ~$575M).
• Raised adjusted EBITDA guidance to a range of $120M to $127M, raising the bottom end from $116M.
• Confidence in team's execution and disciplined approach to navigating evolving macro environment drives the guidance update.

• Dynamic tariffs and supply chain costs remain a concern, but diversified sourcing and pricing discipline help manage impacts.
• Potential destocking by B2B partners could affect guidance if they become more conservative with forecasts.
• Weather can impact event attendance, though events still drive digital engagement and merchandise sales.

Q: You had talked about taking high single-digit pricing, but price realization was only around 3% in the quarter. Could you talk about why that delta exists? What was same SKU inflation? And then is it simply a function of channel mix and more B2B sales versus D2C or is there some trade down or favoring smaller projects over larger ones?

A: Yes. Good question, Christian. I think it's -- from what we can tell, it's a combination of those things. Obviously, continued strong growth on B2B as it relates to the ASP, you're going to have a bit of a lower price realization on a comparable basis as well as we've got several of our customers who, from a contractual perspective, the pricing doesn't flow through immediately. It comes in later periods. And then there's just -- as it relates to some of the contractual prices on some of the other items that we do for our existing distribution partners that are not playing in there but it really is a combination of them. As it relates to some of the trade down piece, Christian, we're not necessarily seeing that as much. It's just the other items.

Q: The midpoint of your guidance implies a fairly big step down in organic sales growth in the fourth quarter it seems. So is that more just a function of conservatism in the current environment or is that driven by something more specific that you've seen quarter-to-date that warrants a bit more caution here?

A: Good question, Phillip. And it's a combination of the conservatism, like the current environment is a bit murky, and I think we're all reading the news every day. And so, Matt and I are really big on making sure that we don't overpromise on this. Plus, this time last year, we're lapping a marketing calendar event that we decided not to reengage in this year just from a margin profile perspective. So that's impacting the top line a bit. So those 2 things combined really account for the majority of it.

Q: Could you talk about the B2B and sort of what the white space you see there? I mean I think you talked about sort of doing more with some of the big parts retailers, traditional mechanical guys, but sort of good growth there, how do you see the run rate?

A: Yes, Bret, on a strategic initiative tracker, we call out a number of things there. We think there's still a lot of runway in our existing relationships, of course, with whether it's e-tailers, wholesale distributors, but some of the areas you referenced, national retailers is something we're continuing to engage in strongly. We feel that, that channel is accretive in our omnichannel strategy that in-store impulse purchase being able to provide enthusiast products that they want, being able to just go in and pick up something from one of our brands. We also see continued opportunity in export markets, and you see some of the expansion that we're doing in Mexico and other areas. And we continue to work with OEMs on programs for their aftermarket, not OE production, but their aftermarket performance teams and providing them solutions for enthusiasts. So there are a number of ways we're continuing to drive the B2B growth for the long term.