Overview of Holley’s Financial Performance

Holley Inc. is a designer, marketer, and manufacturer of high-performance automotive aftermarket products. In 2024, the company reported net sales of $602.2 million, a decrease of 8.7% compared to 2023. This decline was driven by lower sales volume, partially offset by improved price realization. Major product categories that saw decreases include electronic systems (-11.6%), mechanical systems (-7.3%), accessories (-10.7%), and exhaust systems (-10.5%), while safety products increased by 7.5%.

Gross profit for 2024 was $238.5 million, down 6.9% from 2023. However, gross margin improved to 39.6% from 38.8% in the prior year, driven by lower freight costs and reduced inventory write-downs, partially offset by a $8.2 million charge related to strategic product rationalization.

Selling, general and administrative (SG&A) costs increased 9.9% to $132.2 million, primarily due to a $2.0 million litigation settlement reserve, higher marketing and advertising, and advisory services. Research and development costs decreased 21.5% to $18.7 million as the company implemented resource allocation efforts.

Holley recognized significant impairment charges in 2024, including $40.9 million for goodwill and $7.7 million for indefinite-lived intangible assets. The company also recorded a $9.2 million loss on the sale of Detroit Speed Engineering. These charges, along with other one-time items, resulted in a net loss of $23.2 million for the year, compared to net income of $19.2 million in 2023.

Revenue and Profit Trends

Holley’s net sales have declined over the past two years, from $688.4 million in 2022 to $659.7 million in 2023 and $602.2 million in 2024. This was primarily driven by lower sales volume, partially offset by improved price realization. The company’s product categories have seen mixed performance, with electronic systems, mechanical systems, accessories, and exhaust systems all experiencing declines, while safety products grew.

Despite the revenue decline, Holley’s gross margin has improved, increasing from 36.8% in 2022 to 38.8% in 2023 and 39.6% in 2024. This was due to lower freight costs, reduced inventory write-downs, and the company’s strategic product rationalization efforts, which included a $8.2 million charge in 2024.

However, Holley’s operating income and net income have been more volatile. Operating income decreased from $94.0 million in 2023 to $14.7 million in 2024, primarily due to the significant impairment charges. Net income swung from $19.2 million in 2023 to a net loss of $23.2 million in 2024.

The company’s Adjusted EBITDA, a non-GAAP metric that excludes certain one-time items, has also declined from $130.9 million in 2023 to $110.5 million in 2024. This reflects the impact of lower sales volume and the strategic product rationalization charge, partially offset by cost savings initiatives.

Strengths and Weaknesses

One of Holley’s key strengths is its commitment to innovation and new product development. The company has a history of introducing new products and expanding its product lines, which has allowed it to adapt to evolving consumer needs. Additionally, Holley has pursued a growth strategy through strategic acquisitions, which have enabled it to expand its brand portfolio, enter new product categories, and realize synergies.

However, Holley’s financial performance has been impacted by several external factors, including supply chain disruptions, inflation, and labor shortages. These challenges have adversely affected the company’s costs and profitability, leading to the need for cost-saving initiatives, price increases, and inventory management efforts.

Another weakness is Holley’s significant impairment charges in 2024, which resulted in a net loss for the year. The $40.9 million goodwill impairment and $7.7 million indefinite-lived intangible asset impairment indicate that the company may have overpaid for past acquisitions or that the acquired assets have not performed as expected. This raises concerns about Holley’s ability to effectively integrate and extract value from its acquisitions.

Outlook and Future Prospects

Despite the challenges faced in 2024, Holley remains optimistic about its future prospects. The company believes that its commitment to innovation and new product development, as well as its strategic acquisition strategy, will continue to drive growth and profitability.

However, the company acknowledges that the future impact of supply chain disruptions, inflation, and labor shortages remains highly uncertain. Holley has implemented various measures to mitigate these risks, such as cost-saving initiatives, price increases, and inventory management. The company’s ability to successfully navigate these macroeconomic conditions will be crucial to its future performance.

Holley’s liquidity position appears to be relatively strong, with $56.1 million in cash and $97.8 million in available borrowing capacity under its revolving credit facility as of December 31, 2024. The company also expects capital expenditures of up to $16 million in 2025, which should support its ongoing investments in maintenance, information technology, and product development.

Overall, Holley’s financial performance in 2024 was mixed, with declining revenues and profitability, as well as significant impairment charges. However, the company remains focused on innovation, strategic acquisitions, and cost management to navigate the challenging macroeconomic environment and position itself for future growth and success.