Supply chain disruptions, reseller de-stocking and softer demand in certain categories cause headwinds, Holley says.
Holley Inc., one of the largest and fastest-growing platforms serving performance automotive enthusiasts, has announced financial results for its second quarter ended July 3, 2022.AdvertisementSecond Quarter Highlights vs. Prior Year Period Net Sales decreased 7.1% to $179.4 million compared to $193 million in the prior year’s second quarterGross Profit decreased 7.3% to $75.3 million compared to $81.2 million in the prior year’s second quarterNet Income of $40.6 million, or $0.35 per diluted share, compared to $23.1 million, or $0.34 per diluted share, in the prior year’s second quarterAdjusted Net Income of $13.2 million, compared to $23.1 million reported in the prior year’s second quarterAdjusted EBITDA of $37.2 million compared to $54.1 million in the prior year’s second quarter “Our financial results for the second quarter fell short of expectations primarily due to supply chain challenges including both slower than expected production and movement of goods from global suppliers and shortages in automotive-grade microchips that negatively impacted our ability to build and ship many or our most popular electronic products,” said Tom Tomlinson, Holley’s president and CEO. “We also saw meaningful reseller de-stocking in the quarter as resellers reduced their purchases well below their out-the-door sales of our products. These issues, against a backdrop of reduced discretionary consumer spending and the resultant softer demand we experienced in certain categories, caused us to reduce our outlook for the remainder of the year. We are slowing our spending in an effort to optimize our performance and stay ahead of what will likely be a challenging economic environment in the months ahead.”AdvertisementSecond Quarter 2022 Financial Results Net sales decreased 7.1% to $179.4 million in the second quarter of 2022 compared to $193 million in the second quarter of 2021. Non-comparable sales associated with acquisitions contributed $9.4 million, or 4.8%, of year-over-year net sales growth in the second quarter. Sales excluding the impact of acquisitions decreased by $23 million, or 11.9%, more than offsetting the growth from the acquisitions. The decline in comparable sales was driven by reduced unit volumes, destocking from our resellers, and reduced consumer demand in certain categories including tuning. Cost of goods sold decreased $7.7 million, or 6.9%, to $104.1 million, as compared to $111.8 million, for the second quarter of 2021 and is primarily attributable to the decrease in product sales. Gross profit for the second quarter of 2022 decreased $5.9 million, or 7.3%, to $75.3 million, as compared to $81.2 million for the second quarter of 2021. The decrease in gross profit was driven by the decrease in sales. Gross margin for the second quarter of 2022 was 42.0% compared to a gross margin of 42.1% for the second quarter of 2021.AdvertisementNet income for the second quarter of 2022 was $40.6 million compared to net income of $23.1 million in 2021. Net income for the second quarter of 2022 was favorably impacted by a $27.4 million non-cash decrease in liabilities for warrants and earn-out shares. Diluted EPS of $0.35 for the second quarter of 2022 compared to $0.34 in 2021. Full Year 2022 Outlook Holley’s current outlook for 2022: Net Sales in the range of $700-$725 millionAdjusted EBITDA of $135-$145 millionCapital Expenditures in the range of $14-$16 millionDepreciation and Amortization Expense of $24-$26 millionInterest Expense in the range of $33-$35 million “Our outlook for the full year 2022 is consistent with the previously communicated full year guidance issued on July 28, 2022, and reflects the current supply chain pressures, inventory, and demand trends we have seen in recent weeks,” said Dominic Bardos, Holley’s CFO. “We do not expect to fully resolve the supply chain and inventory issues that are impacting our sales in the near-term, and we have reduced our sales projections accordingly.”
Second Quarter Highlights vs. Prior Year Period
“Our financial results for the second quarter fell short of expectations primarily due to supply chain challenges including both slower than expected production and movement of goods from global suppliers and shortages in automotive-grade microchips that negatively impacted our ability to build and ship many or our most popular electronic products,” said Tom Tomlinson, Holley’s president and CEO. “We also saw meaningful reseller de-stocking in the quarter as resellers reduced their purchases well below their out-the-door sales of our products. These issues, against a backdrop of reduced discretionary consumer spending and the resultant softer demand we experienced in certain categories, caused us to reduce our outlook for the remainder of the year. We are slowing our spending in an effort to optimize our performance and stay ahead of what will likely be a challenging economic environment in the months ahead.”
Net sales decreased 7.1% to $179.4 million in the second quarter of 2022 compared to $193 million in the second quarter of 2021. Non-comparable sales associated with acquisitions contributed $9.4 million, or 4.8%, of year-over-year net sales growth in the second quarter. Sales excluding the impact of acquisitions decreased by $23 million, or 11.9%, more than offsetting the growth from the acquisitions. The decline in comparable sales was driven by reduced unit volumes, destocking from our resellers, and reduced consumer demand in certain categories including tuning.
Cost of goods sold decreased $7.7 million, or 6.9%, to $104.1 million, as compared to $111.8 million, for the second quarter of 2021 and is primarily attributable to the decrease in product sales. Gross profit for the second quarter of 2022 decreased $5.9 million, or 7.3%, to $75.3 million, as compared to $81.2 million for the second quarter of 2021. The decrease in gross profit was driven by the decrease in sales. Gross margin for the second quarter of 2022 was 42.0% compared to a gross margin of 42.1% for the second quarter of 2021.
Net income for the second quarter of 2022 was $40.6 million compared to net income of $23.1 million in 2021. Net income for the second quarter of 2022 was favorably impacted by a $27.4 million non-cash decrease in liabilities for warrants and earn-out shares.
Diluted EPS of $0.35 for the second quarter of 2022 compared to $0.34 in 2021.
Holley’s current outlook for 2022:
“Our outlook for the full year 2022 is consistent with the previously communicated full year guidance issued on July 28, 2022, and reflects the current supply chain pressures, inventory, and demand trends we have seen in recent weeks,” said Dominic Bardos, Holley’s CFO. “We do not expect to fully resolve the supply chain and inventory issues that are impacting our sales in the near-term, and we have reduced our sales projections accordingly.”
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