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Holley Reports Fourth Quarter and Full Year 2021 Results

·20 min read

Results driven by robust sales growth and strong underlying consumer demand

Provides outlook and guidance for full year 2022

BOWLING GREEN, Ky., March 03, 2022--(BUSINESS WIRE)--Holley Inc. (NYSE: HLLY), the largest and fastest growing platform serving performance automotive enthusiasts, today announced financial results for its fourth quarter and full year ended December 31, 2021.

Fourth Quarter Highlights vs. Prior Year Period

  • Net Sales increased 29.9% to $179.8 million compared to $138.4 million in 2020

  • Gross Profit increased 37.0% to $74.7 million compared to $54.6 million last year

  • Net Loss of $(18.0) million, or $(0.16) per share, compared to Net Income of $2.0 million, or $0.03 per share, in fourth quarter 2020

  • Adjusted Net Income1 of $9.0 million, compared to Adjusted Net Income of $2.0 million reported last year

  • Adjusted EBITDA1 rose to $36.1 million compared to $30.4 million in 2020

Full Year 2021 Highlights vs. Prior Year Period

  • Net Sales increased 37.4% to $692.8 million compared to $504.2 million in 2020

  • Gross Profit increased 37.7% to $286.8 million compared to $208.2 million last year

  • Net Loss of $(27.1) million, or $(0.30) per share, compared to Net Income of $32.9 million, or $0.49 per share, in 2020

  • Adjusted Net Income1 of $61.8 million, compared to Adjusted Net Income of $32.9 million reported last year

  • Adjusted EBITDA1 rose to $169.5 million compared to $126.2 million in 2020

1See "Use and Reconciliation of Non-GAAP Financial Measures" below.

"Holley delivered very solid fourth quarter results, capping off what has been a milestone year for the Company," said Tom Tomlinson, Holley’s President and Chief Executive Officer. "Strong consumer demand for our products continues to drive growth across our various sales channels and we look forward to driving further consumer engagement as we enter 2022."

Fourth Quarter 2021 Financial Results

Net sales increased 29.9% to $179.8 million in the fourth quarter of 2021, up from $138.4 million in the fourth quarter of 2020. Non-comparable sales associated with acquisitions contributed $24.0 million, or 17.3% of year-over-year net sales growth in the fourth quarter. Sales excluding the impact of acquisitions increased by $17.4 million and contributed 12.6% of year-over-year growth.

Cost of goods sold increased $21.2 million, or 25.3%, to $105.1 million, as compared to $83.9 million for the fourth quarter of 2020 and is primarily attributable to the increase in product sales. Gross profit for the fourth quarter of 2021 increased $20.2 million, or 37.0%, to $74.7 million, as compared to $54.6 million for the fourth quarter of 2020. The increase in gross profit was driven by the increase in sales. Gross margin for the fourth quarter of 2021 was 41.6% compared to a gross margin of 39.4% for the fourth quarter of 2020. The increase in margin is attributable to price increases, increased leverage from the higher sales, and product mix.

Selling, general and administrative costs for the quarter increased $15.6 million to $37.7 million, representing an increase of 70.7% when compared to $22.1 million in 2020. Incremental SG&A from recent acquisitions were responsible for $4.1 million of the increase in the quarter. Additional cost drivers include an increase in non-cash compensation expense related to equity awards, increased costs associated with operating as a public company, an increase in outbound shipping costs related to higher sales, and an increase in professional fees related to acquisitions.

Net income for the fourth quarter of 2021 was impacted by a non-cash liability increase for warrants and earn-out shares, and a loss on early extinguishment of debt. Growth in operating income was more than offset by these expenses. As a result, we recorded a net loss of $(18.0) million in the fourth quarter compared to net income of $2.0 million in 2020.

Adjusted for the special transaction and non-cash items noted above this quarter, Adjusted Net Income was $9.0 million, compared to last year’s Adjusted Net Income of $2.0 million. Reconciliation to GAAP Net Income is included in the "Use and Reconciliation of Non-GAAP Financial Measures" table below.

Adjusted EBITDA grew to $36.1 million in the fourth quarter compared to $30.4 million in the fourth quarter last year. Reconciliation to GAAP Net Income is included in the "Use and Reconciliation of Non-GAAP Financial Measures" table below.

EPS of $(0.16) for the fourth quarter of 2021 compared to $0.03 in 2020.

Significant Events During the Quarter

On November 19, 2021, Holley announced the successful refinancing of its 2018 credit facility with a new $825 million credit facility.

During the fourth quarter, Holley completed the acquisitions of Arizona Desert Shocks (ADS), Baer Brakes, Brothers Trucks, and Rocket Racing Wheels for approximately $56 million.

Full Year 2021 Financial Results

Net sales increased 37.4% to $692.8 million in 2021, up from $504.2 million in 2020. Non-comparable sales associated with acquisitions contributed $116.4 million, or 23.1% of year-over-year growth. Sales excluding the impact of acquisitions increased by $72.3 million and contributed 14.3% of net sales growth in 2021.

Cost of goods sold increased $110.1 million, or 37.2%, to $406.0 million, as compared to $295.9 million for 2020 and is primarily attributable to the increase in product sales. Gross profit for 2021 increased $78.6 million, or 37.7%, to $286.8 million, as compared to $208.2 million for 2020. The increase in gross profit was driven by the increase in sales. Gross margin in 2021 was 41.4% compared to a gross margin of 41.3% in 2020.

Selling, general and administrative costs for year increased $45.9 million to $116.8 million, representing an increase of 64.8% when compared to $70.9 million in 2020. Incremental SG&A from recent acquisitions were responsible for $18.5 million of the increase. Additional cost drivers include increased professional fees, an increase in outbound shipping costs related to higher sales and domestic supply chain pressure, and an increase in non-cash compensation expense related to equity awards.

Net income for the year was impacted by a non-cash liability increase for warrants and earn-out shares, and a loss on early extinguishment of debt. As a result, we recorded a net loss of $(27.1) million in 2021 compared to net income of $32.9 million in 2020.

Adjusted for the special transaction and non-cash items noted above this year, Adjusted Net Income was $61.8 million, compared to last year’s Adjusted Net Income of $32.9 million. Reconciliation to GAAP Net Income is included in the "Use and Reconciliation of Non-GAAP Financial Measures" table below.

Adjusted EBITDA grew to $169.5 million in 2021 compared to $126.2 million last year. Reconciliation to GAAP Net Income is included in the "Use and Reconciliation of Non-GAAP Financial Measures" table below.

Basic EPS of $(0.30) in 2021 compared to $0.49 in 2020.

Full Year 2022 Outlook

Holley is providing the following outlook for the full-year 2022:

  • Net Sales in the range of $765-$790 million

  • Adjusted EBITDA of $186-$194 million

  • Capital Expenditures in the range of $14-$16 million

  • Depreciation and Amortization Expense of $24-$26 million

  • Interest Expense in the range of $30-$32 million

Additional information regarding 2022 Outlook is included in the "Use and Reconciliation of Non-GAAP Financial Measures" table below.

"We are encouraged by our performance in 2021 with strong financial results in our first year as a public company," said Dominic Bardos, Holley’s Chief Financial Officer. "As we look to 2022, we believe we are positioned to achieve a good balance of organic and acquired growth while we welcome new enthusiasts to the Holley family."

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 13727022.

For those unable to participate, a telephone replay recording will be available until Thursday, March 10, 2022. To access the replay, please call 877-660-6853 (Toll Free) or 201-612-7415 (Toll) and enter confirmation code 13727022. 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 including, but are not limited to: 1) the ability to recognize the anticipated benefits of the business combination with Empower LTD, which may be affected by, among other things, competition, the ability of the combined company to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its management and key employees; 2) costs related to the business combination and 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; and 10) other risks and uncertainties set forth in the section entitled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" in the Prospectus filed with the U.S. Securities and Exchange Commission ("SEC") filed on February 23, 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.

HOLLEY INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

For the thirteen weeks ended

For the year ended

December 31,

%

December 31,

%

2021

2020

Variance

Variance

2021

2020

Variance

Variance

Net Sales

$

179,801

$

138,419

$

41,382

29.9

%

$

692,847

$

504,179

$

188,668

37.4

%

Cost of Goods Sold

105,071

83,865

21,206

25.3

%

406,040

295,935

110,105

37.2

%

Gross Profit

74,730

54,554

20,176

37.0

%

286,807

208,244

78,563

37.7

%

Selling, General, and Administrative

37,700

22,085

15,615

70.7

%

116,793

70,875

45,918

64.8

%

Research and Development Costs

8,113

6,285

1,828

29.1

%

28,280

23,483

4,797

20.4

%

Amortization of Intangible Assets

3,608

2,983

625

21.0

%

13,999

11,082

2,917

26.3

%

Acquisition and Restructuring Costs

1,791

4,119

(2,328

)

-56.5

%

23,668

9,743

13,925

142.9

%

Related Party Acquisition and Management Fee Costs

-

3,424

(3,424

)

-100.0

%

25,789

6,089

19,700

323.5

%

Other Operating Expense

752

2,606

(1,854

)

-71.1

%

755

1,517

(762

)

-50.2

%

Operating Expense

51,964

41,502

10,462

25.2

%

209,284

122,789

86,495

70.4

%

Operating Income

22,766

13,052

9,714

74.4

%

77,523

85,455

(7,932

)

-9.3

%

Change in Fair Value of Warrant Liability

15,307

-

15,307

nm

32,580

-

32,580

nm

Change in Fair Value of Earn-Out Liability

2,009

-

2,009

nm

8,875

-

8,875

nm

Loss on Early Extinguishment of Debt

12,225

-

12,225

nm

13,650

-

13,650

nm

Interest Expense

8,032

11,929

(3,897

)

-32.7

%

39,128

43,772

(4,644

)

-10.6

%

Non-Operating Expense

37,573

11,929

25,644

215.0

%

94,233

43,772

50,461

115.3

%

Income (Loss) Before Income Taxes

(14,807

)

1,123

(15,930

)

nm

(16,710

)

41,683

(58,393

)

nm

Income Tax Expense (Benefit)

3,174

(830

)

4,004

nm

10,429

8,826

1,603

18.2

%

Net Income (Loss)

$

(17,981

)

$

1,953

$

(19,934

)

nm

$

(27,139

)

$

32,857

$

(59,996

)

nm

Comprehensive Income (Loss):

Foreign Currency Translation Adjustment

42

16

26

162.5

%

30

16

14

87.5

%

Pension liability gain (loss)

388

(293

)

681

nm

388

(293

)

681

nm

Total Comprehensive Net Income (Loss):

$

(17,551

)

$

1,676

$

(19,227

)

nm

$

(26,721

)

$

32,580

$

(59,301

)

nm

Common Share Data:

Basic and Diluted Earnings per Common Share

$

(0.16

)

$

0.03

$

(0.18

)

nm

$

(0.30

)

$

0.49

$

(0.79

)

nm

Average Shares of Common Stock Outstanding - Basic and Diluted

115,807

67,674

48,133

71.1

%

89,960

67,674

22,286

32.9

%

nm - not meaningful

HOLLEY INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands)

(Unaudited)

December 31,

2021

2020

Assets

Total Current Assets

$

291,717

$

257,980

Property, Plant and Equipment, Net

51,495

43,729

Goodwill

411,383

359,099

...

Other Intangibles, Net

438,461

404,522

Total Assets

$

1,193,056

$

1,065,330

Liabilities and Stockholders' Equity

Total Current Liabilities

$

90,816

$

82,009

Long-Term Debt, Net of Current Portion

637,673

649,458

Deferred Taxes

70,045

71,336

Other Noncurrent Liabilities

90,035

22,146

Total Liabilities

888,569

824,949

Common Stock

12

7

Additional Paid-In Capital

329,705

238,883

Accumulated Other Comprehensive Loss

(256

)

(674

)

Retained Earnings

(24,974

)

2,165

Total Stockholders' Equity

304,487

240,381

Total Liabilities and Stockholders' Equity

$

1,193,056

$

1,065,330

HOLLEY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

For the thirteen weeks ended

For the year ended

December 31,

December 31,

2021

2020

2021

2020

Operating Activities

Net Income (Loss)

$

(17,981

)

$

1,953

$

(27,139

)

$

32,857

Adjustments to Reconcile to Net Cash

25,858

13,960

93,002

31,837

Changes in Operating Assets and Liabilities

(11,211

)

(3,104

)

(44,280

)

23,719

Net Cash from Operating Activities

(3,334

)

12,809

21,583

88,413

Investing Activities

Capital Expenditures, Net of Dispositions

(4,724

)

(2,082

)

(14,869

)

(8,735

)

Acquisitions

(57,434

)

(156,833

)

(119,220

)

(156,883

)

Net Cash from Investing Activities

(62,158

)

(158,915

)

(134,089

)

(165,618

)

Financing Activities

Net Change in Debt

57,090

163,044

(45,942

)

140,544

Recapitalization

-

-

132,299

-

Payment of acquisition contingent consideration

(9,200

)

-

(9,200

)

-

Net cash from Financing Activities

47,890

163,044

77,157

140,544

Net Change in Cash and Cash Equivalents

(17,602

)

16,938

(35,349

)

63,339

Cash and Cash Equivalents

Beginning of Period

53,927

54,736

71,674

8,335

End of Period

$

36,325

$

71,674

$

36,325

$

71,674

Holley believes EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income Per Share, 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 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.

USE AND RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(In thousands)

(Unaudited)

For the thirteen weeks ended

For the year ended

December 31,

December 31,

2021

2020

2021

2020

Net Income (Loss)

$

(17,981

)

$

1,953

$

(27,139

)

$

32,857

Adjustments:

Interest Expense

8,032

11,929

39,128

43,772

Income Taxes

3,174

(830

)

10,429

8,826

Depreciation

4,199

1,847

11,527

7,886

Amortization

3,608

2,983

13,999

11,082

EBITDA

1,032

17,882

47,944

104,423

Acquisition Integration & Restructuring

1,791

4,119

6,495

9,743

Earn-Out from Simpson Acquisition

-

-

17,173

-

Notable Items

757

2,248

11,270

3,891

Equity-Based Compensation Expense

2,215

131

4,963

487

Change in Fair Value of Warrant Liability

15,307

-

32,580

-

Change in Fair Value of Earn-Out Liability

2,009

-

8,875

-

Loss on Early Extinguishment of Debt

12,225

-

13,650

-

Related Party Acquisition and Management Fee Expenses

-

3,424

25,789

6,089

Other Expense

752

2,606

755

1,517

Adjusted EBITDA

$

36,088

$

30,410

$

169,494

$

126,150

For the thirteen weeks ended

For the year ended

December 31,

December 31,

2021

2020

2021

2020

Net income (loss)

$

(17,981

)

$

1,953

$

(27,139

)

$

32,857

Special items:

Add back: Change in Fair Value of Warrant Liability

15,307

-

32,580

-

Add back: Change in Fair Value of Earn-Out Liability

2,009

-

8,875

-

Add back: Change in Fair Value of Acquisition Contingent Consideration payable

-

-

17,173

-

Add back: Loss on Early Extinguishment of Debt

9,658

-

10,784

-

Add back: Fees paid related to the Business Combination

-

-

19,561

-

Adjusted Net Income

$

8,993

$

1,953

$

61,834

$

32,857

For the thirteen weeks ended

For the year ended

December 31,

December 31,

2021

2020

2021

2020

Net income (loss) per share

$

(0.16

)

$

0.03

$

(0.30

)

$

0.49

Special items:

Add back: Change in Fair Value of Warrant Liability

0.13

-

0.36

-

Add back: Change in Fair Value of Earn-Out Liability

0.02

-

0.10

-

Add back: Change in Fair Value of Acquisition Contingent Consideration payable

-

-

0.19

-

Add back: Loss on Early Extinguishment of Debt

0.09

-

0.12

-

Add back: Fees paid related to the Business Combination

-

-

0.22

-

Net income per share, as adjusted

$

0.08

$

0.03

$

0.69

$

0.49

13 Weeks Ended

December 31, 2021

Net Sales

179,801

Adjustments:

Sales from Acquisitions within 365 Days of Purchase (Non-Comparable to Prior Year)

(23,993

)

Organic Sales (Comparable to Prior Year Period Net Sales)

$

155,808

Full Year 2022

2022 Forecast

2022 Forecast

Low Range

High Range

Net Sales

$

765,000

$

790,000

Adjusted EBITDA

186,000

194,000

Depreciation and Amortization

24,000

26,000

Interest Expense

30,000

32,000

Capital Expenditures

14,000

16,000

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 due to a change in the fair value of the Simpson acquisition contingent consideration payable, (iii) notable items that in 2021 consist primarily of the amortization of the fair market value increase in inventory and in 2020 consist primarily of the amortization of the fair market value increase in inventory and a legal settlement, (iv) compensation expense related to equity awards (v) changes in the fair value of the warrant liability, (vi) changes in the fair value of the Earn-Out Shares, (vii) losses from the early extinguishment of debt, (viii) related party acquisition and management fee costs, and (ix) other expenses, which includes losses from disposal of fixed assets and foreign currency transactions. We have included within the definition of Adjusted EBITDA the changes in the fair value of the warrant liability, 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 and Adjusted Net Income per share 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 (loss) and net income (loss) per share, 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, Adjusted Net Income per share, 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 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 (loss) or any other performance measures derived in accordance with GAAP.

A forecast for full year 2022 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/20220303005228/en/

Contacts

Investor Relations:
Ross Collins / Stephen Poe
Alpha IR Group
312-445-2870
HLLY@alpha-ir.com