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Holley Reports Third Quarter 2021 Results

·18 min read

Results demonstrate continued strong consumer demand and enthusiast engagement

Reiterates outlook and guidance for fiscal year 2021

BOWLING GREEN, Ky., November 10, 2021--(BUSINESS WIRE)--Holley Inc. (NYSE: HLLY), the largest and fastest growing platform serving performance automotive enthusiasts, today announced financial results for its third quarter ended September 26, 2021.

Third Quarter Highlights vs. Prior Year Period

  • Net Sales increased 19.8% to $159.7 million compared to $133.3 million in 2020

  • Gross Profit increased 17.4% to $65.2 million compared to $55.5 million last year

  • Net Loss of $(30.2) million, or $(0.28) per share, compared to Net Income of $13.5 million, or $0.20 per share, in third quarter 2020

  • Adjusted Net Income1 of $13.5 million, flat to Net Income of $13.5 million reported last year

  • Adjusted EBITDA1 rose to $35.5 million compared to $34.6 million in 2020

  • Record attendance at three Holley consumer events in Bowling Green, Kentucky, including Holley LS Fest East, Holley MoParty, and The Holley Intergalactic Ford Festival

2021 Outlook

  • Company reiterates fiscal 2021 Net Sales expected to range between $648 million-$663 million, Pro Forma Net Sales1 between $655 million-$670 million, and Pro Forma Adjusted EBITDA1 between $165 million-$170 million

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

Tom Tomlinson, Holley’s President and Chief Executive Officer, said, "We continued to see solid consumer demand during the third quarter. Our team capitalized on this demand and delivered excellent results despite continued supply chain challenges and a cybersecurity incident that caused some sales to shift into our fourth quarter. As expected, we are seeing a return to more normal seasonality in demand."

Third Quarter 2021 Financial Results

Net sales increased 19.8% to $159.7 million in the third quarter of 2021, up from $133.3 million in the third quarter of 2020. Non-comparable sales associated with acquisitions contributed $29.8 million, or 22.4%, of net sales growth in the quarter. Sales excluding the impact of acquisitions declined by $3.4 million (2.6% from the prior year quarter. We estimate that $7 million of sales was deferred from our third quarter into the fourth quarter due to a cybersecurity incident near the end of the quarter.

Cost of goods sold increased $16.7 million, or 21.5%, to $94.5 million, as compared to $77.8 million for the third quarter of 2020 and is primarily attributable to the increase in product sales. Gross profit for the third quarter of 2021 increased $9.7 million, or 17.4%, to $65.2 million, as compared to $55.5 million for the third quarter of 2020. The increase in gross profit was driven by the increase in sales. Gross margin for the third quarter of 2021 was 40.8% compared to a gross margin of 41.7% for the third quarter of 2020. The decline in margin is attributable to increased inbound shipping costs, some component cost increases, and product mix.

Selling, general and administrative costs for the quarter increased $11.6 million to $28.9 million, representing an increase of 67.0% when compared to $17.3 million in 2020. Incremental SG&A from recent acquisitions were responsible for $5.4 million of the increase in the quarter. Additional cost drivers include an increase in non-cash compensation expense related to equity awards, an increase in outbound shipping costs related to higher sales and domestic supply chain pressure, and an increase in professional fees, primarily due to the business combination with Empower.

Research and development costs for the third quarter increased $1.2 million, to $7.1 million, representing an increase of 19.2% when compared to $6.0 million in 2020. The increase in research and development costs was primarily due to headcount investments as the Company continues to pursue the development of innovative new products.

Net income for the third quarter of 2021 was significantly impacted by the business combination with Empower. Transaction and public company charges included a non-cash liability increase for warrants and earn-out shares, a transaction fee paid to a related party, and a non-cash charge for equity compensation. Growth in operating income was more than offset by these expenses. As a result, we recorded a net loss of $(30.2) million in the third quarter compared to net income of $13.5 million in 2020.

Adjusted for the special transaction and non-cash items noted above this quarter, Adjusted Net Income was $13.5 million, flat to last year’s net income of $13.5 million. Reconciliation to GAAP Net Income is included in the "Use and Reconciliation of Non-GAAP Financial Measures" table below.

Adjusted EBITDA grew to $35.5 million in the third quarter compared to $34.6 million in the third quarter last year. Reconciliation to GAAP Net Income is included in the "Use and Reconciliation of Non-GAAP Financial Measures" table below.

EPS of $(0.28) for the third quarter 2021 compared to $0.20 in 2020.

Significant Events During the Quarter

On July 16, 2021, Holley completed the business combination with Empower LTD and became a publicly traded company on the New York Stock Exchange (NYSE: HLLY).

On September 9, 2021, Holley experienced a cybersecurity incident. Access to operational systems was restricted or significantly limited through the following week. A majority of sales shipments were delayed during the incident, causing some sales to be deferred past our quarter end of September 26, 2021. The event is not expected to have a material impact on 2021 annual sales or earnings.

Fiscal 2021 Full Year Outlook

We reiterate our full-year expectations of recognized net sales in the range of $648 million to $663 million for fiscal 2021. We expect pro forma net sales in the range of $655 million to $670 million, and pro forma adjusted EBITDA between $165 million and $170 million. Additional information regarding pro forma adjustments is included in the "Use and Reconciliation of Non-GAAP Financial Measures" table below.

Dominic Bardos, Holley’s Chief Financial Officer, added, "Holley embarked on a new journey as a public company this quarter. Consumer demand remains strong and the underlying business remain healthy and growing. The cybersecurity incident presented another challenge for the team to overcome, but I’m pleased with the speed at which we returned to normal operations to meet the needs of our consumers."

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 1-855-979-6654 (United States Toll Free), 1-646-664-1960 (United States Local), or + 44-203-9362-999 (All Other Locations) using the access code of 917221.

For those unable to participate, a telephone replay recording will be available until Wednesday, November 17, 2021. To access the replay, please call 1-845-709-8569 (U.S.), 020-3936-3001 (U.K.), or + 44-203-9363-001 (All Other Locations) and enter confirmation code 855262. 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) the possibility that Holley may be adversely affected by other economic, business and/or competitive factors; 7) Holley’s estimates of its financial performance; 8) the impact of the novel coronavirus disease pandemic and its effect on business and financial conditions; and 9) 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 July 28, 2021, 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 thirty-nine weeks ended

Sept. 26,

Sept. 27,

%

Sept. 26,

Sept. 27,

%

2021

2020

Variance

Variance

2021

2020

Variance

Variance

Net Sales

$

159,673

$

133,307

$

26,366

19.8

%

$

513,046

$

365,760

$

147,286

40.3

%

Cost of Goods Sold

94,475

77,778

16,697

21.5

%

300,969

212,070

88,899

41.9

%

Gross Profit

65,198

55,529

9,669

17.4

%

212,077

153,690

58,387

38.0

%

Operating Expense

63,284

27,149

36,135

133.1

%

157,320

81,287

76,033

93.5

%

Operating Income

1,914

28,380

(26,466

)

-93.3

%

54,757

72,403

(17,646

)

-24.4

%

Non-Operating Expense

35,415

9,325

26,090

279.8

%

56,660

31,843

24,817

77.9

%

Income (Loss) Before Income Taxes

(33,501

)

19,055

(52,556

)

nm

(1,903

)

40,560

(42,463

)

nm

Income Tax Expense (Benefit)

(3,301

)

5,512

(8,813

)

nm

7,255

9,656

(2,401

)

-24.9

%

Net Income (Loss)

$

(30,200

)

$

13,543

$

(43,743

)

nm

$

(9,158

)

$

30,904

$

(40,062

)

nm

Comprehensive Income (Loss):

Foreign Currency Translation Adjustment

(31

)

-

(31

)

nm

(12

)

-

(12

)

nm

Total Comprehensive Net Income (Loss):

$

(30,231

)

$

13,543

$

(43,774

)

nm

$

(9,170

)

$

30,904

$

(40,074

)

nm

Common Share Data:

Basic and Diluted Earnings per Common Share

$

(0.28

)

$

0.20

$

(0.48

)

nm

$

(0.11

)

$

0.46

$

(0.57

)

nm

Average Shares of Common Stock Outstanding - Basic and Diluted

106,285

67,674

38,611

57.1

%

80,736

67,674

13,062

19.3

%

nm - not meaningful

HOLLEY INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)

As of

As of

Sept. 26,

Dec. 31,

2021

2020

Assets

Total Current Assets

$

282,563

$

257,980

Net Property, Plant & Equipment

50,393

43,729

Goodwill

381,860

359,099

Other Net Intangibles

421,870

404,522

Total Assets

$

1,136,686

$

1,065,330

Liabilities and Stockholders' Equity

Total Current Liabilities

$

101,577

$

82,009

Long-term Debt Net of Current Portion

564,187

649,458

Deferred Taxes

72,172

71,336

Other Noncurrent Liabilities

78,927

22,146

Total Liabilities

816,863

824,949

Common Stock

12

-

Additional Paid-In Capital

327,490

238,890

Accumulated Other Comprehensive Loss

(686

)

(674

)

Retained Earnings

(6,993

)

2,165

Total Stockholders' Equity

319,823

240,381

Total Liabilities and Stockholders' Equity

$

1,136,686

$

1,065,330

HOLLEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

For the thirteen weeks ended

For the thirty-nine weeks ended

Sept. 26,

Sept. 27,

Sept. 26,

Sept. 27,

2021

2020

2021

2020

Operating Activities

Net Income (Loss)

$

(30,200

)

$

13,543

$

(9,158

)

$

30,904

Adjustments to Reconcile to Net Cash

35,147

6,102

67,144

17,877

Changes in Operating Assets and Liabilities

(26,427

)

12,510

(33,069

)

26,823

Net Cash from Operating Activities

(21,480

)

32,155

24,917

75,604

Investing Activities

Capital Expenditures, Net of Dispositions

(3,289

)

(3,218

)

(10,145

)

(6,653

)

Acquisitions

(7,775

)

-

(61,786

)

(50

)

Net Cash from Investing Activities

(11,064

)

(3,218

)

(71,931

)

(6,703

)

Financing Activities

Net Change and Principal Payments in Debt

(101,493

)

(48,950

)

(103,032

)

(22,500

)

Recapitalization

132,299

-

132,299

-

Net cash from Financing Activities

30,806

(48,950

)

29,267

(22,500

)

Net Change in Cash and Cash Equivalents

(1,738

)

(20,013

)

(17,747

)

46,401

Cash and Cash Equivalents

Beginning of Period

55,665

74,749

71,674

8,335

End of Period

$

53,927

$

54,736

$

53,927

$

54,736

Holley believes EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income Per Share, Pro Forma Net Sales, and Pro Forma Adjusted EBITDA 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 thirty-nine weeks ended

Sept. 26,

Sept. 27,

Sept. 26,

Sept. 27,

2021

2020

2021

2020

Net Income (Loss)

$

(30,200

)

$

13,543

$

(9,158

)

$

30,904

Adjustments:

Interest Expense

9,851

9,325

31,096

31,843

Income Taxes

(3,301

)

5,512

7,255

9,656

Depreciation

2,875

2,026

7,328

6,039

Amortization

3,553

2,699

10,391

8,099

EBITDA

(17,222

)

33,105

46,912

86,541

Acquisition Integration & Restructuring

368

1,092

21,877

5,624

Notable Items

938

205

10,513

1,643

Equity-Based Compensation Expense

2,486

121

2,748

356

Change in Fair Value of Warrants Liability

17,273

-

17,273

-

Change in Fair Value of Earn-Out Liability

6,866

-

6,866

-

Loss on Early Extinguishment of Debt

1,425

-

1,425

-

Related Party Acquisition and Management Fee Expenses

23,250

894

25,789

2,665

Other Expense

89

(821

)

3

(1,089

)

Adjusted EBITDA

$

35,473

$

34,596

$

133,406

$

95,740

For the thirteen weeks ended

For the thirty-nine weeks ended

Sept. 26,

Sept. 27,

Sept. 26,

Sept. 27,

2021

2020

2021

2020

Net income (loss)

$

(30,200

)

$

13,543

$

(9,158

)

$

30,904

Special items:

Add back: Change in fair value of warrant liability

17,273

-

17,273

-

Add back: Change in fair value of earn-out liability

6,866

-

6,866

-

Add back: Change in fair value of acquisition contingent consideration payable

-

-

17,173

-

Add back: Fees paid related to the Business Combination

19,561

-

19,561

-

Adjusted Net Income

$

13,500

$

13,543

$

51,715

$

30,904

For the thirteen weeks ended

For the thirty-nine weeks ended

Sept. 26,

Sept. 27,

Sept. 26,

Sept. 27,

2021

2020

2021

2020

Net income (loss) per share

$

(0.28

)

$

0.20

$

(0.11

)

$

0.46

Special items:

Add back: Change in fair value of warrant liability

0.16

-

0.21

-

Add back: Change in fair value of earn-out liability

0.06

-

0.09

-

Add back: Change in fair value of acquisition contingent consideration payable

-

-

0.21

-

Add back: Fees paid related to the Business Combination

0.18

-

0.24

-

Net income per share, as adjusted

$

0.12

$

0.20

$

0.64

$

0.46

13 Weeks Ended

Sept. 26, 2021

Net Sales

159,673

Adjustments:

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

(29,794

)

Organic Sales (Comparable to Prior Year Period Net Sales)

$

129,879

2021 Forecast

2021 Forecast

Low Range

High Range

Net Income (Loss)

$

647,600

$

662,600

Pre-Acquisition Net Sales (AEM Performance Electronics)

7,400

7,400

Pro Forma Net Sales

$

655,000

$

670,000

Adjusted EBITDA

163,400

168,400

Pre-Acquisition Adjusted EBITDA (AEM Performance Electronics)

1,600

1,600

Pro Forma Adjusted EBITDA

$

165,000

$

170,000

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) 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, (ii) compensation expense related to equity awards (iii) acquisition and restructuring costs, which for the 39-week period ended September 26, 2021 includes a $17.2 million adjustment due to a change in the fair value of the Simpson acquisition contingent consideration payable, (iv) changes in the fair value of the warrant liability, (v) changes in the fair value of the Earn-Out Shares, (vi) losses from the early extinguishment of debt, (vii) related party acquisition and management fee costs, and (viii) 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 2021 Adjusted EBITDA and Pro Forma 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/20211110005304/en/

Contacts

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