HLLY - Earnings call transcript Q3 2021

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Operator

Hello, and welcome to the Holley Third Quarter 2021 Earnings Call. My name is Charlie, and I will be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Ross Collins with Alpha IR to begin. Ross, please go ahead.

Ross Collins

Thank you, Charlie. everyone. morning, Good taking for to us join Thank the today. you time

Executive with On Financial Tom Nimmagadda, their Corporate prepared me the Holley. Tomlinson, will for Ventures call and Officer, President New Development Chief Vinny remarks, Chief are, After Bardos, questions. today the at of Dominic Executive and open we Vice call Officer,

statements to This Now are Litigation control. Reform Securities risks I the call contain including operating under may Private the will subject and In company's reference of and Provisions the cases, that certain uncertainties, and financial uncertainties forward-looking of these the risks significant the Safe XXXX. are many Harbor future beyond Act company. performance

not the filings discussed. time. recent this discussed at Holley no is S-X The to expectations in or any forward-looking of are this results believes expectations expectations. included S-X forward-looking to obligation only and update differ may statements information company Securities any could the later of the that from the factors are its assume reflected call from information materially remain in the actual will relevant Although, in results prove Important a and and reflected actual that risk in as Exchange company's contained in and correct, should XX-Q, in Investors statements assurance future. statements a with that accurate those Commission. date the operative to forward-looking differ be such undertakes can its give will no call statements reasonable, materially it cause

today's these on are non-GAAP to Tom reconciliation is certain discussing GAAP The over Chief Relations Officer. press to Holley's call will in At the our website. time, Investor release, Executive U.S. to posted this I’d which turn of Additionally, Tomlinson, we also included Tom? items measures. like be financial

Tom Tomlinson

you everyone, Thanks, and Ross. today. thank for us morning, joining Good

consumer acquisitions, benefits demand from our demonstrate release, As enthusiast third quarter and press recent consumers. you saw engagement Holley's from results solid continued in our strong

drove by Our Sales refer X.X%. $X.X the the grew declined of in impact acquisitions growth. our by from we sales net excluding sales which organic XX% million, or to as sales quarter, non-comparable acquisitions,

for However, a quarter occurrence this to sales in quarter, also which shift of the second we extraordinarily XXXX, XXXX. quarter grew of third strong the cybersecurity cybersecurity that incident incident, third organic to an in the the from XXXX, COVID-related comparison by benefited is sales. third also from In XX% compared Until organic and experienced a the impacted system incident to quarter incident positive the million and $X our occurred well disrupted consumers. fourth were product The to near timing of the the that and quarter, ability quarter. end as the of we September the to had estimate been the in growth on sales deferred ship quarter. resellers track to in into our sales of availability, Due as our

of have last results. timing was from the incident no with not we've impact we impacted, And do the confirmed annual sales changes our annual a guidance quarter. While our material on believe will

in incidents additional steps the reduce Importantly, risk cybersecurity future. similar the we're taking to of

event our partners can we While ensure immune operations technology systems to technology working quickly in resume rarely we're systems more are help that processes, and attack. with attack, in from and order a our business harden the future strategic of

I'll recently frequent many form of constraints steps In our increase price of and announced looking response necessary the consumers third We team enthusiast is by focused mainly consumer light quarter, cost and it pressure ultimately pleased our adjustments. to more over to inflation price becoming to our journey other In and across a direct our innovative challenges in path our pass consistent raw increases the on our I channel, projections supply the new personalization chain to cost chain recent we to the developing in supply now protect through the and to events turn Despite for and and margins effect to this we're another remain discussed Vinny forward, quarter. our this, continue and products, results take and to globe. challenges face public the progress enhancing M&A to modification activity, the material company. companies consumer related and to similar Holley consumers. taking to discuss growing

Vinny Nimmagadda

morning Tom, to call. and everyone good on you, Thank the

acquisition of accelerate profitability, Our team drive expansion continues Holley's to new flow robust manage companies cash a and categories, to into opportunities, value. quality pipeline targeting shareholder

offering our two consumers' our Switching deepens and During Holley the powertrain how brands journey we our closed of part to its smaller and on with and meet to acquisitions, highlight gears, categories, engages Holley wanted that enthusiast an with connection. I proprietary consumers, agnostic expanding enabling important third quarter, of more emotional matter.

of way brands and partners these while so Intergalactic we hosting serving consumer Holley's Holley Green, events. an and quarter, East, is our events record Green, that in Ford events had of of pleased the Each industry, deeply proud our Holley enthusiast and During to This We attendance, know, illustrating and of of and are Kentucky, Fest Bowling like create hometown, further in unique events our enthusiast. levels thank was and the stewards new of sense support Holley some returning the Holley resonate MoParty, to host to partnership most Festival. are of would Bowling our three community. LS in impactful City We a influx these the iconic consumers. including consumers the

Finally, third XXX-year the to company's now this will and we the sharing results regularly. to major our we last with to a Dominic? to our Empower results you in greater Dominic, as in milestone ahead And traded look quarters the forward Again, like a the journey. in call, as over I'd completed road we is discussed discuss merger with hand quarter. quarter call third publicly company, our detail. during who

Dominic Bardos

of XX% the million quarter third in sales Holley quarter. net Acquisitions $XXX.X XXXX. Vinny, the growth, with million of you, of organic that sales million negative being the increase provided remaining $XX.X and an slightly Thank quarter, delivered in in or everyone. the $XX.X third good of morning,

inbound also cybersecurity in lesser from to margin sales supply negatively Gross was the and our As cybersecurity reflects XX.X% unforeseen $X delays gross by organic Gross reduction caused growth decreased extent approximately The and to year increases. in fourth of third from mix Tom earlier, organic the on chain impacted the margin by shipping sales inflation a continuation leveraged was incident. from component margin and product in quarter. an cost the incident, XXXX. million lower quarter to corresponding some impacted which resulted that deferral last mentioned shipping, our XX.X% the

general administrative expense monitor raw and million of well cost expenses realities as as and into XX% We chain acquired in pricing supply quarter. non-cash $X.X in The million Total projections and economic these increase to third continue current global equity action. recent compensation approximately closely, material we selling, the increased increase SG&A factored does $X.X our include expense.

the versus sales was tied domestic Empower million third Additional higher increase XXXX. costs and and $X.X additional the rates, modestly merger. Interest million outbound DTC freight costs was SG&A expense shipping expense at to $X.X associated quarter for of up to due with the

earn an provide to facility maturity publicly our strategy have net support existing million and forward. income for with and greater performance, acquisition We to we announced provided believe in desire to this is from basis, net third in measure of $XX.X XXXX. flexibility including items see credit underlying the income, flat adjusted XXXX. the non-GAAP our transaction adjusting in net We business quarter. liabilities million and to net in third paid the expense, million going valuable We quarter, interest a XXXX. to a On third-party. reduce investors net income the GAAP of EBITDA loss of transactions adjusted for our increased refinance in impacted to of extend recorded this $XX.X third these of quarter Several warrant a net the was change income quarter and out fee million up $XX.X Adjusted income $XX.X

forma million. million outlook XXXX. of EBITDA in $XXX $XXX we reiterate call forma for prepared previously As of net of the of we to the year, includes fiscal annual sales Ross, balance the for the pro remarks. to our and to million net million, pro we the $XXX $XXX our This up $XXX million, for range questions. sales concludes year range guidance the open resulting $XXX million provided the That can to adjusted in turn

Ross Collins

Absolutely, Dominic. line Instructions] Charlie, [Operator for the open our please questions participants. from

Operator

comes Instructions] from question Koenig [Operator first Our Jefferies. Randy of

Your line go Please open. is ahead.

Randy Koenig

trends like on stickiness prepared at that remarks quarter. demand, question good your ask about It I in about record a around seems, home market about events talked you the record durability. guess, from wanted your talked or a work to seems you morning. Hey, Vinny thoughts attendance the there. there's are guys, I out Tom during to It

And could demand So base to over just few that you points years from your and the want very demand on the data your So you robust? think next on how customer about here? thoughts from continues share be

Tom Tomlinson

everything at this our Randy, continued demand strong towards points point products. see for we

trucks at consumers I and the step we trend modification for And, look when strategies, for every we're think want. core into outlook Our the on mean, products category engaged. enthusiast journey by that through basically consumers see we love. go need, when you that and consumer, and in Those very the to the our what they them giving enthusiast are what about they their year, industry very they growth to are think And, our additional them is focusing pursue cars continuing enthusiast positive. allow coming step

Randy Koenig

out quick The Got it. embarked And upon rounding portfolio product then acquisitions. maybe maybe Vinny. different company with for follow-up a has the

us helpful? into give it just just company gotten perspective terms acquisition have I that of areas where about maybe of through cars, in for foreign opportunity, guess some example, goes give company more perspective you be may I on some would underpenetrated Thanks. when the you've maybe future some be on know different opportunity? So us strategies the thinking categories, could product how might

Vinny Nimmagadda

enthusiast cars same with really the and but many of products modifying prioritize, Analyst additional think, $X a a about a We're in and if safety as strong looking billion drive of that a of as into know and We've getting very about pipeline. $X additional chassis and gets of definitely whitespace that category, the and Randy. as modification overlaid billion parts well I systems in broader how we on robust journey, we billion, kind categories it intend integrated their think the that's and they consumers at you It's continue one Yeah, products. question. of $XX back that engine trucks. sides share in their got to call suspension, truck in And that that one that presentation. is train, And they're these serving billion adjacent that filters going and great that's really $X Day to

methodology, past there's in we've strategic. about that we prioritizing really So as talked be as a opportunities about can well more calls,

Dominic Bardos

platform, And and Randy, to add Finspeed that this see Dominic. to thing, -- and our Q, acquisitions saw want as that's in I that, just you would of did you the we Classic announce add I one Finspeed any their things of Instruments suspension in high-end wheels wheels absolutely which going something And talked across the will is goes about, transformative and one quarter. be being that with is really forward. we've the

in Q additional So, information our there filing. is

want Just point out. that to

Randy Koenig

I’ll check it Perfect. you. Thank out.

Operator

The next Michael Davidson. Baker of from question comes D.A.

open. Your line Please go is ahead.

Jeff Walter

on guys of get we -- This new customers, organic driving Jeff just repeat some being if road? any there what's is $X and And customers? numbers access attract repeat could growth Michael retain of of cybersecurity down Are new able And help color for million, hoping more. Baker. into Have you was being of hopefully them growth? can to could guys morning, turn guys. the organic the seeing done little been dig kind this what's more these to lot able Walter Thank in what's a a you. we been if you I customers? customers Good to kind we on

Tom Tomlinson

strategy So, I is think point of number innovation. would I the continuous thing to one the

digital basically new us. us consumers. our also So do add from help to these into to buy in they basically, us. target ecosystem consumers do that we once we're consumers our programs that see build the capability consumers, just the continue help continue directly coming And loyalty enthusiast as retain new from actually potential exciting to buy assessing to a we to fold. to allows our are And products layer We that to launch have out

we on continue haven't we and of and interest program a launched a the tremendous amount But, that's that in yet like so consumers part see our So opportunity. products future of to brands.

Dominic Bardos

last remarks, consumer is Dominic. say terms this very back-half seasonality. his sales. I demand and consistent Jeff, year unusual our Tom have in your of as to of we're prepared seeing the in If stacks But just with a the was mentioned we bit one can did thing, little

pleased So demand. see we're that of to the very continuation

add to wanted Just that.

Jeff Walter

have. you very I Thank That's much. all

Operator

next from comes of Ryan Sundby The question William Blair.

Please open. go is line Your ahead.

Ryan Sundby

Yeah, Thanks taking morning. my questions, hi, good for guys.

if you little channels? sales bit about in BXC your different retail any across all, was across and of that I could First a there heard and performed partners? the more the script how there talk I business the retail color DTC more traditional think, up,

Tom Tomlinson

the DTC greater continues across fastest-growing impact channels. look cybersecurity reseller the Demand would have had to our the be And, strong. remained quarter, we channels channel. when the on a at basically incident

Ryan Sundby

expect Instruments, a there follow Finspeed top-line and And to from it what [technical anymore what difficulty]. on Great. I Classic guess And up we just contribution? color should on was

Tom Tomlinson

them platforms those qualitatively. talking that to us allow enthusiast components by start to or We provide assembling, view as consumers. we're that really just would product I about categories So, platforms of acquisitions

So, some And, as line, that time grow really these on line lines, or product and product well technology. acquisitions organically over through product acquisitions. capability additional category product relatively of small were we'll as possibly

Ryan Sundby

for the questions. Thanks Great.

Tom Tomlinson

Sure. Thank you.

Operator

question Securities. next comes of Mike Truist The Swartz from

ahead. Please open. is line go Your

Mike Swartz

morning, guys. Good

looking maybe Just a quick mentioned pricing, I actions pricing going at on taking more Tom, frequent you're forward. question you'd think

you've historically done per price I think more increase one year.

guess your you prices? to And reacting you all are surcharges? through? the I list customers any Are consumers maybe is, doing these or those what how are using increases? those mechanism pass price to Are So question

Tom Tomlinson

also retail separately. have then benefit portfolio. our we very pricing So, And at and a of we actually product wholesale the broad our look pricing

we're spreading without shocking so the by to get able our these And portfolio, increases more product around price consumers.

So we're the been really way feedback the good has on this. approaching

this, to on also very I we're our think margins. we'd do focused not have all rather but protecting

so, your is I'd guess, And question. to that I mean, responsive say, I

I historically situations price I basically the get I into think, have years, add guess very is, increases, been in a the price preferred thing arose. sees would the do and particular we've we've a when it goes to up. that those commodity sums year. over other the need we one increase increases that to But products our demonstrated where ability heavy

about we able approach but price So generally, to we've been increases. increases, get we're careful, thoughtful the how price the

Mike Swartz

color remediation to any there you Thank And the follow some question mean, that. going you're provide of about taking. Okay. maybe And up about little incident. the cybersecurity on the I just for a efforts more investments think are us forward? incremental

Dominic Bardos

systems, I'll publicly that we're But a the going gap Yeah, things Mike. one, there's increase handle action monitoring. can air this there do future is been the a things some modest expense, pricing prevent few to there Dominic, is all the we're you Yeah, but not things obviously recent to encompassed attacks. have in are folks that to some look be Any But doing tell to things SG&A increase. to backup in as forward. better we there's that's going

of of guidance us a that it to yeah, Holley. keep the margins EBITDA impacts desire north our margins, So, XX%. going I definitely was anything But it's for not say our busy at stated quarter that to would be here our

Mike Swartz

Okay. Thank you.

Dominic Bardos

Mike. You it, got

Operator

The next from question John Benchmark. comes of Lawrence

is go line open. Please Your ahead.

John Lawrence

give that Good morning, bucket walk cost, you mix. guys. gross Yeah, dig Dominic, just bit a of? thanks. margin decline mentioned Can of little things, of a a you through of little product us shipping sort would sense sort about bit. the couple talk you I and inbound just mean into of a

Dominic Bardos

But, Pacific in limited is talk everyone continued containers. the pricing, the tremendous we disclosing to John, has magnitude, things about, are as seen one detail the container Trans of the that increase we have that publicly. in we've

actually, that QX early stabilizing into here end of have the back the here. We quarter, towards seen

now forward. optimistic the we're worst seen we've that in that pressures the of on we've containers that factored So going

So cost container shipping goods big of our on sold. about the of portion

and As from between actually you recall our XX% Analyst product of Day overseas. does materials, come XX%

that our most EFI which big dollars, bit shipping products a of which mix, product might be good that sales line. margin our was and growth little And container a to a gross margin popular was and the of may cost items some Those more, now, So items, in the lower have access continue point the point. lower. the Sniper margin costs in our drive good little of right pressure some bit things top-line another impacted some

actually there's So us the Channel mix was for the our product well. a mix as quarter, outpace did favorable impact as in resellers. DTC

So that was positive there. a

So those are some impact that of the us. things

components. We continued are electronic pressure seeing the on

our did that keeping are we and that into we So factor in mind pricing.

John Lawrence

how's at moment? manageable Is cybersecurity, backlog is the at Excluding point? I really know up. still I this this mean, it building it

Tom Tomlinson

very backlog. manageable. It's a still robust John. Yes, It's

John Lawrence

is, have me quarter the the DTC Thanks. with side. last challenges in up for retailer question Great. the the of with And percentage gone on

Dominic Bardos

we're annual the numbers, Yeah, because that's But a comparable because were we feel DTC consumer challenged. the a number some fair we not direct quarterly. on releasing and resellers basis was to were have. better organic of assessment, the But that's positive, release to will

John Lawrence

guys. Good Thanks, luck. Great.

Dominic Bardos

it. John. Appreciate Thanks,

Operator

Altobello next Raymond question Joe comes The James. from of

go Please ahead. open. is line Your

Joseph Altobello

Good morning.

First, you're on lingering two not cybersecurity, now. have you And it's it's going resellers? the seen a cybersecurity, terms with relationships But your have of issue. to confident on months effects any fairly in

Dominic Bardos

say, was to I effects supportive. They're resellers. just very going with no

to brands. for supportive, very time get to down. and they Muskerry very Our up period were Again, anxious brands the them. back us were we and of shipping are And

Joseph Altobello

Got it.

wide In of terms but today, it's range. you reiterated guidance, a fairly

supply the the But you the We that the end to higher assuming drive them. you're range? of Obviously, out chain, quarter, two I'm that have of that are one biggest months what or variables are in what lower variables what left will is watching? biggest

Tom Tomlinson

chain. I chain. supply And we've been do production is that inability to a some biggest stabilization the We of more as the as from slowdown the our thing. chain, it, then, we're the seeing from has that, supply see supply characterized more than mentioned, So get entirely guidance perspective, in variable we believe

last stabilization of So perspective, the I very year. of And do we supply chain the being going the see mindful weeks from our factor. into eight think we are

We the you that financial inventory have in our see positions, statements as released. we improved

but inventory some higher, are positions weakest are of We popular our getting position. in most the the inventory items where still

are of building we all So that.

keep be us as on inventory coming guidance as through with we open supply the be for keep are No ports fine things are and this think an just and to in the situation, have guidance. I should the we'll problem. chain, long is So chunking issues ability fine and eye

Joseph Altobello

And last on for just then helpful. me That's M&A. one the

just It smaller quarter. in going You announced sheet balance couple all of the a not impact acquisitions to like sound it's that much. the

like So look what are what for And point? additional M&A? the pipeline at your appetite this does

Dominic Bardos

start talk we'll doing of about I'll Vinny then the we're what the with facility pipeline So, let credit from things. And standpoint. some

As for looking for credit approaching to down refinancing and facility, we existing facility, there looking M&A. the but are we're paying expand capabilities the also the

back talk And to Vinny so, I'm and Vinny, pipeline for. about going what over hand let the looking it and to we're

Vinny Nimmagadda

Thanks, Yeah. Dominic.

I the future. at even we ahead, pipeline extending it and, important. the look the refinancing be think continues as into robust, Joe, very to is And definitely

again, think, where one it's looking I sizes. of So opportunities at we're various prioritizing deals certain and

we focus. our into ones companies expanding and in that's categories in ones are guidance does the and XXXX. that the kind commensurate in expanding pipeline ranges done really think smaller opportunities deals and prioritizing, acquisitions, strategic looking the TAM past at with that ahead new have two are a And the that recent and sizes the varying major of transactions and I are of definitely quarter, that

Joseph Altobello

Okay. Great. Thank you guys.

Dominic Bardos

Joe. Thanks,

Operator

Instructions] Joe Telsey Feldman next from of comes question Advisory [Operator Group. Our

Please open. is line ahead. go Your

Joe Feldman

the quantify how actually like Or you seeing, down you're regard that seeing being With guys. inflation the side level with? cost on and you're level sides inflation that kind it of morning, is of somehow what to much through? of of good the Hey, kind both passed you're working of maybe on it break can

Tom Tomlinson

intent beyond ahead. maintain Well, is basically go I to would Dominic, And, start our by saying margins. that that with pricings

Dominic Bardos

it is the disclosed was not that we pressures seeing have numbers. we're is and we're components more that on shipping than on component just inflation to But say on the labor. side, seeing inflation the going I inflation individual cost Yeah, which

fair Our markets very labor for rates we in. operate the are that

account, that pressures as guided. And we the takes chain-driven. are can so feeling XX%, our as into north keep So pricing really that action mentioned, gross we've we're supply margins of that Tom the

Joe Feldman

And actually, I guys. thought Thanks, then another was had that about Dominic was labor.

pressure the labor? on do So, staffing Or, you the goods move and need people the and ability you're have seeing you the any goods? and to make

Dominic Bardos

slowdown We've have the that hour, example, had operate. labor. feel we like than Yeah, chain we've in already were limitations going wage, $XX where Amazon our there. on to the And others our we competitive from we very and we more production are an competitive when been own markets for supply were

So we wage don't feel like there's issue. a huge

to It's us. have We markets. limitations labor our in the really external

Joe Feldman

are it. then, Yeah, Thanks. an which just that? you level at topic, like EV would still kind Okay, asked maybe it, you And expect from other one with EV you engine seeing perspective? someone or about thanks. demand sort mentioned, you got a compared And of to traditional where of are

Tom Tomlinson

Yeah, sure.

So, and the is at EVs in consumer you miniscule But of are as a performance-oriented well emerging opportunity. growing are powertrain seeing part an look operation, EVs, we overall. the interest this anecdotally, as conversion. still vehicles When

even pulling we putting drivetrain it's out would the EV in vehicle into old be an basically category whether drivetrain. more or So it's classic And for vehicles, very the installing drivetrain us. a modern and think this strategic EV ice

that is see there's to it associated mass not expect it today, in sales yet. the grow a We meaning emerging of future. an opportunity, it critical But with

Joe Feldman

really that's interesting. But Understood.

-- could engine to -- put a into an car that EV I Is saying? car. turn an what you So to looking you're guess, actually regular people in are

Tom Tomlinson

Yes.

Joe Feldman

Wow.

Interesting. Okay.

Good this quarter. Okay. Thanks, guys. fourth with luck

Tom Tomlinson

Thanks. We appreciate it.

Operator

time. this at lines the on questions further no are There

Tom Tomlinson

we Thanks one. of Ross, everyone's point attention look and We on conclude. appreciate for at one speaking to you today. I interest Thanks. the Well, to many I can this think forward

Operator

call. Thank This today's joining. for concludes you

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Holley (HLLY) 13 Nov 212021 Q3 Earnings call transcript