Earnings call transcript Q4 2022

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Operator

Good afternoon, ladies and gentlemen and welcome to the Conference Call to discuss the Results from Holley’s Fourth Quarter 2022. [Operator Instructions] Please be advised the reproduction of this call in whole or in part is not permitted without written authorization of Holley. And as a reminder, this call is being recorded and will be made available for future playback. I would now like to introduce your host for today’s call Mr. Ross Collins, Managing Director of Alpha IR. ahead. go Please

Ross Collins

good time and Thank for you Thank join morning, us the to today. taking you everyone.

On the After for Officer; call Chairman; with Development the Nimmagadda, me today are call of President remarks, Interim Financial and Corporate and we Executive Chief open Vice Michelle New Matt President Chief prepared Weaver, questions. Executive Ventures. Jesse and Officer; Vinny their Gloeckler, Rubel, Executive will

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

expectations statements factors its actual SX of and be Commission. and believes statements with its no expectations. the actual XX-Q, are in differ recent that forward-looking from Securities give can results company and company’s the to could are they included statements the that differ the such or risk results materially SX those in forward-looking assurance may cause Important correct will prove in Although the reflected expectations reasonable, forward-looking from Exchange to filings any reflected materially

update at the call later the accurate not operative no of remain future. time. The should information contained Holley in this information discussed. a to date this will obligation and is any in relevant Investors only call as assume statements undertakes included that in

press Relations is posted we reconciliation in U.S. measures. are of which A be these also non-GAAP today’s to certain Investor GAAP website. financial our Additionally, items included on will discussing release,

President turn would like the Holley’s Michelle over Officer. Michelle? At Executive Gloeckler, Chief call this time, and to to I Interim

Michelle Gloeckler

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

Holley, and of of enthusiast by say organization’s not and our I when by have the in incredible for vision Holley. talent discovery enable of vision this Many adventures leadership excited know As of in speak we they and our believe is also in myself motor Board depth a that and to the chapter the focus but industry for enthusiast I can supported fun built life, I the team. This inspire for the are and next we enter about organization in experience innovation, day-to-day bringing to and by enthusiast. company decades their lives live associates the their our automotive only outside business

That strategy category. three, on enthusiast. direct channel strategy; is continued categories one, this enthusiast for four, innovation; and mergers experience and and team’s pillars: five connection necessary a consumer acquisitions; product that is strategic us inspiring Our and our key to consumer and enthusiast our built platforms; engaging two, the themselves execute asset foundation and the focused strategy capitalize as underpins the prioritizing five, on in to growth on

Moving forward, value. plan the team in we are place shareholder right confident that and drive we have the to right

the long Our believe over fundamentally markets pre-COVID of at is run. a strong firmly to and is levels, we growing experiencing X% to organically capable sector demand our although normalization industry remain X%

powerhouse M&A our leading market at is proven innovation, platform, Given product unmatched scale, market. above or direct-to-consumer new brands, the Holley to grow poised and

in can EBITDA to margins than XX% believe greater margins future. return business to continue gross XX% We this with near the

cash gain our we a strategic to While deliver are traction of combination growth. bottom to and flow tied drive initiatives These these to and XXXX contributing be will top our in in implementing due efforts we beginning not meet directly to line factors to several are and did pillars XXXX in initiatives targets both macroeconomic growth headwinds, free we our cost challenges, challenging profitability and the also this improvement and these their vision areas successes sincerely I for many our tireless organization. long-term acknowledge strategic was of on to XXXX our levels. and thank year wins to broader Holley deliver a return achieved Despite efforts for surfaced for one to year. employees want and XXXX to in that

We seeing DTC our are channel. continued demand pleased through solid sales we the are with

Holley’s were is it M&A year, of XX% value as in DTC million, importantly, forward XX.X% compared million sales XXXX, continued of in or additional the acquisitions story XXXX. previous Holley made look For integrating up compared and in represented acquisitions to us drive by our to enthusiast These our is the new pillar XXXX growth XXXX, directly a a $XXX in total with XX.X% platform but channel sales sales the $XX to full We core DTC successfully as three connects with made years. just to DTC record. continued in during year, growth which customers.

It’s pillar a to months. synergies events increase has with cost in Over and growing and in integrated of capture consumer multigenerational XX.X% XX XXXX, total the of attendance is a enthusiast self-funded true next We $XXX to XX success individuals, allow the integration systems is X expectation The acquisitions, to events our acquisitions our of years, engagement to which key Holley XX XX n community. to XXX,XXX us efforts team of Furthermore, action our annualized of last sales million XXXX. over facilities. past surpass strategy. a an square feet our over continues XXX,XXX hosted contributed consolidated of testament $XX year. will completed million X ERP the our These nearly

due orders headwinds, As various our and due we elevated and receive chain including operating reliable ability to chips past remain in a timely to strained quarter, last supply fashion. the outlined

$XX $X.X the that past coming category. With of mechanical our due product due to XX% at from able reduction of past that quarter, and our said, total levels million electronics remain million, elevated the in During were orders by are our the end concentrated category. we approximately with at reduce quarter

as headwinds demand business, from will continue levels, a is looked we focused to our Company-wide supply a we levels critical normalization pillars Holley and face strategy. our and heightened is of be ready all various COVID As execute organization more including our team constraints. XXXX, inventory at to broader on of execution chain to

as freight costs. input heightened inflationary Additionally, as persisted, costs have pressures causing well elevated

EFI product us are has reduced product we as today general and availability on available. products, our semiconductors heavy, experience supply the to This we engineering microchips. have to an chain that opportunity. management unique it widely mechanical continue While call is Holley us not a and make The semiconductors to with our line, is is progress of designed challenge both headwinds helped related on lifecycle congestion we

and is ahead challenges. of are better critical to Redesign take being on time. engineering any focused to management line processes Engineering Product anticipate product prioritized efforts lifecycle resources the potential intently improved supply redesigning on components chips. more accessible support reduced

which to will we supply top on So, minimize will market critical the line possible continue secure bottom our and headwinds these anticipated XXXX. further for help where during efforts spot components,

more both our In Because strategy cost maximizing accelerating year align on. you issues operations. management efforts to committed excellence to team Board prioritizing costs which XX optimize to in are and and and our our reevaluating business. contract refocus our XX,XXX our operations will operational refinement have been brands organization the successfully to platforms, capital working to flow categories and face path pillars M&A processes, our This head management platforms, than manufacturing and our can key I combined options, and are categories by addressing through include of we of in able our to of inventory drop-ship meaningful capture remove overall SKUs and the our of In returning synergy the expected that and reassessing back the free improve XXXX. assure while the to across arrangements, these cash management on rationalized from we uncertainties, these prioritized QX, efforts dedicated to

team to initiatives powerful our of to channels, $X.X costs and our all believe shareholders. to emerging strong large, XXXX an and will Fueled brands and improvements Jessie stronger in to combined XXXX. improve $X deliver is pipeline robust innovation our position our Additionally, our by base, XX% a with and synergy depth is expected strong long-term million in profitability for the progress loyal Holley a will as company With We million team previous driving solid in future right-sizing prioritization acquisitions of through with deliver about, you is talk from a savings and near structure cost our with including customer we These initiatives of in future. focus our to back a roster sales vibrant in are be capture consolidation. leadership a look incremental expected strategy, calls. our in efforts, in path sharing team, we much on clear EBITDA shipping on the to growth forward

With financial call provide to results. that, an the pass Jesse will I to overview our of now Jesse?

Jesse Weaver

quarter, a million compared X.X% year-over-year fourth of XXXX. associated morning sales or good and Non-comparable of million net million $XXX.X acquisitions in of or fourth Holley you, to Thank delivered the $X.X contributed Michelle with XX.X% $XX.X the quarter sales growth. by of The mechanical from everyone. XX.X% decreased in million year orders the quarter in remaining to the by Past sales $XX million $XX.X by improvements impact to driven comparable the acquisitions. declined compared product $X.X offsetting quarter prior due million or primarily availability. our decrease

an electrical We continue elevated to XXXX. potential sales dues are products, expected in are which opportunity our in past impact be to still seeing and

our with down exhaustion below Sales prior by as levels XX% the well driven as were supply our were chain Orders in safety products. year-over-year orders the quarter performance customer weakest weaker expectations year, in both the impacts. from

To As to we the demand between COVID a addressable stimulus COVID by habits of grew between XXXX. spending growth Michelle demand rates demand, growth likely the any exceeded that reported X% mentioned, consumer impacted a positively XXXX roughly annual impacts Prior sales our XXXX are compound that normalization trends XXXX pre-COVID back had and at extent, seeing comparable to on to rates. to rate related and X% shutdowns. level from our team market was growth

entrants. potential believe from the guide is better not or gains market we in to share demand understanding approach would factor appropriate any approach an While new upside this normalization,

market X% While upside long-term demand line near-term, the with maybe to we the in to Holley grow and in to to year still in believe medium the mergers market we with acquisitions. from per organically perform for innovation potential X% expect a the normalization and and headwind

margin XX.X% constraints, $X.X inefficiencies to million, decrease XXXX. and quarter can on deleverage gross one-time The chain inflationary of pressures. the for gross to manufacturing one-time XX.X%. charges supply our cost, was higher product of channel us sales margin results XX% attributed rationalization product fourth and quarter fixed for year the in of last margin disappointing in the DTC year, year enthusiast know will decreased customer success Despite year-over-year full we our and in delivered to growth and the quarter strong closer our Gross XX% from the DTC base. bring for continue to adjusting the full be continued fourth by After ongoing XX.X% charges in in quarter rationalization driven channel the

Total expense million by quarter. interest general in of $X.X selling, included general million business and DTC increased related partially was with offsetting to cost administrative by stockholder early synergy prior million the and a million $XX.X shipping cost the and the pressures expenses recent from personnel granted costs, administrative related $X.X increase profit inflationary reflecting in with the in of acquisitions. $XX.X non-cash administrative Holley $XX.X compensation selling, prior saving in and to adjustment on increase the these combination. driven implementation increases initiatives increased handling decrease Outbound in fourth companies equity an combined vesting cumulative units a to awards, million, and which shipping capture sales reflecting to The cost growth

recorded product million loss We million liabilities impacted inflationary the EBITDA added headwinds XXXX. XXXX. earn-out of quarter the performance versus by an calculation. net shares. was the was normalization primary EBITDA loss on rationalization $X non-cash our fourth of $X.X in fourth the a Net income manufacturing pressures of million the quarter $XX.X million favorably adjusted warrants million million Adjusted decreased of net inefficiencies impacts fourth in Please and of Similar quarter. are profit EBITDA XXXX. the supply for On in a income for quarter, and $XX.X sales, by the constraints, the adjusted basis, fourth $XX.X to in quarter decrease charges net driven quarter combined were $XX.X from down during in note, gross back from with demand to lower chain the in

being during $XX in balance or which increased driven experienced was in Inventory high for Turning either actively year, inventory addressed, total to challenges increase that have a many our by sheet, by we our million and including the due been are significant and $XXX drawn restocking million on perspective, order only $XX minimum purchasing focus platforms. less ended million on $XX From categories in the quantity cash to prioritized address challenges million a and revolver. quarter past with we liquidity XXXX.

the $XXX to ahead look the of we net and in As projecting $XXX of million to range adjusted million. in million $XXX EBITDA are million $XXX an XXXX, to range sales we

CapEx purposes, modeling and also are depreciation and For guidance for amortization we providing interest.

capital in million the We $XX to expect $XX and $XX million XXXX results $XX million expenditures million, million and interest to expense include depreciation amortization to range million. of $XX and of $XX between

outlined expectations a platforms, strategy Michelle we are prioritizing cost these ranges. As and already We guidance capturing acquisitions, and are by synergies initiatives detail, as provided in categories team in our XXXX in key our reflected to deliver from fully expect to committed and these on our operational excellence. previous

working and we XXXX balance objectives been the expectations have team this on objectives financial delever restore key optimize XXXX the improve M&A and our to In capture. like metrics. addition a These would focus to around Holley and well last key be priorities joined year, to provide flow, in on to main our M&A outlook, our successful cash year, I while integrations profitability, few sheet. synergy capital, for the as efforts I Since continue team for for free activity some Holley’s will as late pause finalizing

experienced continued in As XXXX. coupled we demand chip of likely normalization our the our with the demand, impacting we expect of XXXX. consumer be will half of shortages continuation XXXX, throughout sales it headwind the relates heavy outlook This line, second a product trends to in

our capture operating the several to we of our result acquisition million from In expected million reduction we to relates deliver year-over-year force strategy, structure. of these right-size expect synergy SG&A our XXXX, steps structure, in efforts $XX recent freight total, it and have As approximately cost in capture. $XX improve savings as and synergies, cost to a taken coming with

contract shipping come result margin a improved logistics million new also We cost with by of largely gross as a provider. $XX a from driven negotiated expect third-party to recently

cash in see better As we headwinds are we back capital it prep-COVID to last relates electronics year. flow free in experienced working inventory flow, not of to cash outside we and historical the with capital expect positions over from line come free turns beginning With course levels levels. of shape, the working inventory do

be of capital While in this there and expect some maybe tail throughout business. QX opportunities sense. perspective, be the in ‘XX XXXX made to continue will we through beginning And manufacturing QX on further manufacturing QX. focused a effects making capital-light exploring year, early From flow we year, of QX investments disciplined will in of where a XXXX, while capital we heavily financial investment outsourcing in changes it to makes

have leverage Turning financial to need exposure our flow several plans to necessary ensure has levels we to execution interest in team the exposure, rate XXXX. taken to our interest free steps and de-risk the we improve and our of cash flexibility our

XXXX. through First, amendment this financial of as us QX filed it net provides relates credit agreement of that levels, with an to flexibility the details leverage to overall morning, we our

floating debt of effort Second, that below costless of a we interest X% SOFR in above against into rate fluctuations hedges rate to interest our XXXX. million $XXX and an reduce entered collar exposure to X.X% rates, mid-February X-month to

credit Additional can details on our the materials on and our found agreement rate website. earnings be interest amended in posted supplemental collar

In environment. economic including continued and closing, a the cost uncertainties multiple while we recessionary in potential near-term, pressures, face

believe aftermarket, consumer firmly been prospects fundamentally We We and that long-term performance sector. products in enthusiasm of are for business bullish unwavering. extremely the changed our on in our the automotive the has nothing has that

targets and and on cash long-term these our flow get of and believe gross EBITDA XX%, to focus track margin us respectively. our XX% efforts free will For we XXXX generate back in reasons, growth, achieving

call open prepared the up our questions. for concludes we can remarks. That Ross,

Ross Collins

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

Operator

ahead Mr. Altobello, go your please question. with

Joe Altobello

better that thanks. I dramatic good change in Great, and question. guide, sounds you’re on understand I what expecting demand want not to chain guys. Hey, morning, the supply anything you’re the guess first assuming terms appreciate on I of front. like to

how throughout dynamics about So ‘XX? us maybe understand we help two those think

Jesse Weaver

you’ve midpoint illustrating you’re trends of a supplemental the the X% demand Jesse. we’re at the X% to the in of continuation probably assessing normalization XXXX. more thinking we’re And is tried that of of recent our about kind range do just the as that headwinds demand. of that of normalization related seen look the good of being question. availability. job And how in it X% to to to is materials related to largely in of this to Good chip assessment we’ve of a balance year-over-year. is it And coming got, the relates when sort X.X% of much Hey, of way And sort you we’ve of guide, the

So that changes. if the some of the would in improvement environment be But it any months. assume more doesn’t recent upside

Joe Altobello

very of distributors growth, question, Okay, the the issue yourselves outperforming helpful. of of company. of channel for Is growth that resellers it’s your and rest between obviously, and channel? there DTC example, terms that’s Maybe any second given of some in the terms in conflict

Michelle Gloeckler

for the being Yes, million. question. at this growth $XXX thank of is almost correct, XX% you overall And you’re DTC Michelle, with our XX%

does We’re that your But us create with it it with link happy question directly the on channel because enthusiast. does to conflict.

small add relationships distributors, great especially those with that service to mix. have wholesalers, We our the shops,

business and we So way reach customers vital in mix of enthusiasts. they’re part our a the our

want So and they like if wholesalers shop. their to the way whenever shops, – reach think we distributors our it independent add are however to and I about services, value And to to they want want shop need they enthusiast, is our that. to

an this demand led piece. trying to be So enthusiast we’re really let

Joe Altobello

you. Thank great. Okay,

Operator

Thank you.

Our line Please Company. comes questions. John Benchmark next of with proceed from Lawrence, the question your

John Lawrence

the chip – most of and cost is out as these on innovation piece what importantly from can changes, the of cuts you little you there, talk and liquidity of you of Michelle, first, a in of innovation lot apart initiatives talk as things has initiatives, strategic the through the of lot a on piece? has dive far guess strategic that some sets of any piece? that chance, sort rest chance debt etcetera, you thanks And what it’s always we when Can reengineering, to the put mean, I’ve that happen Great, a the please? how the the bit questions. a about walk lot them a viewed sort I I for you industry, deeper about concerns a – by ask fact way to expected get innovation side. buckets can little

Michelle Gloeckler

my to to you the thank for you an very which would be the for on the talk It operational do reengineering important chips. point. tied savings, That’s you when is going pleasure. try some And your cost things sequential put Because excellence, is buckets thank I’m SKU I for both And question. order a also, to in of understanding you. there think about rationalization. the

So brands we the facing, things were website. efficiencies centers. but SKUs And we on that’s also XX,XXX XX scroll that in operations, consumer to only mentioned to that distribution our bring less across through able will in rationalize not

than needed? more is what think So to costing what is the what there to things SKU we are thing, reductions. efficiencies is readily operations that, has get done were manufacture Operating to I site-to-site manufacturing our improvement, substitutability? refinement, our we’re doing And as rationalization we’re us is are Under things Chief in going consumer what me fundamental finding for several we good that duplicate, things improvement. those items there. So And diligence as Green, what getting Officer not where we toward they’re that one an Bowling And have center available as the did facing here eye team was the sites. of And in feedback continuous a but facing there, an facing order. well only cost with hold operations just distribution continuous inventory the things build will from

most realize a over And most working in are still yes, on past our a have of You our them and them back we’re several the on making optimizing business, years. centers. And of are synergies. them acquisitions. listening brands And businesses of that are are manufacturing. we and distribution there mentioned that have of running to them mergers them but ERP through we’re systems, lot had find those Most other like those we payroll, each office, and centralized both folks things things a to and marketing standpoint, are focused from that to unique and the sure

brings we us for So innovation, product, gave credit our us things to that That’s look you of the me being at sets vitality charts. that absolutely when which true. one And apart.

real We we judges market, the well as both the innovation have enjoy. that things to And will team the that team up, our some our on enthusiast that make process, engineering of the whitespace. and where gave improved clarity works team, size the that and as financial manufacture that can

long a then answer how but of a is it’s and shop, and sequence product the prioritizing, just about really, the like to it’s of So there, innovation. we’re kind cleaning And and thinking areas lot there it. covered I up cranking out

So thank you.

John Lawrence

Great, you. thank

obviously, Just one capital covenants at you M&A there, and have you on requirements, to able look any any a to? that’s quick okay debt when the does find restrictions if so go down the debt, opportunity, agreements choose pay being to or follow-up

Jesse Weaver

relief much, the this the tighten ability much prepared to to year during year some we you acquisitions. we And our year have operational screws in and at the is exit and that thank stronger make a limitations is period, articulate And for on focus the go financial the position. question. remarks we’ve the position tried Yes, do we covenant our that

know, of. market gross to greater is get deliver back business is sheet which changed cash And the so, here, margins potential this business XX% generate EBITDA in to our XX% believe has our XX% nothing fundamentally of is that from being and hit long-term EBITDA. flow. to and the position to is we strong or We margin enthusiast this to us what this than able over intent is free the And what capable prevent balance

year. this focus the is that so And

John Lawrence

Great. Thanks, Jesse.

Operator

you. Thank

Anna the with questions. Jefferies. proceed Glaessgen your Our of with line next question from is Please

Anna Glaessgen

for Hey, my good questions. Thanks morning. taking

XXXX. wanted to in gross the I takes margin dig first puts into and Just

about talked Can some the to You could be widen the benefit and gross margin timeline talk to reengineering line? expected chip model, the about potentially potential to the products there that you when supply. get into the flowing

Michelle Gloeckler

question. this a and for those and new we Michelle, on That through expect purely both our try reengineering engineering the it’s this the wouldn’t procure lifecycle end before was chips an put to products as thanks Anna, to And opportunity as for the year. just any that available. about of available product when as to said, time Yes, that And market we reengineer products an open is chips, we and demand the of existing distributors are not the buy opportunity, model well more so older continuing engineering to talk are are there to readily chips, on we the consuming. readily mentioned which these out

glad understood for I’m in order EFI there you efforts So that meet are items. the those demand going to two on there

Anna Glaessgen

Thanks. Great.

Jesse Weaver

at the purchase just line of at spot on a opportunity bigger would that we a the headwind can’t it looking the is as economics whenever coming because the question, to, it, I obviously that the this you’re your answer think sales bottom of come is to drives business But margin is that I dollars of relates which say that from piece premium. number to greatest long-term just the getting So and reengaged. our biggest here where the we do find from, market, the have chips

financially that access an spot we the to the just towards And is about market, we doing where number is chips are on pay we be can what so priority the getting profitability. smart obviously the but that’s, eye to with one everything really

hungry brand. that stay customers and are the able to product get actually our So that the to our sure that we can product, make for loyal are

Anna Glaessgen

building inventory basically on you that, how then product for waiting chip? And can much unfinished any on a perspective Holley Thanks. EFI give is that’s

Michelle Gloeckler

– our past our haven’t have progress still we you our that injection shared But And of around overall tell dues. dues, lines. mechanical amount we’ve a made dues we’re of past I fuel through. shared in we working past the on Yes, We kind that. product an numbers electronic will

specific number. We haven’t given a

Jesse Weaver

point Well, and We you I you can think have materials. get supplemental the the here. in do I ballpark in to

various mechanical, between Now a two buckets breakdown those categories, electronics, and the so on. of past exhaust,

the As to the were electronics which related put to we there $XX the is of market, normal in single million bar perspective overall about think you’ll what bottom see vast talking see, QX sales you of total and these in products, in is majority bucket, which value. digits roughly a I on which mid is in

Anna Glaessgen

Okay, great. you. Thank

Operator

Thank next question Swartz Instructions] question. is proceed with And Truist. you. line [Operator of with the Mike our you Please from

Mike Swartz

from distributors in I consumers as buying, has that’s changed the the of view seems on ask saw around strong this just ordering morning, and then so we that? are demand the throughout if it digit everyone. the the good I direct-to-consumer a that quarter And that normalization – that is wanted putting end your to question anything just And the retailers? changed on growth, reading Hi, just the to Because of correctly? double still kind patterns reorder the normalization you am commentary. Are demand still business of year. kind read to in guess, growth we first supposed expect to I really –

Matt Rubel

the grow, you’re may seeing invest XXX% all for how fundamentals and of incremental going a to in. into the question. margin guidance. opportunity channel the good to something customers mean, I any is and a I And destocking. continuing has that have question us much bigger harder in, to And certainly online we is shifting DTC I as will just case it’s not think – that of this That’s versus retailer, gross helped there. believe to around quarter. business. bigger continuing call this spoke how we’re QX of I channel moment, business kind is think it getting we closer demand. at But different around couple thing the things underpinning can are I the around, one from. is giving I relates really dig know commentary really that normalization see a to from think become I say either first is as answer Certainly, higher been your getting What our consumer, understand be in we and or just And But it the this think of generally part that I products their this an channel to another of that ways and DTC to relates us but of our of that is, to was quarterly just

cases inventory might So, as you the shift back that to to have had bearish. the a comes recognizing we still goods product of bit a saw, in lot become as year, can available. more consumer of it came services when the it availability, all trends from our half imagine, to we when And resellers

as so available that have decline, allow that it’s likely to purchase. their as of some for products we And them picked to up inventories they benefit we

firmly DTC portion So, the great of into. the piece for there really nuance long-term are dig that incrementality is But additional it is believe us. we is we And that channel of having sort of there. a sort to

Mike Swartz

to just the anyway difference costs fixed they in of back just ‘XX, investments, look And us margin understand that ‘XX somewhere like great. I idea, are disconnect the incremental it ‘XX, guess is XX%. guidance, you looks think EBITDA XX%, kind normalization just you the to think to are running it we in go at, there, deleveraging, pertains flying of about the the XX% range as if are the help XX% we delta? And range. that Okay, to the EBITDA I

Jesse Weaver

that a And XX% greater Yes. additional the to than part at on can that line. demonstrate keying be I of are just the think EBITDA reason we is is in on, provided this business you detail

in I the world would the to that of are the public, Holley in keep gone costs with mind few as which I XXXX think would say like kind what public, numbers. associated XXXX, versus a apply is incremental different for between not it there least certainly things some on business. been have where wouldn’t looked there today, pressure and being in the is additional that of we have

work the good some are we that done of we those. really help have addition, right-sizing seeing from SG&A while some on In think the offset efforts to side, I

the very place, initiatives good that can us of We come on call the relates all vendors are have commodities have we a commodity occurred driven, a sort then work the commodity hey, have a increases and have raise you in come costs. still you the since would them our prices, were and actually said, given business. are lower of of down. and as seeing that expect, prices, freight bit but are of quick are as it none A And back also to lot we burden cost to

balance through don’t cost income come that and on the of the the off benefits you kind all they and lot sheet. our flows savings that’s works actually and So, would here. take statement. valuation seeing way comes then A those go is of The get the sheet, the that’s And an it business inventory going of I to the time. some just then accounting nuance when bit say effort to thing last a things immediately, the balance

And that the so through half some year. back you of the see of flow will towards

Mike Swartz

Thanks help, Okay. That’s for perfect. Jesse. your

Jesse Weaver

Sure.

Operator

you. Thank

line of with Carlino proceed JPMorgan. Please comes Christian from the next with your questions. Our question

Christian Carlino

Hi. question. Good morning. Thanks taking my for

sales contribution As versus about given should we digit remains price on that? from you and think units increases still or price multiple you reevaluating persistent year, year, are the are planning doing this you inflation about think mid-single for how next

Michelle Gloeckler

competitive. to remain the for to it’s been you understand pricing an Thank has important and And lever And strategic us. Yes. be and the important for for question. us industry

be correct. will we So,

continuing buying looking portfolio We have costs our Jesse price, with said and don’t for strategically we commodity we across to our work are the we the is down will it competitive. pricing. have where are things are that other be best take something And in always come suppliers looking at comment, as to to so previous But we yet sure that reflecting make at remaining pricing.

Christian Carlino

maybe Jesse’s And then benefit new about into higher you then costs. margin through agreements. XQ way of and will you double XXXX once just the is And will year capitalized it. Got also that turn the with get on answer, freight all inventory you right XQ, previous the to gross through think from clicking this the

least you discrete you inflection components as half, the this at the margin? get into for back those upward of have So,

Jesse Weaver

Yes.

some we as is, strong line And because QX kind last that this QX a economy whatnot. about on at to we balance little help quarters, I look seasonality. in this do, our XX% that start anomalies shape the of because reading kind we stimulus the the the front to The the think top just again, as will leaves last QX, top the understand happening important being and what guidance, year, you but think a experienced you line, I typically is QX. I kind is maybe was perspective, And think was And with strongest what won’t bit to the QX, tea bit. extremely of an year. think And be QX, lot it’s year. of loaded, business the generally with if historical in giving about I it relates can of XX%, year, quarter of year the quarterly to of in of from a so in end the a

reap reap of a So, I QX in identified team I around keep benefits. be in that first more flowing bit swiftly has you profitability cost certainly the partial the the would the half. back And as I half what starting done a in think the bit year. there, costs a benefits year the go perspective, see a that you through, But really part of mind. around over ahead to then with implies of good to going from the piece, definitely to is this of year your And those then where with deleverage sales about job the of early think say important possible and to acting think coupled win comments a that’s

kind So, helps of the get you of as hopefully you ballpark year. anticipating that we are in what the for

Christian Carlino

helpful. luck of guys. really Best That’s Yes.

Michelle Gloeckler

you. Thank

Operator

Thank you.

Please is of line with proceed question of Bank your Perry from next Alex with the questions. America. Our

Alex Perry

my Hi. Thanks for questions. taking

going that like of sight is us are for EFI is just being X.X this those X.X Holley sort the that out at bottom demand way the I your now decline, COVID and like guidance is few, the to normalization it of to sort And with right then of any range in about dealing a of if impact end of of chip have the you think points I a chip and say would demand you of sort the demand of the entire Just portfolio? product of the there a headwinds, and XXXX, high normalization the is of guess guess that’s points line imply improving? then end of the availability products still shortages? X%, with the with that of right chip sort improves. it can COVID of and range are sales X% the highest X.X% And – there a the highest implies help sort

Michelle Gloeckler

take will want first And guidance, demand of just to the you thank and I our I Yes. the the through part kind of portfolio. for reiterating talk that. across

We of electronic have than fuel products just more lot a really wide a across portfolio injection.

my go constrained, favorite portfolio. chips exhaust, retooling. Sniper, broad other we which don’t supplying to Those there categories. the could you on a we that and think want portion this when as EFI is because all Think that about bit But we So, little expensive, safety, of And we is a It’s are think when about while are brakes, much chips our portion The But mechanical, are have a better constrained. items performance for are think in with I –it’s shipping vehicles. ones and share portfolio in just you are is they conditions mentioned, we portfolio you less that called on But brands are EFI will brands. available. readily I about high demand. race are those There in we of isn’t EFI and our portfolio those the cars, many huge overall other expensive. that the high. are are strictly a in margin have so more I

Jesse Weaver

the end, key will would you implied to line mean around And identified, the relates question end, that from I of in worth. think the months your past top of the levers you the the end that that range range and with would range the end And in as that top on sort I the there of experiencing supply that mean take that. have or would assume bottom some have guidance. of a And reverse it availability get demand I I end then done top which then as be get so. six improvement probably the ones two you would could say to as be combination headwinds we what pointed I of the to or work us the what’s normalization. for be less some the we normalization, are combined bottom I kind the the been bottom think out, to

to as bad as now it we the that like, talk will think think in it estimated unknown to it’s to that relates relates I the it any is But indications answers you as get realm of think half. I five So, a have that But of that supply, I the that any the what’s back would going gotten don’t here, And economic right either. you outlook at what as certainly, moment bit economists, do to in different don’t have relates looks this demand would five normalization. think get it have did, we it I then worse. as possibility, to

And top guide so that we at have this the into baked line moment.

Alex Perry

selling And guys EBIT channel sales margin an in XH just back just then like And of actually sort of through declines. and half DTC of my said expectation And margin should I your margins to for more is then on we there. of it half, ask higher the that on assume then Perfect. follow-up the the of about the a you first profile wholesale? guidance. sort gross both to clarify pronounced the versus you It sort sort wanted be increase steeper, phasing year-over-year? maybe what the could is and moderation would Is Thanks? sounded DTC

Michelle Gloeckler

Yes. I will DTC the take piece.

Jesse said We or what the have strongest as had And a there margin direct earlier, year. the consumer our was you for other. reiterate just not of to as QX channel shared of to last other our that questions year to structure quarter wholesale the comparison

the was year quarter. quarter I So, highest XX%. about year, that, And are our thinking a think typical first year, in a as of you growth he last flow answered were XX%, the the

So, with should you strong expect see to QX overlaps.

Jesse Weaver

Yes.

range see particularly QX I would what imputed you pretty said year. you that from with I kind being just combine XX% in think last think kind sort when strongest, we first will half to generally The a typical it there the on and seasonality would strong where lab, spot of you had how are and QX XX% get tough you that – of the you was and reiterate sales of it. more I is is that of be

Alex Perry

helpful. Perfect. of That’s really Best luck going forward.

Michelle Gloeckler

you. Thank

Operator

is question next questions. line your Feldman proceed Group. Joe the with in Telsey Please Our of with Advisory

Joe Feldman

guys. Yes. the for to Hey Thanks wanted something. clarify taking I question.

that be you a just I headwind at the was was it. which X.X% digit are headwind of said due And misheard beginning, the the the at regard But the then X% had guys maybe around around a asking that, be about say, let’s headwind, at guidance quite you thought sales would the Just when you headwind, the the microchip doesn’t that to that to if we I industry. mid-single But with of someone to X%. then midpoint, match later, said normalization said X%. may

kind So, those square you of comments? two can

Jesse Weaver

to of recall the callers. to into. was piece. – recall But was I we what are are have it there you those related we the mean and we don’t digit there mid-single is, deeper ones. you don’t guys what read guide dig big for of drivers, also in wanted I meat think is sort get the the the quantifying, would way qualifying chain if if kind apologize of call got do I to and the headwind two big I what the I and that trying supply

tailwind. pricing have We that’s a got

burning what certainly bit then down got from have as tailwind us you year, certainly look at other because the we demand, a tailwind sales would is, from of year. backlog it good that our a have strong implied of out. the order But some just acquired would there as We had helping wasn’t net if sort last the throughout be businesses headwind the

that those demand, but of of ability kind all would I Hopefully, on see the and we or here, the the normalization happening investment guide. recommend and is to your, to out, community big our focus secure improve So, clarify the help for helps midpoint think to items the that I chips what wash these with things Joe. what’s of

Joe Feldman

does. That

Matt Rubel

Yes.

Just one other thing, this is Matt Rubel.

not was callers was they it the asked it how in think of what it put who something that I the out. number one questions. Jesse They Michelle out, or put framed

you have what that’s So, might heard.

Joe Feldman

you or to reading you back the but SEMA, Thank normal that. XXXX in know, of a but they if like, And is I maybe couple Okay. the benchmarking…? guess forecast I then to tea according of their just, XXXX? clarifying for a are you have guys. times like this get I Like, it demand, you guys, we now maybe really not said like, industry level what assuming does appreciate is and even leaves, to when

Matt Rubel

On the Matt macro, again. this is

that will seen in the be general there we and is with X%-plus SEMA validated of we growth believe One have things has that that industry. the this, that the trend

I things was of year. to think the last is ton that we of here stimulus to the have backward that one of go was go quarter that put there still into forward a first

and both year, last And so the industry, us, of quarter was distorted. for first for the

Michelle Jesse here. a and trying good so a the And done that’s job think things job, one good Jesse has have to of done I contextualize

channel so some that that other will through you and – some mitigated. things adjustments after inventory of happened went you demand And then

so an what to historical we the demand is on are evening of get And back kind levels. think trying I to of

then see, our all start noise XXXX, should to and hit more the anniversaried you half, you to state. normal So, should to you And moving the you that back be of curve in time That’s by time perspective. some a the second by get norm. have the

Joe Feldman

And have helpful. but this will you. luck Thank very That’s I ask Good very, quarter. them I appreciate more, guys. Thanks I that. later. it. Got

Matt Rubel

Thank you, Joe.

Michelle Gloeckler

Thank you.

Operator

Thank you.

line Our with Please final proceed [ph] your question. Pravin question is Glenn Capital. from GHC with of the

Unidentified Analyst

questions. two had I morning. Good Yes.

assess of the is I former prior a you acquisitions. first some in, executive to think integration, The had brought

seeing? Just secondly, job beyond some want talk for you are you just what know to called a did with there? seeing at anything how year innovation what about been level, this I good that always And curious is high is But the excited pretty you if and you coming a product, about? known then you am million and its these are there and are I out. that, or in here $XX opportunity that cost-outs

Michelle Gloeckler

will our Applegate us tackle Glenn, are last correct. Yes, thank in previous the conversations, the COO. I QX one. you Brian year our first From you joined for questions. Interim as

you former of As also he was a former and CEO SEMA. of Driven the recall, President

more ERP and the brands on have an do system I fortunate things. and as things website we him. mentioned that at So, knows industry. their been way with focused to And distribution the And the And he already also on and operational are are looking is and efficiently in what they on system he unique, their done our expertise. their are we the earlier, cost it’s, have wizard. knows he back our office has But acquisition center savings, a the do He acquisitions are of synergies. lot

we did realized during go, future When you think realized XXXX. range put we synergies how innovation a more an million I there our pipeline. have we have product, and acquisitions $X.X in we with we to XXXX, So, work share we continued million and we our innovation through to that talk have, to and for much about $X out while

marketing process today, and quarters to an share. But launches whitespace. share team But we it’s really innovation with engineering, new at on in will the anything have demand to We looking coming details have product functional, you. don’t have cross I

Unidentified Analyst

progress there last is Thanks. you. was seems tremendous done. of a there call, since Thank that And the made Great. well amount like so

Michelle Gloeckler

your We Thank you Glenn. support. appreciate

Operator

I this over have of to we the will remarks. end it question-and-answer turn closing the reached Thank management time, you. At session. And for

Michelle Gloeckler

following sharing available have to dialing and We following who in Q&A. for meetings in along Holley day. this everyone we and Thanks scheduled. with a great future Have those for are calls already on look forward appreciate today to our and journey

Operator

conference. today’s This will conclude you. Thank

You time. may disconnect your for lines Thank your you this at participation.

Holley (HLLY) 9 Mar 232022 Q4 Earnings call transcript