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Holley Inc. (HLLY)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 net sales were $166.7M, down 1.7% YoY but up 3.9% in core business; diluted EPS was $0.09, and Adjusted EBITDA was $36.4M, while record quarterly Free Cash Flow reached $35.7M .
  • Versus S&P Global consensus, revenue beat ($166.7M vs $162.7M*), EPS was roughly in line/slightly below ($0.09 vs $0.093*), and EBITDA came in below ($33.3M GAAP vs $34.8M*); Adjusted EBITDA of $36.4M shows operating resilience .
  • Management tightened FY25 guidance to revenue $580–$595M and Adjusted EBITDA $116–$127M, citing improved tariff visibility and flat early Q3 trends; interest expense outlook lowered to $45–$50M .
  • Potential catalysts: tariff mitigation success (negligible impact expected), core growth across all divisions, strong DTC/3P marketplace momentum, and accelerating deleveraging with targeted debt repurchases funded by free cash flow .

What Went Well and What Went Wrong

  • What Went Well

    • Core net sales grew 3.9% YoY with breadth across 20+ brands; DTC orders +8.6% and 3P marketplaces +28% .
    • Record quarterly Free Cash Flow of $35.7M from working capital optimization and operational efficiencies; inventory reduced ~$9M YTD .
    • Tariff mitigation through strategic sourcing and pricing expected to render negligible impact on margins and FCF in 2025–2026; guidance tightened on improved visibility .

  • What Went Wrong

    • Headline net sales -1.7% YoY due to lapping non-core divestitures and prior SKU rationalizations; Adjusted EBITDA margin contracted 74 bps YoY to 21.9% given mix and higher rebates .
    • Diluted EPS fell to $0.09 from $0.14 YoY; GAAP EBITDA $33.3M trailed consensus* as non-operating expenses and interest increased .
    • Cautious H2 posture given mixed macro signals and flat start to Q3; Safety & Racing growth muted (+1%) ahead of SA2025 “Snell cycle” certification transitions .

Financial Results

MetricQ2 2024Q1 2025Q2 2025Q2 2025 Consensus
Revenue ($USD Millions)$169.5 $153.0 $166.7 $162.7*
Diluted EPS ($USD)$0.14 $0.02 $0.09 $0.093*
Gross Margin (%)41.5 —41.7 —
Adjusted EBITDA ($USD Millions)$38.3 $27.3 $36.4 —
Adjusted EBITDA Margin (%)22.6 17.8 21.9 —
Division Performance (YoY)Q2 2025
Domestic Muscle+6%
Modern Truck & Off-Road+17%
Euro & Import+4% (Dinan+APR +20% combined; overall moderated by import timing)
Safety & Racing+1% (Simpson+Racequip +15%; “Snell cycle” transition)
KPIsQ2 2024Q2 2025
Net Cash Provided by Operating Activities ($M)$25.7 $40.5
Free Cash Flow ($M)$24.4 $35.7
Cash & Equivalents ($M)—$63.8
Inventory ($M)—$180.8
Bank-Adjusted EBITDA Leverage Ratio (x)—4.22x (TTM)

Note: *Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance (Q1 2025, May 7)Current Guidance (Q2 2025, Aug 6)Change
Net Sales ($M)FY 2025$580–$600 $580–$595 Tightened (lower top end)
Adjusted EBITDA ($M)FY 2025$113–$130 $116–$127 Tightened; midpoint raised
Capital Expenditures ($M)FY 2025$12–$16 $10–$14 Lowered
D&A ($M)FY 2025$22–$24 $22–$24 Maintained
Interest Expense ($M, ex collar reval)FY 2025$47–$52 $45–$50 Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
Tariffs/MacroSoftness; inventory normalization; lowered FY24 outlook Maintained FY25 guide; tariff risk noted; mitigation planned Mitigation executing; negligible impact expected; guidance tightened Improving visibility; cautious macro
Supply Chain & InventoryImproved lead times; reduced safety stock SIOP improvements; working capital focus $9M inventory reduction YTD; improved in-stock rates; operational efficiency Operational progress
Product InnovationNew product revenue up 25% YTD (2024) ~$4M new product revenue; portfolio elasticity ~$8M new product revenue; pricing+innovation $10.8M Accelerating
Channel Performance (DTC/B2B)DTC +16%; B2B event support helped sell-through DTC +10%; Top 50 B2B growth DTC orders +8.6%; 3P +28%; B2B +6.5% Broad-based strength
Regional Expansion——Mexico build-out validated; BMW dealer expansion (Dinan) Early-stage growth
Regulatory/Legal——Safety & Racing cycling to SA2025 helmets; temporary distributor pause Near-term headwind, H2 rebound expected
Leverage/Balance Sheet4.25x TTM; ratings upgrade 4.32x TTM 4.22x TTM; no revolver draw; debt reduction continues Deleveraging momentum

Management Commentary

  • “We are very pleased with another solid quarter… new product launches … roughly $8 million in new product revenue… strengthening partnerships with B2B … growth across both B2B and DTC” — Matthew Stevenson, CEO .
  • “We have tightened our guidance range… includes the anticipated impact of recently announced tariffs… forecasting a negligible impact on our business” — Matthew Stevenson, CEO .
  • “Record quarterly free cash flow of ~$35.7M… saved roughly an additional $1M in Q2 primarily driven by reduction in freight cost… reduce inventory by more than $9M YTD” — Jesse Weaver, CFO .
  • “Actions in motion expected to offset more than $15M of tariff-related costs between 2025 and 2026” — Jesse Weaver, CFO .

Q&A Highlights

  • Pricing reception and share gains: Pricing taken in June viewed as in-line or better than peers; out-the-door growth outperforming distribution partners, indicating share gains .
  • Gross margin cadence and promotions: No incremental promotions planned; expect margins to be maintained/expand in H2 with pricing actions captured in guidance .
  • Volumes vs price: Units positive YTD with pricing; conservative H2 volume assumptions given macro/pricing across economy .
  • Free cash flow outlook and capital allocation: Implied FY25 FCF ~$40–$50M at current rates; pipeline for M&A but prioritizing debt prepayment; perpetual license payment highlighted .
  • Mexico expansion: Long-term potential ~5% of U.S. market; sequencing distributors and product fit; focus near term .
  • Tariff mitigation and sourcing: Shifting exposure from China to lower-cost countries with more stable U.S. ties; major part of $15M mitigation .

Estimates Context

  • Q2 revenue beat consensus ($166.7M vs $162.7M*), while EPS was roughly in line/slightly below ($0.09 vs $0.093*); GAAP EBITDA missed ($33.3M vs $34.8M*) .
  • Q1 2025 also exceeded revenue consensus ($153.0M vs $148.3M*) but EPS fell short ($0.02 vs $0.051*), and GAAP EBITDA below ($25.6M vs $28.6M*) .
  • FY25 consensus stands at revenue ~$600.7M*, EPS ~$0.22*, EBITDA ~$123.7M*; guidance midpoint now $587.5M revenue and $121.5M Adjusted EBITDA, suggesting modest downward top-line tightening with raised EBITDA midpoint .

Note: *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Core growth, robust DTC/marketplace traction, and B2B share gains underpin resilience despite headline YoY declines from non-core lapping .
  • Tariff mitigation appears effective, with negligible impact forecast to margins/FCF; management tightened guidance on improved visibility and mixed macro .
  • Record Free Cash Flow and inventory discipline support accelerating deleveraging; leverage improved to 4.22x with further debt paydowns post quarter .
  • Near-term watch items: H2 unit elasticity post price actions, Safety & Racing rebound post SA2025 certification, and macro consumer signals given flat start to Q3 .
  • Estimate revisions likely modest: revenue consensus may drift higher after the beat; EPS and EBITDA likely trimmed slightly given small misses and margin mix .
  • Trading lens: Positive skew from tariff clarity and FCF strength; monitor H2 demand cadence and margin execution vs tightened guide for potential re-rating catalysts .