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Holley Inc. (HLLY)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 revenue of $138.4M rose 3.2% YoY; core net sales grew 6.4% YoY, the third consecutive quarter of core growth; gross margin expanded to 43.2% and Adjusted EBITDA margin reached 19.6% .
  • EPS: GAAP diluted EPS was $(0.01); Adjusted Diluted EPS was $0.03; revenue beat consensus while EPS was below normalized consensus; guidance for FY25 was raised for revenue ($590–$605M) and the lower bound of Adjusted EBITDA ($120–$127M) .
  • Balance sheet progress: net leverage fell to 3.91x, the lowest since 2022; Holley prepaid $15M of debt in Q3 and an additional $10M post-quarter, totaling $100M since Sep-2023, funded by free cash flow .
  • Near-term stock catalysts: raised FY25 guidance, sequential operational improvements (B2B +7.3% YoY, DTC +4.2% YoY), and demonstrated tariff mitigation; watch holiday merchandising (“Holley Days”) and partner sell-through for Q4 trajectory .

What Went Well and What Went Wrong

What Went Well

  • “Third consecutive quarter of core business net sales growth,” +6.4% YoY; broad-based across divisions and channels .
  • Margin expansion: gross margin 43.2% (+422 bps YoY) and Adjusted EBITDA margin 19.6% (+309 bps YoY), driven by pricing flow-through and operational initiatives (efficiencies, reduced warranty claims) .
  • Balance sheet strengthening: net leverage fell to 3.91x; cumulative $100M debt reduction since Sep-2023, with free cash flow of $5.5M in seasonally slow Q3; “We are looking to build on that and finish the year with momentum” .

What Went Wrong

  • GAAP bottom line remained slightly negative: net loss of $(0.8)M as SG&A increased (lapping prior-year furloughs, incentive accruals, tariff-mitigation investments) .
  • Inventory reduction moderated (Q3 vs Q2) due to operational decisions (bringing consigned product in-house and exiting bonded warehouse), delaying progress toward the low end of the $10M reduction target for FY25 .
  • EPS missed normalized consensus despite revenue strength; management’s FY25 outlook midpoint implies a conservative Q4 organic growth step-down, reflecting macro caution and calendar changes (not repeating a marketing event) .

Financial Results

MetricQ3 2024Q2 2025Q3 2025Consensus (Q3 2025)*
Revenue ($USD Millions)$134.038 $166.661 $138.373 $132.361*
GAAP Diluted EPS ($)$(0.05) $0.09 $(0.01) —
Adjusted Diluted EPS ($)$(0.01) $0.09 $0.03 Primary EPS Consensus Mean: $0.0467*
Gross Margin (%)39.0% —43.2% —
Adjusted EBITDA ($USD Millions)$22.114 $36.428 $27.106 —
Adjusted EBITDA Margin (%)16.5% 21.9% 19.6% —
Net Income Margin (%)(4.7%) 6.5% (0.6%) —

*Values retrieved from S&P Global.

Segment/Division KPIs (Q3 2025):

Division / Channel KPIQ3 2025 YoY
Domestic Muscle division growth+6.2%
Modern Truck & Off-Road division growth+5.2%
Euro & Import division growth+16.6%
B2B channel growth+7.3%
DTC orders+4.2%
Strategic initiatives revenue contribution~$27.8M
Product innovation & strategic pricing contribution$11.3M in Q3; $30.1M YTD

Operating and Cash KPIs:

KPIQ3 2025
Free Cash Flow ($USD Millions)$5.490
Cash and Cash Equivalents ($USD Millions)$50.723
Net leverage (Bank-adjusted EBITDA leverage)3.91x
Inventory ($USD Millions)$195.657
In-stock rate improvement (top 2,500 SKUs)+2.2% YoY
Efficiency savings (quarter)~$3M
Past-due ordersDown 20.7% YoY

Context and drivers:

  • Management cited “pricing flow-through” and operational improvements (facility efficiencies, reduced excess inventory write-downs, reduced warranty claims) as gross margin drivers .
  • Q3 is “typically our slowest quarter of the year,” explaining sequential revenue down from Q2 despite YoY core growth .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Millions)FY 2025$580–$595M (incl. tariffs) $590–$605M (incl. net impact of tariffs) Raised range (+$10M on both ends)
Adjusted EBITDA ($USD Millions)FY 2025$116–$127M $120–$127M Raised lower bound (+$4M)
Capital Expenditures ($USD Millions)FY 2025$10–$14M $10–$14M Maintained
Depreciation & Amortization ($USD Millions)FY 2025$22–$24M $22–$24M Maintained
Interest Expense, excl. collar revaluation ($USD Millions)FY 2025$45–$50M $45–$50M Maintained

Management emphasized tariff mitigation via strategic sourcing and targeted pricing as basis for improved visibility .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
Tariffs / macroMaintained FY25 guidance excluding tariff impact; working to mitigate via sourcing and pricing Guidance range refined to include net tariff impact; negligible impact expected via mitigation Raised FY25 guidance; reiterated effective tariff mitigation Improving visibility
B2B data & partnershipsTop 50 account growth via enhanced data quality +6.5% B2B growth; momentum across customer sizes +7.3% B2B growth; enhanced product data adoption drove $1.7M; broader partner collaboration Accelerating
DTC / marketplacesDTC +10%; marketplaces >+50% (Amazon focus) DTC +8.6%; marketplaces +28% YTD DTC +4.2% YoY; events merchandising strong; total e-commerce +5% YTD Stable to positive
Product innovation~$4M new product revenue ~$8M Q2 new product revenue New launches across divisions; $11.3M contribution in Q3 Building
Operational efficiency / working capitalCost reductions; sourcing initiatives Savings and efficiencies; inventory down $9M YTD by Q2 $3.2M quarter savings; inventory strategy shift (consignment in-house, exit bonded warehouse) moderates reduction Mixed (strategic repositioning)
Leverage / debt reductionNet leverage 4.32x TTM; focus on deleveraging 4.22x; continued prepayments 3.91x; +$25M prepayments Q3 and Oct; cumulative $100M Improving
Events / SEMAStrategy refinement underway —Strong SEMA engagement; LS Fest East impacted by weather yet profitability in line Positive engagement

Management Commentary

  • CEO: “We achieved core business net sales growth for the third consecutive quarter… Year-to-date, our growth has been fueled primarily by strong volume gains of more than 4%, complemented by a ~1% benefit from pricing” .
  • CFO: “Gross margin…43.2%, an increase of 422 basis points versus 39% in the prior year… through pricing flow-through as well as operational initiatives” .
  • CEO: “We generated $5.5 million in free cash flow… leverage at 3.9x… lowest level since 2022… prepaid… $10 million… bringing total prepayments to $100 million since September 2023” .
  • CFO: “We are raising our full-year guidance for revenue and the bottom end of our range on adjusted EBITDA” .
  • CEO: “Our omnichannel approach remains central to our core strategy… serving customers wherever they choose to engage” .

Q&A Highlights

  • Price realization vs “high single-digit pricing” plans: EPS and pricing realization lower due to B2B mix and contractual price timing; trade-down not a major factor .
  • Guidance midpoint implying Q4 step-down: mix of conservatism and lapping a marketing event not repeated in 2025 for margin reasons .
  • Inventory heavier than expected: operational decision to move consigned inventory in-house (+$2–$3M headwind) and exit bonded warehouse; timing and port dynamics pulled additional inventory into Q3 .
  • B2B runway: continued expansion across retailers, national chains, export markets, and OEM aftermarket programs .
  • Consumer environment: distribution partners report consistent out-the-door sales; Holley continues to take share; no signs of deterioration in recent weeks .

Estimates Context

MetricQ1 2025 Consensus*Q1 2025 ActualBeat/MissQ2 2025 Consensus*Q2 2025 ActualBeat/MissQ3 2025 Consensus*Q3 2025 ActualBeat/Miss
Revenue ($USD Millions)$148.289*$153.044 Beat$162.669*$166.661 Beat$132.361*$138.373 Beat
Primary EPS / Adjusted Diluted EPS ($)$0.0514*$0.02 Miss$0.0933*$0.09 Near Inline/Miss$0.0467*$0.03 Miss

*Values retrieved from S&P Global.

Observations:

  • Holley beat revenue consensus in all three quarters, suggesting consistent sell-through and share gains; EPS normalized fell short in Q1 and Q3, and was slightly below in Q2, reflecting investment in SG&A (tariff support, incentives) and timing in pricing realization .

Key Takeaways for Investors

  • Revenue momentum is broad-based, with three straight core-growth quarters and repeated revenue beats; focus on sustained share gains in B2B and DTC channels .
  • Margin structure improved materially (GM to 43.2%, Adj. EBITDA margin 19.6%); drivers include pricing flow-through and operational execution—watch for maintenance of >40% GM and ~20% EBITDA margin targets cited by management .
  • Balance sheet de-risking continues; net leverage at 3.91x and cumulative $100M term loan prepayments materially reduce interest burden (management estimates up to ~$4M annualized savings) .
  • FY25 guidance raised for revenue and Adjusted EBITDA lower bound; near-term performance hinges on holiday merchandising, partner participation, and macro stability (tariffs, consumer sentiment) .
  • EPS misses vs normalized consensus reflect mix/contract timing and SG&A investments; if pricing catches up and efficiency initiatives continue, EPS conversion should improve .
  • Inventory strategy changes should enhance visibility and service but temper 2025 reduction targets; expect improvements in 2026 as SIOP and safety stock optimization mature .
  • Trading implication: raised guidance and below-4x leverage are positive catalysts; monitor Q4 sell-through (“Holley Days”) and any tariff/macro headline risk; revenue beats + margin stability could drive estimate revisions upward even if EPS normalization lags near-term .