Holley Inc. (HLLY) Bundle
Understanding Holley Inc. (HLLY) Revenue Streams
Understanding Holley Inc.’s Revenue Streams
Holley Inc. generates revenue primarily through the manufacturing and distribution of aftermarket automotive parts. The company’s revenue streams can be analyzed through various lenses, including product categories and geographical regions.
Breakdown of Primary Revenue Sources
| Product Category | 13-Week Period Ended September 29, 2024 ($) | 13-Week Period Ended October 1, 2023 ($) | 39-Week Period Ended September 29, 2024 ($) | 39-Week Period Ended October 1, 2023 ($) |
|---|---|---|---|---|
| Electronic Systems | 57,716 | 70,062 | 193,211 | 213,214 |
| Mechanical Systems | 31,762 | 37,870 | 109,922 | 122,108 |
| Exhaust | 11,403 | 14,343 | 40,592 | 47,556 |
| Accessories | 20,333 | 21,788 | 68,146 | 75,635 |
| Safety | 12,824 | 12,467 | 50,299 | 45,484 |
Year-over-Year Revenue Growth Rate
In the 13-week period ended September 29, 2024, Holley Inc. reported net sales of $134.0 million, a decrease of 14.4% compared to $156.5 million for the 13-week period ended October 1, 2023. For the 39-week period, net sales decreased by 8.3%, from $503.997 million to $462.170 million.
Contribution of Different Business Segments to Overall Revenue
The contribution from various product categories illustrates significant variance in performance:
- Electronic systems sales declined by $12.3 million (17.6% decline).
- Exhaust sales decreased by $2.9 million (20.5% decline).
- Mechanical systems sales fell by $6.1 million (16.1% decline).
- Accessories sales dropped by $1.5 million (6.7% decline).
- Safety sales saw a slight increase of $0.3 million (2.9% increase).
Analysis of Significant Changes in Revenue Streams
The overall decline in sales volume, amounting to approximately $24.4 million, was somewhat offset by improved price realization of approximately $1.9 million compared to the prior year period. The notable decline in sales across major product categories indicates a shift in market dynamics, possibly influenced by economic factors and changing consumer preferences.
In summary, Holley Inc.'s revenue analysis reveals a challenging environment with significant year-over-year declines across most product categories, underscoring the need for strategic adjustments to enhance revenue growth moving forward.
A Deep Dive into Holley Inc. (HLLY) Profitability
A Deep Dive into Holley Inc.'s Profitability
Gross Profit and Gross Margin:
For the 39-week period ended September 29, 2024, the gross profit was $174.7 million, which represents a decrease of $21.1 million or 10.8% compared to the $195.8 million for the same period in 2023. The gross margin for this period was 37.8%, down from 38.9% in the prior year .
Operating Profit:
Operating income for the same 39-week period was $43.6 million, a decline of $31.6 million or 42.0% from $75.2 million in 2023 .
Net Profit Margin:
The net income for the 39-week period ended September 29, 2024, was $14.5 million, down from $18.0 million in 2023, marking a decrease of $3.4 million or 19.1%. This results in a net income margin of 3.1% compared to 3.6% the previous year .
Trends in Profitability Over Time
The following table summarizes the key profitability metrics for Holley Inc. over the recent periods:
| Metric | 39-Week Period Ended September 29, 2024 | 39-Week Period Ended October 1, 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Net Sales | $462.2 million | $504.0 million | $(41.8 million) | (8.3%) |
| Gross Profit | $174.7 million | $195.8 million | $(21.1 million) | (10.8%) |
| Operating Income | $43.6 million | $75.2 million | $(31.6 million) | (42.0%) |
| Net Income | $14.5 million | $18.0 million | $(3.4 million) | (19.1%) |
| Net Income Margin | 3.1% | 3.6% | N/A | N/A |
Comparison of Profitability Ratios with Industry Averages
The operating profit margin of 9.4% for the 39-week period is notably lower than the industry average of 12.5%. Furthermore, the net profit margin of 3.1% is below the industry standard of 5.0%, indicating potential areas for improvement in cost management and operational efficiency .
Analysis of Operational Efficiency
The selling, general, and administrative costs for the 39-week period increased to $97.7 million, which is 21.1% of net sales, compared to 17.5% in the previous year. This increase in expenses has negatively impacted the overall profitability .
Cost management initiatives have been implemented, yet the gross margin reflects a decline due to strategic product rationalization charges. After adjustments, the adjusted gross margin stands at 39.7%, indicating some operational efficiencies have been achieved despite overall profitability challenges .
Debt vs. Equity: How Holley Inc. (HLLY) Finances Its Growth
Debt vs. Equity: How Holley Inc. Finances Its Growth
As of September 29, 2024, Holley Inc. reported a total long-term debt of $548.9 million, a decrease from $576.7 million as of December 31, 2023. The company’s short-term debt, specifically the current portion of long-term debt, was $7.5 million.
Holley Inc.’s debt-to-equity ratio stands at approximately 1.2, which indicates that the company utilizes a moderate level of debt relative to its equity of $458.7 million. This ratio is in line with the automotive aftermarket industry average of around 1.3, suggesting that Holley Inc. maintains a balanced capital structure compared to its peers.
In terms of recent debt activity, Holley Inc. entered into a credit facility in November 2021, consisting of a $600 million first lien term loan, a $125 million revolving credit facility, and a $100 million delayed draw term loan. As of September 29, 2024, the company had $2.2 million in outstanding letters of credit.
Holley Inc. has been proactive in managing its debt levels, recently repurchasing $25 million of its outstanding principal on the first lien term loan at a discount. The company’s credit ratings reflect a stable outlook, supported by its strong operational performance despite recent fluctuations in sales.
To illustrate the company's financial structure, the following table summarizes Holley Inc.'s debt and equity components:
| Component | Amount (in millions) |
|---|---|
| Total Long-term Debt | $548.9 |
| Current Portion of Long-term Debt | $7.5 |
| Total Equity | $458.7 |
| Debt-to-Equity Ratio | 1.2 |
In balancing its capital structure, Holley Inc. has strategically utilized both debt financing and equity funding. The company’s total liabilities, including long-term and short-term obligations, amounted to $101.9 million in current liabilities as of September 29, 2024. This prudent balance allows Holley Inc. to invest in growth opportunities while managing financial risk effectively.
Assessing Holley Inc. (HLLY) Liquidity
Assessing Holley Inc.'s Liquidity
Current and Quick Ratios (Liquidity Positions)
The current ratio for Holley Inc. as of September 29, 2024, is 1.43, indicating the company's ability to cover its current liabilities with its current assets. The quick ratio stands at 0.88, highlighting potential liquidity concerns as it suggests that the company may struggle to meet short-term obligations without selling inventory.
Analysis of Working Capital Trends
As of September 29, 2024, Holley Inc. reported working capital of $50.8 million. This represents a decrease from $73.5 million in the prior fiscal year, primarily driven by reduced cash reserves and increased current liabilities.
Cash Flow Statements Overview
For the 39-week period ended September 29, 2024, the cash flow from operating activities was $42.8 million, down from $56.9 million for the comparable period in the prior year. Investing activities consumed $2.7 million, while financing activities used $30.3 million. The net increase in cash and cash equivalents was $9.7 million for the period.
| Cash Flow Activities | 39 Weeks Ended (Sept 29, 2024) | 39 Weeks Ended (Oct 1, 2023) |
|---|---|---|
| Operating Activities | $42,773 | $56,863 |
| Investing Activities | ($2,727) | ($3,125) |
| Financing Activities | ($30,314) | ($42,998) |
| Net Increase in Cash | $9,670 | $10,683 |
Potential Liquidity Concerns or Strengths
Despite a healthy cash position of $50.8 million and available borrowing capacity of $122.8 million under its revolving credit facility, the company faces liquidity challenges due to its quick ratio of 0.88 and declining working capital. A minimum liquidity financial covenant of $45 million is stipulated in its credit agreement, which the company has successfully maintained.
As of September 29, 2024, Holley Inc. had total debt of $556.4 million, with a first lien term loan due November 17, 2028, amounting to $564.2 million. This high debt level may pose additional liquidity risks moving forward.
Is Holley Inc. (HLLY) Overvalued or Undervalued?
Valuation Analysis
To assess whether Holley Inc. (HLLY) is overvalued or undervalued, we will examine several key financial metrics, including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, along with stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
As of the latest data, the P/E ratio for Holley Inc. stands at —. The company reported a net loss of $6.3 million for the 13-week period ended September 29, 2024, compared to a net income of $0.8 million for the same period the previous year.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated as the market price per share divided by the book value per share. As of September 29, 2024, the total stockholders' equity was $458.7 million, with 118.7 million shares outstanding. This results in a book value per share of approximately $3.86.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
As of the latest reporting period, EBITDA for the 39-week period ended September 29, 2024, was $71.1 million. With a market capitalization of approximately $456 million, the EV/EBITDA ratio is 6.41.
Stock Price Trends
| Date | Closing Price | Market Cap (in millions) |
|---|---|---|
| September 29, 2024 | $3.84 | $456 |
| June 30, 2024 | $4.20 | $498 |
| March 31, 2024 | $4.50 | $532 |
| December 31, 2023 | $5.00 | $588 |
Dividend Yield and Payout Ratios
Holley Inc. does not currently pay a dividend, resulting in a dividend yield of 0%. The company is reinvesting its earnings back into the business as indicated by the net loss reported in recent quarters.
Analyst Consensus
As of the latest reports, analyst consensus on Holley Inc. stock is categorized as follows:
- Buy: 2 analysts
- Hold: 5 analysts
- Sell: 1 analyst
This mixed consensus reflects the uncertainty surrounding the company's recent performance and strategic direction.
Key Risks Facing Holley Inc. (HLLY)
Key Risks Facing Holley Inc.:
Holley Inc. faces several internal and external risks that impact its financial health:
- Industry Competition: The automotive aftermarket industry is highly competitive, with numerous players vying for market share. As of September 29, 2024, net sales decreased by $22.5 million, or 14.4%, from the previous year, indicating a potential loss of market position.
- Regulatory Changes: The company is subject to various regulations affecting product safety and environmental standards, which may increase operational costs or limit market access.
- Market Conditions: Economic downturns or shifts in consumer preferences can significantly affect demand for automotive products. For instance, net sales for the 39-week period ended September 29, 2024, fell to $462.2 million, down from $504.0 million the previous year, a decline of 8.3%.
Operational Risks:
Operational risks highlighted in recent earnings reports include:
- Supply Chain Disruptions: Ongoing supply chain challenges have led to increased costs and delays in product availability. The company reported a $8.8 million strategic product rationalization charge due to the elimination of unprofitable SKUs.
- Interest Rate Sensitivity: As of September 29, 2024, the company faced interest expenses of $15.0 million, reflecting a 9.5% increase from the previous year.
Financial Risks:
Financial risks include:
- Net Income Loss: The company reported a net loss of $6.3 million for the 13-week period ended September 29, 2024, compared to a net income of $0.8 million in the same period the previous year.
- High Debt Levels: Total liabilities stood at $725.5 million as of September 29, 2024, which poses risks related to cash flow and interest payments.
Mitigation Strategies:
To address these risks, Holley Inc. has implemented several strategies:
- Cost Control Measures: The company has focused on reducing selling, general, and administrative expenses, which increased by 11.0% to $97.7 million for the 39-week period ended September 29, 2024.
- Product Portfolio Optimization: The strategic product rationalization efforts aim to streamline operations and focus on more profitable product lines.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Competition | Loss of market share due to intense competition | Net sales decreased by $22.5 million (14.4%) |
| Regulatory Changes | Increased costs due to compliance with new regulations | Potential for increased operational expenses |
| Supply Chain Disruptions | Delays and increased costs affecting product availability | $8.8 million strategic product rationalization charge |
| Interest Rate Sensitivity | Higher interest expenses affecting profitability | Interest expense of $15.0 million (9.5% increase) |
| Net Income Loss | Net loss impacting financial stability | Net loss of $6.3 million for the quarter |
| High Debt Levels | Increased financial risk due to high leverage | Total liabilities at $725.5 million |
Future Growth Prospects for Holley Inc. (HLLY)
Growth Opportunities
The future growth prospects for the company are driven by several key factors, including product innovations, market expansions, and strategic initiatives.
Key Growth Drivers
- Product Innovations: The company is focusing on enhancing its product offerings, particularly in electronic systems and safety products. For the 39-week period ended September 29, 2024, electronic systems sales decreased by $20.0 million or 9.4% compared to the prior year, indicating a need for new product introductions to regain market share.
- Market Expansions: The company is exploring opportunities in international markets. For the 39-week period ended September 29, 2024, net sales from Italy increased to $14.964 million from $12.612 million in the previous year, highlighting growth potential outside the U.S.
- Acquisitions: The company has engaged in strategic acquisitions, including the anticipated sale of Detroit Speed Engineering, which will help streamline operations and focus on core competencies.
Future Revenue Growth Projections
For the 39-week period ended September 29, 2024, net sales decreased by $41.8 million or 8.3% to $462.1 million from $503.997 million in the prior year. Analysts project a gradual recovery with an estimated annual revenue growth rate of 5-7% over the next three years as new products are launched and operational efficiencies are realized.
Earnings Estimates
Based on current trends, earnings estimates for the next fiscal year suggest a return to profitability, with projected net income of approximately $18 million, up from $14.547 million for the 39-week period ended September 29, 2024.
Strategic Initiatives and Partnerships
The company is actively pursuing partnerships to enhance its market position. Recent initiatives include:
- Collaboration with technology firms to advance electronic systems.
- Strategic marketing partnerships aimed at increasing brand visibility in new markets.
Competitive Advantages
The company benefits from several competitive advantages that position it well for future growth:
- A strong brand presence in the automotive aftermarket sector.
- Established relationships with distribution partners, ensuring robust supply chain logistics.
- Ongoing investment in research and development, with R&D costs decreasing to $13.743 million for the 39-week period ended September 29, 2024, from $18.935 million the previous year.
| Growth Driver | Current Status | Future Potential |
|---|---|---|
| Product Innovations | Decline in electronic systems sales by $20.0 million | New product launches expected to drive revenue recovery |
| Market Expansions | Growth in Italy from $12.612 million to $14.964 million | Further international market penetration planned |
| Acquisitions | Sale of Detroit Speed Engineering | Streamlining operations and focus on core competencies |
| Revenue Growth Projections | Current net sales at $462.1 million | Projected annual growth of 5-7% |
| Earnings Estimates | Net income of $14.547 million | Projected net income of $18 million |
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Updated on 16 Nov 2024
Resources:
- Holley Inc. (HLLY) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Holley Inc. (HLLY)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Holley Inc. (HLLY)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.