Holley NYSE: HLLY reported second-quarter 2026 net sales growth as three of its four operating divisions posted double-digit core sales gains, while the company continued divesting non-core assets, reducing debt and investing in marketing and product launches.
Net sales increased 3.2% year over year to $172 million. On a core-business basis, excluding portfolio rebalancing and divestiture effects, sales grew 4.9%. Chief Executive Officer Matthew Stevenson said the company’s first-quarter headwinds—including elevated distributor inventories and an unfavorable start to the spring season—eased during the second quarter.
“Three of our four divisions delivered double-digit core sales growth year-over-year,” Stevenson said, adding that the result reflected the breadth of Holley’s portfolio and execution against its strategic priorities.
Division Performance Improves
Modern Truck & Off-Road was Holley’s fastest-growing operating division during the quarter, with net sales rising 15.7%, accelerating from 3.8% growth in the first quarter. The company attributed the performance to consumer demand and new-product introductions across retail and enthusiast channels.
Euro & Import sales increased 13.1%, compared with 1% growth in the first quarter. Holley said prior supply constraints had been resolved, enabling the division to better meet demand in the European enthusiast vehicle market.
Safety & Racing sales rose 13.8%, building on 10.2% growth in the first quarter. Growth was supported by new products from the Stilo and Simpson brands, demand connected to the Snell SA2025 helmet certification cycle, and momentum in motorcycle safety products.
American Performance, the company’s largest business, reported a 2.1% sales decline. That was an improvement from a 9.7% decline in the first quarter. Stevenson said channel inventory levels have normalized, while the company also shifted certain product categories from its second-quarter marketing calendar to the second half of the year. Holley expects the division to improve through the balance of 2026, supported by retailer placements and expanded marketing activity.
Margins Affected by Tariffs; Cash Flow Rises
Gross profit was $70.5 million, compared with $69.6 million a year earlier, while gross margin fell 72 basis points to 41%. Adjusted EBITDA declined to $33.8 million from $36.4 million, and adjusted EBITDA margin fell to 19.6% from 21.9%.
Chief Financial Officer Jesse Weaver said the year-over-year margin comparisons were affected by tariff-related costs and a one-time, non-cash benefit in the prior-year quarter from capitalizing tariff costs into inventory. During the question-and-answer session, Weaver said that benefit was approximately $3 million to $3.5 million. Adjusting for the prior-year item, he said adjusted EBITDA was roughly flat year over year.
The company reported a GAAP net loss of $2.4 million, compared with net income of $10.9 million in the prior-year period. Holley said the loss reflected the divestiture of its non-core Restoration brands. Adjusted net income more than doubled to $24 million from $10.6 million.
Quarterly free cash flow increased $5.2 million year over year to $40.9 million. The result included improved working-capital management, operational discipline and a one-time benefit from refunds related to IEEPA tariffs. Weaver said the refund totaled about $10 million to $11 million and was not an ongoing benefit, as other tariffs more than offset it.
Portfolio Simplification and Debt Reduction
During the quarter, Holley completed the divestiture of its Restoration brands, including Brothers Trucks and Scott Drake. The company has one remaining business to divest among the five businesses identified under its portfolio rebalancing program, according to Stevenson.
Year to date, Holley said it has divested four brands, eliminated two facilities, reduced warehouse space by approximately 95,000 square feet, reduced its workforce by about 5% through divestitures, and removed roughly 7,000 low-margin SKUs, or approximately 16% of its portfolio.
The company also completed two manufacturing-site consolidations during the second quarter and reduced its employee and contractor base by more than 115 positions. Holley expects its portfolio rebalancing and cost-reduction work streams to provide more than $12 million of one-time net cash, 150 to 200 basis points of EBITDA-margin expansion, an additional $3 million to $5 million of annualized benefit, and improved inventory turns.
Holley generated $8.3 million in quarterly savings, including $5 million from purchasing and tariff-related actions and $3.3 million from operational improvements. Through the first half, the company said operational initiatives delivered about $6 million in savings. Weaver said Holley expects to reach or exceed the high end of its previously stated $5 million to $7 million full-year cost-reduction target.
Total leverage ended the quarter at 3.74 times, the company’s lowest level in four years. Holley had $69 million of cash on hand and had repaid the $10 million drawn under its revolving credit facility in the first quarter. After quarter-end, the company made an additional $15 million voluntary debt repayment, bringing voluntary debt reduction since September 2023 to $115 million.
Second-Half Outlook Reaffirmed
Management reaffirmed its full-year 2026 guidance, though specific guidance ranges were not discussed on the call. Holley cited normalized channel inventories, approximately $12 million in new national-retailer placements planned for the third quarter, a pipeline of product launches and ongoing contributions from HRX, which management said continues to exceed its original estimates.
The company also completed a restructuring of its marketing organization, reducing reliance on outside agencies and hiring more than 20 marketing professionals to work within operating divisions. Management said the approach is intended to bring marketing teams closer to enthusiast communities and improve speed and relevance across social media, forums, events and direct-to-consumer channels.
In the second quarter, Holley’s strategic initiatives contributed $13.4 million in revenue, including contributions from product innovation, national retail activity, international expansion and HRX. The company also repurchased approximately $2 million of common stock during the quarter.
Stevenson said Holley remains focused on debt reduction while evaluating selective acquisitions and potential share repurchases. He reiterated the company’s long-term targets of at least 6% stable organic top-line growth, 40% gross margins and adjusted EBITDA margins above 20%.
About Holley (NYSE:HLLY)
Holley Inc is a designer, manufacturer and marketer of high‐performance automotive products for the enthusiast market. Through its portfolio of well‐known brands, the company develops fuel delivery systems, intake manifolds, ignition components, nitrous oxide systems, digital controls and other engine‐dress accessories tailored to both street and competition applications. Holley's products are sold through a network of domestic and international distributors, retailers and directly to professional race teams and hobbyists.
The company's product offerings span mechanical and electronic fuel injection, carburetion, engine management, add‐on power systems and calibration tools.
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