Holley Q3 Earnings Call Highlights

Key Points

• Holley’s Q3 sales rose 2.3% to $141.6 million, while it returned to profit with net income of $7.8 million. Adjusted EBITDA increased 8.6% to $29.4 million, and its margin expanded to 20.8%.
• Its largest division, American Performance, returned to growth with a 9% increase in core sales; Modern Truck & Off-Road grew 8.2%. Euro & Import sales fell 12.2%, and some Simpson Racing helmet launches were delayed.
• Holley repaid $25 million of debt, reaching its 3.5-times leverage target a quarter early. It narrowed the upper ends of its full-year sales and adjusted EBITDA outlook, citing cautious consumers, higher fuel prices and product-launch timing.

Holley NYSE: HLLY reported higher sales and a return to profit in the third quarter of 2026 as its largest division resumed growth, cost savings lifted margins and the company reduced debt. The automotive aftermarket products company also narrowed its full-year outlook, citing a cautious consumer environment and some product launch delays.

Net sales rose 2.3% to $141.6 million from $138.4 million a year earlier. Core net sales, which exclude brands exited through portfolio rebalancing, increased approximately 6.7%, accelerating from 4.9% growth in the second quarter.

Net income was $7.8 million, or $0.06 per diluted share, compared with a loss of $800,000, or $0.01 per share, a year earlier. Adjusted EBITDA increased 8.6% to $29.4 million, and its margin expanded 120 basis points to 20.8%.

President and CEO Matthew Stevenson said the results reflected broader growth across the portfolio, improved profitability and a stronger balance sheet. He said 27 brands grew across the company’s direct-to-consumer and business-to-business channels.

American Performance Returns to Growth

American Performance, Holley’s largest division, posted 9% core sales growth after declines of 9.7% in the first quarter and 2.1% in the second. Stevenson said the business had worked through elevated inventory in its distribution channels, expanded placement at a national retailer and aligned marketing with seasonal demand. Holley, MSD and CataClean were key contributors.

Modern Truck & Off-Road grew 8.2%, following 15.7% growth in the second quarter. The division’s direct-to-consumer e-commerce sales rose approximately 65% year over year. Safety & Racing grew 2.5%, slowing from a double-digit pace in the first half that benefited from demand associated with a helmet certification cycle. Some new Simpson Racing helmet products were delayed and are now expected in the fourth quarter.

Euro & Import declined 12.2%. Stevenson attributed the decrease to marketing activities shifted out of the quarter and insufficient inventory of key products, rather than a change in the company’s view of the European enthusiast market. During the question-and-answer session, he said in-stock rates had already shown material improvement heading into the fourth quarter.

Margins and Debt Improve

Gross margin rose to 44% from 43.2% a year earlier. Chief Financial Officer Jesse Weaver attributed the improvement to higher operational productivity and the exit of lower-margin businesses. Selling, general and administrative expenses, including research and development, fell 4.6% to $36.4 million.

Free cash flow increased to $8.8 million from $5.5 million. Holley repaid $25 million of debt during the quarter, bringing its debt reduction since September 2023 to $125 million. Its leverage ratio fell to 3.5 times, reaching its year-end target one quarter early.

The company expects to end the year below 3.5 times leverage, including the effect of its acquisition of SXTH Element, and continues to target approximately three times over the long term. It ended the quarter with approximately $50 million in cash and $147 million in total liquidity.

Weaver said operational efficiency efforts produced approximately $8.3 million in savings through the first nine months, exceeding the company’s full-year target of $5 million to $7 million. In response to an analyst’s question, he said the company expects to continue seeking annual operating savings, primarily to offset inflationary pressure.

Acquisition and Outlook

After the quarter ended, Holley acquired SXTH Element, a maker of performance parts for Toyota trucks and SUVs, using cash on hand. The business will join the Modern Truck & Off-Road division. Weaver said the acquisition does not change Holley’s deleveraging trajectory.

Holley also outlined a strategic collaboration with Australian aftermarket company Amotiv. The initial effort involves Flowmaster oil filters engineered by Amotiv’s Ryco brand. Beginning in 2027, the companies expect to expand distribution of select products in North America, Australia and New Zealand and explore operational cooperation.

For the full year, Holley now expects net sales of $610 million to $625 million, core business growth of approximately 2% to 5%, and adjusted EBITDA of $127 million to $132 million. The company lowered the upper ends of its sales and adjusted EBITDA ranges while leaving the lower ends unchanged; it did not specify the previous upper bounds on the call.

Weaver said higher fuel prices, uncertainty tied to the conflict in the Middle East and the timing of several product launches informed the more measured outlook. At the guidance midpoint, the company expects an adjusted EBITDA margin of approximately 21%, including the effects of tariffs and freight costs.

About Holley (NYSE:HLLY)

Holley Inc is an automotive aftermarket company that designs, manufactures and distributes performance products for cars, trucks, powersports vehicles and other enthusiast applications. Its offerings include fuel systems, engine and ignition components, exhaust products, suspension and driveline components, electronic controls, vehicle accessories and safety equipment.

The company serves do-it-yourself consumers, professional installers, racing teams, automotive enthusiasts and original equipment manufacturers through a portfolio of established aftermarket brands.

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