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Holley Inc. (NYSE:HLLY) reported its second quarter 2025 financial results, showcasing record free cash flow generation and continued growth across its core business segments, despite ongoing tariff challenges. The performance marks a significant improvement from the company’s first quarter results, with strategic initiatives beginning to deliver measurable revenue contributions.
Quarterly Performance Highlights
Holley delivered net sales of $166.7 million in Q2 2025, representing 3.9% year-over-year growth in its core business. The company achieved a gross margin of 41.7%, a 26 basis point improvement compared to the prior year, while adjusted EBITDA reached $36.4 million with a margin of 21.9%, down 74 basis points year-over-year.
The most notable achievement was Holley’s free cash flow generation, which reached a record $35.7 million, an $11.3 million increase from the same period last year. This represents a dramatic turnaround from the negative $10.8 million free cash flow reported in Q1 2025.
As shown in the following financial results summary:
The company reported net income of $10.9 million, down $6.2 million from Q2 2024, and adjusted diluted EPS of $0.09, a slight decrease of $0.01 year-over-year. Interest expense remained relatively stable at $13.4 million.
Holley’s performance varied across its business divisions, with all segments showing positive growth:
The Truck & Off-Road division led growth at 17%, followed by Domestic Muscle at 6%, Euro & Import at 4%, and Safety & Racing at 1%. This balanced growth across segments demonstrates the company’s ability to capitalize on diverse market opportunities within the performance automotive aftermarket.
Strategic Initiatives and Growth Drivers
Holley’s management highlighted that ongoing execution of its strategic framework delivered approximately $27 million in revenue from key initiatives in Q2. The company has organized its strategy around several core pillars, including accelerating profitable growth and enhancing customer experience.
The company’s strategic initiative tracker shows progress across multiple fronts:
Notable achievements include $13.2 million in revenue from strengthening B2B partnerships, $10.8 million from product innovation and portfolio management, and $2.2 million from e-commerce and third-party platform growth. Direct-to-consumer (DTC) channels grew 8.6% year-over-year, with third-party platforms like Amazon (NASDAQ:AMZN) and eBay (NASDAQ:EBAY) increasing by more than 28%.
"Momentum continued in Q2, with core business delivering a solid 3.9% revenue growth across all divisions," noted the company in its presentation, highlighting the successful implementation of its strategic framework.
Tariff Mitigation Efforts
A significant focus for Holley has been addressing the impact of tariffs on its business. The company has established a comprehensive tariff mitigation strategy expected to deliver approximately $15 million in savings through 2026:
The mitigation efforts include $5.5 million from negotiating with existing suppliers, $4.5 million from relocating production with existing suppliers, $4.0 million from sourcing with new suppliers in lower-cost countries, and $1.0 million from bringing products in-house.
These initiatives, combined with strategic pricing measures, are expected to minimize the impact on free cash flow and margins in both 2025 and 2026:
The company implemented an 8.75% price increase announced on April 11, 2025, as part of its margin protection strategy. This pricing action, along with supply chain initiatives, is effectively offsetting tariff pressures and preserving margin stability.
Financial Position and Working Capital Optimization
Holley continues to make progress on reducing its net debt, which decreased from $512.2 million in Q1 2025 to $486.3 million in Q2 2025. The company’s net debt to adjusted EBITDA leverage ratio stands at 4.2x, showing a gradual improvement trend:
The company has also made significant strides in optimizing its working capital, reducing inventory by more than $9 million since the beginning of the year against a full-year target of $10-$15 million reduction. Management highlighted improved manufacturing efficiency and asset utilization as key contributors to restoring historical profitability.
Financial Outlook
For the full year 2025, Holley provided the following guidance:
The company expects net sales between $580 and $595 million, representing year-over-year growth of 0.8% to 3.4%, and adjusted EBITDA between $116 and $127 million. This guidance is slightly narrowed from the previous range of $580-$600 million mentioned in the Q1 earnings report, suggesting increased confidence in the company’s projected performance range.
Capital expenditures are expected to be between $10 and $14 million, with depreciation and amortization projected at $22 to $24 million. Interest expense is anticipated to range from $45 to $50 million for the year.
Conclusion
Holley’s Q2 2025 presentation depicts a company that has rebounded strongly from its Q1 challenges, particularly in cash flow generation. The consistent growth across all divisions, successful implementation of strategic initiatives, and effective tariff mitigation efforts position the company well for the remainder of 2025.
The record quarterly free cash flow of $35.7 million stands out as a significant achievement, especially following the negative free cash flow reported in Q1. While adjusted EBITDA margins showed a slight year-over-year decline, the company’s gross margin improvement and strategic pricing actions demonstrate its ability to navigate challenging market conditions.
As Holley continues to execute its strategic framework and optimize its operations, investors will likely focus on whether the company can sustain its momentum and achieve its full-year guidance in the face of ongoing tariff pressures and market dynamics.
Full presentation:
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