Holley at 45th Annual William Blair Growth Stock Conference: Strategic Growth Insights

On Wednesday, 04 June 2025, Holley (NYSE:HLLY) participated in the 45th Annual William Blair Growth Stock Conference, where the company presented a strategic overview of its recent performance and future outlook. Despite challenges such as tariffs, Holley reported positive growth in its core business and outlined plans for operational improvements and market expansion. The conference highlighted both the company’s successes and areas for potential growth.

Key Takeaways

• Holley’s core business grew by 3.3% in Q1, driven by strategic initiatives.
• The company aims to generate $120-121 million in EBITDA for the full year.
• Operational efficiencies have saved over $30 million in the past two and a half years.
• Holley is expanding its presence in third-party marketplaces, with 50% growth reported.
• Strategic focus includes domestic muscle, truck/SUV/CUV, and import markets.

Financial Results

Holley reported a 3.3% year-over-year growth in its core business for Q1. Key financial metrics include:

• B2B business grew by 2.5%, marking the first growth in five quarters.
• Direct-to-consumer sales increased by over 10%.
• Third-party marketplace business saw a significant 50% growth.
• Gross margins and adjusted EBITDA margins improved due to operational efficiencies.
• Free cash flow was negative in Q1 due to customer payment timing but is expected to improve in Q2.
• The company maintained its full-year EBITDA guidance at $120-121 million and projected free cash flow of $40-50 million.

Operational Updates

Holley is focusing on several strategic initiatives to enhance its market position:

• The domestic muscle portfolio grew by 3%, while the trucking/off-road portfolio saw a 2% increase.
• Year on import portfolio experienced a robust 17% growth.
• Safety and racing portfolio grew by 3%, with Stilo showing near double-digit growth.
• Efforts to improve workplace culture are ongoing, with a target of achieving a 65% great place to work score.
• Expansion into new markets and categories, including Mexico and chemicals, is underway.
• Tariff impacts are being mitigated through supplier consolidation and strategic pricing actions.

Future Outlook

Holley’s three-year strategic plan includes several growth drivers:

• Focus on the truck, SUV, and CUV market, which comprises 80% of new vehicle sales in the US.
• Expansion in the year on import market and safety and racing segments.
• Continued product innovation and portfolio management.
• Operational improvements and cost reduction to support growth.
• The company is also considering strategic acquisitions that align with its financial and strategic goals.

Q&A Highlights

The Q&A session addressed key issues such as tariffs and market growth:

• Majority of the cost of goods sold are in the US, with efforts to mitigate tariff exposure.
• Opportunities for purchasing improvements and supplier consolidation were discussed.
• The enthusiast market is large and growing, presenting opportunities for aftermarket upgrades.

In conclusion, Holley’s participation in the conference underscored its commitment to strategic growth and operational efficiency. For a deeper understanding, readers are encouraged to refer to the full transcript below.

Full transcript - 45th Annual William Blair Growth Stock Conference:

Philip Lee, Consumer Analyst, William Blair: My name is Philip Lee. I’m the consumer analyst here at William Blair covering Holly. Today, we have Matt Stephenson, president and CEO and CFO, Jesse Weaver. Before I kick it over to them, just as an FYI for a full list of disclosures, please visit our website. Alright.

I will kick it over to them. Thank you, guys.

Matt Stephenson, President and CEO, Holly: Alright. Thank you, Philip, and good afternoon, everyone. I hope we have plenty of car enthusiasts in the audience today because this is what we do. We don’t make cars, but we make them better, faster, louder, and more fun and exciting. So as Philip said, the the normal disclaimer, before we present our materials.

And then, we’ll get in a little bit about our market overview. If you’re not familiar with the Holly story, we’ll talk about the size of our market and, the general verticals we compete in and how we structure our company. So, where we serve the market is around enthusiasts. This is our consumers’ customers’ pastime. It is their hobby.

You can liken it to golfing. You can liken it to fishing or hunting. This is what people do for an enjoyment. They love working on their cars. They love showing them off with their friends, or they like taking them to to the track and racing.

There’s roughly about 70,000,000 enthusiasts in The United States, so you can see comparatively to some of the categories like golf and outdoors. It really surpasses the number of people that consider themselves an enthusiast in the automotive sector. Some of the, companies, that you can compare. So I think that’s one of the more difficult parts, in this industry, in this market, being public is who are our direct comparisons. ARB is a close one.

They’re trading on the Australian exchange, mostly focused on serving the off road community of, trucks and SUVs. And then you have Fox, but Fox is very different. They are a diverse company into now sporting goods, but also serving a lion’s share of OE shocks for Ford and other companies, which is a very cyclical different business than us who is focused solely on the performance auto aftermarket. Over a a hundred and twenty years behind us from the early days of, carbureted Model Ts and some of the first vehicles all the way through the history, and some of the great brands that have become over the years. You can see some brands back in the early nineties that like NOS, nitrous oxide, that fuel that fueled literally the fast and the furious craze of Dominic and all those fast cars then to then becoming truly an aftermarket performance company post the great recession.

After that, some iconic brands such as MSD, Flowmaster, Simpson, Stilo, others became part of the portfolio. We became public in ’21 and continue to acquire a number of companies post going public, and then been really concentrating on developing the infrastructure and professionalization to grow the company, to the billion dollar plus platform we believe it has the potential to be. How we organize ourselves? This is something that Jesse and I have spent a lot of time on. I should’ve started this, but I’ve been here about two years.

Jesse has been here, about two and a half. So we’re the team that came in after the company went public. So what we’ve been spending a lot of time doing is organizing the the company for growth and operational effectiveness. So we organize ourselves now around three verticals or sorry. Four verticals.

Three around the vertical, one around safety and racing. Traditionally, where Holly was focused was a part of the smallest portion of the market. So domestic muscle, classic cars, modern day muscle cars, and, candidly, there’s not a whole lot of those in from the American manufacturers. You have the Corvette. You have the Mustang, Challenger, Charger, and but it was a small segment of the market.

Now where the growth really is around trucks, SUVs, and CUVs. It’s a $26,000,000,000 space. 80% of the vehicles Americans buy new today are either trucks, CUV, or SUV, and they’re the most heavily modified sector of of the auto aftermarket. We also have great year on import business. It’s about 14,000,000,000, and then we have our safety and racing.

This is a global business, about $10,000,000,000, and we have some of the most iconic brands in the space. So we not only organize our business around these four verticals, we also were organized our brands. We have 70 brands in our portfolio, but we concentrate our efforts around the lifestyle and power brands. Lifestyle brands, you can actually think of people tattoo these on their body. Being real.

Holly, Simpson, some of these people are so passionate about that they they wear them and live them. We also have power brands that we focus a lot of energy on that are like the MSD, the Edge, the Flowmasters, the APR dining type, and then we are contributing in tertiary brands or make up the other 50. And we’re focusing on the brands that offer us the biggest potential to drive the growth that we want. Quickly on q one, which we reported in the May, it was a bit of an inflection point for the organization. It was the first time we grew the core business year over year.

So in q one, we grew the core business 3.3%, including for the first time in five quarters our direct our b to b business. We grew that about two and a half percent. We grew over 25 brands. Most of those were lifestyle and power brands, in the quarter year over year through both our direct to consumer and b to b channels. And, also, the growth we drove was, in parts of the strategic initiatives that we’re focused on as an organization.

I’ll provide some more transparency to that in a minute. Now we also one of the things I I’d say we’re quite proud of over the last two years, we’ve we’ve had this new leadership team. We’ve been able to maintain and grow margins by taking a lot of the operational inefficiencies out of the company. And I and I when I say that, I don’t mean people. I mean, really taking low hanging fruit, the nonvalue added cost out of the business, and being able to put that to the bottom line or reinvest it in some of our growth initiatives.

We’re also growing our third party marketplaces business within our d to c significantly. Direct to consumer grew over 10%. We’re seeing our third party business on Amazon and some of those platforms up 50%. Product innovation and strategic pricing drove 8,100,000.0 in the quarter, and we’re continuing, on proactive cost reduction in place to mitigate any tariff impacts as much as possible for future quarters. So just some of the highlights.

We talked about net sales. This 3.3% is on the core business, and that is because we divested some businesses year over year. We also discontinued a lot of product lines. So that is net net on the core like for like. You can see the gross margins and adjusted EBITDA margins just to go into the details of some of the puts and takes behind there.

Free cash flow, shows negative, but our business had a large portion that showed up in March, which normally would show up in January or February due to weather. We have thirty thirty days terms with our customers. So a lot of that cash we normally record in the first quarter just fell off on timing, which will pick back up in the second quarter that we’re in now. Have a a lot of new products that launched, lifeblood of a consumer products enthusiast company, and some of the operational excellence. We’ve concentrated on the top 2,500 product in stock rates, which are the majority of our business, up 2%.

We reduced past dues 20%. We continue to gain efficiencies in operations over a million for the quarter, and we continue to get out unproductive inventory. So we’re really trying to free up cash and take out that inventory where it doesn’t make sense. And then we talked about our d to c growth, continue to execute on our promotional periods or marketing calendar. We’re up on our key IRS sale 27% year over year, and we have a massive social media, following.

We have 8,000,000 followers across our brands and our various platforms, which is, quite amazing for the size of our company and our brands is how engaged consumers are with our organization. So when we look at our verticals, we’re starting to break this now out so we can be more transparent where we’re focusing our efforts and then the results of that. So domestic muscle, which is, again, where the lion’s share of Holly’s focus was in the past, we grew that portfolio about 3%. Those brands there, picture grew about 11. Trucking off road, we were up 2%, but some of those brands there were up over 30%.

Year on import, that portfolio roughly grew about 17, and then safety and racing were up 3% year over year, with steel nearly being up double digits. So, again, showing that focusing our re our resources and our accountability is really moving the power brands in a market that we consider to be flat or down. Our industry does not have great indexes. We track the sell out data, closely, not only for, of course, our d to c business, but our, major customers, and we’re gaining share. But, ultimately, the market has been soft the last three years.

Provided this framework a couple of earnings calls ago about our the key areas of our strategic plan for the next three years. First and foremost, we make Holly a great place to work, and we have a number of initiatives every day that go into place to make that happen. Premier consumer journey is about really meeting the consumer where we they wanna be met and our direct to consumer experience. Trailblazing trusted partners. Our goal is to become the best partner in our industry in the b to b space.

Product innovation and portfolio management is, of course, around new products, but managing the elasticity of our products around our portfolio management, ensuring that we not only have the right price points for the value proposition we present to consumers, but also ensure, distributors can be profitable selling our products. They’re a key component of our go to market strategy, and and we’ve done a lot of work there to make sure, all products are competitive. Global expansion in new markets, or expanding in in new markets, new chemical, categories. We’re also expanding new countries. Mexico, we haven’t been president and recently launched in Mexico and are expanding in just naturally adjacent markets to The US and eventually, we’ll look to other export markets in the future.

Transformational m and a is something as the company has dramatically improved its, professionalizations, capabilities, its processes. We’re now looking at where and when does m and a make sense and what are some of the quality assets out there that may be of interest to us. Fund the growth is around operational improvements and continuing to bootstrap our investments through our own productivity, and then, of course, delivering results that our shareholders expect. So these are some of the numbers from the first quarter. B to b delivered two and a half million year over year by partnering with our national retailers as well as our top 50 accounts.

We also launched a new initiative focused on small customers, which is starting to bear a lot of fruit. Our d to c business we talked about was up quite a bit for a number of reasons and yielded 3,300,000.0. Product innovation and portfolio management added another eight, and we’re just beginning some of the expansion around the dealer channel, chemicals, Mexico, which added about 300,000 in the quarter. Continue with the operational improvements that added just over 3,000,000, and we approved our great place to work score up to 60%. To qualify to get the great place to work, designation, you have to be at 65, and it’s something we wanna nail down in our, long term plan.

It doesn’t happen overnight, but it’s it’s important to who we wanna be as an organization. Okay. I’m gonna turn it over to Jesse, go in a little more detail.

Jesse Weaver, CFO, Holly: Uh-huh. Okay. So I know we have another fifteen minutes, but I’ll probably get through this much more quickly than that. And we can get upstairs, do more breakout q and a. But I’m Jesse Weaver.

As Matt pointed out, I’ve been here two and a half years. And one of the first things that we focused on were the financial priorities, which I’ll get down into what they are here today. But, you know, coming into the company, what I saw was a storied brand, as Matt pointed out, a hundred and twenty years. Holly has been around. I think one of the facts that we talk about internally is it’s one of, I’m gonna say, three to six, whatever myth you wanna believe, businesses that was on the first Model T that’s still around today.

So these brands actually have a lot of staying power. And then through that time, obviously, putting together the portfolio as it stands today, really focusing on, you know, the consumer in ways that, you know, enhance their life, their lifestyle. And when I came into the business, you’ve had a situation where inventory was going up, past dues were going up, revenue was coming down, but you had such great brands that this business definitely had an opportunity to turn things around. And one of the first things we had to focus on was free cash flow. And, you know, immediately, the team jumped on this.

And this was one of the the best teams I’ve ever worked with and four as everyone got all in on getting working capital straight. And in that first year, we generated $80,000,000 in free cash flow coming off of a year really of being just flat. And so we’ve continued this discipline as an organization to focus on cost to serve was the initiative Matt put in place. And over the last two point five years, we’ve cut out over $30,000,000 of operational inefficiency through a combination of improved efficiency in our freight, improved efficiency in operations, and, you know, we are not stopping that. And so coming into this year on the left side of the page, you can see we even put another target out there of another 5,000,000 to $10,000,000 this year.

And this is really just in the operational efficiency side, where through a combination of what we’re doing in our manufacturing facilities, getting the teams to find better, smarter, faster ways of doing the production and the distribution, What we’re doing through just management of our returns and allowances. We have a lot of distribution partners that we need to have policies in place and hold those teams accountable to what they return. And on our warranty side, one of the areas that we focused on as a team is just getting quality in check. So, you know, making sure that we are managing the quality in a way that certainly our consumers have a better experience, but we also have less cost. And then throughout the business, as we’ve encountered, I think anyone here heard of tariffs, we’ve immediately doubled down on making sure the spend throughout the organization is actually perfected in a way that we can manage through this uncertain time.

And so this year, just continuing on our $30,000,000 plus trajectory, we’re going after another five to 10. Q one was you know, annualizes to four, but a lot of the initiatives in place will be coming through towards the back half of the year. So we’re on a really good trajectory there. And then the other place that, you know, Matt had pointed out we really focus on is making sure the right products are going to market and getting our working capital to a place that actually is even more efficient than we’ve already made it. I mean, I think one of the big opportunities that the team had when Matt joined was making sure we’re making products that people, you know, wanna buy and not overinvesting in inventory.

So one of the topics that we’ve talked a lot about is through that process improvement, we get to a place to where, you know, we’re we’re not saddled with inventory that hangs around for many years. We cut out 45% of our SKUs pretty early on, so we had 70,000 SKUs when I started. Today, we have just over 35,000, and that only accounted for 3% of sales. And so there was a big inventory improvement there. And then as we move ahead into the future, it’s just getting ahead, not not just looking at what’s happened, but looking at what’s to come when it comes to inventory that we may be starting to lean out on and making sure that we have got process and promotions or programs in place to get that inventory moving again.

And so the team is you know, organizationally, I would say we are, I’m looking at our stock price today at $2, and I looked at our stock price when I started. We were $2. I think we were $2.15. And then when my appointment was announced, we dropped to $2. So I don’t know what that means, but we are in a much stronger place because at that point, there was no path to cutting $30,000,000 in operational inefficiency.

We were about to, you know, breach our covenants, and we structured a great deal with the banks, which were great partners. We’ve exited that. We’ve improved operational efficiency. The team that we have in place looks meaningfully different than the team that we had in place before. And I think as you can see here, we’re continuing to do what we need to do to protect the balance sheet.

When you look at the guide for the year, so this was our original guide for the full year. And then at the end of Q1, we just reiterated our guidance. No change. The caveat here would just be that, you know, we are still at the time of the call in early May digesting what was going on with tariffs. And I think to think that we’ve fully eaten the elephant in any of this would probably be naive because even within a week of that call, the picture changed.

But, you know, excluding any of those impacts, largely, I would say on the consumer end, what happens in the back half, we still feel like we’ve got a path to around 120,000,000, hundred and 20 1 million at the midpoint on the EBITDA. And I think following this down through, for those of you who are, you know, really focused on the free cash flow, when you take this into account, this would say the company should produce around 40 to $50,000,000 of free cash flow, which is a really good return on a per share basis relative to what we’re trading at today and puts us in a great position to do what I think a lot of investors say they are looking for in our stock in this time, which is to delever. And so, you know, if we do 40 to 50,000,000 in free cash flow this year and the next year, we should see a path towards the low threes on leverage. And as we’ve demonstrated a willingness to do in the absence of incredible acquisitions that fit strategically and make financial sense, you know, we will prepay the debt. And since I’ve been here in September of twenty three, since that time, we’ve prepaid 75,000,000.

So I think we are on a really good path. We’ve got a great story. It’s a tough story to tell in this market with so much uncertainty. But when you look at the overall investment thesis of Holly, there’s lots more we could go into as it relates to the enthusiast. But the enthusiast spends differently, and they are very passionate.

Just to put a finer point on that, there’s a as Matt pointed out, we have 8,000,000 social followers. A 10,000 people come every year or more to our Holly owned events. One of those that for those of you who are interested in learning more, we’d recommend you come to is our Holly LS East event, which will be in September. We’d be happy to host you for dinner. We’re talking about what this could look like.

But there, you’ll see over 45, 50 thousand people there of all walks of life really engaged and excited about the brands and what we’re doing. The industry is huge over 4 around 40,000,000,000 plus if you include the safety international components of it. And it’s been a pretty consistent grower, you know, up until the time of, you know, COVID and then sort of what we’ve seen over the last couple of years. But this is a lifestyle that these enthusiasts really live into day in and day out. And when you look at the brands that we have, brands matter, particularly in this category.

If anyone in here ever worked on a car I can raise my hand now because I have. But prior to this job, I had not. It is a challenge, and a lot of people are up for that challenge. I needed help. But it took a lot of time, and the one thing you wanted to make sure of when you were done is that the car started.

The last thing you’d wanna do is to put on a part that with a brand you don’t recognize that you’re not sure of, and these brands and these margins, which are about 40% gross margin, demonstrate the power of what these brands can do and how iconic they are. The organization, as Matt pointed out, has been grown over a series of acquisitions over a decade at this point, and I think we are structured today better than ever to actually know what strategically fits, where it fits in, and how we can extract value from those acquisitions in a in a very meaningful way, particularly with the team that we have in place. On the digital and d to c side, we didn’t speak as much to our distribution channels, but one of the things to keep in mind is, you know, the company made an investment pre COVID in direct to consumer at that time. B2C was about 15% of sales. Today, we’re in the 20 to 25%.

This platform makes for a great opportunity for us to complement our b two b business, and we’ve continued to see actually really good partnership with our b to b partners, which creates a real opportunity for us as we acquire companies to get them to market and to get full value out of what they do. And then the last couple of things just here, as you think about the financial business, the algorithm here, on an organic basis, we’d expect to do mid single digits through a combination of price and volume split about fifty-fifty. And as I pointed out, we’ve consist margin or plus. And as we’ve done operational efficiencies, we’ve been holding close to the 20% EBITDA even in spite of the revenue, the top line over the past couple of years being challenged. And then lastly, free cash flow.

Cash, as we all know in this room, is king, and we’ve demonstrated an ability to continue to to generate that even in this past couple of years. So I think with that, we ended six and a half minutes early. Could take a question or two, or, Philip, would you recommend that we move to the other room? Go ahead. Move to the other Okay.

Philip Lee, Consumer Analyst, William Blair: Switch over to, I believe, it’s Burnham B for Q and A, but we’ll do a few questions here, and I’ll I’ll I’ll start. Just your question on tariffs right now, how you’re thinking about it. I know we have a little bit more information now still, you know, very uncertain. But maybe any color on your sourcing, domestic manufacturing presence versus international, and then just how you think about any mitigation efforts, know, weighed between either pricing or OpEx or, vendor negotiations, how you how you think about balancing all of those.

Matt Stephenson, President and CEO, Holly: Yeah. Sure. So, obviously, we get that question a lot over the last month or so. So the majority of our cost of goods sold are in The US. Right?

So that is, you know, sourcing, manufacturing, assembly, what have you. So we do have exposure in Asia and other countries around the world. And I’d I’d encourage you to look at our, earnings material from our May 1 or May 8 call, I think it was, that goes into real detail how we’re handling it as a team. So we have a structured, project management office. We have, we call them, 11 tiger teams that work on 11 product categories that are focusing on eighty twenty, the high movers, where they’re subject to, you know, I’d say, moderate tariff exposure.

Now back in the May, that was quite significant. You know, it went from kinda minor to kinda really, really high, and it’s come back down. And so for us, we’re finding a lot of opportunities just to get better in our purchasing or supplier consolidation. So I’d say it’s we’re using it as never let a good crisis go to waste. And even though the tariffs have come down significantly, we’re finding opportunities to mitigate some of the existing tariffs that were on the products and some of the core the countries we source, consolidate suppliers get better volume based pricing.

And, and and in some senses, get less, you know, capital on the water, so to speak. So I think the team has done an amazing job over the last six weeks. We get report outs every day on our progress in mitigating the tariffs. And at the same time, we did take some moderate pricing action, comparatively to our competitors. We did roughly about eight and three quarters across the portfolio.

Many of our competitors did ten, twenty, 30 plus percent because of their, much higher exposure to some of these affected countries. So, you know, some think we have the ability to to pick up share in categories. We’ll see how that pans out. But I think between our approach, our pricing, and the tenacity of the team to, negate, mitigate the tariffs on some effective, products, I think we feel, we’re we’re definitely in better shape than most the for, what’s on the horizon. So, again, it’s a fluid situation, but I think we’re starting to see it calm down.

And, during our August call, we’ll provide, more specific transparency on what we think the tariff impact will be, if any, outside of, what we can’t recover in pricing. But but, again, we’re we’re proud of what the team is doing. Does anyone else have a question they wanna ask right now? Structural growth

Unidentified speaker: The structural growth of particularly, like, the enthusiast market, what does that look like over time? And is there any consequence to, like, the digitization of automobiles and kind of how you think about people working on their own cars?

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