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    HLLY
    Earnings call· Jun 2026(Q2 FY26)

    Holley Q2 FY26 earnings call HLLY

    Aug 5, 2026 Source

    Executive summary

    Holley Inc. Q2 FY26 — Return to Growth, Strong FCF, and Leverage Reduction

    Holley Inc. returned to net sales growth in Q2 FY26, driven by strong performance in three divisions and strategic initiatives. The company significantly improved profitability and cash flow, reduced leverage, and continued portfolio rebalancing. Management reaffirmed full-year guidance, anticipating continued momentum into the second half with new retail placements and product launches.

    Highlights

    5

    • Net sales increased 3.2% to $172 million, with core business net sales up 4.9%.

    • Three of four divisions delivered double-digit core sales growth.

    • Adjusted net income increased to $24 million, more than double $10.6 million in the prior year period.

    • Generated $40.9 million in free cash flow, a $5.2 million increase year-over-year.

    • Leverage ratio reduced to 3.74x, its lowest level in four years, on track for below 3.5x by year-end.

    Concerns

    3

    • Gross margin was 41%, down 72 basis points year-over-year, primarily due to higher tariff-related costs.

    • Adjusted EBITDA margin was 19.6%, a 223 basis point decline year-over-year, also impacted by tariffs.

    • Net loss for the quarter was $2.4 million due to the divestiture of non-core restoration brands.

    Guidance & targets

    6
    CategoryTargetConfidence
    Leverage ratio
    below 3.5 times
    high materiality
    High
    Cost reduction initiatives savings
    at or above the top end of our $5 to $7 million range
    medium materiality
    High
    Inventory reduction
    targeted reduction range for the year
    medium materiality
    High
    Organic top-line growth
    at least 6 percent
    high materiality
    High
    Gross margins
    40 percent
    high materiality
    High
    Adjusted EBITDA margins
    greater than 20 percent
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    American Performance
    Net sales declined 2.1% in Q2, an improvement from -9.7% in Q1. Impacted by elevated channel inventory (now normalized) and intentional shift of Q2 marketing calendar products to H2. Expected to continue improving through the balance of the year.
    		—declined 2.1%——
    Modern Truck and Off-Road
    Delivered outstanding quarter with net sales increasing 15.7%, accelerating from 3.8% growth in Q1. Benefiting from strong consumer demand and successful new product introductions.
    		—increased 15.7%——
    Euro and Import
    Grew 13.1%, a significant acceleration from 1% growth in Q1. Earlier supply constraints resolved, meeting consumer demand and capitalizing on strength of European enthusiast vehicle market.
    		—grew 13.1%——
    Safety and Racing
    Continued to be a standout performer with net sales increasing 13.8% year-over-year, building on 10.2% growth in Q1. Driven by strong new product introductions, innovation, and sustained demand from Snell 2025 helmet certification cycle.
    		—increased 13.8%——

    Operational metrics

    37
    Strategic initiatives revenue contribution
    $13.4 million
    Q2 FY26

    Total revenue contribution from strategic initiatives.

    Strategic initiatives cost savings
    $8.3 million
    Q2 FY26

    Total cost savings from strategic initiatives.

    Purchasing and tariff-related savings
    $5 million
    Q2 FY26

    Savings specifically from purchasing and tariff-related actions.

    Operational improvement savings
    $3.3 million
    Q2 FY26

    Savings specifically from operational improvement initiatives.

    Marketing organization internal hires
    >20
    Q2 FY26

    Number of marketing professionals hired internally, reducing reliance on outside agencies.

    Share repurchases
    $2 million
    Q2 FY26

    Opportunistic share repurchases during the quarter, despite a limited repurchase window.

    Voluntary debt repayment
    $15 million
    post Q2 FY26

    Additional voluntary debt repayment made after quarter end.

    Total voluntary debt reduction
    $115 million
    since Sep 2023

    Cumulative voluntary debt reduction since September 2023.

    Cost reduction initiatives savings
    ~$6 million
    H1 FY26

    Savings realized from operational improvement initiatives in the first half of the year.

    Inventory reduction
    >$10 million
    YTD FY26

    Inventory reduction achieved year-to-date, adjusted for portfolio rebalancing efforts.

    Net sales from acquisitions
    $4.7 million
    Q2 FY26

    Incremental net sales contribution from acquisitions.

    Improved price realization
    ~$10 million
    Q2 FY26

    Contribution to net sales from improved pricing.

    Lower sales volume impact
    ~$9.4 million
    Q2 FY26

    Offset to net sales from lower sales volume compared to prior year.

    SG&A (including R&D) legal and rebalancing costs
    $4.4 million
    Q2 FY26

    Costs related to securities class action settlement and portfolio rebalancing, excluded from adjusted EBITDA.

    IEPA refunds
    $10 million to $11 million
    Q2 FY26

    One-time benefit from IEPA refunds, not ongoing.

    Trailblazing trusted partner revenue contribution
    $1.5 million
    Q2 FY26

    Revenue contribution from the 'Trailblazing trusted partner' strategic pillar.

    Premier consumer journey revenue contribution
    $1.1 million
    Q2 FY26

    Revenue contribution from the 'Premier consumer journey' strategic pillar.

    Modern Truck and Off-Road direct-to-consumer channel growth
    approximately 17%YoY
    June

    Growth in direct-to-consumer sales for the Modern Truck and Off-Road division.

    Third-party marketplaces growth
    more than 25%YoY
    Q2 FY26

    Growth in sales through third-party marketplaces, led by strength across all divisions.

    Product innovation revenue contribution
    $4.5 million
    Q2 FY26

    Revenue contribution from product innovation, led by Safety and Racing and Modern Truck and Off-Road.

    Global expansion revenue contribution
    $1.6 million
    Q2 FY26

    Revenue contribution from global expansion and new markets.

    International strategy incremental revenue
    $760,000
    Q2 FY26

    Incremental revenue generated through distributed growth and global expansion via international strategy.

    Transformational M&A revenue contribution (HRX)
    $4.7 million
    Q2 FY26

    Revenue contribution from the HRX acquisition.

    Brands divested
    4
    YTD FY26

    Number of brands divested as part of portfolio rebalancing.

    Facilities eliminated
    2
    YTD FY26

    Number of facilities eliminated through portfolio rebalancing.

    Warehouse footprint reduced
    95,000
    YTD FY26

    Reduction in warehouse footprint.

    Workforce reduction
    approximately 5%
    YTD FY26

    Workforce reduction through divestitures.

    Low margin SKUs removed
    7,000
    YTD FY26

    Number of low margin SKUs removed from the portfolio.

    Manufacturing site consolidations
    2
    Q2 FY26

    Number of manufacturing site consolidations completed.

    Employee and contractor base reduced
    >115
    Q2 FY26

    Reduction in employee and contractor base.

    Annualized one-time net cash from rebalancing/optimization
    >$12 million
    annualized

    Expected one-time net cash generation from portfolio rebalancing and cost optimization work streams.

    Annualized EBITDA margin expansion from rebalancing/optimization
    150 to 200
    annualized

    Expected EBITDA margin expansion from portfolio rebalancing and cost optimization work streams.

    Annualized additional benefit from rebalancing/optimization
    $3 million to $5 million
    annualized

    Expected additional annualized benefit from portfolio rebalancing and cost optimization work streams.

    Annualized deleverage acceleration from rebalancing/optimization
    0.2 to 0.3
    annualized

    Expected deleverage acceleration from portfolio rebalancing and cost optimization work streams.

    Annualized inventory turns improvement from rebalancing/optimization
    approximately 5%
    annualized

    Expected improvement in inventory turns from portfolio rebalancing and cost optimization work streams.

    New national retailer placements
    $12 million
    Q3 FY26

    Revenue expected from new national retailer placements scheduled to launch in Q3.

    Industry growth rate
    flat to low single digits
    current

    General industry growth rate as tracked by the company.

    Industry KPIs

    9
    MetricValueDetails
    Revenue$172 millionUSD
    Inventoryreduced >$10 millionUSD
    Net incomeNet loss $2.4 millionUSD
    Gross margin41%%
    Sg a OPEX ratio$44.2 millionUSD
    Adjusted EBITDA ebita$33.8 millionUSD
    Cash investments balance$69 millionUSD
    Tariff impact mitigationhigher tariff-related costsN/A
    Share buyback capital return$2 millionUSD

    Product announcements

    4
    ProductTypeDetails
    Engine swap portfolioexpansion
    CataClean product familyexpansion
    Simpson retro-inspired Bandit motorcycle helmetslaunch
    Range RA-0110 modulelaunch

    Deals & partnerships

    2
    Brothers Trucks and Scott DrakeDivestiture of non-core restoration brands.

    Completed the divestiture of non-core restoration brands, including Brothers Trucks and Scott Drake, as part of portfolio rebalancing initiative. One remaining business to divest.

    HRXAcquisition of a highly complementary business.

    The acquisition of HRX is cited as an example of adding a business with attractive growth prospects, strong margins, and solid cash flow generation that complements the existing portfolio.

    Risks & headwinds

    3
    Higher tariff-related costsQ2 FY26

    impacted gross margin by 72 bps and adjusted EBITDA margin by 223 bps YoY

    Mitigation: Offset by pricing actions and operational improvements; IEPA refunds provided a one-time benefit.

    Macroeconomic uncertaintyH2 FY26

    inflationary pressures, higher fuel and transportation costs, evolving tariff landscape

    Mitigation: Closely monitoring external factors and taking actions as necessary to protect the health of the business.

    Elevated channel inventories in American PerformanceQ1-Q2 FY26

    impacted Q1 and Q2 performance

    Mitigation: Inventories have now normalized, providing a stronger foundation for H2.

    What to watch in Q3 FY26

    5

    Leverage ratio

    Year-end 2026
    Current3.74x
    TargetBelow 3.5x

    Why it matters

    This is a key indicator of financial flexibility and balance sheet strength, crucial for capital allocation decisions.

    keeping us on track to end the year below our targeted leverage ratio of 3.5 times.

    Q&A highlights

    6

    Can you elaborate on the marketing strategy changes, the KPIs used to measure success, and any early signs of improvement?

    Matthew Stevenson explained that the company moved over 20 marketing positions from outside agencies to internal divisional teams. This allows teams to be closer to enthusiasts, create content faster, and interact more effectively on forums and social media. Success is tracked through a comprehensive performance marketing funnel, from awareness to reorders, and early results are positive, especially in the Modern Truck and Off-Road division.

    “So, it was over 20 positions that we then took from outside agencies. agency and put those positions internally into our division marketing team. So our division marketing teams now have full staffs.”

    asked by Olivia May Witte · answered by Matthew Stevenson

    2 min read4 chapters

    Detailed Narrative

    01

    Portfolio Rebalancing and Cost Optimization

    Holley made significant progress in its portfolio rebalancing initiative, divesting four brands, eliminating two facilities, and reducing its warehouse footprint by approximately 95,000 square feet. The workforce was reduced by approximately 5% through divestitures, and roughly 7,000 low-margin SKUs, representing about 16% of the portfolio, were removed. Additionally, the company completed two manufacturing site consolidations and reduced its employee and contractor base by over 115 positions in Q2. These actions are expected to deliver over $12 million of one-time📎 net cash, 150-200 basis points of EBITDA margin expansion, and a 5% improvement in inventory turns on an annualized basis.

    02

    Marketing Organization Transformation

    The company completed a transformation of its marketing organization, significantly reducing reliance on outside agencies and hiring over 20 marketing professionals internally. These resources are now embedded directly within operating divisions, aiming to bring teams closer to enthusiasts, enable faster responses to market trends, and strengthen brand activation. Early results indicate meaningful improvements in consumer engagement, marketing effectiveness, and direct-to-consumer sales, particularly in the Modern Truck and Off-Road division.

    03

    National Retailer Expansion and Strategic Initiatives

    Holley secured approximately $12 million of new national retailer placements scheduled to launch during the third quarter, expanding distribution and visibility for its brands. Management highlighted Holley's ability to act as a 'one-stop shop' for national retailers, offering a broad and deep product line. Overall strategic initiatives contributed $13.4 million in revenue and $8.3 million in cost savings during the quarter, with the HRX acquisition continuing to be a meaningful contributor to both growth and earnings.

    04

    Debt Reduction and Capital Allocation

    Following the close of the quarter, Holley made an additional $15 million voluntary debt repayment, bringing total voluntary debt reduction to $115 million since September 2023. The company ended the quarter with a leverage ratio of 3.74 times, its lowest in four years, and remains on track to achieve its target of below 3.5 times by year-end. Holley also opportunistically repurchased approximately $2 million of common stock during the quarter, demonstrating confidence in the underlying value of the business and its cash flow generation.

    AI-generated summary of the company’s earnings call. Not investment advice.