$HLLY reports Q4 and FY 2022 results, turnaround initiatives to deliver $30M cost savings in 2023.
Mar 9th 2023, 12:36 pm
Analyst Summary: Holley Inc. (NYSE: HLLY) has reported its Q4 and FY 2022 financial results. The company remains confident that it holds a dominant position in the performance enthusiast automotive space. Despite supply-chain disruptions and demand normalization during the previous quarter, senior management remains upbeat about Holley's underlying strength. The Holley Interim President and CEO, Michelle Gloeckler, said the company is keen on strategically aligning its cost structure, delivering positive free cash flow, and returning the company's growth and margin performance to historical levels through improvements in operational efficiency and cost-cutting measures. Matthew Rubel, Executive Chairman of the Board, stated that 2022 was a challenging year for Holley, and management is focused on realizing additional cost savings and M&A synergies, prioritizing key product categories, and platforms while returning to operational excellence through the refinement of organizational structures. In addition, the company entered into a costless interest rate collar that hedged $500 million in debt by capping 3-Month SOFR at 5%, subject to a floor on 3-Month SOFR of 2.8%, through mid-February of 2026. Looking forward, the company expects these initiatives to deliver around $30 million of year-over-year cost savings in 2023, with $15 million in SG&A expected from a recent reduction in force and expected synergy capture and $15 million in gross margin largely driven by improved shipping costs as a result of a recently negotiated contract with a new third-party logistics provider. Jesse Weaver, Holley’s Chief Financial Officer, said the organization aims to restore profitability, optimize inventories, drive innovation, and deleverage the balance sheet in 2023 and beyond. Despite a normalization to pre-COVID trend growth levels, the end markets are still robust, and Holley is an unquestioned leader across key product categories. The company’s leadership believes it has the needed financial flexibility to align its cost structure to current market demand. Finally, the company reached an agreement with its lending group to amend the net leverage covenant applicable to the revolver.