This article first appeared on GuruFocus .
Release Date: August 05, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Holley Inc ( NYSE:HLLY ) returned to net sales growth in Q2 2026, with a 3.2% increase to $172 million and a 4.9% rise in core business sales, driven by double-digit growth in three of its four divisions.
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The company generated strong free cash flow of $40.9 million in the quarter, a $5.2 million increase year-over-year, supported by operational discipline and working capital management.
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Holley Inc ( NYSE:HLLY ) reduced its leverage ratio to 3.74 times, its lowest level in four years, and made an additional $15 million voluntary debt repayment after quarter-end, bringing total voluntary reductions to $115 million since September 2023.
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The company completed the divestiture of its non-core restoration brands, simplifying its portfolio and focusing resources on higher-growth areas, while adjusted net income more than doubled to $24 million.
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Holley Inc ( NYSE:HLLY ) secured approximately $12 million in new national retailer placements for Q3, has a robust product launch pipeline, and its HRX acquisition continues to outperform expectations, contributing to growth and earnings.
Negative Points
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Holley Inc ( NYSE:HLLY ) reported a GAAP net loss of $2.4 million for Q2 2026, primarily due to one-time costs associated with the divestiture of its restoration brands.
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Gross margin declined by 72 basis points to 41%, and adjusted EBITDA margin fell by 223 basis points to 19.6%, impacted by higher tariff-related costs and fixed cost deleverage.
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The American Performance division, the company's largest, saw net sales decline 2.1% in Q2, reflecting elevated channel inventories and a shift in marketing calendar, though it improved sequentially.
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The company faces ongoing macroeconomic headwinds, including inflationary pressures, higher fuel and transportation costs, and an evolving tariff landscape, which could impact future performance.
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Holley Inc ( NYSE:HLLY ) incurred $4.4 million in SG&A expenses related to legal costs from a securities class action settlement and portfolio rebalancing, which weighed on profitability.
Q & A Highlights
Q: Can you elaborate on the changes to your marketing strategy, the KPIs you're tracking, and any early signs of improvement in traffic, conversion, or sales productivity? A: CEO Matthew Stephenson explained that the company significantly reduced its reliance on outside agencies by hiring over 20 marketing professionals and embedding them directly within the operating divisions. This brings teams closer to enthusiasts, enables faster responses to market trends, and strengthens brand activation. They track performance through a complete marketing funnel, from awareness and consideration to activation and purchase. Early results are encouraging, with Modern Truck and Off-Road, which has had the complete marketing team the longest, showing strong growth.
Q: How do you view the runway for further retail expansion, and what is driving the recent wins with national retail partners? A: CEO Matthew Stephenson stated that Holley's differentiation lies in being a one-stop shop for performance needs, offering a breadth and depth of product line that competitors can't match. The long lead sales cycles involve significant partnership and planogram development. The company is seeing growth across all national retailers and views this as a growth category both in the U.S. and internationally, with new placements secured for the third quarter.
Q: How are you thinking about pricing for the balance of the year? A: CFO Jesse Weaver noted that the company recently announced a modest price increase to address freight headwinds, fuel surcharges, and memory chip challenges. They have strong partnerships with national retailers who understand these changes. Outside of this, no additional pricing is expected for the year.
Q: Could you size the impact of last year's one-time tariff capitalization benefit on the year-over-year EBITDA comparison? A: CFO Jesse Weaver quantified the impact at approximately $3 million to $3.5 million. Adding that back would result in slightly better EBITDA dollars year-over-year and a margin rate much closer to par with the prior year.
Q: On Slide 13, which of the five factors gives you the most optimism for H2, and can you provide color on the new national retailer partnership? A: CEO Matthew Stephenson said all five factors are impactful, but highlighted the simplification of operations from divestitures, the long-awaited national retailer partnerships, and a robust product innovation pipeline with two big launches planned for late Q4. He also noted that HRX continues to outperform original estimates, and the new marketing structure is enabling faster reactions to market trends.
Q: Can you quantify the sales from last year that didn't repeat due to divestitures, and is it fair to run-rate HRX's Q2 performance for a full year? A: CFO Jesse Weaver acknowledged there is seasonality in HRX's performance. He declined to break out the specific prior-year divestiture impact on the call but reiterated that on a year-over-year basis, investors should pull out approximately $6 million to $7 million from last year to account for all divestitures and the HRX acquisition.
Q: The market isn't giving the stock credit for the progress. Any thoughts on the disconnect? A: CEO Matthew Stephenson acknowledged the many positive initiatives underway and stated the company will continue to execute its capital allocation priorities, primarily paying down debt. They have a robust pipeline of M&A targets but remain selective, seeking founder-led, high-growth, cash-flow-positive businesses like HRX. They will remain opportunistic with share repurchases when the share price seems disconnected from results.
Q: Why is the annualized net cash impact on Slide 12 now $12 million versus $15 million before, while the EBITDA benefit is up? A: CFO Jesse Weaver clarified that the original $15 million estimate was an initial projection. The $12 million reflects the actual results generated so far, excluding cash tax benefits. The increase in the EBITDA benefit range reflects additional work done since the last call, including closing more facilities and reducing headcount, which increases the overall operational cost savings impact.
Q: Was the $12 million from the new retail deal in the previous guidance, and why hasn't the EBITDA guidance changed given higher savings? A: CFO Jesse Weaver confirmed the $12 million from the retail deal was part of the initial guidance. He explained the EBITDA change is de minimis and represents an annualized impact that won't all hit this year. He also clarified that the share buyback is not contemplated in these figures.
Q: Can you share your thoughts on the industry growth rate and how you're thinking about it heading into next year? A: CEO Matthew Stephenson noted the industry is generally flat to low single-digits based on tracking at larger partners. Holley is outperforming with three divisions delivering double-digit growth. The American Performance division's decline was attributed to a hangover of channel inventory, which is now normalized, and a strategic shift of some major product lines from the Q2 marketing calendar to the back half of the year.
Q: Are there any other puts and takes for gross margin in the second half, and should we expect it to tick up? A: CFO Jesse Weaver stated there are no other one-time items like the tariff capitalization benefit from last year. He expects gross margin to slightly tick up in the back half, consistent with historical patterns between the first and second halves, aided by the recent pricing actions taken to offset cost increases.
Q: Can you discuss the tariff refunds received this quarter, and will you share any of those refunds with retail partners? A: CFO Jesse Weaver clarified the IEPA refund is a one-time event, as the tool was repealed and other tariffs more than offset it. The refund, which was around 10% to 11% as broken out in the 10-Q, was used to offset other costs. Without it, pricing would have increased even more, so in a way, the benefit was shared with partners through more moderate price increases.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
