Holley Q2 2025 Earnings Report

Holley EPS Results

• Actual EPS: $0.09
• Consensus EPS: $0.10
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: N/A

Holley Revenue Results

• Actual Revenue: $166.66 million
• Expected Revenue: $162.67 million
• Beat/Miss: Beat by +$3.99 million
• YoY Revenue Growth: N/A

Holley Announcement Details

• Quarter: Q2 2025
• Date: 8/6/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, August 6, 2025
• Conference Call Time: 8:30AM ET

Holley (NYSE:HLLY) is a designer, manufacturer and marketer of high‐performance automotive products for the enthusiast market. Through its portfolio of well‐known brands, the company develops fuel delivery systems, intake manifolds, ignition components, nitrous oxide systems, digital controls and other engine‐dress accessories tailored to both street and competition applications. Holley’s products are sold through a network of domestic and international distributors, retailers and directly to professional race teams and hobbyists.

The company’s product offerings span mechanical and electronic fuel injection, carburetion, engine management, add‐on power systems and calibration tools. Key brands in Holley’s family include Holley® Performance Products, MSD® Ignition, NOS® Nitrous Systems, Diablosport® and FiTech® Fuel Injection, each targeting distinct segments of the performance aftermarket. Holley also provides engineering services, custom calibrations and technical support to customers seeking turnkey solutions for drag racing, road course competition and street‐performance builds.

Founded in 1903 by George and Earl Holley, the company gained prominence with the invention of the first successful four‐barrel carburetor in the late 1930s. Over more than a century, Holley has expanded through organic growth and strategic acquisitions, integrating new technologies in electronics and digital controls to meet evolving emissions and performance standards. The firm emerged from a recent corporate restructuring as a publicly traded entity, reflecting its renewed focus on innovation and operational excellence.

Headquartered in Bowling Green, Kentucky, Holley serves customers across North America, Europe, Latin America and select Asian markets. The business is led by a management team with deep roots in automotive performance and motorsports, supporting a global sales and distribution footprint. Holley continues to invest in research and development, leveraging its legacy of performance engineering to address the needs of both classic‐car restorers and professional racing teams.

Holley Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Q2 core business delivered 3.9% revenue growth and generated a record quarterly free cash flow of $35.7 million.
• Positive Sentiment: The comprehensive tariff mitigation plan is set to offset over $15 million in costs, with no meaningful impact projected on free cash flow or margins in 2025 or 2026.
• Positive Sentiment: Omni-channel execution drove balanced expansion, with direct-to-consumer sales up 8.6% (including 28% growth on third-party marketplaces) and B2B channel sales growing 6.5%.
• Neutral Sentiment: Gross margin improved to 41.7% (up 26 bps) despite external cost pressures, while adjusted EBITDA margin of 21.9% remained within expectations.
• Neutral Sentiment: Full-year 2025 guidance was tightened to $580 million–$595 million in revenue and $116 million–$127 million in adjusted EBITDA, reflecting a conservative outlook amid a mixed macro environment.

Presentation

[Operator]

Good morning, ladies and gentlemen, and welcome to the conference call to discuss Holley's Second Quarter twenty twenty five Earnings Results. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions for asking questions will be provided at that time. We ask that participants limit themselves to one question and one related follow-up during the Q and A period. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Holli.

[Operator]

And as a reminder, this call is being recorded and will be made available for future playback. I would now like to introduce your host for today's call, Anthony Roslund with Investor Relations. Please go ahead.

[Anthony Rozmus, Managing Director at Solebury Strategic Communications]

Good morning, and welcome to Holley's second quarter twenty twenty five earnings conference call. On the call with me today are President and Chief Executive Officer, Matthew Stephenson and Chief Financial Officer, Jesse Weaver. This webcast and presentation materials, including non GAAP reconciliations, are available on our Investor Relations website. Our discussion today includes forward looking statements that are based on our best view of the world and our businesses as we see them today and are subject to risks and uncertainties, including the ones described in our SEC filings. This morning, we will review our financial results for the second quarter twenty twenty five and discuss guidance for full year 2025.

[Anthony Rozmus, Managing Director at Solebury Strategic Communications]

At the conclusion of the prepared remarks, we will open the line up for questions. With that, I'll turn the call over to our CEO, Matthew Stephenson.

[Matthew Stevenson, President, CEO & Director at Holley]

Thank you, Anthony, and good morning, everyone. As we look back on our 2025, I am happy to report that the momentum we began building more than twenty four months ago continues to grow. It's been a highly productive quarter, one that not only reflects strong operational discipline, but also the impact of staying focused on our strategic priorities. Thank you, as always, for your continued support as we navigate a constantly evolving consumer and macroeconomic environment. For the second straight quarter, our core business delivered solid growth.

[Matthew Stevenson, President, CEO & Director at Holley]

Just as a quick reminder, when we say core business, we're referring to results that exclude the businesses we divested in the product lines we phased out as part of last year's strategic rationalization efforts. This quarter, our team made strong progress across the board with core growth showing up in every division of the company. What's especially encouraging is that we're again seeing this momentum in both our direct to consumer and business to business channels. That speaks to the strength and balance of our omni channel strategy. As we emphasized many times before, our omni channel approach is a cornerstone of our growth strategy as a leading consumer enthusiast platform in automotive performance aftermarket.

[Matthew Stevenson, President, CEO & Director at Holley]

We're committed to meeting customers wherever they choose to do business, whether it's through e tailers, distributors, wholesalers, third party marketplaces, installers, national retailers or our own e commerce platform. Our second quarter performance reflects the foundation we have built over the last two years in key areas like go to market execution, product innovation, digital capability and operational excellence, all of which are now driving the progress we're making under our three year strategic plan. With that foundation firmly in place, we're focused on keeping up the momentum and building on the progress we've already made. Before we get into the specifics of Q2 performance, I want to revisit something we discussed last quarter and that's tariffs. I'm proud to say that the tariff mitigation plan we introduced in Q1 is working, thanks to the incredible effort and execution from teams across the company.

[Matthew Stevenson, President, CEO & Director at Holley]

This wasn't luck. It was a result of careful planning, strong cross functional teamwork and consistent hard work. From the initiatives we developed to lower our tariff exposure across the supply chain to the pricing strategies we rolled out this past spring, all of it has come together to form a smart, resilient response. Because of these efforts, we're currently not forecasting any meaningful impact to free cash flow or margins this year or next. This is a great example of how strong leadership, operational focus and a culture of accountability can overcome major challenges and deliver real results.

[Matthew Stevenson, President, CEO & Director at Holley]

Now, let's turn to Slide five, which includes our highlights for the 2025. We continue to build momentum in Q2, delivering a solid 3.9% revenue growth in our core business across all divisions. This performance reflects consistent execution of our strategy and the resilience of our operating model. Most notably, we achieved free cash flow of $35,700,000 marking the highest quarterly free cash flow generated in our history. This is a clear testament to both our disciplined capital management and the strong cash generating power of the business.

[Matthew Stevenson, President, CEO & Director at Holley]

We continue to execute against our strategic framework, which drove approximately $27,000,000 of revenue from key initiatives this quarter. This includes focused work streams across our commercial and operational pillars that are accelerating profitable growth. Our growth remained broad based with expansion across more than 20 of our brands in both the direct to consumer and business to business channels. In the B2B channel, we further strengthened our relationships with key partners, driving approximately 6.5% growth in the channel. This growth stems from increased sales support, deeper integration with our partners and a relentless focus on customer satisfaction.

[Matthew Stevenson, President, CEO & Director at Holley]

In direct to consumer, we saw an increase of 8.6% overall with especially strong performance on third party marketplaces like Amazon and eBay, which grew over 28%. These platforms continue to be a major growth lever for us as we meet customers where they prefer to shop. Product innovation remains a cornerstone of our performance. Combined with strategic pricing initiatives, our efforts contributed $10,800,000 in incremental revenue this quarter. We continue to calibrate pricing to match customer value perception while ensuring competitiveness and profitability across all channels.

[Matthew Stevenson, President, CEO & Director at Holley]

Lastly, as I mentioned, we made significant strides in our supply chain initiatives which are forecasted to effectively offset tariff related pressures and help preserve margin stability. These efforts underscore our proactive approach to tackling issues head on and getting in front of them before they impact the business. Let's turn to slide six, which features some more quantitative highlights from the 2025. We achieved net sales of $166,700,000 reflecting a 3.9% increase in the core business compared to the prior year. This solid growth continues to validate the strength of our strategic execution and the dedication of our teams across all divisions.

[Matthew Stevenson, President, CEO & Director at Holley]

Our gross margins were 41.7, up 26 basis points year over year, demonstrating continued stability and positive momentum even in the face of external cost pressures. The improvement is partially due to strategic product and pricing actions as well as operational initiatives including supply chain efficiency. Free cash flow as I mentioned reached 35,700,000.0 an increase of $11,300,000 versus the prior year. This strong cash generation highlights the underlying strength of the business aided by disciplined capital allocation and working capital management. Adjusted EBITDA margin came in at 21.9%, down 74 basis points year over year.

[Matthew Stevenson, President, CEO & Director at Holley]

This decline reflects the normalization following prior year SKU rationalizations and divestitures, but it remains well within expectations given the shift in product mix and ongoing investments in innovation and growth. Regarding new product activity in Q2, we introduced several launches across our portfolio and I'd like to highlight just a few standout examples. We launched the Terminator X Bluetooth module enabling wireless engine tuning via a smartphone. It's quickly gaining traction with strong early demand enhancing our EFI platform and driving mobile integrated growth. We also expanded our Arizona Desert Shocks Mesa 2.5 line by adding new applications to meet growing demand in the off road market.

[Matthew Stevenson, President, CEO & Director at Holley]

These premium shocks deliver exceptional performance and durability, positioning ADS for continued growth with enthusiasts seeking race proven technology for everyday builds. In our Euro segment, our APR brand introduced new high performance exhaust systems for the Audi S4 and S5 platforms. These upgrades deliver improved sound, reduced back pressure and weight savings, broadening our appeal in the premium European space. Additionally, we released new colorways for the Simpson Outlaw Bandit three point zero motorcycle helmet, building on this popularity of this iconic model. The refreshed designs inject energy into a top performing product and further strengthen our position in motorcycle safety.

[Matthew Stevenson, President, CEO & Director at Holley]

Together, these launches highlight a small example of our continued focus on innovation, consumer engagement and expanding our leadership across key enthusiast categories. On the operational metrics, we also delivered significant progress in the quarter. We achieved a 2.2% year over year increase in the in stock rates for our top 2,500 products, dollars 1,000,000 improvement in operational efficiency and a 17% year over year reduction in past dues. Additionally, we've reduced inventory by approximately $9,000,000 since the beginning of the year, contributing meaningfully to improved cash flow and working capital efficiency. On the marketing front, our focused promotional efforts continue to drive results.

[Matthew Stevenson, President, CEO & Director at Holley]

We recorded 8.6% year over year increase in D2C sales bolstered by third party platform growth of more than 28%. Our earned media impressions reached four sixty three million from six fifty seven media clips and our social media following grew 2% over the previous year, reflecting deeper engagement with our enthusiast customer base. In summary, our second quarter performance demonstrates continued execution of our strategic priorities, driving growth, operational excellence and shareholder value creation across every part of the organization. Let's take a closer look at some of the standout core business growth we saw across our divisions in Q2 shown on slide seven. In the domestic muscle vertical, we delivered 6% year over year growth driven by sustained consumer demand and the enduring strength of our brands.

[Matthew Stevenson, President, CEO & Director at Holley]

Many brands within this division posted high single digit growth in our core product categories highlighting solid performance across the board. Our modern truck and off road division led the way with an impressive 17% growth. This was fueled by standout results from several of our priority brands including at least five of our power brands that recorded double digit growth in their core businesses. Euro and import division experienced strong momentum as well, up 4%. Now the Euro brands of dine in and APR within this were up 20% combined.

[Matthew Stevenson, President, CEO & Director at Holley]

However, this growth was offset by year over year revenue timing shifts in our import division, which moderated overall performance in this vertical. The Safety and Racing division reported 1% growth, but that figure doesn't fully reflect what's happening under the surface. Our Simpson and Racequip brands posted a combined 15% growth, plus the division is currently navigating a regulatory transition known as the Snell Cycle, which happens every five years and impacts automotive motorsports helmets. Distributors are limiting orders until the next certification SA2025 helmets become available to enthusiasts in October. As a result, we anticipate a significant rebound and growth in the second half of the year.

[Matthew Stevenson, President, CEO & Director at Holley]

Overall, these results affirm the strength and the resilience of our core business. Our strategic focus on investing in power brands, streamlining accountability and aligning resources is driving measurable success. Despite a challenging market environment, our commitment to brand leadership and disciplined execution continues to deliver sustainable core growth across our major divisions. On slide eight, we revisit the eight areas that form the foundation of our strategic framework, which we have reviewed in prior calls. At the center of this framework lie our steering principles.

[Matthew Stevenson, President, CEO & Director at Holley]

The first of these principles is fueling our teammates, which supports our ambition to establish Holly as a recognized great place to work. Our focus remains on fostering a workplace where team members feel empowered, have meaningful opportunities for advancement and look forward to being part of a dynamic and inclusive environment. Our second principle is supercharging our customer relationships, whether that's with our passionate consumers or trusted B2B collaborators. This principle touches three vital components of the framework building and delivering the premier consumer journey in our industry, becoming a trailblazing trusted partner to our B2B customers by finding innovative paths for shared growth and bringing to market innovative new products that set the benchmark in their categories. We support these priorities by deliberately managing and merchandising our entire portfolio with clear differentiation.

[Matthew Stevenson, President, CEO & Director at Holley]

The third and final principle, accelerating profitable growth, focuses on strategic expansion into new global and adjacent markets, pursuing transformational M and A and enabling reinvestment through continuous operational improvements. Together with the other initiatives, these actions drive us toward our overarching aim delivering superior financial results. Now on to slide nine. I'm pleased to share the highlights and achievements for the second quarter as captured in our updated strategic initiative tracker. Under our trailblazing trusted partner pillar encompassing our B2B efforts, we've seen another quarter of strong performance.

[Matthew Stevenson, President, CEO & Director at Holley]

Revenue from our top 50 plus accounts accelerated significantly contributing $8,300,000 in the growth. Our HollyPro small customer initiative also continued to gain momentum adding $1,800,000 in revenue, thanks to our focused sales team, proactive outreach and deepened customer relationships. In total, these B2B sales initiatives contributed $13,200,000 in incremental revenue in Q2. Turning to our premier consumer journey pillar, our e commerce strategy remains a key driver of growth. Year to date, e commerce revenue is up approximately $4,000,000 Our efforts on third party platforms, especially the Amazon has been particularly successful with over 50% growth in Amazon sales and over 40 growth across all 3P platforms in the first half.

[Matthew Stevenson, President, CEO & Director at Holley]

These efforts alone added 2,200,000.0 revenue during the second quarter. Innovation continues to be a cornerstone of our growth. We launched new products across all four divisions delivering approximately $8,000,000 in revenue. At the same time, our portfolio management strategies, including strategic pricing and optimization of our active portfolio generated an additional $3,000,000 in B2B sales. In total, this pillar added $11,000,000 to our top line in Q2.

[Matthew Stevenson, President, CEO & Director at Holley]

Our international expansion efforts remain on track. The progress in Mexico has validated our product market fit and our go to market strategy, setting a solid foundation for future growth. Additionally, we expanded our reach in the car dealer channel with six more BMW dealers joining the dine in program, bringing the total to 28 participating dealers. These combined initiatives, while still early in their adoption, generated $1,100,000 in revenue for the quarter. We continue to make strong progress under our Fund the Growth pillar.

[Matthew Stevenson, President, CEO & Director at Holley]

In Q2 alone, we completed and implemented over $2,500,000 of purchase savings projects and achieved more than $1,000,000 in operational improvements. Together, these efforts resulted in $3,500,000 in cost savings for the quarter. We're also proud of the ongoing progress we're making in strengthening our culture and employee engagement. As reported last quarter, we saw a 3% increase in our Great Place to Work Pulse survey scores, an encouraging sign of our efforts taking root. Looking ahead, we're excited to build on this momentum with our annual employee survey scheduled for later this fall.

[Matthew Stevenson, President, CEO & Director at Holley]

Additionally, through continued operational efficiencies, we remain on track to achieve our year end target for revenue per employee. All told, we generated $27,000,000 of revenue from key strategic initiatives and achieved $3,500,000 in cost savings. In addition to advancing our strategic initiatives, we have continued to prioritize actions to mitigate the impacts of tariffs introduced since our last meeting. As we promised during our last earnings call that we would come back to you during this August call and provide greater clarity to the impact of tariffs to our business both in 2025 and 2026. Today, we are going to do that.

[Matthew Stevenson, President, CEO & Director at Holley]

Let's walk through some more detail first on slide 10. During last quarter's call, we outlined our detailed comprehensive plan to tackle tariffs, an effort we had already been driving through a swiftly established cross functional project management office. To address the various aspects of tariff mitigation, we organized work into five major work streams governance, products, logistics and supply chain, regulatory and classifications and pricing and margin protection. Our approach was multifaceted, supported by daily meetings to maintain momentum, track progress and ensure alignment across teams. Each work stream was intentionally structured to address a distinct set of challenges and opportunities, enabling a coordinated and effective response.

[Matthew Stevenson, President, CEO & Director at Holley]

As we highlighted, the product work stream was a particularly critical component of our overall strategy. It kicked off approximately one hundred and twenty days ago with an ideation workshop involving 11 product teams, each led by dedicated team leaders. The workshop focused on identifying and prioritizing high impact initiatives and building a consistent executable playbook. That playbook included supplier negotiations, relocations, resourcing decisions, footprint analysis and make versus buy evaluations. In addition, we verified product classifications to ensure compliance and to optimize how our products are coded.

[Matthew Stevenson, President, CEO & Director at Holley]

The collective focus, coordination and tenacity across all teams have led to meaningful results, which I'll walk through next on Slide 11. Through a combination of strategic negotiations with existing suppliers, targeted relocations, sourcing from new partners in lower cost regions and selective in sourcing, we've executed on over $15,000,000 opportunities through 2026. While disciplined execution will continue to be essential, we're confident in our strategy, our team's capabilities and our ability to successfully navigate this evolving landscape. In short, our response to the tariff environment has been both proactive and comprehensive. We launched dedicated work streams, facilitated cross functional workshops, secured optimized logistics solutions, brought in leading regulatory experts and executed targeted pricing actions, all aimed at minimizing the financial impact of tariffs on our business.

[Matthew Stevenson, President, CEO & Director at Holley]

That said, we all understand that the tariff landscape remains highly fluid. However, based on the progress of our current mitigation efforts and pricing strategies, we are not projecting any adverse impact to free cash flow or margins in 2025 or 2026. With that, I'll now turn things over to Jesse, who will walk us through a detailed financial analysis and year over year comparison of our Q2 twenty twenty five performance followed by a deeper look into the projected impact of our tariff mitigation strategy. Jesse?

[Jesse Weaver, CFO & Head of Information Technology at Holley]

Thank you, Matt, and good morning, everyone. I'd like to start by providing an update on our progress against our financial priorities, then discuss our second quarter twenty twenty five results, our updated view on the tariff impacts of free cash flow and our refinements to our guidance. Moving to slide 13, we remain focused on our financial priorities, which are restoring historical profitability and optimizing working capital. Our keen focus on these financial priorities has allowed us to generate our strongest quarterly free cash flow results in the history of Holly achieving approximately $35,700,000 in Q2. We relentlessly work towards restoring historical profitability and make progress towards our full year operational efficiency targets again in the second quarter.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

We saved roughly an additional $1,000,000 in the second quarter primarily driven by a reduction in freight cost, which brought our year to date cost savings in 2025 to just over $2,000,000 And as a reminder, anticipate savings of 5,000,000 to $10,000,000 through improved manufacturing efficiency, warranty and return policy compliance and quality improvements to better the customer experience in 2025. In Q2, we made strong progress optimizing working capital by proactively managing inventory by continuing to make improvements in our SIOP processes to build a more agile demand driven model. These efforts are aligning production with market needs, optimizing safety stock and lead times and cutting slow moving inventory, all while maintaining high service levels and boosting operational efficiencies. Through these efforts, we've been able to reduce inventory by more than $9,000,000 year to date and are on track to achieve our year end reduction target of 10,000,000 to $15,000,000 On slide 14, we'll walk through our key financial metrics for the second quarter. Net sales for the second quarter were $166,700,000 versus $169,500,000 in the same period a year ago.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

The decrease was primarily related to lower sales volume partially offset by improved price realization. Excluding approximately $9,000,000 of divestiture and strategic product rationalization sales from net sales for the 2024, we achieved growth of roughly 3.9% exceeding our expectations for the quarter. Core business growth once again came across all divisions and is a byproduct of execution across all aspects of our strategic framework for '25. Gross profit was $69,600,000 in the quarter compared to $70,300,000 in the same period last year. Gross margin for the quarter was 41.7%, an increase of 26 basis points versus 41.5% in the prior year.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

This increase was primarily due to significant clearance activity in the prior year and not repeated in 2025. SG and A including R and D expenses for the second quarter was $38,000,000 versus $38,900,000 in the same period for the prior year. Overall salaries increased for the company in the 2025 compared to the 2024. The increase is due to the furlough that occurred in 2024 that was offset by a decrease of transformational consulting fees. Net income for the second quarter was $10,900,000 versus net income of $17,100,000 in the 2024.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

Adjusted net income in the second quarter was $10,600,000 versus adjusted net income of $12,600,000 in the same period of last year. Adjusted EBITDA for the quarter was 36,400,000 compared to $38,300,000 in the prior year, primarily due to higher growth among distribution partners coupled with increased rebates and the absence of the furlough impact seen in 2024. Adjusted EBITDA margin was 21.9% versus 22.6 in the 2024. On slide 15, you can see this quarter we delivered record quarterly free cash flow of $35,700,000 compared to $24,400,000 in free cash flow for the same quarter a year ago. This performance was driven by continued improvements in operational efficiency and successful optimization of working capital across the business.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

While we're proud of the strong free cash flow performance this quarter, we're also very mindful of the headwinds ahead, particularly the potential impact of recently implemented tariffs. With that in mind, let's turn to page 16, where we've outlined the expected minimal net impact of tariffs on our free cash flow. As Matt had mentioned earlier, our team has been relentlessly focused on mitigating the impact of tariffs through a comprehensive set of strategies. And as you can see on 16, we have actions in motion that are expected to offset more than $15,000,000 in additional tariff related costs between 2025 and 2026. Despite ongoing inflationary pressures and the continually evolving tariff landscape, we remain proactive and disciplined in managing our operations.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

We project that the combination of our tariff mitigation initiatives and strategic pricing actions position us to fully offset tariff related headwinds in 2025. Looking further ahead into 2026, we expect net pricing gains and mitigation efforts to not only absorb anticipated tariff costs, but also support our ability to maintain strong free cash flow generation even in an environment of potentially lower volume. On slide 17, we reduced our covenant net leverage at the end of the second quarter to 4.22 times versus 4.32 times a quarter ago, which remains well under the five times covenant when the revolver is drawn. At the end of the quarter, there was no outstanding balance on our revolver and we continued concluded the quarter with $63,800,000 in cash and no expectation of drawing on the revolver in the near term. This brings our total net debt to just under $500,000,000 for the quarter.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

As a team, we are pleased with our execution in the first half of the year. We've built on the success of Q1 with core business growth again in the second quarter. As we move into the second half of the year, we are keeping a close eye on a mixed economic landscape. However, we have more clarity on expected tariffs for 2025 though broader trade conditions remain fluid. Therefore with sales trending flat to start Q3 and mixed macro signals we're taking a measured approach to our guidance.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

Our updated full year 2025 guidance reflects both the known effects of tariffs and consumer trends. We are tightening our 2025 revenue range to $580,000,000 to $595,000,000 which implies approximately a 2.2% growth at the midpoint over the core business base of roughly $575,000,000 in 2024. Additionally, we have tightened our range for our 2025 adjusted EBITDA guidance to $116,000,000 to $127,000,000 from $113,000,000 to 130,000,000 Our first half results were stronger than originally expected and a direct result of the team's execution upon our strategic framework. While we continue to operate in an uncertain macro environment, we delivered two consecutive quarters of core business growth. We continue to build on this momentum and have better visibility on the impacts of known tariffs today, which are captured in our 2025 guidance.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

While we remain mindful of the evolving environment and the fluid tariff situation, we are confident that the operational discipline and momentum we have built will continue to serve us well as we move through the balance of the year. This concludes our prepared remarks. We would now like to open the line up for questions.

[Operator]

Thank you. We will now be conducting a question and answer session. Your first question comes from Brian McNamara with Canaccord Genuity. Please go ahead.

[Brian McNamara, MD & Senior Analyst - Consumer at Canaccord Genuity - Global Capital Markets]

Hey, good morning, guys. Congrats on the strong progress and thanks for taking the questions. First on pricing, how have your partners and enthusiasts overall responded to the price increases you put in and the kind of the change intact in terms of approaching your resellers with the sixty day notice? And with that, how would you characterize current sentiment in the marketplace? Has it improved with a little more certainty on tariffs? Any other color there would be helpful.

[Matthew Stevenson, President, CEO & Director at Holley]

Sure. Good morning, Brian, and thanks for the question. When we look at just kind of that sentiment in June and just the overall out the door sales, they were strong in the marketplace. Now we notified to our distributors in April that price increases would take effect roughly in June. And then July is historically one of the softest months of the year.

[Matthew Stevenson, President, CEO & Director at Holley]

But generally speaking, the feedback was the pricing was in line or lower than competitors in the relative categories. Of course, given how many categories were present in that wide range of competitive dynamics exist. But overall, our pricing was definitely in line with the competition And we just got to see in terms of just that overall elasticity of industry demand, pricing and discretionary spending, how that plays out once we get past the slower summer months and into more of the higher months of the year.

[Operator]

Next question, Christian Carlino with JPMorgan. Please go ahead.

[Christian Carlino, Equity Research Associate at J.P. Morgan]

Hi, good morning. Thanks for taking our questions. Follow-up on the prior question, similar to how you're moving some sourcing to vendors in lower cost countries, what are your conversations like with the resellers? Like are you winning share or shelf space because you're taking less price than the industry, in addition to the channel expansion and product innovation work you've been doing?

[Jesse Weaver, CFO & Head of Information Technology at Holley]

Hey, Christian, it's Jesse. It's a good question. I think all the indicators that we've got as we work much more closely with our distribution partners is that we are continuing to take share in the market. When we look at sort of our out the door growth relative to what the overall business is doing in these distribution partners, we continue to outperform there and that continued all the way up through our most recent data which is June. So I think to Matt's earlier point, the pricing we put in was in line if not better and that is certainly helping us kind of continue to remain and gain momentum here.

[Christian Carlino, Equity Research Associate at J.P. Morgan]

Got it. That's helpful. And just given the full impact of the tariff cost increases should start to flow through in the second half, How are you thinking about gross margin for the year and maybe cadence over the back half? Understanding it's hard to predict consumer behavior in elasticities right now, but are you anticipating maybe higher prices overall, but key seasonal periods being more intense promotionally to maybe offset the impact to consumers' wallet? And just how you're thinking about that?

[Jesse Weaver, CFO & Head of Information Technology at Holley]

We're not planning to do anything incremental from a promotional period. I mean, we've got a pretty strong partnership with our distribution partners on marketing calendar support in the back half. So no intended changes there. We do anticipate to your question on gross margins to continue to maintain if not increase gross margins in the back half just relative to the pricing that we had taken obviously. But I think our guidance in the back half kind of captures the squeeze on what you would expect in terms of margins there.

[Christian Carlino, Equity Research Associate at J.P. Morgan]

Got it. Thank you very much.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

Thanks, Christian.

[Operator]

Next question, Joseph Altobello with Raymond James. Please go ahead.

[Martin Mitela, Senior Equity Research Associate at Raymond James]

Hey, good morning. This is Martin on for Joe. My first question here is regarding sort of inventory. You've reduced so far by $9,000,000 So I wondering if we can get an update on sell throughsell in?

[Jesse Weaver, CFO & Head of Information Technology at Holley]

Yes. This is Jesse. I think we don't report out on the exact numbers we get from our distribution partners, but we're seeing really good numbers and results from them on the sellout. And that's kind of what we look at to understand just generally what the end user demand is. And I think that that's a testament our relative pricing, our continued enhancement in our partnerships with them and just making sure that we're partnering with them to make sure their inventory levels are in a good spot.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

So I feel like the end distribution partner indicators are continuing to be really strong for us particularly relative to what the rest of their business is doing.

[Martin Mitela, Senior Equity Research Associate at Raymond James]

Great. And I just want to touch really quickly on this free cash flow net impact bridge. Very helpful, by the way. But you mentioned 2025 net pricingvolume is going be about $3,000,000 tailwind. Earlier in the preamble, you had mentioned that about $10,800,000 in revenue was contributed from product innovation and strategic pricing.

[Martin Mitela, Senior Equity Research Associate at Raymond James]

I also believe the PR said that product innovation was about $8,000,000 which implies that strategic pricing was about $2,800,000 Given that that's pretty close to that $3,000,000 number, does that sort of imply that there's going be lower volumes in the back half of the year? Or what should be the read through that?

[Jesse Weaver, CFO & Head of Information Technology at Holley]

So I think those are two different metrics to be clear. The strategic pricing was an action that was taken earlier in the year to realign our channel margins with our distribution partners on some key product lines. So those aren't necessarily related. As it relates to your question on the back half, I think generally we feel like our visibility is much better than it was three months ago in the back half of the year. And we're just from a volumes perspective as you can imply in the guidance just taking a pretty conservative view relative to the back half just given everything we're seeing in the economic indicators just generally around the consumer.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

But what we are seeing now we feel like demand is holding up and the back half from what we can tell is headed in the right direction to hit this guidance.

[Martin Mitela, Senior Equity Research Associate at Raymond James]

Great. Thank you. Very helpful and good luck.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

Thank you.

[Operator]

Next question Philip Lee with William Blair. Please proceed.

[Phillip Blee, Research Analyst at William Blair]

Good morning, Matt, Jesse. Thanks for the question. Product innovation growth is an interesting metric here. So just curious around the level of new products that you've launched year to date and then maybe how that would compare to plans for next year or just steady state going forward assuming we're past a lot of the tariff related trade disruptions?

[Matthew Stevenson, President, CEO & Director at Holley]

Yes. Good morning, Philip. This is Matt. Thanks for the question. Philip, we're really focused on quality versus quantity.

[Matthew Stevenson, President, CEO & Director at Holley]

I mean, we of course want to continue to drive the right innovations and of course increase the volume of those. When you think back to our strategic product rationalization that occurred where we took out basically about 45% of the portfolio, there was a lot of work being done for innovations that really weren't moving the needle. So now we put in a very robust phase gate system with seven gates to make sure we're bringing those right innovation to markets that are really going to drive the top line forward and to underline this organic growth trajectory. So again, it's not about quantity, but for us we want to continue to drive more revenue through innovation.

[Phillip Blee, Research Analyst at William Blair]

Okay. Makes sense. Great. And then now that you have some comfort around tariff mitigation, core business seems to be moving in the right direction. How are you thinking about free cash flow and capital allocation in the second half of the year and maybe going forward?

[Phillip Blee, Research Analyst at William Blair]

And then just timeline around reaching leverage around three times. Thank you, guys.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

Great question, Philip. And we obviously don't guide on free cash flow. I think as we've talked about historically, just given this guide, you can back into a free cash flow profile that would be about 40,000,000 to $50,000,000 at the current interest rates. I think we're on track to be in that range with better free cash flow in the back half of this year versus last year. And just as a reminder, this time last year in Q3, Q4, we had some headwinds to the tune of $6,000,000 to $8,000,000 in each quarter from AP process changes.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

So we should continue to see positive free cash flow in the back half. And just in terms of capital allocation, we continue to maintain a pretty robust pipeline on M and A, but we are very conscientious on any transactions we look at as to sort of the net leverage profile on the back end. But in the absence of having a really good target in mind, we're going to continue to look at prepayment of debt like we've done historically. And this year obviously with that cash flow we've talked about around $23,800,000 of it is used for the perpetual license on Catechlein which we look back and say has really been a really good deal and growth driver for us.

[Phillip Blee, Research Analyst at William Blair]

Excellent. Thank you. Best of luck.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

Thanks, Philip.

[Operator]

Next question, Bret Jordan with Jefferies. Please go ahead.

[Martin Mitela, Senior Equity Research Associate at Raymond James]

Hey, good morning, guys.

[Patrick Buckley, Senior Equity Research Associate at Jefferies]

This is Patrick Buckley on for Bret. Thanks for taking our questions.

[Matthew Stevenson, President, CEO & Director at Holley]

Hey, good morning, Patrick.

[Patrick Buckley, Senior Equity Research Associate at Jefferies]

On the new market growth, could you talk a bit about the trajectory of growth moving forward in Mexico and potential size there? And maybe how that strategy differs from the growth strategy in The U. S? And I guess a quick follow-up there would be, is this the primary market expansion for the foreseeable future? Or are you guys seeing any other markets that you've identified for potential growth?

[Matthew Stevenson, President, CEO & Director at Holley]

Yes, Patrick, thanks for the question. This is Matt. I mean, Mexico is just a natural market, of course, for us. Just the adjacency to the and proximity to The U. S.

[Matthew Stevenson, President, CEO & Director at Holley]

And the amount of enthusiasts that are down there. And that was something that just was just not focused in years past. How we look at the potential of Mexico, we would see that long term to be about 5% of The U. S. Market is where we would see that.

[Matthew Stevenson, President, CEO & Director at Holley]

And it's going to take some time to get there, right? It's really an all new market entrance for us. It's everything from setting up distributors, setting up the proper product distribution, working with the national retailer footprint there. So it's all going to take some time. But in terms of other markets, this is just a great market that we're spending the majority of our time on right now, again for those reasons.

[Matthew Stevenson, President, CEO & Director at Holley]

But there's a lot of enthusiasts around the globe and we can continue to evaluate where it makes sense to plant a flag, so to speak, in a larger presence.

[Patrick Buckley, Senior Equity Research Associate at Jefferies]

Great. Very helpful. That's all for us. Thanks guys.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

Thanks Patrick.

[Operator]

Next question, Mike Baker with D. A. Davidson. Please go ahead.

[Michael Baker, MD & Senior Research Analyst at D.A. Davidson]

Hey, thanks guys. Can I ask you, Jesse, you said flat sales so far in the third quarter? What's the base? In other words, is that including or excluding some of the one timers from a year ago?

[Jesse Weaver, CFO & Head of Information Technology at Holley]

Hey, Michael. We didn't we're trying not to speak specifically to the third quarter thus far, but I think what you implied from the script is kind of in line. And those trends we are seeing versus prior year as well as for the back half are embedded in our guidance. And your question around how does that compare to last year? I mean, I think to Matt's earlier comments, I mean, is seasonally one of our lowest volume periods.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

And demand is holding up relative to the prior year. And that's just on a gross basis. I think as we get into the back half, you're not there's only about $3,000,000 in each quarter related to divested businesses and we're largely past the meaningful SKU rationalization that happened in the first half.

[Michael Baker, MD & Senior Research Analyst at D.A. Davidson]

Okay. Okay. Thanks for that. And then I also wanted to ask just a little bit more detail on unit versus price in terms of your if we use a 3.9% sales growth in the second quarter, is there a way to break out how much of that was price versus unit?

[Jesse Weaver, CFO & Head of Information Technology at Holley]

Yes. Think we put in the Q that actually volumes were pretty strong in the second quarter with a portion of it coming from price and unit growth. I mean year to date unit growth has been positive with some pricing obviously to kind of get you over the 3% on the core business. So we've been really pleased with how units have really picked up this year to date. But as we've mentioned, we're taking a bit of a conservative approach given what we're seeing in the economic indicators and just the magnitude of pricing across the market and in the economy on units for the back half.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

But there's certainly some room for that to go north of what we're putting in our guidance.

[Michael Baker, MD & Senior Research Analyst at D.A. Davidson]

So in other words, you've raised prices, you're not necessarily seeing unit degradation, but you are assuming that to be conservative in the back half?

[Jesse Weaver, CFO & Head of Information Technology at Holley]

We're taking a conservative approach to it. But again, this is a business that you don't get a lot of visibility. But from what we can tell in our testing and trend evaluation and discussions with distribution partners, we feel like this is a good guide.

[Michael Baker, MD & Senior Research Analyst at D.A. Davidson]

Okay. Understood. Thank you.

[Operator]

Next question, Joe Feldman with Telsey Advisory Group. Please go ahead.

[Joseph Feldman, Senior Managing Director & Assistant Director of Research at Telsey Advisory Group]

Yeah. Thanks guys for taking the questions. I wanted to ask about just your view of the consumer at this point. I know you said summer is always a soft period and you pass through price increases now, so it's a little hard to tell. But I mean, what the customer has been buying at least in the second quarter, are you seeing people stepping up?

[Joseph Feldman, Senior Managing Director & Assistant Director of Research at Telsey Advisory Group]

Are they adjusting their spend? It sounds like unit sales are up. So I assume that's a good thing. People are kind of back at the projects. But just how do you view the consumer right now?

[Matthew Stevenson, President, CEO & Director at Holley]

Hey, good morning, Joe. It's Matt. Thanks for the question. As a comment, Joe, the out the door sellout in June is really good. And so generally speaking to Jesse's points what we saw on units for the first half of the year, there's a couple of components.

[Matthew Stevenson, President, CEO & Director at Holley]

I mean overall the market is hanging in there, but more importantly we're taking share, right. And so now that you have that price increase that goes through in June, July typically is that softer, one of the softest months just due to a lot of back to school, summer vacations and things that go on. Right now we haven't seen anything meaningful one way or the other, but it will we'll get more color here as the third quarter plays out. But as of right now nothing meaningful one way or the other from what we've been seeing.

[Joseph Feldman, Senior Managing Director & Assistant Director of Research at Telsey Advisory Group]

Got it. Thanks. And then maybe just a follow-up for Jesse. With regard to the guidance, I know you're not giving too many specifics, but like are there any puts and takes we should think about in the second half? Like is there anything unique about maybe third quarter versus fourth quarter this year?

[Joseph Feldman, Senior Managing Director & Assistant Director of Research at Telsey Advisory Group]

Or should we are we safe to use kind of the last year kind of flow to get us to the numbers for the full year?

[Jesse Weaver, CFO & Head of Information Technology at Holley]

Yes. I would say just as a reminder in the back half usually Q3 is slightly lower than Q4 just with our end of year holidays is a really big sales cycle for us. When you think about we're not going to give necessarily the quarterly guidance on the top line, but it's usually around like a 48% in the third quarter, 49% in the third quarter, but slightly more obviously in the fourth. And then we've talked about sort of our operational initiatives and the pricing and a lot of that stuff is kind of helping bolster margin on a year over year basis as we go into the back half.

[Joseph Feldman, Senior Managing Director & Assistant Director of Research at Telsey Advisory Group]

Okay. Thank you.

[Matthew Stevenson, President, CEO & Director at Holley]

Thanks, Joe. Good luck for the quarter.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

Thank you.

[Operator]

Next question, Brian McNamara with Canaccord Genuity. Please go ahead.

[Brian McNamara, MD & Senior Analyst - Consumer at Canaccord Genuity - Global Capital Markets]

Hey, guys. Thanks for the follow-up here. So great job on the tariff mitigation. Looking at Slide 11, looks like $8,500,000 out of the $15,000,000 in tariff mitigation is relocation with existing suppliers and sourcing with new suppliers in lower cost countries. I was wondering if we could get a little color there, specifically on how your exposures to China, maybe some of the higher cost countries changing?

[Brian McNamara, MD & Senior Analyst - Consumer at Canaccord Genuity - Global Capital Markets]

And then what kind of lower cost countries you're kind of shifting to? China sourcing exposure is a consistent question we get from investors. Thanks.

[Matthew Stevenson, President, CEO & Director at Holley]

Yes. Brian, I'd say our overall strategy had a number of facets to it as you could see in the prepared material. But overall, we want to be in countries that have a more stable long term relationship with The United States and that's where we've been focusing on either relocating with our current suppliers or finding new suppliers in lower cost countries. So that's just been the main focus and mitigating that exposure in China.

[Brian McNamara, MD & Senior Analyst - Consumer at Canaccord Genuity - Global Capital Markets]

And then at risk of beating a dead horse on the H2 guide, and maybe I'll try it a different way. So a pulse for a big deceleration in organic sales, I think it's up less than 1% despite you're lapping much easier comps. And I know July is typically a slow month, so and you mentioned it's flat. I guess why wouldn't all the heavy lifting you've done internally kind of help achieve a little bit better H2 growth? Or is it just simply conservatism on your part?

[Jesse Weaver, CFO & Head of Information Technology at Holley]

Yes. I think Brian again we all had been saying the back half is the biggest question mark just given what we were all seeing in April with the consumer and the tariffs and the pricing flowing through. And so we're really just taking like to your point a bit of a conservative view on what the units are going to do. I mean, I think we've all read the headlines of the pricing across the economy starting to actually flow through and what's going on with just employment. And we're in the thick of all of that right now.

[Jesse Weaver, CFO & Head of Information Technology at Holley]

And if you give us a couple more months obviously we'll be in a much better position and we're just not in the position where we feel like it's prudent to lean out until we know more.

[Brian McNamara, MD & Senior Analyst - Consumer at Canaccord Genuity - Global Capital Markets]

Fair enough. Thanks guys. Appreciate it.

[Matthew Stevenson, President, CEO & Director at Holley]

Thanks Brian.

[Operator]

I would like to turn the floor over to Matthew Stevenson for closing remarks.

[Matthew Stevenson, President, CEO & Director at Holley]

All right. Thank you, Stacy. Slide 20 underscores the compelling investment thesis behind Holley Performance Brands. At the heart of this story is a passionate and deeply engaged automotive enthusiast community. For our customers, this is far more than a pastime.

[Matthew Stevenson, President, CEO & Director at Holley]

It's a lifestyle rooted in performance, personalization and pride. With an addressable market exceeding $40,000,000,000 Holley is uniquely positioned as the industry leader, powered by a portfolio of iconic brands recognized for decades of innovation and excellence. Our growth story is grounded in a proven track record of successful acquisitions and disciplined integration. We consistently created value by expanding our reach, enhancing capabilities and unlocking synergies across the platform. Looking ahead, we see a transformative opportunity to redefine how both consumers and distribution partners interact with their brands.

[Matthew Stevenson, President, CEO & Director at Holley]

Through expanded digital capabilities and omnichannel engagement, we're building a new frontier that strengthens loyalty, accelerates conversion and expands access. Now as we emerge from our multiyear transformation and return to growth in our core business, our financial ambitions are clear. We remain focused on delivering sustainable organic growth, maintaining gross margins of 40% and achieving adjusted EBITDA margins greater than 20%. At the same time, we are committed to generating strong consistent free cash flow to building a disciplined M and A platform that unlocks long term value. Together, our powerful enthusiast ecosystem and Holly's trusted best in class brand portfolio represent a rare and differentiated investment opportunity.

[Matthew Stevenson, President, CEO & Director at Holley]

In closing, I want to thank our dedicated team members for their tireless efforts to commitment to excellence, our loyal consumers who bring our brands to life and our value distribution partners, many of whom have been with us for decades. Your partnership and passion continue to drive Holley forward. I want to thank you for your attendance on our call today and wish you all a great morning. Thank you.

[Operator]

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.

Participants

Executives

• Matthew Stevenson, President, CEO & Director
• Jesse Weaver, CFO & Head of Information Technology

Analysts

• Anthony Rozmus, Managing Director at Solebury Strategic Communications
• Brian McNamara, MD & Senior Analyst - Consumer at Canaccord Genuity - Global Capital Markets
• Christian Carlino, Equity Research Associate at J.P. Morgan
• Martin Mitela, Senior Equity Research Associate at Raymond James
• Phillip Blee, Research Analyst at William Blair
• Patrick Buckley, Senior Equity Research Associate at Jefferies
• Michael Baker, MD & Senior Research Analyst at D.A. Davidson
• Joseph Feldman, Senior Managing Director & Assistant Director of Research at Telsey Advisory Group