Good morning, ladies and gentlemen, and welcome to the conference call to discuss Holley’s First Quarter 2025 Earnings Results. At this time, all participants are in listen-only mode. Later, we’ll conduct a question-and-answer session and instructions for asking questions will be provided at that time. We ask that participants please limit themselves to one question and one related follow-up during the Q&A period. Please be advised that reproduction of this call, in whole or in part, is not permitted without written authorization of Holley. 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 Rozmus with Investor Relations. Please go ahead.

Good morning, and welcome to Holley’s first quarter 2025 earnings conference call. On the call with me today are President and Chief Executive Officer, Matt Stevenson, and Chief Financial Officer, Jesse Weaver. This webcast and the 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 first quarter and discuss guidance for the full year 2025. At the conclusion of our prepared remarks, we will open the line up for questions. With that, I’ll turn the call over to our CEO, Matt Stevenson.

Thank you, Anthony, and good morning, everyone. As we review the first quarter results for 2025, I’m excited to share the early achievements from the transformation we embarked on, over 18 months ago. We have seen significant progress in our business and your support has been greatly appreciated as we navigated dynamic macroeconomic and consumer environment. Despite the challenges, we have made considerable strides and I’m eager to present that to you, today. We will present compelling evidence demonstrating how the focus areas of our strategic plan and the initiatives within them are driving growth across our business. For the first time in five quarters, we have experienced growth in our core business across both direct-to-consumer and business-to-business channels. As a reminder, core business excludes divested businesses and discontinued products from our SKU rationalization efforts, last year. Our comprehensive omni-channel approach is crucial to driving our growth. We are dedicated to meeting our customers wherever they prefer to do business, whether through e-retailers, distributors, wholesalers, third-party marketplaces, installers, national retailers and our own e- commerce platform. Now despite a challenging macroeconomic environment, we are successfully gaining market share from our competitors. We have accomplished this by creating captivating consumer experiences through our events and expert merchandising, leveraging best-in-class digital capabilities, implementing a new third-party marketplace strategy and introducing great new products across our divisions. Additionally, we have strengthened our partnerships with B2B customers who are adopting more of our product line due to enhanced support, better data quality and our robust marketing calendar. While focusing on growth, we are also committed to improving operations by eliminating non-value-added costs and enhancing our operational KPIs, across the business. These efforts enable us to reinvest in the business while maintaining margins, despite decreased market demand. Before we delve into the specific highlights for…

Thank you, Matt, and good morning, everyone. I’d like to start by providing an overview of our updated financial priorities for 2025 and then discuss our first quarter 2025 financial results. As we navigate a dynamic operating environment, we remain focused on our financial priorities. Free cash flow generation continues to be a top priority for the entire organization, and we remain committed to supporting this priority in 2025 to a focus on operating efficiency, to drive profitability and working capital optimization. In 2025, we are continuing to work towards restoring historical profitability through elimination of inefficiencies in operations, which have already saved $1 million in Q1. We anticipate savings of $5 million to $10 million, through improved distribution, manufacturing efficiency, return policy compliance and quality enhancements to better the customer experience throughout the year. Our second priority remains to optimize working capital to unlock free cash flow generation and financial flexibility. Given the potential impacts related to tariffs, we are adopting a more proactive approach in managing our portfolio to reduce inventory held in non-working inventory such as work in progress and raw materials. Concurrently, we are actively advancing initiatives to better align our product mix with market demand. Furthermore, we are enhancing our sales, inventory and operations planning and forecasting processes to create a more agile and demand-driven operating model. By improving alignment between production, inventory and market demand, we not only increase accuracy and responsiveness, but also strengthen our ability to anticipate shifts in the market and drive more informed strategic decisions. Additionally, we are optimizing safety stock levels and lead times as part of a broader effort to create a more efficient and resilient supply chain. These measures enable us to, systematically, reduce slow moving inventory while maintaining the high service levels that our customers expect,…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from the line of Christian Carlino with JPMorgan. Please proceed with your questions.

Good morning, thanks for taking our questions. Your response to the tariff you laid out in slides is really impressive. So, I’m curious how both your sourcing mix and maybe your broader capabilities to respond differs versus peers and spending on the category aside, would you expect share gains to accelerate and that the current tariff backdrop persists?

Good morning, Christian, and thank you for the question. One of the big differentiators for Holley is the breadth and depth of product that we have across various categories and so, for us, it’s really a category by category approach within, based on our competitive dynamic, based on our sourcing strategy. So, Christian, we’ve got to see how it ultimately plays out but we think Holley is poised to take share just based on the majority of our production cost and our cost of goods sold being in the US versus some of our competitors and other categories that are primarily sourced out of Asia.

Got it, that’s helpful. And as a big segue to my follow-up, which is basically, what’s been the feedback to the price increase you announced in April from the distribution partners, and what are they saying about how this level compares to maybe what peers are requesting? And is this a broad increase across the portfolio and then you maybe sensitize it to product and categories later on? Just a bit more color on how you’re thinking about that and what the distinct back spend. Thanks.

Yeah, thanks, Christian. Overall, the feedback has been positive relative to our approach. I think our distribution partners appreciated our blending approach across portfolios versus just hitting harder in the impacted products. Now, in the marketplace, we have seen price increases well in excess of what we put out into the market. I mean, we’ve seen increases as high as 30% or more on some categories from some competitors. So overall, think our distribution partners understand the situation and appreciated our approach and, really, their skepticism and pushback is on competitors that have that north of double-digit increases.

Got it, that’s really helpful. Thanks a lot.

Thank you, Christian.

Our next question is coming from the line of Mike Swartz with Truist Securities. Please proceed with your questions.

Hey, guys, good morning. Could you just elaborate a little more? There was a comment in the press release and I think, Matt, you mentioned it on your prepared remarks just around maybe some moderation in demand that you’ve witnessed through the first quarter. I’m just trying to understand what that maybe means on a quantifiable basis, out the door sales, maybe what we’ve seen in the last month or two versus what we saw in the first quarter, or is this more tied to broader statements around the consumer, consumer sentiment, things of that nature?

Yeah, Mike, good morning. Thank you for the question. In general, March was quite strong and, yeah, the out the door performance of our products, as well with the distributors overall business was quite healthy. My comment referenced slow sales in January and February. And we commented on the last earnings call about just there’s a lot of weather, cold weather that extended much further south than typically normal, which caused demand maybe somewhat slow in January and February, but March was really good. And my other comment was, in the prepared remarks, as we sit here today, we really haven’t seen demand trends go either way. I mean, we’re generally on the same course that we saw coming out of March, and there hasn’t been any material pre-buy or slowdown from what we’re seeing, but it’s still early in the quarter. We’ve got to see how things play out.

Okay, that’s helpful. And then, I guess maybe just follow up on the pricing question, previously. Maybe just a little more color. I think you said that retailers are approving the approach that you’re taking. So maybe what is that approach? Are you doing anything in terms of surcharges where this is more temporary pricing, based on the outcome of everything or maybe just a little more context around that comment?

Yeah, Mike, our approach was to blend the impact across our portfolio. And again, a big differentiator for us in the marketplace is the breadth and depth of products that we cover, as well as the majority of our production costs being in the US. So, we had that ability to do that and take roughly that 8.75 and a blended approach across our portfolio with a few exceptions, not all products got that increase, versus some of our competitors who didn’t have that luxury in taking significant price increases, double digits or more on specific categories of products because they’re sole sourced out of Asia and may only compete in one or two product categories.

Okay, wonderful. Thanks for the comments.

Yeah, thanks, Mike.

Our next questions are from the line of Bret Jordan with Jefferies. Please proceed with your questions.

Hey, good morning, guys.

Good morning, Bret.

Could you talk about the third-party platform strategy that more, I guess, real growth there, is the margin profile comparable to your core B2C and I guess, is there any channel conflict as you grow those businesses with Amazon or eBay? Do any of your legacy customers see them as a threat?

Yeah, hey, Bret, it’s Jesse. So, we haven’t seen a lot of strength there. The team has done a great job on the data and the output of the data work is continued improvement on the third-party. What we found, internally, is that it’s highly incremental. In 2023, when I was here, we were seeing changes in the algos, changes in what was happening with data and Amazon dropped off and it was being picked up in the other channels. So, that signaled to us that there really is very limited channel conflict and then that kind of gets into your question on the margin profile. There are different fee structures there. Obviously, we sell that at retail but then you have to pay other fees associated with it. But given the incrementality there, we view it as a viable growth channel that we will continue to lean into, just along our approach of what we want to be where the customers want to shop.

And are the selling prices on the same SKU basis the same? I mean, are you sort of doing a fixed price model?

Yeah, I mean, we comply with MAP on those channels, and that’s an area that as we continue to enhance our support of the distribution partners, that we have monitored even more closely as we do have distribution partners who also sale on those marketplaces.

Great, thank you.

Thanks, Bret.

The next questions are from the line of Phillip Blee with William Blair. Please proceed with your questions.

Good morning, guys, thanks for the question. Just a quick point of clarification. Your guide does not include the impact of tariffs. So, does it exclude the impact of some of those, the pricing that consigned for early June and some of the other cost savings and mitigation efforts. Just trying to get a feel for the level of conservatism embedded here.

Thanks, Phillip, it’s Jesse. Yes, it excludes the impacts, obviously, of tariffs, as we made clear. There’re two potential impacts as it relates to tariffs. One is the obvious one that we all talk about, write about, know about. But then the other one is just like the general impact of the tariffs and the price increases across the economy and what it does to consumer sentiment. And so, with our guide, there’s certainly a bit of understanding that needs to be done as we kind of venture into the back half before I feel like we would feel confident enough to kind of quantify anything for you, at this time.

Okay, that makes sense. And then, you reiterated your guide for low mid-single digit growth in the core business. So, along with your expectations for price, can you just talk about some of your assumptions and impacts around volume and what kind of elasticity you think that, based on historical results, or have you seen maybe less of an impact on volume with some of your previous pricing actions? Thank you.

Yeah, I think at this moment, what’s implied in that, Phillip, as we talked about the price increase goes into effect, it will be later this quarter and without changing the sales piece, there is an implication on the volume side that would be offset on the pricing increase. Certainly, that would come through a higher margin but I think, as we’ve all talked about, there’s just uncertainty around the ultimate tariff impact. So, that is the volume -- to answer your volume question, there is a volume sort of offset to that with holding sales flat with that higher price.

Okay, makes sense. Thanks, guys, best of luck.

Thanks, Phillip.

Next questions are from the line of Joe Feldman with Telsey Advisory Group. Please proceed with your questions.

Yeah, thanks, guys. Just again on the tariff thing, can you clarify how much exposure you do have to China? I know you keep saying there’s not a lot of exposure to tariffs and yet, there’s a lot of work being done to mitigate them. So, I’m just trying to reconcile those two comments that a majority of it is US based but you still have decent exposure. I mean, it would just help to kind of quantify, I think for some of us, what that would be.

Yeah, Joe, good morning, I appreciate the question. Yeah, a lot has changed since we reported on the last earnings call with the numerous changes in the administration regarding the tariffs and the new ones that have been implemented, as well as increase, over the last, roughly, two months. So, we spoke prior, the tariffs at the current state can be covered just with a pretty moderate price increase. Now, as those tariffs have escalated, they become meaningful for a business, hence, the work that is going into mitigate those, as well as the pricing action that we just took. But we remain optimistic, Joe. It’s a definitely fluid situation. The team is doing a ton of hard work and is finding opportunities to mitigate these, daily. As well, we’re optimistic in the changes in the administration, as the dust starts to settle and things get more permanence on what actually these tariffs will be. So, for us, to give you any insight really into the exact number right now, it just wouldn’t be accurate because it’s a fluid situation and the great work the team is doing every day is mitigating those tariffs. And we will know more when we come back to you in early August.

Thank you. And then, maybe an unrelated question is, you mentioned the Holley events, changing structure a bit and trying to generate more revenue from them because of that change. Can you share a little more color on that? I’m just curious how that you would change it.

Our events are just an amazing opportunities to connect with enthusiasts. And attendance continues to grow. We just had our LS Fest West in Las Vegas that was -- attendance was up and our merchandise sales were up, and there were just great opportunities there for our enthusiasts for our enthusiasts to partake in these great events in the culture of high-performance brands. And for us, we offer more opportunity whether it’s VIP experiences, different merchandise and different events are participated in, as well, look to the value that we provided in our pricing structure. But, overall, just continuing to optimize how we produce and put on our events and not only to enhance the enjoyment of our enthusiasts, but to provide opportunities to grow revenue in the process.

Got it, thank you. Good luck this quarter

Thanks, Joe.

Our next question is from the line of Brian McNamara with Canaccord Genuity. Please proceed with your questions.

Hey, good morning, guys, thanks for taking the question.

Hey, good morning, Brian.

Good morning, guys. So, first off, I think when you guys reported Q4, I think March 11, sales quarter-to-date were flattish. I know they ended up pretty nicely. You guys seem pretty confident that there’s no pre-buying. I guess, how do you know kind of thing because we saw auto sales jump towards the end of March and things like that. Just curious what gives you confidence there’s no pre-buying after all the tariff noise that we saw on Liberation Day on April 2.

Yeah, Brian, it’s the information we get from our B2B partners and, of course, with our direct consumer platform. January and February were so soft relative to the patterns that were driven in the weather. And so, the feeling from our distribution partners and from what we’re seeing in our business is just consumers didn’t get a chance to work on their cars. And so, when the weather started to break in March, a lot of that demand for people wanting to take on projects and get in their garage was a bit delayed. So, we really feel that was the driver in March. And as we sit here, today, the conversations from our distribution partners are more of a wait and see attitude, relative to seeing how things will play out, but again, it’s still early in the quarter, our pricing increase goes in on June 9, and we’ll see how that plays out for the rest of the quarter here in terms of the demand patterns.

Got it. And then, I have a pretty technical question on tariffs, at least as they relate to China. So, we cover an eclectic group of companies and we learned from another coverage company that the Steel 232 tariffs supersede the reciprocal tariff for China. So, I’m just curious if there’s any nuance as it relates to your tariff exposure to China.

Yeah, Brian, it is a very complex situation and there’s Section 232 auto parts, there’s Section 232 steel and aluminum, there’s reciprocal out of China, there’s a number of ones that are in play. Now, the administration made a change last week that the stacking of steel and aluminum are reciprocal has come off. But we literally have to go product by product and analyze what tariffs are applicable and stay up with the changes. And so, this is why we have a host of firms on the outside that are helping us navigate and validate the situation as it changes because there’s a whole flow chart that you walk through the various tariffs and exceptions and yes/no causes to determine what is the applicable percentage on our product line.

All right, thanks a lot, Matt, appreciate it.

Thanks, Brian.

Thank you. At this time, I will now turn the floor back to Matt for closing remarks.

Okay, thank you, Rob. Slide 20 highlights the compelling investment narrative we see surrounding Holley Performance Brands. This market, driven by automotive enthusiasts, is more than just a hobby; it’s a passion and a way of life for our customers. We have a vast addressable market nearing 40 billion, and Holley leads the industry with a collection of storied brands, known for their legacy of innovation. Our history is also marked by successful acquisitions and value creation through strategic integrations. Additionally, we have a unique opportunity to create a new digital frontier that will transform how our consumers and our distribution partners engage with our brands, giving us competitive advantage and fostering growth. As we are emerging from this transformation, our commitment is to deliver stable organic topline growth of at least 6%, maintain 40% gross margin targets and achieve greater than 20% in adjusted EBITDA margin targets. We aim to generate sustainable free cash flow and establish a platform that unlocks value and strategic acquisitions. Accommodation of our automotive enthusiasts’ marketplace and Holley's distinguished brand portfolio presents an exceptional investment opportunity. In closing, I want to express my sincere appreciation to our team members for their dedication to serving our customers daily and to our remarkable consumers who support our brands, and to our distribution partners, many of whom have been integral to our success for decades. So, with that, I’d like to thank you for your attendance on the call today and have a wonderful rest of the week. Thank you.

This will conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.