Holley Inc.

Good morning, ladies and gentlemen, and welcome to the conference call to discuss the results from Holly's second quarter of 2023. 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&A period. Please be advised that the reproduction of this call in whole or in parts is not permitted without written authorization of Holly. 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, Mr. Ross Collins, Senior Managing Director of Alpha IR. Please go ahead, sir.

Thank you, operator. Good morning, everyone. Thank you for taking the time to join us today. On the call with me today are Matthew Stevenson, President and Chief Executive Officer, and Jesse Weaver, Chief Financial Officer. After their prepared remarks, we will open the call for questions. We will be referencing page numbers from our second quarter 2023 quarterly earnings presentation, which can be found on our Holley Investor Relations website. Now I will reference the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. This call may contain certain forward-looking statements that are subject to significant risks and uncertainties, including the future operating and financial performance of the company. In many cases, these risks and uncertainties are beyond the company's control. Although the company believes the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct, and actual results may differ materially from the expectations. Important risk factors that could cause actual results to differ from those reflected in the forward-looking statements are included in the company's recent 10Q, S4, and S1 filings with the Securities and Exchange Commission. The information contained in this call is accurate only as of the date discussed. Investors should not assume that statements will remain relevant and operative at a later time. Holly undertakes no obligation to update any information discussed in this call in the future. Additionally, we will be discussing certain non-GAAP financial measures. A reconciliation of these items to U.S. GAAP are included in today's press release, which is also posted on our investor relations website. At this time, I'd like to turn the call over to Matthew Stevenson, Holley's President and Chief Executive Officer.

Matt? Thank you, Ross, and good morning, everyone. It is an absolute pleasure to be joining you on my first earnings call here at Holley. Not only did I join this company because I am an automotive enthusiast, but I also saw the remarkable growth potential in this organization. We have great brands, great products, great people, and great customers. What more could you ask for? I joined the company in June of this year, and there was a lot of fantastic progress already underway from the leadership of our board member and interim CEO, Michelle Gleckler. I want to thank Michelle for all her efforts in the four months prior to me joining Holly. On slide five, we've highlighted the key takeaways for the second quarter. It is clear we are continuing to build a path for gross margins of approximately 40% and EBITDA greater than 20% over the long term. We demonstrated that ability by delivering nearly 40% gross margins and 21.6% adjusted to EBITDA for the quarter. Through forecasting and operational improvements, we brought down net inventory levels by more than 10 million in the quarter, boosting our year-over-year improvement in free cash flow. We also reduced past dues across both our electronic and mechanical categories by $4 million. And on the new product development side, we launched our all-new Sniper 2, the next evolution of our marquee fuel injection product line. The Sniper 2 features enhanced capabilities and greater compatibility with older vehicles. Plus, installation is a lot simpler. which greatly reduces install time for our customers. Also, our unique quick start feature allows users to get their Sniper EFI system running by answering only a few questions about their engine. No laptop or prior tuning experience is required. In addition, future product line extensions like wireless connectivity will allow enthusiasts to connect their Sniper 2 to Holley via their smartphone. With this level of consumer connectivity, we will unlock multiple avenues for greater consumer engagement, which will allow us to better understand how our products are being used and what additional needs our consumers may have. We launched Sniper 2 at the tail end of the second quarter, and through the end of July, we have already registered 1.5 million in sales. As a key piece of my onboarding process at Holley, I spent a lot of time on the road, visiting 11 of our facilities and a number of major customers over an eight week period. I wanted to get out and form my perspective as quickly as possible. Getting out to see over 90% of our teammates, along with customers who represent a sizable portion of our annual revenue, was a great start. What I found, frankly, was not a real surprise. An incredibly passionate group of teammates that are excited about where the company is headed and great distribution partners who are enthusiastic about Holley and want to find ways to grow their business with us. This valuable input, time spent with our board and our leadership team have informed the development of what we call the steering principles for the business. You can see these steering principles on the left side of slide six. The first one of those centers around fueling our teammates. That principle is about making sure we here at Holley are on a journey to make this a great place to work by providing the resources and the environment for our teammates to be successful. This means clear direction, strong leadership, an appreciation for diversity, accountability, and opportunities for growth. We want to create a working environment where our teammates' opinions and insights are welcomed and respected. When our teammates are fueled, it allows us the opportunity to supercharge our customer relationships by delivering exciting brands and innovative products, as well as making it as easy as possible to do business with Holley. By doing so, it'll enable us to accelerate profitable growth, drive and exceed the returns our shareholders expect. and allow us to invest back into our teammates and customer relationships in this continuous cycle of growth. The way we make these principles a reality is by focusing on four key areas. On the right, you can see those. First, we need to listen to our teammates and ensure we get their input in the daily and strategic actions of the business. Our teammates are enthusiasts and have a great knowledge of the market our customers, the competition, and our products. Second, we need to enhance our operations in order to take out non-value-added activities while ensuring we have the right products available with the right inventory levels to serve the market. We also need to analyze and understand the cost to serve of each of our business lines, product categories, and customer types. Plus, we need to offer our enthusiast consumers and distribution partners the best omni-channel customer experience in our space. The third key area is focused on optimizing our acquisitions. Holley has acquired some amazing brands and businesses over the last few years, and we realize that each of these has their nuances. We must foster these differences to enable them to continue to deliver in their distinct markets. We are making sure that there is no one size fits all approach, and we are striking the appropriate balance of integration and synergy creation in order to fully optimize each organization's growth potential. Finally, we are focused on putting all customers first. This not only includes our fabulous base of consumers, but also our loyal distribution partners. We are finding ways to grow and expand all of our sales channels, in an effort to reach and serve a broader range of enthusiasts. And the great thing about our business is that there is a $40 billion total addressable market. So there's plenty of growth potential out there. On slide seven, you can see some of the financial and business highlights from our second quarter. Our net sales were down just over 2% due to the normalization demand we had previously forecasted with a similar reduction in gross margins mainly due to sales mix. However, our adjusted EBITDA margin was 21.6%, up nearly a full percent compared to the prior year. This is a testament to the operational improvements the team has made in reducing costs throughout the organization by right-sizing the team structure, finding efficiencies in manufacturing, and making meaningful improvements in freight. These efforts have helped generate free cash flow of $29 million for the quarter, which is a $30 million improvement versus the prior year. Let's also touch on some of the business highlights for the quarter. For this call, we'll touch on two areas in particular. The first is on our product innovation, and the second is on our consumer engagement, both key pillars of our overarching strategy. Just this quarter alone, We launched 75 new products, including the Marquee Sniper 2 EFI, which I already discussed. Not only does this product have great new features and enhancements, but it's also built on a newer generation of microprocessors that are much more readily available. In addition, we launched new in-vehicle tuning products at our Edge brand for the 2020 to 2023 full-size General Motors pickup platform. through our user-friendly EVO HT2 handheld. Aside from serving the domestic platforms, great brands in our portfolio like APR focus on the Euro segment. For example, APR recently launched several new air intake products for the highly successful eighth generation Volkswagen Golf that started with model year 2022. The APR full intake system improves performance offers personalization between OEM style or carbon fiber covers, and enhances the natural sounds of the engine. Plus, we are not just launching new products, but we are also winning awards with them. This past quarter, our Detroit Speed Team attended the 25th Annual Good Guys event in Columbus, Ohio. While there, the team took home two awards, including the Muscle Car Award with our 1965 Buick Riviera, and best new product with our 1967 and 1970 Ford Mustang front end kit. This kit is a complete front end solution to dramatically improving the handling and ride of the classic Ford Mustang. A big part of our strategy as the leading consumer branded company for automotive enthusiasts is to make sure we are driving consumer engagement, particularly at the grassroots level. As many of you know, we hold enthusiast events throughout the year, and in this past quarter, we held three major events. Two of our famous LS events, LS Fest West, held in Las Vegas, and LS Fest Texas in Fort Worth, as well as the 24th Annual Brothers Truck Show held in Silverado, California. These events drew a total attendance of nearly 50,000 people. up over 20% year over year. These events give us a direct connection with our consumers and enable us to listen to their product needs and keep a pulse on where the enthusiast trends are headed. We also use events like these as tools for online social engagement. For example, at Ellis Fest Texas, we invited key social media influencers, YouTube celebrities, and brand ambassadors to join us for this three-day event. Collectively, these influencers have a social following of over 29 million, enabling Holly to digitally reach more enthusiasts and share the experience of our events. Now, I'd like to turn it over to Jesse to discuss our financial priorities, our Q2 financials in more detail, and our updated guidance.