Holley Inc.

Good morning, ladies and gentlemen, and welcome to the conference call to discuss Holly's third quarter 2025 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&A period. Please be advised that reproduction of this call in whole or in part 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, Anthony Rasmus with Investor Relations. Please go ahead.

Good morning and welcome to Holly's third quarter 2025 earnings conference call. On the call with me today are President and Chief Executive Officer Matthew Stevenson 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 of our businesses as we see them today and are subject to risk and uncertainties, including the ones described in our SEC filings. This morning, we will review our financial results for the third quarter and discuss guidance for the full year 2025. At the conclusion of the prepared remarks, we'll open the call up for questions. With that, I'll turn the call over to our CEO, Matthew Stevenson.

Thank you, Anthony, and good morning to everyone joining us live on the call today. As we look back on the third quarter of 2025, I'm pleased to share that the positive momentum we have been building for more than two years continues to gain strength. This quarter marks another clear step forward in our transformation journey, a reflection of disciplined execution, sharp focus, and a resilient team that keeps delivering results in a constantly changing consumer and macroeconomic environment. For the third consecutive quarter, our core business delivered strong growth. Just as a quick reminder, when I say core business, I'm referring to our results excluding the operations we divested and the product lines we phased out as part of last year's strategic rationalization. This quarter, we made meaningful progress across the company with core growth in every division. It's especially encouraging to see continued momentum in both our direct-to-consumer and business-to-business channels, reinforcing the strength and balance of our omnichannel strategy. As we've said before, our omnichannel approach remains central to our core strategy as a leading consumer enthusiast platform in the automotive performance aftermarket. We're committed to serving customers wherever they choose to engage, whether that's through e-tailers, distributors, wholesalers, third-party marketplaces, installers, national retailers, or our own e-commerce platform. The foundation we've built through our strategic framework continues to deliver, from product innovation and digital capability to operational excellence and commercial capabilities. With these fundamentals in place, our focus remains on sustaining momentum and executing against our three-year plan. We're also staying proactive in managing external factors like tariffs and supply chain costs. While these remain dynamic, our diversified sourcing strategies and pricing discipline have positioned us well to manage impacts and protect margins. Overall, it was an excellent quarter, one that reflects the hard work focus, and determination driving our organization forward. I couldn't be prouder of our team and the meaningful progress we continue to make together. Now let's turn to slide five. I'll walk you through a few of this quarter's standout highlights. We delivered strong results this quarter, achieving 6.4% growth in our core business. This performance reflects genuine volume-driven expansion, which continues to build momentum quarter over quarter. Year-to-date, our 5% core growth is composed of a 4% increase in volume and a modest 1% pricing tailwind. This performance showcases the strength of our business model designed to drive consistent growth and the deep commitment of our enthusiast consumer base for whom this is more than a hobby. It's a passion, and it's a way of life. Importantly, our growth was broad-based across all channels, visions and within 17 brands. That breath speaks to the success of our transformation initiatives across the company and the strong execution behind our go-to-market strategy. In our B2B channel, we saw 7.3% growth as we deepened engagement with key partners. Through strong joint planning, continued data integration, and expanded sales enablement tools, we've enhanced collaboration and delivered more value to our channel partners. It's a great example of how our customer-first approach is driving strong relationships and measurable performance gains across the business. Our strategic initiatives also contributed meaningfully this quarter, generating about $26 million in revenue. Roughly $11.3 million came from new product innovation and portfolio management, including strategic pricing and channel margin optimization. These results underscore how well our commercial and operational teams are working together to drive sustainable, profitable growth. Even in what's typically our slowest quarter of the year, we generated $5.5 million in free cash flow, a $7.6 million improvement from last year. That improvement came from higher margin and disciplined capital management across the organization. We ended the quarter with net debt to EBITDA leverage at 3.9 times, ahead of our year-end target of four times. Now, this is the first time we've been below four times leverage since 2022, a clear marker in our transformation and a reflection of our stronger financial position. And after the quarter ended, we prepaid another $10 million in debt, bringing total prepayments to $100 million since September 2023. That's an important milestone for us and reinforces our commitment to strengthening the balance sheet, positioning us for continued long-term value creation. Let's move over to slide six and take a look at some of the key quantitative highlights from the quarter. Net sales for Q3 was 138.4 million, which translated to core business growth of 6.4%. That marks our third consecutive quarter of year-over-year growth in the core business, and it underscores our outperformance in the market and the share gains we are seeing in key categories across the company. Gross margins came in at 43.2%, up more than 400 basis points from last year. That improvement reflects strong pricing discipline and operational improvements across the company, while keeping our focus on quality and serving the customer. Adjusted EBITDA margin rose to 19.6 percent, an increase of over 300 basis points year-over-year. This strong performance highlights the operating leverage within the business and the benefits of maintaining cost discipline and execution focus, resulting in a significant $7.6 million improvement in free cash flow compared to the same quarter last year. On the right-hand side of the slide, you can see a few additional business highlights. Product innovation continues to be central to our philosophy, and this past quarter delivered a range of successful launches across our divisions, including digital dashes from our Holley EFI product suite, Big Claw heavy-duty brake kits from Bayer, at-home BMW performance tuning solutions from Dinan, and Club Sport racing seats from Simpson. We'll see the impact of these and many other recent product introductions when we review our strategic initiatives tracker in the upcoming slides. Operationally, we also continued to move the needle. In-stock rates for our top 2,500 products improved 2.2% year over year, giving customers better access to what they need. Efficiency was up more than 3 million, and past due orders were down 20.7%. Those are strong signs of progress and a testament to the impactful additions we made to our operational leadership team across supply chain, manufacturing, and quality. On the consumer side, we continue to see strong engagement from our enthusiast base. Directed consumer sales were up 4.2% year-over-year, supported by sharper promotional execution and stronger digital performance. The third quarter also represents the peak of our event season. And this year, engagement across our enthusiast community was strong. Attendance at our events was on track to break records. but a rainy weekend during our flagship LS Fest East did impact that momentum, leaving overall attendance roughly flat for our event season this year. Even so, the impact of these events extends well beyond in-person attendance. A key part of our event strategy is leveraging these experiences to grow and engage our digital audience. With more than 8 million followers growing steadily this quarter at 2% year-over-year, our brands continue to reach and inspire enthusiasts across platforms, keeping our community energized during marquee weekends like LS Fest. On slide seven, we can see some standout examples of the core business growth driving our performance across divisions in Q3. Our domestic muscle division roared ahead with 6.2% year-over-year growth. powered by an unwavering enthusiast passion for our legendary brands. Multiple brands delivered standout high single and double-digit gains across categories, reinforcing the vitality of this portfolio. The modern truck and off-road division accelerated with 5.2% growth, led by exceptional performance from Bear, Flowmaster, and Range, each posting double-digit gains. Diablo Sport also delivered robust high single-digit growth, further strengthening the division's overall performance. Meanwhile, our Euro and import division continued its impressive trajectory, climbing 16.6%. Dyna and APR sustained remarkable growth throughout the year, driving strong segment performance. We've also shifted AEM to our domestic muscle portfolio, better aligning its fuel delivery and monitoring focus with that vertical. Going forward, the Euro and import division will include only dyno and APR, sharpening focus and alignment. In our safety division, distributors began ramping up ahead of the Snell 2025 certification changeover, which officially began on October 1st. Simpson Motorsport, Motorcycle, and Stilo all posted solid gains, signaling renewed momentum across the category. This acceleration follows the typical pre-certification cycle slowdown earlier in the year, and it positions the division for continued strength through the balance of 2025 and beyond. Together, these results highlight broad-based growth across our divisions, setting the stage for continued progress. Let's move next to our strategic initiative tracker to see how these efforts are fueling our long-term growth. But before that, just a quick reminder on slide eight, where we revisit the eight areas forming the foundation of our strategic framework centered around three core principles. First, fueling our teammates, making Holly a great place to work, where team members are empowered, seek clear paths for growth, and thrive in an engaging, inclusive culture. Second, supercharging our customer relationships, delivering the premier consumer journey in our industry. strengthening B2B partnerships through shared growth, and leading with innovation that defines performance excellence. And finally, accelerating profitable growth, expanding into new markets, pursuing transformational M&A, and driving continuous operational improvement to enable reinvestment and long-term value creation. Together, these principles continue to guide our strategic initiatives and keep our teams aligned around Holley's long-term vision. Now on slide nine, I'm pleased to share our third quarter highlights as captured in the updated strategic initiative tracker. Under our trailblazing trusted partner pillar, focused on B2B growth, we delivered another strong quarter. Enhanced product data adoption of key retailers drove 1.7 million in new sales, bringing year-to-date gains to 3 million. Our smaller account segment also remained strong, growing 2.4 million year-over-year in Q3, The largest driver of growth in the quarter was continued share gains with our largest e-tailer and wholesale partners. Altogether, B2B initiatives generated $13.5 million in revenue this quarter. Turning to our premier consumer journey pillar, e-commerce and direct-to-consumers channels continue to perform well. Third-party marketplaces grew 28% year-to-date to $12.9 million. with our new Amazon program driving over 50% growth in the chemical product sales. Enthusiast events also fueled record merchandise sales and overall e-commerce sales were up 5% year-to-date. In total, this pillar contributed nearly 2 million year-over-year. New product launches across divisions paired with continuous sales strength in tuning and exhaust for their new innovations delivered 2.5 million in year-over-year growth and set the stage for strong momentum heading into Q4. Within portfolio management, strategic pricing actions and distributor margin enhancements contributed an additional $7.7 million in sales during the quarter. Combined, this pillar contributed approximately $11.3 million in revenue during Q3. Our global expansion and new markets pillar also continues to gain traction. Mexico's shipments reached 240,000 in September. our second straight month above $200,000, tracking toward a $2.5 million annual run rate. Powersports delivered record revenue of nearly $300,000 in September and $1.1 million year-to-date, keeping pace with a $1.8 million target. Together, these efforts generated $1.1 million in revenue for Q3. Under our Fund the Growth Pillar, cost and efficiency initiatives yielded $6.2 million in total savings this quarter. In stock rates for our top 2,500 products are near our 93% goal with significant reductions in past dues with decreased overall inventory levels. Finally, our great place to work initiatives continue to build engagement and productivity. Employee engagement rose 4% and we remain on track to achieve our revenue per employee goals by year end. Altogether, Execution of our strategic framework delivered about $27.8 million in revenue from key initiatives and $6.2 million in cost savings this quarter. Clear proof of focus, discipline, and consistent execution. Holly's third quarter showcased strong, broad-based growth, margin expansion, and disciplined execution across our business. We've strengthened our financial position, bringing net debt to EBITDA leverage below four times, for the first time since 2022, a major milestone in our transformation journey. These results reflect the hard work and focus of our team and position us well for continued momentum. With that, I'll turn it over to Jesse to walk through the financial highlights and refine guidance for the remainder of the year. After Jesse's remarks, we'll return for Q&A.