Holley Inc.

Good morning, ladies and gentlemen, and welcome to the conference call to discuss Holly's first quarter 2026 earnings results. At this time, all participants are in 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 Hawley. 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 Rosmus with Investor Relations. Please go ahead.

Good morning, and welcome to Hawley's first quarter 2026 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 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 of 2026 and 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 today. Before we get into the first quarter details, I wanted to provide some context for the quarter. As discussed on our last earnings call, Q1 began with a couple of temporary headwinds. Distributor inventories were elevated coming into the year as partners worked towards their year-end rebate targets and stocked up in advance of our January 1st price increase. We expected this inventory to normalize through January and February, but more severe winter weather slowed retail activity and delayed that process, shifting some demand out of the quarter. That said, here's the key takeaway for Q1. Beginning in Week 8, as weather conditions improved and channel dynamics normalized, we saw steady improvement in purchasing patterns. We exited the quarter with momentum, and early Q2 trends are encouraging, with healthier inventory levels across the channel and improving order activity. The spring selling season is building. More importantly, the underlying business performed solidly. Adjusted EBITDA remained essentially flat year-over-year at $27.3 million. despite the revenue decrease, reflecting disciplined execution. Net income increased, margins expanded, and free cash flow improved. We're also making progress on key strategic initiatives, including advancing our new portfolio rebalancing efforts and closing the acquisition of HRX. While we're investing in innovation, deepening our connection with enthusiasts, and competing to gain share, we're also prioritizing cost control and portfolio optimization. We believe that this combination positions us well for the balance of the year. Let's please turn to slide five. Net sales were $147.3 million, down 3.7% versus the prior year, reflecting the elevated partner inventory levels and weather impacts we just discussed. Adjusted EBITDA was $27.3 million, in line with the prior year period. Holding EBITDA flat on lower revenue reflects the progress we've made in our continuous improvement efforts as adjusted EBITDA expanded 71 basis points year-over-year to 18.5%. Free cash flow was negative 6.3 million, an improvement of approximately 4.5 million year-over-year, still negative for the quarter but trending in the right direction, and we expect meaningful improvement through the remainder of the year. We delivered $6.5 million in cost savings in Q1 through purchasing discipline, tariff mitigation, and operational improvements. Three of the four divisions grew, and 12 brands performed positively across B2B and D2C. That reflects the breadth of the portfolio working as intended. Strategically, we closed HRX, and we are advancing our portfolio rebalancing initiative which we expect to generate more than 15 million in proceeds to reinvest in higher growth areas of the business. Slide six provides additional insight into recent highlights across the business. Since our last earnings call, we've introduced several new products, including our engine swap solution packages and the Holley performance car care line, both of which have been well received by our enthusiast customer base. On the operational front, we continue to make solid progress, We maintained approximately a 92% in-stock rate on our top 2,500 SKUs and delivered $3.8 million in purchasing and tariff savings and $2.7 million in operational improvements during the quarter. We also reengaged our M&A efforts with the closing of HRX. In further slides, I'll provide more detail on its strategic importance and the broader approach we're taking to rebalance our portfolios. Slide 7 breaks out the Q1 divisional performance, and I think the story here is clear once you understand the context. American performance declined 9.7% in the quarter. This segment saw the most impact from weather and some temporary inventory dynamics at a small number of key partners. As conditions improved over the course of the quarter, demand trends strengthened, and we expect the business to return to growth. Trucking off-road was up 3.8%, a solid result given the market dynamics. The truck category continues to have real momentum, and the product introductions we've been building out over the past year are gaining commercial traction. Euro in import was up 1%. This business would have been stronger, but some product availability constraints earlier in the quarter, which have since been addressed, limited performance. Safety and racing grew 10.2%, driven by the Snell 2025 helmet certification cycle, strong demand for our Stilo brand, and continued strength in motorcycle safety. There is a solid foundation here as we move through the year. Three of our four divisions deliver growth, with a fourth impacted by a defined set of weather and inventory related factors that are normalizing and are actively improving. Our division operating model anchored in clear prioritization, accountability, and resource alignment continues to support consistent progress across the company. Slide 8, which we have shared in the past, outlines our long-term strategic framework, which continues to guide how we operate and allocate resources. It's built around eight pillars, starting with making Holly a great place to work, then premier consumer journey, trailblazing trusted partner, product innovation, and portfolio management, global expansion in new markets, transformational M&A, funding the growth, our operational improvements, all culminating with delivering results. The value of a framework like this is how it keeps the organization aligned and focused, particularly in a more dynamic environment. Through the first quarter, our teams remained disciplined, stayed focused on execution, and continued to deliver against our priorities. You'll see that reflected in our initiative progress. Slide nine outlines some of the highlights for each of these initiatives within the strategic framework for 2026, which we introduced on our last call. There is solid underlying progress across these initiatives in the first quarter. This includes innovative new products such as our package engine swap solutions and the new car care line, along with continued momentum in national retail accounts and international markets. On the operations side, the team is tracking ahead of our 2026 targets, delivering meaningful material cost savings, mitigating tariff exposure, and driving improved efficiency and productivity across our manufacturing facilities. Overall, These efforts position us well to continue execution against our plan and delivering on our objectives for 2026. With that, let's turn to the detailed initiative tracker on slide 10. The strategic initiative tracker provides a clear view of our Q1 performance, highlighting both areas of progress and those impacted by temporary external factors. Trailblazing's trusted partner was down $7.9 million versus the prior year, reflecting elevated inventory levels at a handful of larger accounts and slower seasonal sell-through due to weather. Encouragingly, roughly half of the B2B portfolio delivered positive momentum, and our national retailer channel grew approximately 10%, supported by improved SKU penetration, enhanced product data, expanded e-commerce presence, and enhanced in-store placement. Now, as inventory levels are normalizing and seasonal demand builds, we are seeing growth in the B2B channel. Premier consumer journey was essentially flat to the prior year. Directed consumer performance was impacted by weather early in the quarter, but improved as conditions normalized, returning to year-over-year growth in March. Third-party marketplaces led by Amazon delivered growth of approximately 3%. The improvement in March is a positive indicator as we move into the next quarter. Product innovation contributed approximately $3.6 million, driven by solid performance and safety with new motorcycle helmets and the Snell 2025 Motorsports offerings, as well as in modern truck and off-road with new tuning solutions. Global expansion in new markets contributed approximately $2 million, including $1.4 million from international distributor growth, with continued expansion planned in Q2. and approximately $0.6 million from the globalization of power sports and safety categories led by the Simpson brand and motorcycle helmets. On the growth, delivered approximately $6.5 million in savings, including $3.8 million from purchasing initiatives and tariff mitigations, and $2.7 million from operational improvements. Our focus on managing input costs and tariffs continues to contribute positively to results. Overall, the tracker highlights discipline execution and strategic progress, effectively navigating near-term external pressures while delivering strong performance across new product innovations, expansion into new markets, and cost reduction initiatives, all progressing as expected. Slide 11 outlines our new portfolio rebalancing initiative, which we view as an important driver of long-term value creation. The first step is to exit brands that are not meeting our growth, profitability, or strategic criteria. These businesses tend to consume a disproportionate amount of time and capital relative to their returns. Second, these actions, along with facility consolidations, help simplify the portfolio, reduce complexity, and improve free cash flow and cost structure. Third, we redeploy that capital into disciplined bolt-on acquisitions. Our focus is on businesses with attractive growth profiles, strong margins, and positive cash flow characteristics. The recent HRX acquisition is a good example of this approach in action. Finally, over time, we anticipate these higher growth additions will contribute to improved earnings and cash generation, supporting further reinvestment and balance sheet strength. We are targeting five to 10 bolt-on acquisitions over the next 24 months. While this is a focus goal, we believe we have the pipeline of processes in place to execute effectively. Overall, portfolio rebalancing is a key component of how we are positioning the business for sustained long-term growth. Slide 12 outlines our site and brand optimization program, which represents the operational component of our broader portfolio rebalancing efforts. As part of this initiative, we are in the process of exiting five brands and consolidating five facilities, and we are approximately halfway through this work. This includes reducing our warehouse footprint by approximately 100,000 square feet and streamlining our workforce by about 9%. We're also rationalizing roughly 11,000 SKUs, about 25% of our portfolio by count, reflecting a focus on reducing complexity while maintaining core capabilities. From a financial standpoint, we expect our portfolio rebalancing efforts to generate more than $15 million in one-time net cash, along with adjusted EBITDA margin expansion of approximately 75 to 150 basis points, including at least $1 million in annualized benefits. We also expect a modest improvement in leverage of around 0.15 times and approximately a 5% improvement in inventory returns. Overall, we are creating... a more streamlined and focused operating model, enhancing efficiency, strengthening margins, and improving cash generation, while positioning the business around its strongest opportunities for growth. Slide 13 outlines our M&A acquisition profile, reflecting a disciplined and thoughtful approach to bolt-on acquisitions, as well as how these efforts connect to our broader portfolio optimization work. As we streamline the business through our site and brand optimization initiatives, reducing complexity and generating incremental cash, we are focused on redeploying that capital into higher growth opportunities that we can scale over time. Within M&A, we are primarily targeting founder-led businesses. These companies often bring strong brand equity, deep customer relationships, and a proven operating capability. Our role is to support and accelerate that foundation through our distribution network, commercial infrastructure, and broader customer reach. We structure transactions with alignment in mind, including shared business plans and incentives that encourage continued growth post-close. Our financial criteria is consistent and disciplined. Typically $5 to $10 million in revenue at acquisition, established double-digit revenue growth, and the ability to achieve EBITDA margins of 20% or greater post-senergy with positive free cash flow. These are not turnaround situations, but rather businesses with solid fundamentals where we believe that we can help unlock additional value. Strategic fit is equally important. We prioritize businesses that align well with our existing portfolio, where we can leverage shared customers, channels, and capabilities to drive incremental growth. Overall, we believe that this approach allows us to take the benefits of our optimization efforts and reinvest them in scalable, higher growth brands. Slide 14 provides additional detail on the HRX acquisition, which is a strong example of the M&A framework I just outlined in action. HRX is based in Turin, Italy, and specializes in premium racing apparel and safety equipment, including suits, gloves, shoes, and teamwear. The product line is FIA homologated, and the business has developed a proprietary digital platform that enables scalable customization, an important differentiator in a category where fit, performance, and certification are critical to the customer. The company is founder-led with established double-digit revenue growth, strong EBITDA margin characteristics, and positive free cash flow. It also has a growing international presence, particularly in Europe, with additional opportunities as we leverage Holley's broader distribution and commercial capabilities. From a strategic standpoint, HRX is a strong fit within our safety division. It enhances our position in motorsport safety, adds premium manufacturing capabilities, and expands our presence in the European market, an area we see meaningful opportunity for growth. More broadly, HRX reflects the type of discipline, strategically aligned acquisition we are targeting. It demonstrates how we can deploy capital generated through our optimization efforts into higher growth opportunities. and we expect to continue pursuing similar transactions over time. So stepping back, while Q1 was impacted by temporary external factors, primarily weather and channel inventory, the underlying business performed well. We expanded margins, improved cash flow, and made meaningful progress on our strategic priorities. And as conditions normalized, demands improved, and we exited the quarter with momentum that's carrying into Q2. With that, I'll turn it over to Jesse to walk through the full financials and provide additional perspective on the 2026 outlook. Jesse?