Holley Inc. Piper Sandler 5th Annual Growth Frontiers Conference

All right. Thank you, Peter, and good afternoon, everyone. We're with, as Peter said, Holley Performance Brands, and run by Jesse Weaver, our CFO, and again, I'm Matthew Stevenson. Go through a few quick slides on the background of the company. We're actually headquartered here in Nashville, Tennessee. I'll go over some of our business structure and the great brands that are part of our products, as well as some of the outlook and the near-term strategy. First is a safe harbor statement. I'd like to put that up there, and then Jesse, we'll go past this one here, and we'll talk a bit about our market. Unlike a lot of consumer products, our customers are enthusiasts when they buy our products. The best kind of comparison, I'd say, is the people that golf, people that fish, people that hunt. This is our customers' pastimes.

These are not products they purchase every 5 to 10 years. These are products they purchase as an ongoing basis because it's their hobby. You can see there, when we talk about the enthusiast performance aftermarket, these are people that modify their cars for additional performance. There's roughly about 70 million participants in the market. When you can see some of the other categories that I mentioned, how it dwarfs them in comparison. We're over a 120-year-old company. Originally started with the carburetors on the Model T. Through a series of acquisitions throughout the years, we have over 60 brands in our portfolio, most recently adding a new racing suit provider out of Italy, called HRX. We have four divisions that are set up in our organization. Roughly about a $50 billion addressable market.

American Performance, where Holley is really one or two in a number of categories we can compete with, as a $5 billion sector. The largest segment in the U.S. is the Modern Truck & Off-Road market. 80% of what consumers purchase are either trucks, SUVs, or CUVs. Euro & Import is a $14 billion addressable market, and Safety & Racing is $10 billion. Safety & Racing is protection gear for both motorsports and power sports. Those are how we have our four divisions structured internally. Within our 65 brands, we really prioritize about 20 brands, and you can see those listed under each of the verticals. Our strategic plan centers around making Holley a great place to work. Premier consumer journey, which is our direct-to-consumer business. Trailblazing trusted partner, which is our B2B.

Innovation and product management, global expansion and new markets, transformational M&A, fund the growth, and of course, delivering the results. Here's just a flavor of some of the key initiatives in our 2026 plan that we'll probably talk about a little bit more with Peter, is such expanding our product line through new innovations, new markets, as well as new channel placements in some of the large national retailers, which we announced recently. Focus a lot on growth, but at the same time, operational excellence. We consolidated various manufacturing sites throughout this year and are in the midst of implementing a new ERP and WMS system. One of the other things we've been doing is really taking the opportunity in this market to optimize our portfolio. What we do is we make vehicles better. We like to say we make them faster, louder, safer, more fun, and exciting.

There are some brands in our portfolio that really didn't align to the strategy for our organization. So we took that opportunity to divest those brands, and we've divested four out of the five targets so far this year, with one more to be done by the remainder of the year. Then are reinvesting those proceeds either into paying down debt or acquiring new businesses that fit in that strategy of aftermarket performance. Where we focus on those is really looking at founder-led businesses. This is a highly fragmented market where the average company is around $20 million in a $50 billion space. So we are the largest aftermarket performance platform, and so it gives us a great opportunity to invite new businesses into the fold, and we're really looking for that connection with the enthusiasts that founder-led businesses have.

Typically, even in the recent market cycles that are growing double digits, have strong free cash flow, and have a great pipeline of innovation behind them. The most recent one, as I mentioned, was HRX. This was a founder-led business, focused primarily on direct-to-consumer. So there was a large unlock for us in unlocking the B2B channel for this business around the globe and offering off-the-shelf product. They've been growing at double-digit revenue, have over 20% EBITDA, and strong free cash flow. So these are the types of businesses that we can purchase, generally speaking, at a multiple below where we trade at. Incredibly accretive and using our either operational back end or our commercial synergies to expand and grow these businesses or optimize their profitability. So just some highlights from the second quarter and recent events. We ended up growing on a reported basis, 3.2%.

On a core basis, which was exclusive divested businesses, nearly 5%. We've now grown five out of the last six quarters in a market that has generally been pretty flat. The first quarter was the only exception, where there was some channel inventory that was a little heavier than normal, as well as some weather events that we were down a few percent in Q1 this year. But 27 brands grew this last quarter. We generated $41 million in free cash flow and continue to drive savings from our operational improvements. You can see there, $13.4 million in revenue, but also $8.3 million in cost savings. One of the things we've done is we're continuing to enhance our connection through our marketing efforts. When Jesse and I joined the company about three and a half years ago, all the marketing was centralized and not in the divisions.

Over the last three years, we have made a strategic initiative to put the marketing back within the divisions to be closer to the enthusiasts, to understand the trends and the innovation and the unmet needs that drive this business. It is really starting to bear fruit in some of our divisions, like Modern Truck & Off-Road, that were up double digits this past quarter. We also initialized a share repurchasing on our capital allocation. First and foremost is to pay down debt, then second, M&A. There has been such a disconnect from where we feel the valuation of the company is and the share price, just based on some of the macro events going on relative to fuel and rates, that we remain opportunistic to purchase shares. We did some of that this past quarter.

Talked about the portfolio rebalancing, then one of the things is a real testament to the operational efficiency, as well as the growth algorithm of this company, is we have paid down $115 million of debt proactively since September of 2023. When Jesse and I joined, the leverage was nearly 6x EBITDA. Now we are down to about 3.74, with plans to get under 3.5 by the end of the year and 3x by the end of 2027. Then on the second half, we are pretty excited about some of the great new product innovations, new national retailer placements we have, as well as some of the expansion on export markets that we have initiated. That sets us up for a strong second half. We look at the guidance for 2026. It is in that $610 million to $640 million top line with adjusted EBITDA between $127 million and $137 million.

Just for reference, in 2025, we were at 124. Okay. That is a little background on the organization, then we can jump into some Q&A, Peter.