Slide 1: Second Quarter 2023 Financial Results Call
Second Quarter 2023 Financial Results Call August 10, 2023
Slide 2: Agenda
AGENDA Introductions & Ross Collins Forward-Looking Statements Investor Relations Matthew Stevenson Results and Highlights President & CEO Jesse Weaver Financial Results CFO Matthew Stevenson Outlook President & CEO Q&A Group 2
Slide 3: Disclaimer
DISCLAIMER Certain statements in this presentation may be considered “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to future events or Holley’s future
Slide 4: Results & Highlights
RESULTS & HIGHLIGHTS Matthew Stevenson President & CEO 4
Slide 5: Key Takeaways for Q2
KEY TAKEAWAYS FOR Q2 Building Path to Deliver Annual Gross Margin of ~40% and >20% EBITDA Demonstrated ability to achieve ~20% EBITDA Improved inventory controls delivering improvements in Working Capital Past dues improved in both Electronic and Mechanical Categories Reignited “marquee” product inn
Slide 6: Focusing Organization on Success Principles
FOCUSING ORGANIZATION ON SUCCESS PRINCIPLES Listening to Enhancing Our Teammates Operations Optimizing Putting ALL Acquisitions Customers First 6
Slide 7: Q2 Financial Results & Ongoing Business Highlights
Q2 FINANCIAL RESULTS & ONGOING BUSINESS HIGHLIGHTS FY2023 Q2 Results Business Highlights Net Gross 75 Industry Awards Sales Margin New Products '23 Best New Product '23 Muscle Car Pick Launched in Q2 $175.3M 39.8% (2.3%) vs. PY (220bps) vs. PY THREE Successful Social Adjusted Free Events in Q2 Engag
Slide 8: Financial Results
FINANCIAL RESULTS Jesse Weaver Chief Financial Officer 8
Slide 9: Near-Term Financial Priorities Remain
NEAR-TERM FINANCIAL PRIORITIES REMAIN Proactively Managing the Business to Drive Long-Term Value RESTORE IMPROVE FREE OPTIMIZE DELEVER PROFITABILITY CASH FLOW WORKING CAPITAL BALANCE SHEET • Identified material • Mitigate COVID • Inventory turns • Amended credit cost savings Headwind back inline wit
Slide 10: Q2 Summary Income Statement
Q2 SUMMARY INCOME STATEMENT ($MM) 2Q23 2Q22 B/(W) Net Sales $175.3 $179.4 (2.3%) Gross Margin 39.8% 42.0% (220) bps SG&A (incl. R&D) $35.3 $44.5 $9.2 Adj. EBITDA1 $37.9 $37.2 $0.7 Adj. EBITDA Margin1 21.6% 20.7% 90bps Interest Expense $9.9 $9.0 ($0.9) Adj. Net Income1 $16.0 $13.2 $2.8 Adj. Diluted E
Slide 11: Net Sales Growth Build Up
NET SALES GROWTH BUILD UP Acquisition Vintage1 ($MM) Product Category Detail1 ($MM) 15% CAGR $175 (TOTAL) $175 $3 $16 $14 7% CAGR $24 $26 (LEGACY) $2 $17 $101 $6 $41 $15 $133 $23 $101 $74 $57 2Q19 2Q23 2Q19 2Q23 Legacy Acq 2019 Acq 2020 Acq 2021 Acq 2022 Elec Mech Exhaust Access Safety Compared to 2
Slide 12: Net Sales Trends by Product Category
NET SALES TRENDS BY PRODUCT CATEGORY Quarterly Net Sales by Product Category ($MM) $200 $172 $175 $179 (13.9%) (2.3%) $20 vs PY vs PY $18 $17 $18 $23 $29 $17 $16 $16 $14 $25 $28 $16 $12 $26 $23 $19 $27 $7 $17 $21 $15 $9 $18 $25 $26 $7 $18 $17 $20 $16 $19 $17 $19 $19 $42 $46 $15 $14 $9 $6 $42 $44 $41
Slide 13: Inventory In-Stock Helping Reduce Past Dues
INVENTORY IN-STOCK HELPING REDUCE PAST DUES Past Due Order Trends by Product Category ($MM) QoQ $4MM Decline $56 $55 $53 $51 $47 $44 QoQ $36 $4MM Decline $27 $26 $22 $19 $15 $11 $2 $2 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Electronics Mechanical Exhaust Accessorie
Slide 14: Gross Profit Trends
GROSS PROFIT TRENDS Gross Profit ($MM) and Gross Margin (%) 42% 41% 43% 41% 42% 42% 42% 41% 41% 39% 39% 40% 38% 38% 38% 31% 31% $81 $83 $75 $75 $68 $69 $66 $65 $56 $55 $52 $46 $48 $47 $38 $34 $33 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Gross Profit Gross
Slide 15: SG&A and R&D Trends
SG&A AND R&D TRENDS Quarterly SG&A ($MM), R&D ($MM), Equity Based Comp ($MM) and % of Sales $36MM (excl. R&D) $45MM $29MM (incl. R&D) $14.9 (excl. R&D) $2.2 $3.5 $3.2 $35MM $8.1 (incl. R&D) $8.2 $2.9 $6.7 $0.4 $2.5 $8.2 $1.8 $0.1 $6.7 $6.0 $7.1 $7.1 $6.2 19.7% 18.8% 21.6% 16.5% 18.3% 15.6% 17.2% 13.
Slide 16: Adjusted EBITDA Trends
ADJUSTED EBITDA1 TRENDS Adjusted EBITDA ($MM), Net Sales ($MM) and Adjusted EBITDA Margin (%) 29% 28% 27% $200 26% $193 28% $180 $179 $172 $175 23% 23% 22% $160 $160 $155 $154 22% 20% 21% 20% 20% $138 22% 18% $133 $125 $107 $101 $90 $88 11% 10% $54 $44 $46 $36 $35 $35 $36 $37 $34 $38 $28 $30 $25 $18
Slide 17: Free Cash Flow Generation Improving
FREE CASH FLOW1 GENERATION IMPROVING Free Cash Flow Pre-M&A ($MM) ($58)MM $10MM Inventory Headwind2 Inv. Tailwind $29 $29 $24 $24 $16 $16 $13 $11 ($24)MM $3 Inv. Headwind ($1) ($1) ($8) ($11) ($25) 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Free Cash Flow ($MM) Free Cash F
Slide 18: Net Debt to EBITDA Leverage Ratio
NET DEBT TO EBITDA LEVERAGE RATIO1 Net Leverage Ratio (Net Debt/TTM Covenant EBITDA) 7.25x Amended Q2 Covenant Q2 Net Leverage Ratio was meaningfully below Amended Credit 5.67 x 5.58 x Agreement Covenant of 7.25x 4.96 x 4.10 x 3Q22 4Q22 1Q23 2Q23 $ millions 3Q22 4Q22 1Q23 2Q23 Net Debt $637.0 $636.0
Slide 19: Raising Full Year 2023 Guidance
RAISING FULL YEAR 2023 GUIDANCE Key Drivers of 2023 Guidance ▪ Ongoing normalization of demand back to trend line growth versus pre-COVID levels ▪ Continuing microchip availability constraints with Holley EFI ▪ Savings from our cost-reduction initiatives FY23 Outlook ($ millions) Previous Outlook Re
Slide 20: Q&A
Q&A Matthew Stevenson President & CEO Jesse Weaver Chief Financial Officer 20
Slide 21: Outlook
OUTLOOK Matthew Stevenson President & CEO 21
Slide 22: Working Together to Drive Financial Success
WORKING TOGETHER TO DRIVE FINANCIAL SUCCESS Large base of passionate and highly engaged enthusiast consumers with attractive demographics 6-7% Organic Top Line Growth Massive $39B U.S. market with decades of uninterrupted growth1 ~40% Gross Powerhouse of product innovation with iconic brands Margin
Slide 23: Appendix
‘ite Holley Appendix
Slide 24: Holley Products Serve Needs Across the Vehicle
HOLLEY PRODUCTS SERVE NEEDS ACROSS THE VEHICLE * *Brands listed are representative of Key Holley Brands in each category 24
Slide 25: Orders vs Shipments, Past Due Orders
ORDERS VS SHIPMENTS, PAST DUE ORDERS Orders vs Shipments ($MM) $217 $211 $188 $185 $184 $182 $200 $206 $165 $161 $185 $185 $160 $179 $182 $163 $149 $152 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Orders Shipments Past Due Orders ($MM) $55 $53 $56 $51 $47 $36 $27 $26 $22 2Q21 3Q21 4Q21 1Q22 2Q22 3Q
Slide 26: Net Sales Trends by Acquisition Vintage Year
NET SALES TRENDS BY ACQUISITION VINTAGE YEAR Quarterly Net Sales1 by Acquisition Year ($MM) $5 $18 $7 $3 $2 $31 $14 $6 $31 $14 $14 $29 $2 $1 $2 $3 $30 $26 $2 $12 $11 $24 $2 $24 $27 $2 $2 $2 $12 $3 $23 $23 $2 $2 $4 $2 $2 $1 $1 $154 $148 $142 $131 $132 $128 $133 $133 $124 $125 $126 $116 $116 $101 $106
Slide 27: Inventory Levels Improving
INVENTORY LEVELS IMPROVING Inventory Turnover (Turns/Year) 3.0 x 3.0 x 2.7 x 2.8 x 2.7 x 2.5 x 2.5 x 2.2 x 2.2 x 2.1 x 2.1 x 1.9 x 2.0 x 1.9 x 1.9 x 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Inventory Turns Inventory levels back in-line with historical trends with up
Slide 28: Demand Normalization Illustration
DEMAND NORMALIZATION ILLUSTRATION Legacy1 vs. Hist. Industry Order Growth Indexed to 2019 Base Line Normalization of demand implies a YOY order headwind of 4.0-4.5% when compared to historical industry growth rate of ~6.5% 4.0-4.5% YOY 157 Headwind 135 134 129 100 Historical Industry Benchmark would
Slide 29: TTM EBITDA Reconciliation
TTM EBITDA RECONCILIATION 29
Slide 30: Quarterly EBITDA Reconciliation
QUARTERLY EBITDA RECONCILIATION HOLLEY INC. and SUBSIDIARIES USE AND RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (In millions) (Unaudited) 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Net Income (Loss) $ (9) $ (11) $ 29 $ 5 $ 13 $ 13 $ 2 $ (2) $ 23 $ (30) $
Slide 31: Quarterly Free Cash Flow Reconciliation
QUARTERLY FREE CASH FLOW RECONCILIATION 31
Slide 32: Adjusted Net Income and Adjusted Diluted EPS Reconciliation
ADJUSTED NET INCOME AND ADJUSTED DILUTED EPS RECONCILIATION 32