Slide 1: Fourth Quarter 2023 Financial Results Call
Fourth Quarter 2023 Financial Results Call February 28, 2024
Slide 2: 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 3: Agenda
AGENDA Introductions & Ross Collins Forward-Looking Statements Investor Relations Matthew Stevenson Results and Highlights President & CEO Jesse Weaver Financial Results CFO Q&A Group Matthew Stevenson Outlook President & CEO 3
Slide 4: Results & Highlights
RESULTS & HIGHLIGHTS Matthew Stevenson President & CEO 4
Slide 5: Key Takeaways for Q4
KEY TAKEAWAYS FOR Q4 Focused on Unlocking A Path For Growth and Delivering Annual Gross Margin of ~40% and ≥ 20% Adj. EBITDA Margin Quarterly revenue increased on a year-over-year basis Continued delivery of improved gross margin and adjusted EBITDA Strong free cash flow and debt paydown drove net l
Slide 6: Q4 Financial Results & Ongoing Business Highlights
Q4 FINANCIAL RESULTS & ONGOING BUSINESS HIGHLIGHTS FY2023 Q4 Results Business Highlights New Products Launched in Q4 Across Verticals Net Gross Sales Margin 56 Domestic $155.7M 38.7% Muscle Off-Road Euro & Import +1.0% vs. PY +800bps vs. PY Elevating Promotional Efforts Adjusted Free >670MM +10% Med
Slide 7: Steering Principals Guide Our Success
STEERING PRINCIPALS GUIDE OUR SUCESS Listening to Enhancing Our Teammates Operations Optimizing Putting ALL Acquisitions Customers First 7
Slide 8: A Comprehensive Transformation Is Underway
A COMPREHENSIVE TRANSFORMATION IS UNDERWAY Midway through our journey in developing essential building blocks to drive growth Focus the Drive Accountability Organization on the Develop a High- Unlock Transformative and Empowerment Greatest Areas of Performing Team Growth Opportunities • Foster trans
Slide 9: Keys to Unlocking Transformative Growth
KEYS TO UNLOCKING TRANSFORMATIVE GROWTH ▪ Market and Consumer Segmentation Product ▪ Transformative SKU Rationalization Innovation ▪ Innovation Phase Gate System ▪ Enhancing Launch Capabilities ▪ Digital Transformation Promotional ▪ 3rd Party Marketplace Optimization Excellence ▪ Enhanced Consumer E
Slide 10: Focusing on the Consumer Verticals
FOCUSING ON THE CONSUMER VERTICALS Dedicating Resources to Each Vertical to Foster Growth 10
Slide 11: Focused Growth Based on Customer Verticals
FOCUSED GROWTH BASED ON CUSTOMER VERTICALS Examples from our Off-Road and Euro Verticals Shifting From Pieces and Parts to Solutions for Consumers 11
Slide 12: APR Customer Award for Innovation
• APR won a Customer Award for Innovation for the Direct Replacement Turbo Charger System 12
Slide 13: Financial Results
FINANCIAL RESULTS Jesse Weaver Chief Financial Officer 13
Slide 14: Q4 Key Metric Recap
Q4 KEY METRIC RECAP ($MM) 4Q23 4Q22 B/(W) Net Sales $155.7 $154.2 1.0% Gross Margin 38.7% 30.7% 800 bps SG&A (incl. R&D) $37.2 $54.9 $17.7 Adj. EBITDA1 $28.5 $15.1 $13.4 Adj. EBITDA Margin1 18.3% 9.8% 850 bps Interest Expense $18.8 $13.4 ($5.4) Adj. Net Loss1 ($0.5) ($22.6) $22.1 Adj. Diluted EPS1 $
Slide 15: Free Cash Flow Generation Improving
FREE CASH FLOW1 GENERATION IMPROVING Free Cash Flow Pre-M&A ($MM) ($58)MM Inventory Headwind2 $29 $29 $30 $24 $24 $22 $16 $16 $13 $11 $3 ($1) ($1) ($8) ($11) ($25) 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 Free Cash Flow in 4Q23 up ~$31M YOY due to higher EBITDA
Slide 16: Net Debt to EBITDA Leverage Ratio
NET DEBT TO EBITDA LEVERAGE RATIO1 Net Leverage Ratio (Net Debt/TTM Covenant EBITDA) 5.75x Amended Q4 Covenant 5.67 x 5.58 x 5.0x 4.89 x Original Covenant 4.21 x 1Q23 2Q23 3Q23 4Q23 $ millions 1Q23 2Q23 3Q23 4Q23 Net Debt $634.1 605.3 584.4 553.4 Adj. EBITDA (TTM)2 102.6 103.3 116.7 130.1 Covenant A
Slide 17: FY Key Metric Recap
FY KEY METRIC RECAP ($MM) FY23 FY22 B/(W) Net Sales $659.7 $688.4 (4.2%) Gross Margin 38.8% 36.8% 200 bps SG&A (incl. R&D) $144.1 $179.8 $35.7 Adj. EBITDA1 $130.1 $114.7 $15.4 Adj. EBITDA Margin1 19.7% 16.7% 300 bps Interest Expense $60.7 $40.2 ($20.5) Adj. Net Income1 $25.0 $7.9 $17.1 Adj. Diluted
Slide 18: 2023 Delivered on All Priorities
2023 DELIVERED ON ALL PRIORITIES Proactively Leading the Business to Drive Sustainable Results RESTORE IMPROVE FREE OPTIMIZE DELEVER PROFITABILITY CASH FLOW WORKING CAPITAL BALANCE SHEET • Identified material • Improved free • Inventory turns • Cash flow cost savings cash flow from back in line with
Slide 19: Financial Guidance – Q1 and Full Year 2024
FINANCIAL GUIDANCE – Q1 AND FULL YEAR 2024 Key Drivers of Q1 and Initial 2024 Guidance ▪ Softer than expected out-the-door sales at our distribution partners in late 2023 impacting 1Q sales ▪ Lack of past due tailwinds impacting full year 2024 sales ▪ Sales and EBITDA ranges include further rational
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 6-7% Organic consumers with attractive demographics Top Line Growth Massive $39B U.S. market with decades of uninterrupted growth1 ~40% Gross Margin Target Powerhouse of product innovation with iconic
Slide 23: Appendix
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: Net Sales Trends
NET SALES TRENDS Quarterly Net Sales $200 $193 $179 $156 $180 +1.0% $172 $175 $154 vs PY $160 $160 $157 $155 $138 $133 $125 $107 $88 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 Positive year-over-year growth in both 3Q23 and 4Q23, benefited by continued Past
Slide 26: Inventory In-Stock Helping Reduce Past Dues
INVENTORY IN-STOCK HELPING REDUCE PAST DUES Past Due Order Trends by Product Category ($MM) $56 $55 $53 $51 $47 $44 $36 $5MM Improvement $27 $26 $22 $19 $15 $14 $11 $9 $2 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 Electronics Non-Electronics Past Dues at lowest l
Slide 27: Gross Profit Trends
GROSS PROFIT TRENDS Gross Profit ($MM) and Gross Margin (%) 41% 42% 42% 41% 43% 42% 41% 42% 41% 40% 39% 39% 39% 38% 37% 31% 31% $81 $83 $75 $75 $68 $70 $66 $65 $58 $60 $56 $55 $52 $46 $48 $47 $33 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 Gross Profit Gross
Slide 28: Adjusted EBITDA Trends
ADJUSTED EBITDA1 TRENDS Adjusted EBITDA ($MM), Net Sales ($MM) and Adjusted EBITDA Margin (%) 29% 27% $200 $193 26% 28% $180 $179 $175 23% $172 22% $160 $160 $155 $154 22% $157 $156 21% 20% 23% 19% $138 22% 19% $133 18% $125 20% $107 $88 11% 10% $54 $44 $46 $36 $35 $35 $36 $37 $34 $38 $30 $30 $28 $2
Slide 29: Orders vs Shipments, Past Due Orders
ORDERS VS SHIPMENTS, PAST DUE ORDERS Orders vs Shipments ($MM) $206 $188 $211 $185 $179 $182 $184 $163 $164 $185 $185 $161 $182 $149 $163 $160 $152 $147 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 Orders Shipments Past Due Orders ($MM) $56 $51 $47 $36 $27 $26 $22 $14 $9 4Q21 1Q22 2Q22 3Q22 4Q22 1Q2
Slide 30: Inventory Levels Improving
INVENTORY LEVELS IMPROVING Inventory Turnover1 (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 1.9 x 1.9 x 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 Inventory Turns Inventory levels back in-line with hi
Slide 31: Interest Rate Collar Summary
INTEREST RATE COLLAR SUMMARY Key Terms Effective Date 2/18/2023 Maturity Date 2/18/2026 Holley Inc. Buys a Cap 5.000% Holley Inc. Sells a Floor 2.811% Index 3 Month Term SOFR Premium Zero Hedge Level $500MM With the collar in place, YTD effective cash interest rate of ~8.9% 31
Slide 32: TTM EBITDA Reconciliation
TTM EBITDA RECONCILIATION HOLLEY INC. and SUBSIDIARIES USE AND RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (In millions) (Unaudited) TTM 1Q23 2Q23 3Q23 4Q23 Net Income $ 61.2 $ 33.6 $ 2.8 $ 19.2 Adjustments: Interest Expense 51.1 52.1 55.4 60.7 Income Taxes (1.1) (0.1) 3.4 8.4 Depreciation 10.4 10
Slide 33: Quarterly EBITDA Reconciliation
QUARTERLY EBITDA RECONCILIATION HOLLEY INC. and SUBSIDIARIES USE AND RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (In millions) (Unaudited) 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 Net Income (Loss) $ (11) $ 29 $ 5 $ 13 $ 13 $ 2 $ (2) $ 23 $ (30) $ (
Slide 34: Quarterly Free Cash Flow Reconciliation
QUARTERLY FREE CASH FLOW RECONCILIATION HOLLEY INC. and SUBSIDIARIES USE AND RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (In millions) (Unaudited) 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 Net cash provided by (used in) operating activities $ 17 $ 26 $ 32 $ 13
Slide 35: Adjusted Net Income and Adjusted Diluted EPS Reconciliation
ADJUSTED NET INCOME AND ADJUSTED DILUTED EPS RECONCILIATION 35