Slide 1: Third Quarter 2023 Financial Results Call
Third Quarter 2023 Financial Results Call November 8, 2023
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 Q3
KEY TAKEAWAYS FOR Q3 Building Path to Deliver Annual Gross Margin of ~40% and >20% Adj. EBITDA Delivered marked improvement in Gross Margin and Adjusted EBITDA Inventory efforts delivering continued improvement in Working Capital Past dues improved across all categories, particularly in Electronics
Slide 6: Q3 Financial Results & Ongoing Business Highlights
Q3 FINANCIAL RESULTS & ONGOING BUSINESS HIGHLIGHTS FY2023 Q3 Results Business Highlights Gross Four Successful Net Sales Margin 67 New Products Launched in Q3 Events in Q3 $156.5M 37.3% +1.1% vs. PY +600bps vs. PY Social Engagement New Leaders Adjusted Free SVP EBITDA Cash Flow1 Customer VP Product
Slide 7: Strong Presence and Leadership at SEMA
STRONG PRESENCE AND LEADERSHIP AT SEMA Best Engineered New Product & Celebrity Partnership & Global Media Awards Customer Innovation Award • Holley Easy-LevelTM Fuel Sender won Best Engineered New Product 2023 • Detroit Speed & Engineering unveiled its 1969 Pontiac GTO Pro- Touring restoration commi
Slide 8: Focusing Organization on Success Principles
FOCUSING ORGANIZATION ON SUCCESS PRINCIPLES Listening to Enhancing Our Teammates Operations Optimizing Putting ALL Acquisitions Customers First 8
Slide 9: Key Initiatives Across the Organization
KEY INITIATIVES ACROSS THE ORGANIZATION Focused on Unlocking Growth and Improving Operations Marketing & Sales Enhanced Product New Organizational Cost to Serve Development Structure Evolution Growth in DTC and Lowering Our Cost and Driving Product Empowering Our Distribution Improving Service Leade
Slide 10: Holley's New Consumer Vertical Orientation
HOLLEY’S NEW CONSUMER VERTICAL ORIENTATION Enhanced Customer Focus to Accelerate Growth 10
Slide 11: Financial Results
FINANCIAL RESULTS Jesse Weaver Chief Financial Officer 11
Slide 12: Near-Term Financial Priorities Remain
NEAR-TERM FINANCIAL PRIORITIES REMAIN Proactively Leading the Business to Drive Sustainable Results RESTORE IMPROVE FREE OPTIMIZE DELEVER PROFITABILITY CASH FLOW WORKING CAPITAL BALANCE SHEET • Identified material • Improved free • Inventory turns • Cash flow cost savings cash flow from back in line
Slide 13: Q3 Summary Income Statement
Q3 SUMMARY INCOME STATEMENT ($MM) 3Q23 3Q22 B/(W) Net Sales $156.5 $154.8 1.1% Gross Margin 37.3% 31.3% 600 bps SG&A (incl. R&D) $35.0 $38.0 $3.0 Adj. EBITDA1 $29.7 $16.4 $13.3 Adj. EBITDA Margin1 19.0% 10.6% 840 bps Interest Expense $13.7 $10.4 ($3.3) Adj. Net Income1 $3.5 ($4.1) $7.6 Adj. Diluted
Slide 14: Net Sales Trends by Product Category
NET SALES TRENDS BY PRODUCT CATEGORY Quarterly Net Sales $200 $193 $157 $180 $179 +1.1% $172 $175 vs PY $160 $160 $155 $154 $138 $133 $125 $107 $90 $88 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 Quarterly YOY growth trends improving sequentially in 3Q23 with
Slide 15: Inventory In-Stock Helping Reduce Past Dues
INVENTORY IN-STOCK HELPING REDUCE PAST DUES Past Due Order Trends by Product Category ($MM) $11MM $56 Improvement $55 $53 $51 $47 $44 $36 $8MM Improvement $27 $26 $22 $19 $15 $14 $11 $2 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 Electronics Non-Electronics All categor
Slide 16: Gross Profit Trends
GROSS PROFIT TRENDS Gross Profit ($MM) and Gross Margin (%) 42% 41% 42% 43% 41% 41% 42% 41% 42% 39% 40% 39% 38% 38% 37% 31% 31% $81 $83 $75 $75 $68 $69 $66 $65 $56 $58 $52 $55 $46 $48 $47 $34 $33 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 Gross Profit Gross
Slide 17: Adjusted EBITDA Trends
ADJUSTED EBITDA1 TRENDS Adjusted EBITDA ($MM), Net Sales ($MM) and Adjusted EBITDA Margin (%) 29% 28% 27% $200 $193 26% $180 $179 $172 $175 23% 23% 22% $160 $160 $155 $154 22% $157 20% 21% 19% 20% $138 22% 19% $133 $125 20% $107 $90 $88 11% 10% $54 $44 $46 $36 $35 $35 $36 $37 $34 $38 $30 $30 $25 $18
Slide 18: Free Cash Flow Generation Improving
FREE CASH FLOW1 GENERATION IMPROVING Free Cash Flow Pre-M&A ($MM) ($58)MM Inventory Headwind2 $29 $29 $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 Free Cash Flow in 3Q23 up ~$33M YOY due to higher EBITDA, improve
Slide 19: Net Debt to EBITDA Leverage Ratio
NET DEBT TO EBITDA LEVERAGE RATIO1 Net Leverage Ratio (Net Debt/TTM Covenant EBITDA) 6.50x Amended Q3 Covenant 5.67 x 5.58 x 5.0x Original Covenant 4.96 x 4.89 x 4Q22 1Q23 2Q23 3Q23 $ millions 4Q22 1Q23 2Q23 3Q23 Net Debt $636.0 $634.1 605.3 584.4 Adj. EBITDA (TTM)2 114.7 102.6 103.3 116.7 Covenant
Slide 20: 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 $500MM With the collar in place, YTD effective cash interest rate of ~8.5% 20
Slide 21: Updated Full Year 2023 Guidance
UPDATED FULL YEAR 2023 GUIDANCE FY23 Outlook ($ millions) Previous Outlook Revised Outlook Net Sales $635 – $675 $645 – $675 Adjusted EBITDA $118 – $128 $123 – $128 Capital Expenditures $5 – $10 $6 – $8 Depreciation and $23 – $25 $24 – $26 Amortization Interest Expense $58 – $62 $58 – $62 (excluding
Slide 22: Q&A
Q&A Matthew Stevenson President & CEO Jesse Weaver Chief Financial Officer 22
Slide 23: Outlook
OUTLOOK Matthew Stevenson President & CEO 23
Slide 24: 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 $39B U.S. market with decades of uninterrupted growth1 ~40% Gross Margin Target Powerhouse of product innovation with iconic
Slide 25: Appendix
‘ite Holley Appendix
Slide 26: Holley Products Serve Needs Across the Vehicle
HOLLEY PRODUCTS SERVE NEEDS ACROSS THE VEHICLE * *Brands listed are representative of Key Holley Brands in each category 26
Slide 27: Orders vs Shipments, Past Due Orders
ORDERS VS SHIPMENTS, PAST DUE ORDERS Orders vs Shipments ($MM) $211 $188 $185 $184 $182 $206 $165 $185 $161 $163 $185 $160 $179 $182 $163 $152 $149 $147 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 Orders Shipments Past Due Orders ($MM) $53 $56 $51 $47 $36 $27 $26 $22 $14 3Q21 4Q21 1Q22 2Q22 3Q22 4Q
Slide 28: 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 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 Inventory Turns Inventory levels back in-line with historical tr
Slide 29: TTM EBITDA Reconciliation
TTM EBITDA RECONCILIATION HOLLEY INC. and SUBSIDIARIES USE AND RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (In millions) (Unaudited) TTM 4Q22 1Q23 2Q23 3Q23 Net Income $ 73.8 $ 61.2 $ 33.6 $ 2.8 Adjustments: Interest Expense 40.2 51.1 52.1 55.4 Income Taxes 4.5 (1.1) (0.1) 3.4 Depreciation 10.1 10
Slide 30: 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 Net Income (Loss) $ (11) $ 29 $ 5 $ 13 $ 13 $ 2 $ (2) $ 23 $ (30) $ (18) $
Slide 31: 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 Net cash provided by (used in) operating activities $ 17 $ 26 $ 32 $ 13 $ 19
Slide 32: Adjusted Net Income and Adjusted Diluted EPS Reconciliation
ADJUSTED NET INCOME AND ADJUSTED DILUTED EPS RECONCILIATION HOLLEY INC. and SUBSIDIARIES USE AND RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (In millions, except per share data) (Unaudited) For the thirteen weeks ended October 1, 2023 October 2, 2022 Net Income $ 0.8 $ 31.6 Impairment of Indefinit