Good morning, everyone. Thank you for attending our 46th annual Growth Conference. I am Brian McNamara, one of Canaccord's Analysts in the Consumer/Industrial space. We are delighted to have Holley here, and to host CEO Matt Stevenson and CFO Jesse Weaver. Guys, thank you so much for joining us today. Thank you for having us. Matt, to start out, maybe just give us a brief overview of the company and your key initiatives. Yeah. Holley Performance Brands focuses on automotive performance aftermarket, almost exclusively on performance. We like to say we make cars and trucks better, faster, louder, safer, and more fun and exciting. Based out of Nashville, Kentucky, with facilities around the U.S., as well as a couple facilities in Italy and a team in China as well. We have been doing a transformation for about three years. Holley went public in 2021, and Jesse and I joined, Jesse late 2022 and myself in mid 2023. A lot of great work the team has done as we have returned to growth in the last five of the last six quarters. A lot of hard work has gone into really transforming the company and preparing it to be the multi-billion dollar platform that we know it could be. Can you frame up the opportunity when you arrived? You've been there a little over three years, the initiatives that you've since put in place, and the progress you've made? Yeah. One thing that attracted me to Holley is I'm an enthusiast. I love cars, and what also attracted me was the opportunity for the amazing brands we have in our portfolio. Also what I saw was a great set of brands and products that really did not have the sophistication to scale. We've spent a lot of time, I'd say, professionalizing the business across every part, every department, and putting in key processes that make this truly scalable, as opposed to just its origins as a previous roll-up. Really a business that can run at a Fortune 1000 level and capitalize on everything that's a part of that. Right. The performance automotive aftermarket's a shade under maybe $40 billion market. You're one of the leaders with a little north of $600 million in sales. What areas of the market are growing the fastest, and why is it so fragmented? Is there a big consolidation opportunity here? Yeah. So definitely one of the key parts, as you allude to, Brian McNamara, of our thesis is inorganic. Strategic M&A to round out some of the categories we compete in. It is a highly fragmented industry. It is a large industry, $40 billion when we take the global safety piece that we participate in, probably another $10 billion on top of that, so roughly about $50 billion. I think the origins of this industry, just a lot of great entrepreneurs finding a niche on a car or truck or motorcycle or what have you, and turning that into a great business. The average business in the space we compete in is about $20 million. When you look at large enthusiast performance-oriented platforms, there really are not any. There has been some private equities that have come in and have 10 brands here, this or that, but nothing at our scale and size, nor equipped to scale at the level we will be capable of or are capable of today. You guys rationalized a good chunk of SKUs early on in the turnaround. This year, you have done some further portfolio optimization. What brands have you or will you divest, and why are they or were they not core to your strategy? Yeah. Brian, I think maybe I forgot the other half of your question about growth on it. We are seeing growth across our portfolio. Really, the market, generally speaking, has been flat, probably low single digits this year, and has been over the last couple of years. This is a market that is traditionally growing about mid-single digits. A little bit of price and a little bit of volume is the best way to think about it. That has shown that trajectory outside the ups and downs post-COVID, but that is generally, if you take kind of 2020 to 2023 out of the equation, see a nice linear growth curve across that industry. Now, we are outpacing industry growth in many of our segments because of just key things we are doing. Product innovation is absolutely foremost as we are a consumer products company, driving channel expansion, driving export markets, and driving enhanced strategic relationships with our B2B partners, as well as we do about 22% of our business direct to consumer. So we are able to steer our own ship, so to speak, and drive in that growth. Sorry I forgot that other part. No problem. Then on the portfolio optimization? Yeah. On portfolio optimization, we use a lot of analogies, or maybe I use too many, that Holley was like a house that hadn't been landscaped in 20 years. Couldn't see outside the outside windows. There was a large percentage of our SKU population, roughly half that sold less than $600 per year. You imagine the inventory, the minimum order quantities, the manufacturing changeovers. It was just not disciplined. Jesse started on it before I got here, then we doubled down on it. Taking about a half of the portfolio out, that's less than 5% of revenue. We did that really over 2023 and 2024. Then tariff landscape changes, freight rates have changed pretty considerably over the last two to three years. There are some businesses on the bubble that we looked at. Hey, these are really not core to who we are, performance. They're not scalable, and they're kind of a pain to manage day to day and take a disparate amount of time and effort. There were five businesses we identified that we brought to the market or in our earnings calls, not this past quarter, but before, that we want to jettison, and we've done four of those five. There's a small one left to go. Redeploy that capital into higher growth segments and actually make our margins more accretive. Also simplify the daily lives of the team just dealing with these businesses. You mentioned pretty consistent 6% or mid-single-digit growth for the industry, and it's been kind of flattish, up a little bit down a little bit the last few years. When is a reasonable time to expect that resumption of that typical, typically reliable growth? I'd say we're getting close to it. There's just a lot of, I think, we had the consumer conference, I'm sure I'm not the first person to say this, but there's a lot of noise in what's going on with consumer health, right? Whether that's the K-shaped economy, or now we're seeing some wage growth in the lower incomes, which is just nice to see in general. I think we've seen a lot of change over the last five or six years. There just doesn't seem to be a normal year anymore, whether a war or a supply shock or a pandemic or what have you. So I think when there's less volatility there, we can see just more consistent growth. But generally speaking, the resiliency of the consumer is felt in our segment. Our consumers are enthusiasts. The best thing to compare these to is people that hunt or golf or fish. It's their lifestyle, it's their pastime. That's what they do to keep their sanity. As opposed to a lot of other consumer product stocks that went public in kind of that 2020 to 2022 era, where you maybe buy that product five, 10, or 20 years, our people are always spending. They always got a car or a project. They're doing something. It's just to the degree that they'll spend, and we saw the industry a huge bump during COVID because people weren't traveling. Some people were getting stimulus checks, and they had more time at home. They weren't commuting. So you're going to do what you love more, which is in your garage. Right. So Matt, you are no stranger to successful turnaround stories. At this very conference two years ago, I kind of asked you what the timing was in terms of return to growth. You said 18- 24 months, and it looks like you nailed that because you guys have grown five out of the last six quarters. Why was Q1's organic sales decline the aberration and not the story? Yeah. In particular on Q1, we saw growth in all five quarters, and Q4 was actually a little too much growth, and we are pretty transparent about that when we reported the full year. We said there is probably 3%-4% of growth here that should not be here, probably should be timing in Q1. We have distributors, as you can imagine, they operate generally on competitive margins. The opportunity, a few of them to really lean out and hit their rebate targets. Also to the sophistication, although we have some really great partners. As a whole, the industry does not manage inventory. Maybe perhaps some consumer areas do or some segments. It is a lot of mom and pops that have grown up pretty fast. When you have pricing coming in, you have tariffs coming in, they are managing dollars versus inventory terms. There is a lot I think people got caught up in, and perhaps not looking at unit velocity as they should. There was some inventory in the channel there on a handful of particular customers, mostly 90%+ are American Performance segment. The channel went in too heavy into Q1. They said, "Hey, we will sell it out. Do not worry." Then the end of January and the beginning of February, those weather events, especially in the southeast, we saw our customers on sellouts down like 50%. It really gridlocks the country. There is a seasonality push that happens a lot in our industry. People work on their cars in the south all year long, right? In the north, season is shorter. January and February, a lot of that southeast is buying, working on projects, even working on outside. When they get abnormal weather, they are not buying. That inventory just took a while to work through the channel. We got back to overall growth, with three of the four divisions delivering over double-digit growth. American Performance was still down a little less than 3%, but now that channel inventory is normalized, and we are good for the balance of the year relative to channel inventory. It was really kind of a series of micro events and a little bit of timing. Generally speaking, that linear growth trajectory has been pretty consistent. A question for each of you. Jesse, you have been in the seat for nearly four years, Matt about 38 months. What are the biggest areas of improvement you have each seen during your tenure? The first thing is just the organization overall. I would say today the team we have in place looks very different than the team that we started with. That team is largely responsible for getting the professionalization in the organization that has been necessary to create the platform that generates the growth that we are seeing today. It also creates the opportunity for us to reengage in things such as M&A, which we did with the safety business and HRX. I think now the team is starting to really get into a rhythm and finding non-value-added costs, getting the innovation pipeline really robust. Continuing to support turning over every stone to do the things we have to do with facility consolidations. Then just continuing to do the things that Matt's vision was three years ago. Just seeing that team evolve and the process in place is huge. Your perspective, Matt? Yeah. It's definitely the team. It's a night and day business from what it was three years ago. Even though you go back three years ago, the revenues may have been a little larger, but the team that we had at the time was very much a team that came from very small businesses. The conversations were small business in nature. We've replaced 52 of the top 60 leaders. Holley has a ton of great teammates, and had a lot of great teammates that are car enthusiasts, but not a lot of business functional experts. So we replaced that top leadership. They've upgraded their teams, and the level of sophistication we're now running at is just I think I've commented to you a couple of times, I've put them in the same arena as a Fortune 1000 leadership team, right? Those are the kind of operational savvy and cost reductions we're after. Growth we're driving, in a market that's not doing us many favors generally speaking, right? So it's just the quality of the conversations and the excitement after you leave a room about a certain topic is just night and day. Right. You mentioned innovation. I think that's a key, obviously, area of improvement. Tell us about the evolution of your innovation strategy when you arrived and where it sits today. Yeah. The innovation strategy before was a bit of the Wild West. A lot of engineers turned loose, a lot of personal projects of cars people liked and not so much it wasn't driven off data and market potential and return. We brought a whole new level of discipline is, hey, I like certain cars too, but if that's not a project that makes money or that's not the highest return project, we're not going to work on it. We spent the last three years, really at first came in, we shut down all R&D for a short period of time just to reprioritize all the projects. As you can imagine, we got into this situation where half the portfolio was selling less than $600 because things are not in control. You don't want to repeat that. You got to kind of shut that bad funnel off. Then you want to get the good funnel going. We reprioritize the projects, put a discipline seven-stage phase gate system in from ideation to reflection, and now we have a repeatable process that the teams continue to learn from is what makes a good product introduction, like first to market, large TAM, differentiated product, all those things they start checking the box, and then we have reflection on how we'd launch it, what was good, what was bad, why did this one work, why this one didn't, and with as many products as we're launching every quarter, it's a great learning environment for the team to continue to refine that recipe. It's changed quite a bit, and that's part of the conversations of the first three years ago conversations on product development compared to what we have today. I always say M&A is in your DNA. You made your first acquisition, I think, since late 2022 in March with HRX. Jesse, you mentioned that earlier. Tell us how that came about, the opportunity you saw, and what you ideally look for in M&A targets. Yeah. So, again, our M&A strategy versus five years ago is very different. We're looking for high growth brands, generally speaking that are entrepreneur led, strong EBITDA, strong cash flow that are filling out a criteria or category for us we don't already have. And the other thing is we want to catch brands on the upswing, not brands in the maturity cycle. HRX, we have Simpson Race Products, which makes great race suits as well as helmets and other apparatus for racing, but it's a very traditional kind of American, I compare it to a suit, like a business suit, like an American style versus a European style. A lot of the circuits, they don't want heavy American-like suits. Those are more for drag racers and circle tracks and things like that. They want lighter, more breathable. Zippers sometimes go this way versus that way. There's subtle differences. It's a fashion element to it. HRX supplies suits to IndyCar, F2, F3, WRC, a host of circuits, and just tremendous cachet. We didn't have that reputation of race suits. Then we were selling to teams with our Stilo helmets in Italy, the same teams, and we didn't have the race suit, and vice versa, they didn't have the helmet. So there is a natural synergy of go-to-market overlap, our ability to help them from a capital and operational structure to scale, and then just continue to accelerate their growth. We want to take these great brands that are on the upswing and just put more nitrous to them. Got it. Pardon the pun. Jesse, maybe one for you. Probably the most underappreciated feature of the business, in my view, is your cash generation. Can you touch on how the company can generate the cash it does on an annual basis, even in the years when maybe top-line growth has been challenged? That's definitely something you and I see eye to eye on, Brian. This company generates, just for those that are new to the story, $40 million- $50 million in free cash flow pretty consistently. How we do it, I mean, the margins in the business, it's performance aftermarket, it's branded products. Our consumers tattoo their brands on their bodies. They're willing to pay for the brand. With that, we generate 20% EBITDA, and it's relatively capital light. I mean, CapEx, it's stepped up over the last year just as we've needed to put in some important infrastructure around an ERP system. But it generally runs 2%-3% overall. The way that we've been able to continue to generate this as well as support it through the reduction, like the revenue declines as it relates to getting out of businesses that are not profitable is because we've gotten out of businesses that are not profitable and started to put the right leadership team members in place to help manage things like the inventory in a good way. This is going to be something that I think as the business continues to grow, we've outlined our capital allocation framework, which is to get the leverage out of the business. Right now, we're just into the latest quarter at 3.74, which is a far cry from the 5.6, 5.7, whenever I started. We've prepaid debt, and through that initiative, our intention is to be, by the end of this year, sub 3.5, and by the end of next year, sub 3. You can kind of run that math out pretty easily and see how our prepayment of debt will continue to make that possible. So, it really is just a high cash generating business. Unlevered free cash flow would be close to $80 million- $90 million. So, great as far as that goes. To your point on deleveraging, I think you guys have prepaid $115 million- That is right. in debt since September of 2023. You expect end of the year below, maybe a little bit, a shade below 3.5. What is the ultimate target? Just sub three? Sub three. Okay. Sub three. One of the things when Matt first joined, and we talked a lot about is what is the driver of the disconnect between our value and sort of our closest tradable consumer peers. It came up time and time again, both empirically and in conversations, that the leverage profile of a consumer discretionary business of this size is driving a huge part of that disconnect. That is objective number one. Talk us, tell us about your margin structure. Even in the tough years, you have kind of been at that 40/20 range. How do you do it? Through a lot of continuous optimization of the cost structure, right? Going into that first year, a big part of it was just tackling all of the freight charges that were coming into the business, right? Renegotiation with your existing outbound freight, inbound freight suppliers, working through understanding all the. We were getting charged millions of dollars for not even having the right dimensions in the system for what we would tell UPS, as an example, we were going to ship for. Really just squeezing out the low-hanging fruit, and then keeping a really close eye to where the market is headed, right? If volumes seem to be down, are we challenging our teams to make sure that we have the right staffing models in place in distribution and manufacturing? This year, even we've consolidated two facilities already. We've got more that we're continuing to look at, just reducing the size of the footprint. It really is just a never-ending look at what can we do to take out non-value-added cost. A decent driver of your business is when cars change hands, right? New car sales, used car sales, from my math, were roughly 6 million units below each of their respective peak years. Tell us how you are navigating that environment, whether it be supply chain issues stymieing kind of the new car algorithm or kind of affordability challenges. Yeah. I think the biggest thing I commented a few minutes ago, Brian, is we control our destiny, right? Through innovations, through new channels, through those partnerships, engaging consumer. That is a very different mindset than existed here prior to three years ago. That was more of a company just rode the waves of the market up or down, versus we control our destiny. I think relative to cars changing hands, you are spot on. When that SAAR was 15-ish, and I think we are back in the 16s, you kind of feel the wind in your face, right? Cars changing hands, making sure that SAAR stays over 16, used cars changing hands, because there is a dynamic, especially in the modern truck and Euro import, where when someone buys a used truck or a new truck or a Euro car, that first six months is they are looking at it in the garage saying, "Hey, I got to make it my own. I got to personalize this some form or fashion." Our customers, typically, that is making it faster, louder, doing different things so they know it is their vehicle. Cars changing hands is a good thing for us. Tell us about the types of vehicles that are modified the most. I think obviously truck is a big opportunity. Maybe some other areas there. Yeah. We have something that we call kind of the, when we look at the TAM, the opportunity index is obviously they make a ton of Ford F-150s. Generally speaking, the mod rate on trucks is quite high. Now, there's cars like a BMW M3, fraction of what F-150s are, but extremely high mod rate. We look at all that and just say, "What is that true potential of that?" But generally speaking, in American Performance, those are more project cars. That has a really interesting dynamic where people tend to look at the cars with an eye of nostalgia of what they grew up with. And so peak spending years of a U.S. consumer is 45- 55. You walk that back in American Performance, it's like the mid-'80s, late '80s to mid to late '90s right now are in fashion. Right. Fox body Mustang, '90 Camaro, OJ Bronco, two-door K5 Blazer, you go on and on and on. Modern truck and Euro, those are more late model, and those are more that vehicles are daily or they're a sports car or something, and they just want to do those types of tunes, intakes, exhaust kind of things. Safety and racing, really, sometimes we get the question, well, how does that relate to these other things? Well, that's the pinnacle of the enthusiast. They mod their vehicle, and then they say, "I want to take it to the track and see what it does." We cover them head to toe in helmets, HANS device, racing suits, shoes, gloves, hydration systems, extinguisher systems, seats, everything to keep them safe on the track. It's a portfolio that works well together. Your board authorized its initial share repurchase program a few months ago. To me, that is telling the market that the board and yourselves probably think your shares are undervalued. Is that fair? Yeah. When we look at it, the capital allocation priorities, as Jesse said, are paying down the debt and also opportunistically getting back to the M&A, and we announced a couple quarters ago, we would like to do four to five of these HRX-type acquisitions through the end of 2027. But when there is such a disconnect between what we feel the value is of the company and the share price, we are also going to be opportunistic on that. That is where we did that authorization. Great. The last question we are asking all consumer-focused companies at the conference is on consumer health. How is your enthusiast consumers' health today relative to a year ago? How do you see consumer spending shaping up in the back half of the year and into 2027? Yeah, it is always the unknown where oil trades and a lot of macro factors. But generally speaking, the upper end of the K has hung in there. Now some of our more kind of meat and potatoes Middle America towards the bottom of the K, it almost feels like there is a, I hate to say it, but it almost feels like there is a little resilience coming back in there. They generally speak in the whole enthusiast base have been resilient, but we have noticed in some of those segments, not as robust as other parts of the K. What we have seen and what we have commented on publicly from April on is the sellout rates have held in there pretty nicely on the out the doors. The U.S. consumer just continues that resiliency and hopefully some of the bright spots we're seeing in more some of these Middle America segments continues. All right. I'm going to squeeze one last one in here. I think it's an important one. We attend your LS Fest in Kentucky every September. Tell us how important those events are in terms of brand building and things like that. Yeah. It's a big key of our engagement with enthusiasts. We host our own events. We'll bring in over 110,000, 120,000 people at our various events around the country. These are unique atmosphere environment for people to show off the cars they build. We'll get 40,000 people in Bowling Green that'll do drag racing, drifting, car shows, time attacks, burnout wars. If you love cars, it's the second weekend of September in Bowling Green, and it's really off the hook. And so- I can attest to that. Yeah. All right. We will wrap it up there. Thank you so much, guys. All right. Thanks, Brian.