Does this work? All right. Here we go. Thanks. Hi, everyone. My name is Phillip Blee. I'm the consumer analyst here at William Blair. For a full list of disclosures, please refer to our website. Very excited to have Holley Performance Products' President and CEO, Matthew Stevenson, and CFO, Jesse Weaver. They're going to kick it off for us and give us an overview of their presentation. Thank you. All right. Thank you, Phillip, good afternoon, everyone. Walk through Holley Performance Brands. My name is Matthew Stevenson. I've been the CEO for about three years. Jesse Weaver is about three and a half in the seat as CFO. We've been very much in a transformation over the last three years as we've professionalized the company and got it to more of a steady state growth and improved the operations. I always like to gauge the room. Who owns a car? All right. When you do this in New York, it's like, Whoa, wait a minute. We're going to talk about cars? Yes, we do automotive aftermarket performance for cars and trucks. What we do is we make the vehicle faster, louder, safer, more exciting, and we also equip people that either ride two-wheelers or four-wheelers cars safer with our helmets, race suits, HANS devices, and I'll show you a little bit about that. First and foremost, get this out of the way, our forward-looking statement here in the Safe Harbor provision. I don't look good in orange stripes, so we always make sure. Yep we include this in here. Some of the things we're going to cover today is just the passionate amount of enthusiasts out there. When you'll see the number, I think it really startles folks how many people in the U.S. consider themselves car enthusiasts and how big the market is. We have the most amazing brands in the space, and I'll walk through a bit of the history of how we got there. Also, a big piece of our underlying thesis is the M&A. We participate in an industry where the median company is about $10 million in size, and so it's a great acquisition platform for us to roll up. Also, direct consumer business, which is about 22% of our go-to-market strategy and offers great differentiation platform for us. Great free cash flow. Jesse will talk about some of the transformation we've done in the last year and how we've improved the free cash flow profile of this business a lot over the last three years. Our market overview, if I told you there's more car enthusiasts than golfers, you'd probably be shocked. When you see that number, there are roughly about 70 million people consider themselves car enthusiasts in some form or fashion. It's either they're modding their car, they're liking racing or what have you, but there's a ton of car enthusiasts out there in the market. There aren't a lot of large platforms that serve those car enthusiasts. You see us there. You see Fox Factory, which is mostly centered around upfit on trucks and, of course, shocks. The Australian company, ARB, which really hones in on truck and SUV accessories, shocks, bumpers, winches, various things to take your truck or SUV off-road. We're in unique company because there aren't many platforms at scale like we are. How we got there, we're over 120 years old. Although we went public through a special purpose acquisition company in 2021, we've been around for over 120 years. We're a very real company. We have real revenue and real dividend, real cash flow, and its foundation on many iconic brands. We were on the first Model T's with Holley carburetors, of course, we've acquired brands like MSD and Flowmaster, and for those that like the Fast & Furious movies, NOS, the nitrous oxide system, yes, that's us too. Then we've really built out the safety portfolio, Simpson race suits, Simpson helmets, Stilo helmets, which is a high-end helmet out of Italy. We recently acquired a business called HRX, which does, I'd say, European-cut type suits that the vast majority of the world prefers for motorsports racing. They're all FIA certified. For example, the driver who just won the Indy 500 on Memorial Day weekend was wearing an HRX suit. Those are just a fraction of the iconic brands we have in our portfolio. How we segment the business. We have over 70 brands, but we really focus around 20. We consider those our lifestyle and power brands. Lifestyle brands, simple definition, people have tattoos of these. They literally will come to our events with those tattoos of those brands on there. The power brands are the brands that have also too the highest growth potential for us, or are already sizable revenue for us. You see those 20. We split them up into four divisions. American Performance. These are cars that were American-made. They tend to be the vehicles people lusted after because they had an affinity when they were in high school. Peak spending years of American consumers, 45- 55. Walk that back to when those people are in high school. You're talking Fox Body Mustangs of the late '80s and early '90s. You're talking O.J. Broncos from the early '90s. F-Body Camaros from the mid to late '90s. Those are the vehicles we consider kind of in fashion. Square body trucks is another big one in American Performance. Truck and Off-Road, those are new or late model trucks and SUVs. 80% of what Americans buy are either a truck, SUV, or CUV. It is the largest segment growing for us. Euro and import. We have some of the most sought-after aftermarket performance brands in Euro. Dinan does BMW. APR does Porsche, Audi, and Volkswagen. We talked about a few of the safety and racing brands, Simpson, Stilo, RaceQuip, HRX, and HANS. This is definitely a global business for us, and it is growing quite nicely. We'll walk through our three-year plan, some of the highlights. Premier consumer journey, trailblazing trusted partner around driving our B2B growth, which we'll see some of the key initiatives in another slide coming up. Of course, being a consumer products company, it's all about product innovation. There's a lot of great innovations we're bringing to market this year and the following years that we're working on. Global expansion in new markets. We've been very much a U.S.-focused company, and some of the big growth initiatives for us are outside the United States, as well as in adjacent markets like powersports. Powersports, when I mention there, are UTVs. They are very much becoming like the new middle-class car. They're $30,000. People spend $30,000 in modifications on them, and they enjoy them with their families. You got four seats, and they enjoy the outdoors. That's something we have a lot of products that are applicable to that space that we're finding new roads for those. M&A, as I mentioned, big part of our story that we'll talk about what we're doing with that. Finally, growth is around our operational improvements. We've taken about $40 million of non-value-added costs out of this business over the last few years. We still see a runway to take a lot more out. This is how we've been able to actually improve margins. As the market's declined from its COVID highs over the last few years, we've actually improved margins and free cash flow. Deliver results, of course, about delivering the bottom line. First and foremost, should have started with making Holley a great place to work. We have the fortunate privilege of working with really fun products and fun people, and that makes it a great place to come to every day. Here are some of the growth drivers for us. I talked about innovation. Chemical expansion, we just introduced something. This is just a natural adjacency, a new car care line. Of course, with our customers, odds are they're washing and taking care of their own cars on the weekend. Just introduced a new car care line. We've seen a lot of expansion in Mexico, South America, in some of our European markets with our new products. OE, we partner with a lot of great companies like Fox Factory and others to provide components for them when they make trucks cooler or more performance-oriented in the aftermarket. Talked about powersports. Third-party marketplaces are a big growth driver in our industry. Our goal is to meet the customer wherever they want to shop. Right now, we do effectively about 10 channels, about five in B2B, five in D2C. We run a pure omni channel. Part of that strategy around Amazon is getting the product closer to the customer with Amazon fulfillment under a 3P business model. National retailers, O'Reilly's, Advance, the AutoZone of the world, they're looking to differentiate their inventory versus their competitors. If you're an enthusiast and you get up on a Saturday and you have an extra couple hours and want to do a project, that's the brick-and-mortar of the national retailers helps you get the parts. We think it's a very accretive channel, because Amazon or what have you is not going to get that product fulfilled same day. Someone can go to those national retailers and get it. Package solutions are the things we're working on. Just make sure we offer not just pieces and parts, but solutions for customers. Whether you're taking your car on the track and need a helmet, suit, gloves, and shoes, or you're working on a new BMW and you want an exhaust, intake, tune, or other products to make it faster and look better, very solutions-oriented. Operational excellence, we have a lot going on in purchasing savings and tariffs. If you'll notice, you look at our financials from last year and our forward projection, there was obviously an impact to our business with tariffs, but if you look in the financials, you really don't see it. There's a lot of hard work that's gone on in the team to mitigate that impact, and ensure we're either mitigating it through moving suppliers, redomesticating it, bringing back in-house or what have you. A lot of hard work was done there. Putting in the basics of Toyota Production System and lean manufacturing in all our facilities, which has been a real driver of efficiencies this year and also at the end of last year. We're continuing to modernize the business with a new ERP and a WMS. Something we just talked about on our last earnings call we're pretty excited about, as you can imagine, when you have 70 brands and cover as many categories as we do, you have some things that are doing really well. You have some things that are maybe just a little bit neutral, and you have some things that are actually a bit of a headwind to generating sustained organic growth at the levels we want to, which are the mid-single digits. We've been taking a really fine-tooth comb to the portfolio as the environment has changed. When, I mean, the environment has changed, freight rates, tariff rates, different things relative to how some of these businesses may have looked a year or two years ago and how they look today relative to the contribution versus the time we spend on them. We're in an initiative right now to exit some of our, what we consider either underperforming brands or brands that take a disproportionate amount of time to their value, taking that capital and then reinvesting it either in higher growth brands or continuing to pay down the debt. Jesse will talk about our leverage goals here over the long term, but when him and I first started, we were close to 6x levered, and now we're under 4x. We paid down proactively $100 million in debt over the last few years. We've made a lot of great progress, and we want to continue to accelerate that. One of the other things, as we're taking out some of this complexity during this time, we're also looking at consolidating facilities, freeing up some warehouse space, and then we will naturally reduce our workforce by about 10%. One of the other things that we've done as a leadership team over the last three years, we've cut our portfolio about 45%. We had a really long tail in the business. 45% of the portfolio sold less than $600 a year. With this next move, we're going to take out about another 11,000 low-margin SKUs to get around 35,000 active SKUs, which is a huge win from the 80,000 we inherited. Simpler to manage, we're spending our times on the things that matter. Through this benefit, there's portfolio rebalancing, one-time benefit of about $15 million in cash, actually an improvement to the bottom line and on EBITDA percentage and EBITDA total dollars, and it'll help us actually de-lever faster. All in all, win-win-win across the board. When we look at reinvesting this capital, talked about the highly fragmented industry. One of the things we've done is really sourced our own pipeline based on our four verticals, where we have gaps in categories that we don't have coverage, and brands that we find really interesting that are on, I'd say, riding a wave of consumer demand, whether in trucks or in motorsports. We tend to look at businesses that are founder-led. They have an incredible passion. They buck the trends of the market, and they typically have hit a point. What we find is they need more capital or don't have the investments necessary to expand their distribution or reach, whether that's in B2B or D2C. We also look for businesses that are either at 20% or more on EBITDA or that we can get them there in a pretty quick fashion and then have positive free cash flow. One of those that we just recently did towards the end of the first quarter was this business HRX that I mentioned. We've had in our portfolio for a while Simpson race suits, but Simpson race suits are very Americana for NHRA. They're not global certified, and like a sport coat that a European manufacturer makes or a U.S. manufacturer makes, there is definitely a style difference. It's an apparel business. HRX, candidly, style spoke to most markets around the world, including the higher-end drivers who are in the U.S. where the Simpson suit just didn't have that kind of a cachet. It fits in well to our portfolio. A high-end race suit. We have a high-end race helmet in Stilo. Most people consider that the Gucci of racing helmets. One of our Stilo helmets, $5,000, $6,000. Everything from the gentleman driver to we have three drivers in F1, and we own the WRC, IMSA, all the top drivers in the world. Kind of their goal is really to have a Stilo helmet. Nice complementary. We're calling on the same customers, and we have the ability to unlock growth with HRX through more global B2B distribution. It's just an example of how we're thinking about M&A, how we're rebalancing the portfolio, and ultimately with the goal to generate more sustained growth at a higher level. At the end of the day, that'll enable us to de-leverage faster. With that, I'm going to turn it over to Jesse, who's going to go over some Q1 highlights. Thank you, Matt. Okay. All right. Anyone here heard of Holley before this? Do you own any Holley products? No? Okay. Well, at least we got cars, and so people have heard of us. It's a start. It's a start. Yeah. When Matt and I started, a big part of the story was helping people understand the business. The best place to understand the business is come to one of our LS Fest events. We have 50,000 consumers who show up and really get the chance to partake in the products in a host of different activities that we do. Drifting is one of those, drag racing, drifting, sorry, off-road course. If anyone's interested, come September, give us a call. Happy to host you. For Q1, highlights for the quarter, I'd say before we get to Q1, last year, we logged a little over 6% organic growth from a combination of price, roughly 50% price and volume. Coming into Q1, we actually had a little bit of a headwind ahead of us because Q4 was very, very strong. A few of our distribution partners got a little ahead on their inventory purchases. Whenever we then came into Q1, we had some weather events that I think many people who follow consumer can recognize were impacting the quarter. Those two things combined made Q1 very tough to sustain that growth in that quarter. As we came into the call, we started to see the signs pick back up in April and are expecting to see this quarter to recover a decent amount. Overall, I think some of the things that are lost in just looking at a singular quarter, as Matt pointed out, our EBITDA at this point is above 20%. Our gross margins are above 40%. Free cash flow that first year was $80 million. Free cash flow since then's been between $35 and $45 million. We've paid down $100 million in debt. This business is fundamentally, meaningfully stronger than it ever was multiple years ago on a much lower revenue base as a result of coming off of COVID highs and some portfolio optimization that we're doing. In this quarter, while sales were challenged, EBITDA is still up 71 basis points year-over-year. EBITDA dollars were flat on lower sales, our free cash flow on a year-over-year comparable basis was up $4.5 million. We've made a lot of good progress. As we look forward into this year, this portfolio rebalancing is really just a continuation of, I think, the optimization of the portfolio that we've been doing. As a result of it, not only are we going to increase EBITDA slightly, we're actually going to free up another $15 million in cash to put towards the debt on top of the free cash flow that we generate on top of whatever we get from the IEEPA refunds, which we haven't disclosed an amount, all of these things go to get us to where we hear investors want us from a leverage perspective, and in the public markets, it's under 3x. I'll get into the portfolio rebalancing and the capital allocation here in a second. I'm not going to drain this slide. Again, it's just rehashing some of the metrics on EBITDA, free cash flow, and revenue. I think one of the key unlocks here for us has been what's been going on with the operational side. Getting to 92% in-stock rates in the top 2,500. I think when I started, maybe we were 70%, 75%. It's tough to sell product you don't have. On the operational efficiency side, can't congratulate our purchasing team enough on the reduction on the tariff front that they've done and all the great work they've done to get less of an impact, as a lot of people have struggled a lot with these tariffs. On the operational side, we're just in the beginnings with Q1 generating $2.7 million in operational improvement, and for the year, the team's target is 10, all going towards, like what we said, improving free cash flow, paying down the debt, improving the leverage profile. This re-engagement of HRX, first transaction that we've done since Matt and I joined. Whenever I first joined, I remember saying the team has acquired 16 companies in the last three or four years. We had to put a pause on that to get the organization healthy, structured, and in the right place to not only acquire the right things, but put them in a position so they can be successful. Financial priorities. These have remained largely unchanged for the last several years. The metrics that we're going after here obviously are things that help improve free cash flow, either not directly but in some cases indirectly, and all of that goes to de-lever the balance sheet. On the first end, I said it's $2.7 million generated in Q1. Our range and the target here says $5 million-$ 7 million. I just said $5 million-$ 10 million, but I think we're on the top end of this $7 million range based on Q1. Optimizing working capital. Q1, we did have a little bit of a pickup, you would expect that when sales come in below the plan and expectations. I've seen meaningful improvement within the quarter, and I know the team's initiatives they put in place in Q1, they take time. Just for a data point here, 60% of our inventory is purchased three months in advance. It takes time. Once you change minimum order quantities, you get the safety stock right, you change the approach on high volume SKUs to deliver on a more consistent basis, and we're seeing that happen real time. Then leverage. We're at 384 at the end of Q1. You'll see a step-up typically like we did last year between quarter year end and Q1. I feel very confident at this moment that we'll be 3.5x or below by the end of the year. If you just run $40 million-$50 million in free cash flow out for next year, you can see a pretty reasonable path getting down to sub three at the end of next year, which we feel like is the sweet spot for this business. Now, what do we do with the cash? We recently just issued a press release where we talked about we're adding a share repurchase option to the capital allocation pool. Leading up until this point, we've been 100% focused on prepaying debt, and like we said, we did $100 million through the end of last year. Now we've added accretive acquisitions, and I think Matt did a great job of illustrating to you how these bolt-on acquisitions are founder-led, incentivize the founder to stay, double-digit growers as we acquire them with a clear path to drive synergies and post-acquisition EBITDA multiples south of what we're trading at as a result of growth, not as a result of mass cost-cutting. That is a strategy, but we don't feel like it's the appropriate one for Holley and the businesses that we're looking to acquire because we really want to fund the growth here. Then now with opportunistic share repurchases. I think both Matt and I and a lot of the sell side research analysts and stockholders were surprised to see the stock respond the way it did after we delivered the year that we did. As we're seeing the stock, even today, and for a lot of reasons related to just outside of our control, in the sub $3 range, and we know when I started, it was $2, and it's meaningfully better as I highlighted, there's value here. If we don't see an accretive acquisition in the very near term and we're able to still hit the 3.5x leverage at the end of the year, we're better to invest than in your existing business. We do have that option. It's a $25 million option from the board. We're not saying we're going to use it all, but we're going to start with leverage first, then acquisitions, then share repurchases when the price is right and all those fit. From a guidance perspective, just from our year end to what changed in the update, at this point of the quarter, we'd just done the full-year guide back in March. We had a lot of sharpening of the pencil on this portfolio optimization to do, we didn't have enough to really communicate, I think, effectively what that could look like. The only change to our guidance at that time, given the trends we were seeing going into the call, was just to adjust the revenue side. The revenue adjustment here that you see of $15 million is the net impact of rebalancing. That includes businesses we've exited, plus the addition of HRX. The expectation, in this case, it's an incremental $1 million or so. That wasn't big enough to adjust the EBITDA at the time. Even with that adjustment on the top end, we're still anticipating delivering on the EBITDA and the free cash flow elements that I called out. Free cash flow doesn't change as a result of generating this additional cash, but it is intact as of this guide. I know that was a lot, and I know we've got six minutes on the call or on the presentation here, but that's the end of my presentation, Phillip. Do you want to open it for questions? Yeah. Does anyone have any questions? I want to talk about the SKU optimization.- Sure -piece. I guess from your perspective, is there still quite a ways to go? Do you feel good about where your portfolio is at right now? How does that save on cost? Obviously, high-performing revenue SKUs, but how do you, I guess, flow that through to the P&L and see maybe a gross margin that starts. To be extended cut. The forward costs are maybe reallocated towards those SKUs, and then maybe you're thinking about volumes too. Yep, great question. Phillip's question's related to SKU rationalization and optimization. When I first started, part of the first exercise, this was six months before Matt got here, was we had 70,000 SKUs, something in that range, finished good. That doesn't count all of the hundreds of thousands of raw material SKUs. We cut 20,000 off the bat. Matt got here and said, "Hey, good start. Got more to go." Ultimately, we aligned on there was another 12,500, all in, that we needed to get rid of. All in, these average under $600 in revenue per SKU. Clear opportunity. Ultimately, we cut 40% of the SKUs and only impacted about 3% of the portfolio. We wouldn't expect to do anything like that again. The thing that we've done with this portfolio optimization is looked at full business lines, right? Not SKUs within the categories, full business lines. The result of this is another 10,000, 11,000 SKUs. We're down in the 25,000, 30,000 range at this point. I think at this point, Phillip, we're in a really good spot outside of normal pruning of the yard, if you will, just general life cycle management of the product portfolio. Yes. What was the rationale for the previous management to have thousands and thousands of SKUs under $600? Let me give him a call. Yes. That's a great question. Seriously. I mean. This is a great question. Lawrence? You go by Lawrence? Yeah. All right. What's the rationale? I don't know that there was any actual thought put into it to have them all, just hindsight, right? Looking back at sort of what Matt and I walked into, there was no product development phase gate process in place. You had a ton of engineers. Engineers without guidance do what? They make things, right? As they make things, you then need, in the phase gate process, sort of a reflection life cycle management period for people to look back and say, "Hey, is this selling? Why is it sitting over here?" To be clear, you would expect that when the warehouse is running at 98% capacity, that should trigger that. It hadn't. At the time, I just don't think the process and discipline was in place, and that's what Matt and the team spent a lot of time doing over the last three years. Was that your core number one problem, was the SKUs? If you could benchmark the top three problems. On the free cash flow side, on the immediate sort of things to fix to get the cash- Yep that was, but the commercialization engine all the way through. The general sentiment, again, I wasn't here for all of it because the former CEO was here for two months before he retired. The general sentiment at the time was, "We can't do anything to influence demand." Right? "We are at the whims of what occurs to us." Obviously, Matt and I come from consumer businesses, and that's generally not our experience, right? You create products people want. If you've got something that is inappropriately priced, you price it right. You give them a reason to come and buy again. These are things that just didn't exist. Great question. Okay, no, thank you. You've done a wonderful job, by the way. Oh, thank you. Well, stock's appropriately priced. Exactly. It's not. Yep. What about from an op or operations technology standpoint? I guess you guys have done a lot to try to improve that and invest in that over the past couple of years. Where are you at in that concern? Is there still quite a bit more to go, or is it less about incremental investment, more about, I guess, scaling what Matt had done from a CRM and operations space? Question on operational technology investment, and I'm taking this to be broader than just literally classic manufacturing and supply chain because you mentioned one thing that's important. We have two or three million customer records. We didn't even have a CRM. CRM was, what? 1999 technology? I don't know. It's been a while. Okay. Implementing a CRM was an easy first step as far as that goes, but there is still work to do, and I think as you look at that capital expenditures, that 15-20, typically the business is run in the 10-15 range. That step up is partially due to investments that we're making, and people hate to hear this, in ERP. Not the thing that Matt and I wanted to do, but it is absolutely necessary to allow this business to operate at a scale that it should be operating and focus on the things that they should be focusing on. I mean, the very simple things such as knowing exactly making sure that you can have a warehouse management system, and we have a massive distribution center in Bowling Green, Kentucky, but it's not operated with a warehouse management system. There's millions there sitting in the facility that if operated effectively, come out of the business. Just a quick one, because I know you guys got to go, but M&A integration. Yep How do you guys feel about that? Do you integrate them and consolidate, or do you let them stand alone, operate as they're doing, kind of roll them up? How do you treat that post-integration? I would say that integrations of the past look very different today. Integrations of the past were very much just jam it into the ERP and move on, right? Today, we're being much more methodical about it. We've got a team today, everything from the general counsel to the operators in place that have done many of these types of things and have a very robust playbook going all the way through the back office. They've got a detailed work plan on what they need to do to execute the business case. The technology piece is a part of it, from an ERP perspective. Mainly on the front end, we're focused on making sure that that business continues to do what they've been doing because we're taking founders and helping them grow. When the timing is right, we would put them on the ERP. As we're going through this ERP transition, I think for the most part, they'll operate on their own standalone systems outside of us doing the things that we should be doing from a SOX perspective to get them on the Holley Microsoft platform and things like that. Okay. Yeah, I think we're kind of. Thank you. Yeah. Thank you. We are not-