Holley Inc.: Form 10-Q for the period ended Sep 28, 2025
Filed with the SEC on Nov 7, 2025 and accepted by EDGAR at Nov 7, 2025, 07:34 ET.
Management's discussion and analysis
As filed, 42,675 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Unless the context otherwise requires or indicates, references to “Holley,” “we,” “us,” “our” and “the Company” in this section are to the business and operations of Holley Inc. and its subsidiaries. The following discussion and analysis should be read in conjunction with Holley’s condensed consolidated financial statements and related notes thereto included in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties, and assumptions that could cause Holley’s actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed herein and under the caption, “Cautionary Note Regarding Forward-Looking Statements.”
Overview
We are a leading designer, marketer, and manufacturer of high performance automotive aftermarket products serving car and truck enthusiasts, with sales, processing, and distribution facilities reaching most major markets in the United States, Canada, Europe, and China. We design, market, manufacture and distribute a diversified line of performance automotive products including fuel injection systems, tuners, exhaust products, carburetors, safety equipment and various other performance automotive products. Our products are designed to enhance street, off-road, recreational, and competitive vehicle performance and safety.
Innovation is at the core of our business and growth strategy. We have a history of developing innovative products, including new products in existing product families, product line expansions, and accessories, as well as products that bring us into new categories. We have thoughtfully expanded our product portfolio over time to adapt to consumer needs.
In addition, we have historically used strategic acquisitions to (i) expand our brand portfolio, (ii) enter new product categories and consumer segments, (iii) increase direct-to-consumer scale and connection, (iv) expand share in current product categories and (v) realize value-enhancing revenue and cost synergies. While we believe our business is positioned for continued organic growth, we intend to continue evaluating opportunities for strategic acquisitions that would complement our current business and expand our addressable target market.
Factors Affecting our Performance
We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed above, under the caption, "Cautionary Note Regarding Forward-Looking Statements," in this Quarterly Report on Form 10-Q, under the caption, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on March 14, 2025, and in our subsequent filings with the SEC.
Business Environment
Our business and results of operations, financial condition, and liquidity are impacted by broad economic conditions, as well as by geopolitical events, including the conflict in Ukraine, the conflict in the Middle East, and the possible expansion of such conflicts and potential geopolitical consequences. Our business is impacted by various economic factors that affect both consumers and the automotive industry, including by not limited to inflation, fuel costs, wage rates, supply chain disruptions, hiring, and other economic conditions. In response to inflationary impacts and supply chain disruptions, we have attempted to minimize potential adverse impacts on our business with cost savings initiatives, price increases to customers, and increased attention to maintaining appropriate inventory levels in the distribution channel. Our profitability has been, and may continue to be, adversely affected by constrained consumer demand, a shift in sales to lower-margin products, and demands on our performance that increase our costs. Should the ongoing macroeconomic conditions not improve, or worsen, or if our attempt to mitigate the impact on our supply chain, operations and costs is not successful, our business, results of operations and financial condition may be adversely affected.
Impact of Tariffs and International Trade Policy on Our Operations
Since February 2025, the United States government has imposed new tariffs on imports from certain countries and regions, including China, Canada, Mexico and the European Union. In response, some foreign governments have implemented retaliatory measures. These developments have introduced new complexities to global supply chains; however, we believe Holley's business model and sourcing strategies have positioned us to manage these challenges effectively.
We believe that our international exposure is currently primarily centered in China. Tariffs on Chinese imports have been a factor in our sourcing strategies for several years, and we have proactively developed and implemented plans to mitigate their impact. These initiatives include, but are not limited to, conducting a harmonized tariff code audit to ensure accurate classification and compliance, changing to supplier locations outside of China, reshoring products to North America and exploring direct shipping from suppliers to international customers to reduce tariff exposure on goods entering the United States. We continue to evaluate additional strategies to further minimize the impact of tariffs on our operations.
Because our production costs are primarily U.S.-based and we have a broad product portfolio with a strong concentration of manufacturing and sourcing in the United States, we believe our U.S. focus enables us to better manage and mitigate the impact of tariffs on pricing more effectively than competitors who are less diversified and more reliant on single-source imports from China. During the second quarter of 2025, we undertook the initiatives discussed above to mitigate the economic impact of tariffs on our product portfolio. We believe these initiatives combined with our pricing actions have allowed us to successfully manage the impact of the latest tariff decisions. However, if current tariff levels are sustained or increased, there is a risk that our profitability, cash flows and estimates inherent in our financial statements could be negatively affected.
We continue to monitor international trade developments closely, including potential changes in tariff rates and the possibility of new exemptions or retaliatory actions, in order to analyze their impact on our business and identify possible actions to minimize adverse effects. The extent and duration of these tariffs, as well as their broader impact on macroeconomic conditions and our business, remain uncertain and will depend on a variety of factors outside of our control. Nevertheless, we remain committed to optimizing our operations, managing costs and leveraging our diversified supply chain to minimize the impact of tariffs on our results of operations and financial condition.
Key Components of Results of Operations
Net Sales
The principal activity from which we generate sales is the designing, marketing, manufacturing, and distribution of performance after-market automotive parts for our end consumers. Sales are displayed net of rebates and sales returns allowances. Sales returns are recorded as a charge against gross sales in the period in which the related sales are recognized.
Cost of Goods Sold
Cost of goods sold consists primarily of the cost of purchased parts and manufactured products, including materials and direct labor costs. In addition, warranty, incoming shipping and handling and inspection and repair costs are also included within costs of goods sold. Reductions in the cost of inventory to its net realizable value are also a component of cost of goods sold.
Selling, General, and Administrative
Selling, general, and administrative costs consist of payroll and related personnel expenses, IT and office services, office rent expense, and professional services. In addition, self-insurance, advertising, research and development, outgoing shipping costs, pre-production and start-up costs are also included within selling, general, and administrative.
Restructuring Costs
Restructuring costs include charges attributable to operational restructuring and integration activities, including professional and consulting services; termination related benefits; facilities relocation; and executive transition costs.
Interest Expense
Interest expense consists of interest due on the indebtedness under our credit facilities. Interest is based on SOFR or the base rate, at the Company's election, plus the applicable margin rate. As of September 28, 2025, $542.6 million was outstanding under our Credit Agreement.
Results of Operations
13-Week Period Ended September 28, 2025 Compared With 13-Week Period Ended September 29, 2024
The table below presents Holley’s results of operations for the 13-week periods ended September 28, 2025 and September 29, 2024 (dollars in thousands):
| For the thirteen weeks ended September 28, 2025 | September 29, 2024 | Change ($) | Change (%) | |
|---|---|---|---|---|
| Net sales | $138,373 | $134,038 | $4,335 | 3.2% |
| Cost of goods sold | 78,534 | 81,732 | (3,198) | (3.9)% |
| Gross profit | 59,839 | 52,306 | 7,533 | 14.4% |
| Selling, general, and administrative | 33,466 | 30,109 | 3,357 | 11.1% |
| Research and development costs | 4,715 | 4,620 | 95 | 2.1% |
| Amortization of intangible assets | 3,456 | 3,436 | 20 | 0.6% |
| Restructuring costs | 1,360 | 954 | 406 | 42.6% |
| Write-down of assets held for sale | — | 7,505 | (7,505) | (100.0%) |
| Other operating expense | 975 | 119 | 856 | n/a |
| Operating income | 15,867 | 5,563 | 10,304 | 185.2% |
| Change in fair value of warrant liability | 3,019 | (1,041) | 4,060 | n/a |
| Change in fair value of earn-out liability | 1,126 | (634) | 1,760 | n/a |
| Interest expense, net | 11,259 | 15,010 | (3,751) | (25.0%) |
| Income (loss) before income taxes | 463 | (7,772) | 8,235 | (106.0%) |
| Income tax expense (benefit) | 1,269 | (1,484) | 2,753 | (185.5)% |
| Net income (loss) | (806) | (6,288) | 5,482 | (87.2)% |
| Foreign currency translation adjustment | $382 | $386 | (4) | (1.0%) |
| Total comprehensive income (loss) | $(424) | $(5,902) | $5,478 | (92.8)% |
Net Sales
Net sales for the 13-week period ended September 28, 2025 increased $4.3 million, or 3.2%, to $138.4 million, as compared to $134.0 million for the 13-week period ended September 29, 2024. Improved price realization of approximately $4.4 million, offset partially by lower sales volume resulted in a decrease of $0.1 million compared to the prior year period. The flat volume was related to SKU rationalization and divested business.
The table below presents our net sales for the 13-week periods ended September 28, 2025 and September 29, 2024, as well as sales related to divestitures and sales related to our strategic product rationalization project. The divestitures sales relate to divested businesses prior to the divestiture date. The divestitures include Detroit Speed Engineering, Gear FX, and Proforged. The strategic product rationalization sales related to a 2024 initiative to discontinued stock keeping units ("SKUs").
| For the thirteen weeks ended September 28, 2025 | September 29, 2024 | |
|---|---|---|
| Net Sales | $138,373 | $134,038 |
| Divestitures | — | 2,780 |
| Strategic Product Rationalization | — | 1,264 |
Cost of Goods Sold
Cost of goods sold for the 13-week period ended September 28, 2025 decreased $3.2 million, or 3.9%, to $78.5 million, as compared to $81.7 million for the 13-week period ended September 29, 2024. The decrease in cost of goods sold in the third quarter of 2025, a period in which product sales increased 3.2%, was due to improved operational initiatives across facility efficiencies, and improvements in quality through reduced warranty claims.
Gross Profit and Gross Margin
Gross profit for the 13-week period ended September 28, 2025 increased $7.5 million, or 14.4%, to $59.8 million, as compared to $52.3 million for the 13-week period ended September 29, 2024. Gross margin for the 13-week period ended September 28, 2025 was 43.2% as compared to a gross margin of 39.0% for the 13-week period ended September 29, 2024. This improvement was through a combination of pricing flow through as well as operational initiatives across facility efficiencies, and improvements in quality through reduced warranty claims.
Selling, General and Administrative
Selling, general and administrative costs for the 13-week period ended September 28, 2025 increased $3.4 million, or 11.1%, to $33.5 million, as compared to $30.1 million for the 13-week period ended September 29, 2024. Selling, general and administrative costs expressed as a percentage of sales increased to 24.2% for the 13-week period ended September 28, 2025 compared to 22.5% for the 13-week period ended September 29, 2024. The increase in selling, general and administrative costs was due to an increase in salaries for the Company in the third quarter of 2025, compared to the third quarter of 2024. The increase is due to reduced payroll expense in 2024 from the furlough activity, reduced 2024 incentive compensation, and increased investments in 2025 related to SOX, cyber security and tariff mitigation.
Research and Development Costs
Research and development costs for the 13-week period ended September 28, 2025 slightly increased to $4.7 million as compared to $4.6 million for the 13-week period ended September 29, 2024, primarily due to the Company's realignment of employees' roles and responsibilities from selling, general and administrative to research and development.
Amortization and Impairment of Intangible Assets
Amortization of intangible assets was $3.5 million for the 13-week period ended September 28, 2025 compared to $3.4 million for the 13-week period ended September 29, 2024.
Restructuring Costs
Restructuring costs for the 13-week period ended September 28, 2025 increased by $0.4 million to $1.4 million, as compared to $1.0 million for the 13-week period ended September 29, 2024, reflecting restructuring and integration activities associated with our implementation of resource allocation efforts in support of portfolio development optimization.
Write-Down of Assets Held-For-Sale
Write-down of assets held-for-sale for the 13-week period ended September 29, 2024 related to the sale of Detroit Speed Engineering, reflecting a $7.5 million loss after adjusting the assets from carrying value to fair value.
Operating Income
As a result of factors described above, operating income for the 13-week period ended September 28, 2025 increased $10.3 million, or 185.2%, to $15.9 million, as compared to $5.6 million for the 13-week period ended September 29, 2024.
Change in Fair Value of Warrant Liability
For the 13-week periods ended September 28, 2025 and September 29, 2024, we recognized a loss of $3.0 million and a gain of $1.0 million, respectively. The warrant liability reflects the fair value of the Warrants issued in connection with the Business Combination.
Change in Fair Value of Earn-Out Liability
For the 13-week periods ended September 28, 2025 and September 29, 2024, we recognized a loss of $1.1 million and a gain of $0.6 million, respectively. The earn-out liability reflects the fair value of the unvested Earn-Out Shares resulting from the Business Combination.
Interest Expense
Interest expense for the 13-week period ended September 28, 2025 decreased $3.8 million, or 25.0%, to $11.3 million, as compared to $15.0 million for the 13-week period ended September 29, 2024. The increase was primarily attributable to the unfavorable impact of the interest rate collar, which resulted in recognized interest expense of $1.0 million and interest income of $2.2 million related to the interest rate collar for 13-week periods ended September 28, 2025 and September 29, 2024, respectively. This increase was partially offset by lower interest expense on outstanding debt due to a decrease in our debt balance.
Income (Loss) before Income Taxes
As a result of factors described above, we recognized $0.5 million of income before income taxes and $7.8 million of loss before income taxes for the 13-week periods ended September 28, 2025 and September 29, 2024, respectively.
Income Tax Expense (Benefit)
Income tax expense for the 13-week period ended September 28, 2025 was $1.3 million, as compared to income tax benefit of $1.5 million for the 13-week period ended September 29, 2024. Our effective tax rate for the 13-week period ended September 28, 2025 was 274.1%. The difference between the effective tax rate for the 13-week period ended September 28, 2025 and the federal statutory rate in 2025 was due to permanent differences related to changes in fair value of the warrant and earn-out liabilities recognized during the period, state taxes, and the impact of foreign taxes in higher rate jurisdictions. The effective tax rate for the 13-week period ended September 29, 2024 was 19.1%. The difference between the effective tax rate for the 13-week period ended September 29, 2024 and the federal statutory rate in 2024 was due to permanent differences related to changes in fair value of the warrant and earn-out liabilities recognized during the period and the impact of foreign taxes in higher tax rate jurisdictions.
Net Income (Loss) and Total Comprehensive Loss
As a result of factors described above, we recognized net loss of $0.8 million and net loss of $6.3 million for the 13-week periods ended September 28, 2025 and September 29, 2024, respectively. Additionally, we recognized total comprehensive loss of $0.4 million for the 13-week period ended September 28, 2025, as compared to total comprehensive loss of $5.9 million for the 13-week period ended September 29, 2024. Comprehensive loss includes the effect of foreign currency translation adjustments.
Results of Operations
39-Week Period Ended September 28, 2025 Compared With 39-Week Period Ended September 29, 2024
The table below presents Holley’s results of operations for the 39-week periods ended September 28, 2025 and September 29, 2024 (dollars in thousands):
| For the thirty-nine weeks ended September 28, 2025 | September 29, 2024 | Change ($) | Change (%) | |
|---|---|---|---|---|
| Net sales | $458,078 | $462,170 | $(4,092) | (0.9)% |
| Cost of goods sold | 264,593 | 287,512 | (22,919) | (8.0)% |
| Gross profit | 193,485 | 174,658 | 18,827 | 10.8% |
| Selling, general, and administrative | 103,119 | 97,675 | 5,444 | 5.6% |
| Research and development costs | 13,894 | 13,743 | 151 | 1.1% |
| Amortization of intangible assets | 10,338 | 10,307 | 31 | 0.3% |
| Restructuring costs | 2,178 | 1,566 | 612 | 39.1% |
| Write-down of assets held-for-sale | — | 7,505 | (7,505) | (100.0)% |
| Other operating expense | 1,232 | 213 | 1,019 | 478.4% |
| Operating income | 62,724 | 43,649 | 19,075 | 43.7% |
| Change in fair value of warrant liability | 2,939 | (7,570) | 10,509 | n/a |
| Change in fair value of earn-out liability | 722 | (2,341) | 3,063 | n/a |
| Loss on early extinguishment of debt | — | 141 | (141) | n/a |
| Interest expense, net | 40,341 | 39,192 | 1,149 | 2.9% |
| Income before income taxes | 18,722 | 14,227 | 4,495 | 31.6% |
| Income tax expense (benefit) | 5,848 | (320) | 6,168 | (1927.5)% |
| Net income | 12,874 | 14,547 | (1,673) | (11.5)% |
| Foreign currency translation adjustment | $1,336 | $244 | 1,092 | 447.5% |
| Total comprehensive income | $14,210 | $14,791 | $(581) | (3.9)% |
Net Sales
Net sales for the 39-week period ended September 28, 2025 decreased $4.1 million, or 0.9%, to $458.1 million, as compared to $462.2 million for the 39-week period ended September 29, 2024. Lower sales volume resulted in a decrease of approximately $12.5 million, offset partially by improved price realization of approximately $8.4 million compared to the prior year period.
The table below presents our net sales for the 39-week periods ended September 28, 2025 and September 29, 2024, as well as sales related to divestitures and sales part of our strategic product rationalization project. The divestitures sales relate to divested businesses prior to the divestiture date. The divestitures include Detroit Speed Engineering, Gear FX, and Proforged. The strategic product rationalization sales related to a 2024 initiative to discontinued stock keeping units ("SKUs").
| For the thirty-nine weeks ended September 28, 2025 | September 29, 2024 | |
|---|---|---|
| Net Sales | $458,078 | $462,170 |
| Divestitures | — | 9,961 |
| Strategic Product Rationalization | — | 13,642 |
Cost of Goods Sold
Cost of goods sold for the 39-week period ended September 28, 2025 decreased $22.9 million, or 8.0%, to $264.6 million, as compared to $287.5 million for the 39-week period ended September 29, 2024. The decrease in cost of goods sold in 2025, a period in which product sales decreased 0.9%, was primarily due to the $9.1 million of product rationalization initiative in 2024. The initiative focused on eliminating unprofitable or slow-moving SKUs. Lower freight costs also contributed to the decrease.
Gross Profit and Gross Margin
Gross profit for the 39-week period ended September 28, 2025 increased $18.8 million, or 10.8%, to $193.5 million, as compared to $174.7 million for the 39-week period ended September 29, 2024. Gross margin for the 39-week period ended September 28, 2025 was 42.2% as compared to a gross margin of 37.8% for the 39-week period ended September 29, 2024. Gross profit margin increased primarily due to inventory charges in 2024, driven by the product rationalization initiative. The increase was also due to sales and improvements in freight costs.
Selling, General and Administrative
Selling, general and administrative costs for the 39-week period ended September 28, 2025 increased $5.4 million, or 5.6%, to $103.1 million, as compared to $97.7 million for the 39-week period ended September 29, 2024. Selling, general and administrative costs expressed as a percentage of sales increased to 22.5% for the 39-week period ended September 28, 2025 compared to 21.1% for the 39-week period ended September 29, 2024. The increase in selling, general and administrative costs was driven by an increase in legal fees of $1.1 million, which was related to legal settlement costs. Overall, salaries increased for the Company in 2025, compared to 2024. The increase is due to the furlough that occurred during 2024. The increase was offset by a decrease in transformative consulting fees.
Research and Development Costs
Research and development costs for the 39-week period ended September 28, 2025 slightly increased to $13.9 million as compared to $13.7 million for the 39-week period ended September 29, 2024, primarily due to the Company's realignment of employees' roles and responsibilities from selling, general and administrative to research and development.
Amortization and Impairment of Intangible Assets
Amortization of intangible assets was $10.3 million for the 39-week period ended September 28, 2025 compared to $10.3 million for the 39-week period ended September 29, 2024.
Restructuring Costs
Restructuring costs for the 39-week period ended September 28, 2025 increased by $0.6 million to $2.2 million, as compared to $1.6 million for the 39-week period ended September 29, 2024, reflecting restructuring and integration activities associated with our implementation of resource allocation efforts in support of portfolio development optimization.
Write-Down of Assets Held-For-Sale
Write-down of assets held-for-sale for the 39-week period ended September 29, 2024 related to the sale of Detroit Speed Engineering, reflecting a $7.5 million loss after adjusting the assets from carrying value to fair value.
Operating Income
As a result of factors described above, operating income for the 39-week period ended September 28, 2025 increased $19.1 million, or 43.7%, to $62.7 million, as compared to $43.6 million for the 39-week period ended September 29, 2024.
Change in Fair Value of Warrant Liability
For the 39-week periods ended September 28, 2025 and September 29, 2024, we recognized a loss of $2.9 million and a gain of $7.6 million, respectively. The warrant liability reflects the fair value of the Warrants issued in connection with the Business Combination.
Change in Fair Value of Earn-Out Liability
For the 39-week periods ended September 28, 2025 and September 29, 2024, we recognized a loss of $0.7 million and a gain of $2.3 million, respectively. The earn-out liability reflects the fair value of the unvested Earn-Out Shares resulting from the Business Combination.
Interest Expense (Benefit)
Interest expense for the 39-week period ended September 28, 2025 increased $1.1 million, or 2.9%, to $40.3 million, as compared to $39.2 million for the 39-week period ended September 29, 2024. The increase was primarily attributable to the unfavorable impact of the interest rate collar, which resulted in recognized interest expense of $4.3 million and interest income of $0.2 million related to the interest rate collar for 39-week periods ended September 28, 2025 and September 29, 2024, respectively. This increase was partially offset by lower interest expense on outstanding debt due to a decrease in our debt balance.
Income before Income Taxes
As a result of factors described above, we recognized $18.7 million and $14.2 million of income before income taxes for the 39-week periods ended September 28, 2025 and September 29, 2024, respectively.
Income Tax Expense
Income tax expense for the 39-week period ended September 28, 2025 was $5.8 million, as compared to income tax benefit of $0.3 million for the 39-week period ended September 29, 2024. Our effective tax rate for the 39-week period ended September 28, 2025 was 31.2%. The difference between the effective tax rate for the 39-week period ended September 28, 2025 and the federal statutory rate in 2025 was due to permanent differences related to changes in fair value of the warrant and earn-out liabilities recognized during the period, state taxes, the impact of foreign taxes in higher tax rate jurisdictions, and excess tax deficiencies from share-based compensation recognized during the period. The effective tax rate for the 39 week period ended September 29, 2024 was (2.2)%. The difference between the effective tax rate and the federal statutory rate in 2024 was due to permanent differences related to changes in fair value of the warrant and earn-out liabilities recognized during the period, federal research and development tax credits, and the impact of foreign taxes in higher tax rate jurisdictions. In addition, the Company incurred expenses related to product rationalization that were determined to be significant and infrequent in nature; therefore, the full tax benefit of these expenses was recorded during the year as a discrete adjustment.
Net Income and Total Comprehensive Income
As a result of factors described above, we recognized net income of $12.9 million and $14.5 million for the 39-week periods ended September 28, 2025 and September 29, 2024, respectively. Additionally, we recognized total comprehensive income of $14.2 million for the 39-week period ended September 28, 2025, as compared to total comprehensive income of $14.8 million for the 39-week period ended September 29, 2024. Comprehensive income includes the effect of foreign currency translation adjustments.
Non-GAAP Financial Measures
We present certain information with respect to EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted EPS, and Free Cash Flow as supplemental measures of our operating performance and believe that such non-GAAP financial measures are useful to investors in evaluating our financial performance and in comparing our financial results between periods because they exclude the impact of certain items that we do not consider indicative of our ongoing operating performance. We believe that the presentation of these non-GAAP financial measures enhances the usefulness of our financial information by presenting measures that management uses internally to establish forecasts, budgets and operational goals to manage and monitor our business. We believe that these non-GAAP financial measures help to depict a more realistic representation of the performance of our underlying business, enabling us to evaluate and plan more effectively for the future.
EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted EPS, and Free Cash Flow are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. These measures should not be considered as measures of financial performance under GAAP, and the items excluded from or included in these metrics are significant components in understanding and assessing our financial performance. These metrics should not be considered as alternatives to net income, gross profit, net cash provided by operating activities, or any other performance measures, as applicable, derived in accordance with GAAP.
Adjusted EBITDA
We define EBITDA as earnings before depreciation, amortization of intangible assets, interest expense, and income tax expense. We define Adjusted EBITDA as EBITDA adjusted to exclude, to the extent applicable, acquisition and restructuring costs, which includes operational restructuring and integration activities, termination related benefits, facilities relocation, and executive transition costs; changes in the fair value of the warrant liability; changes in the fair value of the earn-out liability; equity-based compensation expense; loss on the early extinguishment of debt; notable items that we do not believe are reflective of our underlying operating performance, including litigation settlements, transformative consulting fees and certain costs incurred for advisory services related to identifying performance initiatives; and other expenses or gains, which includes gains or losses from disposal of fixed assets, franchise taxes, and gains or losses from foreign currency transactions. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net sales.
The following unaudited table presents the reconciliation of net income, the most directly comparable GAAP measure, to EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin for the 13-week and 39-week periods ended September 28, 2025 and September 29, 2024 (dollars in thousands):
| For the thirteen weeks ended September 28, 2025 | September 29, 2024 | For the thirty-nine weeks ended September 28, 2025 | September 29, 2024 | |
|---|---|---|---|---|
| Net income (loss) | $(806) | $(6,288) | $12,874 | $14,547 |
| Adjustments: | ||||
| Depreciation | 2,669 | 2,231 | 7,183 | 7,364 |
| Amortization of intangible assets | 3,456 | 3,436 | 10,338 | 10,307 |
| Interest expense, net | 11,259 | 15,010 | 40,341 | 39,192 |
| Income tax expense (benefit) | 1,269 | (1,484) | 5,848 | (320) |
| EBITDA | 17,847 | 12,905 | 76,584 | 71,090 |
| Change in fair value of warrant liability | 3,019 | (1,041) | 2,939 | (7,570) |
| Change in fair value of earn-out liability | 1,126 | (634) | 722 | (2,341) |
| Write-down of assets held for sale | — | 7,505 | — | 7,505 |
| Equity-based compensation expense | 2,322 | 1,521 | 5,225 | 4,283 |
| Loss on early extinguishment of debt | — | — | — | 141 |
| Restructuring costs | 1,360 | 954 | 2,178 | 1,566 |
| Notable items | 457 | 785 | 1,941 | 6,479 |
| Other operating expense | 975 | 119 | 1,232 | 213 |
| Adjusted EBITDA | $27,106 | $22,114 | $90,821 | $81,366 |
| Net sales | $138,373 | $134,038 | $458,078 | $462,170 |
| Net income margin | (0.6%) | (4.7%) | 2.8% | 3.1% |
| Adjusted EBITDA Margin | 19.6% | 16.5% | 19.8% | 17.6% |
Adjusted EBITDA for 2024 includes the impact of a $9.1 million, non-cash charge related to a previously announced strategic product rationalization. For 2024, Adjusted EBITDA includes $2.0 million benefit also related to the strategic product rationalization, netting to $7.1 million non-cash charge.
Adjusted Net Income and Adjusted Diluted EPS
We define Adjusted Net Income as earnings excluding the after-tax effect of changes in the fair value of the warrant liability, changes in the fair value of the earn-out liability, and gain or loss on the early extinguishment of debt. We define Adjusted Diluted EPS as Adjusted Net Income on a per share basis. Management uses these measures to focus on on-going operations and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present consolidated operating results. We believe that using this information, along with net income and net income per diluted share, provides for a more complete analysis of the results of operations.
The following unaudited tables present the reconciliation of net income and net income per diluted share, the most directly comparable GAAP measures, to Adjusted Net Income and Adjusted Diluted EPS for the 13-week and 39-week periods ended September 28, 2025 and September 29, 2024 (dollars in thousands):
| For the thirteen weeks ended September 28, 2025 | September 29, 2024 | For the thirty-nine weeks ended September 28, 2025 | September 29, 2024 | |
|---|---|---|---|---|
| Net income (loss) | $(806) | $(6,288) | $12,874 | $14,547 |
| Special items: | ||||
| Adjust for: Change in fair value of Warrant liability | 3,019 | (1,041) | 2,939 | (7,570) |
| Adjust for: Change in fair value of earn-out liability | 1,126 | (634) | 722 | (2,341) |
| Adjust for: Write-down of assets held for sale | — | 7,505 | — | 7,505 |
| Adjust for: Loss on early extinguishment of debt | — | — | — | 141 |
| Adjusted Net Income (Loss) | $3,339 | $(458) | $16,535 | $12,282 |
| For the thirteen weeks ended September 28, 2025 | September 29, 2024 | For the thirty-nine weeks ended September 28, 2025 | September 29, 2024 | |
|---|---|---|---|---|
| Net income (loss) per diluted share | $(0.01) | $(0.05) | $0.11 | $0.12 |
| Special items: | ||||
| Adjust for: Change in fair value of Warrant liability | 0.03 | (0.01) | 0.02 | (0.06) |
| Adjust for: Change in fair value of earn-out liability | 0.01 | (0.01) | 0.01 | (0.02) |
| Adjust for: Write-down of assets held for sale | $- | $0.06 | $- | $0.06 |
| Adjusted Diluted EPS | $0.03 | $(0.01) | $0.14 | $0.10 |
We define Free Cash Flow as net cash provided by operating activities minus cash payments for capital expenditures, net of dispositions. Management believes providing Free Cash Flow is useful for investors to understand our performance and results of cash generation after making capital investments required to support ongoing business operations.
The following unaudited table presents the reconciliation of net cash provided by operating activities, the most directly comparable GAAP measure, to Free Cash Flow for the 13-week and 39-week periods ended September 28, 2025 and September 29, 2024 (dollars in thousands):
| For the thirteen weeks ended September 28, 2025 | September 29, 2024 | For the thirty-nine weeks ended September 28, 2025 | September 29, 2024 | |
|---|---|---|---|---|
| Net cash provided by (used in) operating activities | $7,430 | $(1,748) | $40,067 | $42,773 |
| Capital expenditures | (2,145) | (1,727) | (9,953) | (4,372) |
| Proceeds from the disposal of fixed assets | 205 | 1,416 | 205 | 1,645 |
| Free Cash Flow | $5,490 | $(2,059) | $30,319 | $40,046 |
Liquidity and Capital Resources
Our primary cash needs are to support working capital, capital expenditures, acquisitions, and debt repayments. We have generally financed our historical needs with operating cash flows, capital contributions and borrowings under our credit facilities. These sources of liquidity may be impacted by various factors, including demand for our products, investments made in acquired businesses, plant and equipment and other capital expenditures, and expenditures on general infrastructure and information technology.
As of September 28, 2025, the Company had cash of $50.7 million and availability of $97.5 million under its $100.0 million senior secured revolving credit facility. As of September 28, 2025, the Company had $2.5 million in letters of credit outstanding under the revolving credit facility. In February 2023, the Company entered into an amendment to its Credit Agreement which, among other things, contains a minimum liquidity financial covenant of $45.0 million, which includes unrestricted cash and any available borrowing capacity under the revolving credit facility. The amendment also increased the Total Leverage Ratio applicable under the Credit Agreement as of the fiscal quarter ending April 2, 2023, to initially 7.25:1.00, and provides for modified step-down levels for such covenant thereafter through the fiscal quarter ending June 30, 2024. The Company successfully exited the Covenant Relief Period.
The Company is obligated under various operating leases for facilities, equipment and automobiles with estimated lease payments of approximately $1.9 million, including short term leases, due during the remainder of fiscal year 2025. See Note 14, "Lease Commitments" in the Notes to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information related to the Company’s lease obligations.
See Note 6, "Debt" in the Notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further detail of our credit facility and the timing of principal maturities. As of September 28, 2025, based on the then current weighted average interest rate of 8.2%, expected interest payments associated with outstanding debt totaled approximately $11.6 million for the remainder of fiscal year 2025.
As discussed under “Business Environment” above, although the future impact of supply chain disruptions and inflationary pressures are highly uncertain, we believe that cash generated through our current operating performance, and our operating plans, cash position, and borrowings available under our revolving credit facility, will be sufficient to satisfy our liquidity needs and capital expenditure requirements for the next 12 months and thereafter for the foreseeable future.
Cash Flows
The following table provides a summary of cash flows from operating, investing, and financing activities for the periods presented (dollars in thousands):
39-week period ended September 28, 2025 Compared With 39-week period ended September 29, 2024
| For the thirty-nine weeks ended September 28, 2025 | September 29, 2024 | |
|---|---|---|
| Cash flows provided by operating activities | $40,067 | $42,773 |
| Cash flows used in investing activities | (26,408) | (2,727) |
| Cash flows used in financing activities | (19,475) | (30,314) |
| Effect of foreign currency rate fluctuations on cash | 452 | (62) |
| Net increase in cash and cash equivalents | $(5,364) | $9,670 |
Operating Activities. Net cash provided by operating activities for the 39-week period ended September 28, 2025 was $40.1 million compared to net cash provided by operating activities of $42.8 million for the 39-week period ended September 29, 2024. Significant changes in the year-over-year change in working capital activity included negative fluctuations in accounts receivable, inventories, and accrued and other liabilities of $13.6 million, $3.0 million and $1.3 million, respectively. Partially offsetting the decrease were positive fluctuations from prepaids and other assets, accounts payable and accrued interest of $8.1 million, $6.4 million and $4.3 million, respectively.
Investing Activities. Net cash used in investing activities for the 39-week periods ended September 28, 2025 and September 29, 2024 was $26.4 million and $2.7 million, respectively, due to the cash payments related to the acquisition of the perpetual license agreement with Cataclean in January 2025 and other capital expenditures.
Financing Activities. Net cash used in financing activities for the 39-week periods ended September 28, 2025 was $19.5 million, which primarily reflects principal payments on long-term debt and deferred financing fees. The principal payments of long-term debt during the 39-week periods ended September 28, 2025 include the repurchase of $15.0 million outstanding principal on the first lien term loan. Cash used in financing activities for the 39-week period ended September 29, 2024 was $30.3 million, which primarily reflects prepayments of principal of $28.8 million on the first lien term loan.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, sales, expenses and related disclosures. We evaluate our estimates, judgments and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. For a discussion of our critical accounting estimates, refer to the section entitled “Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on March 14, 2025. For further information see also Note 1, “Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies” in the Notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. There have been no material changes to the Company’s critical accounting estimates included in our Annual Report on Form 10-K for the year ended December 31, 2024.
Recent Accounting Pronouncements
For a discussion of Holley’s new or recently adopted accounting pronouncements, see Note 1, “Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies,” in the Notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Market risk
As filed, 3,459 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Interest Rate Risk. Holley is exposed to market risk in the normal course of business due to the Company’s ongoing investing and financing activities. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. Holley has established policies and procedures governing the Company’s management of market risks and the use of financial instruments to manage exposure to such risks. When appropriate, the Company uses derivative financial instruments to mitigate the risk from its interest rate exposure. The Company's interest rate collars are intended to mitigate some of the effects of increases in interest rates. As of September 28, 2025, a total of $542.6 million of term loan and revolver borrowings were subject to variable interest rates, with a weighted average borrowing rate of 8.2%. A hypothetical 100 basis point increase in interest rates would result in an approximately $0.4 million increase in annual interest expense, while a hypothetical 100 basis point decrease in interest rates would result in an approximately $5.4 million decrease to Holley’s annual interest expense.
Credit and other Risks. Holley is exposed to credit risk associated with cash and cash equivalents and trade receivables. As of September 28, 2025, the majority of the Company’s cash and cash equivalents consisted of cash balances in an overnight sweep account where funds are transferred to an interest-bearing deposit account that is insured by the Federal Deposit Insurance Corporation ("FDIC"). The FDIC insures financial institution deposits up to $250 thousand. Holley maintains deposits in certain accounts which exceed the insurance coverage provided on such deposits. The Company does not believe that its cash equivalents present significant credit risks because the counterparties to the instruments consist of major financial institutions. Substantially all trade receivable balances of the business are unsecured. The credit risk with respect to trade receivables is concentrated by the number of significant customers that the Company has in its customer base and a prolonged economic downturn could increase exposure to credit risk on the Company’s trade receivables. To manage exposure to such risks, Holley performs ongoing credit evaluations of the Company’s customers and maintains an allowance for potential credit losses.
Exchange Rate Sensitivity. As of September 28, 2025, the Company is exposed to changes in foreign currency exchange rates. While historically this exposure to changes in foreign currency exchange rates has not had a material effect on the Company’s financial condition or results of operations, foreign currency fluctuations could have a material adverse effect on business and results of operations in the future. Historically, Holley’s primary exposure has been related to transactions denominated in the Euro and Canadian dollars. The majority of the Company’s sales, both domestically and internationally, are denominated in U.S. Dollars. Historically, the majority of the Company’s expenses have also been in U.S. Dollars, and we have been somewhat insulated from currency fluctuations. However, Holley may be exposed to greater exchange rate sensitivity in the future. Currently, the Company does not hedge foreign currency exposure; however, the Company may consider strategies to mitigate foreign currency exposure in the future if deemed necessary.
Controls and procedures
As filed, 3,748 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Evaluation of Disclosure Controls and Procedures
Management, which includes our President, Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report.
Our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 28, 2025, the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were not effective because of a previously reported material weakness in our internal control over financial reporting, which we describe in Part II, Item 9A of our Form 10-K for the fiscal year ended December 31, 2024, and because of the material weakness and is affecting the fiscal quarter ended September 28, 2025 described below.
Management’s Report on Internal Control Over Financial Reporting
As disclosed in our Form 10-K, we concluded that we did not have sufficient resources with the appropriate accounting expertise that resulted in a lack of adequate controls with respect to the preparation and precision of review of reconciliations, manual journal entries and third-party reports supporting journal entries. Accordingly, management has determined that this control deficiency constituted a material weakness. This material weakness has not been remediated as of September 28, 2025.
Remediation of the Material Weakness
We have undertaken and are continuing to design and implement remediation measures intended to address the material weakness. Following the identification of the material weakness, and with the oversight of the Audit Committee of our Board of Directors, we have commenced and will continue to implement remediation efforts to enhance our internal controls over financial reporting, which are described below.
- Hiring and augmenting our accounting team with knowledgeable and qualified accounting and finance professionals.
- Engaging a third-party expert to conduct an external evaluation, provide recommended options, support, and validate our approach.
- Enhancing related policies and process documentation, redesigning existing controls or implementing new controls, and improving the skills of process owners.
- Implementation of a reconciliation and review process.
- Training process owners, evaluating the adoption of revised policies and procedures, and monitoring results.
- Developing and maintaining documentation to promote knowledge transfer upon personnel and function changes.
We are committed to successfully implementing the remediation plan as promptly as possible and believe that these actions will remediate the material weakness. Our plans can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. See our Form 10-K Risk Factors for the year ended December 31, 2024, as filed with the SEC on March 14, 2025.
Changes in Internal Control over Financial Reporting
Our plans for remediating the material weaknesses described above will constitute changes in our internal control over financial reporting, prospectively, when such remediation plans are effectively implemented. There were no changes in our internal control over financial reporting from the prior quarter, other than the remediation actions, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Risk factors
As filed, 943 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially affect our operations. Factors that could materially affect our actual results, levels of activity, performance or achievements include, but are not limited to, those under the caption “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on March 14, 2025 and those under the caption "Item 1A. Rick Factors" included in our Quarterly Report on Form 10-Q for the quarter ended June 29, 2025, as filed with the SEC on August 6, 2025. Such risks, uncertainties and other factors may cause our actual results, performance, and achievements to be materially different from those expressed or implied by our forward-looking statements. If any of these risks or events occur, our business, financial condition or results of operations may be adversely affected.
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2025-09-28. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Revenue | 3 months2025-06-30 to 2025-09-28 | $138.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months2025-01-01 to 2025-09-28 | $458.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months2025-06-30 to 2025-09-28 | $78.5m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months2025-01-01 to 2025-09-28 | $264.6m | us-gaap:CostOfRevenue |
| Gross profit | 3 months2025-06-30 to 2025-09-28 | $59.8m | us-gaap:GrossProfit |
| Gross profit | 9 months2025-01-01 to 2025-09-28 | $193.5m | us-gaap:GrossProfit |
| Research and development | 3 months2025-06-30 to 2025-09-28 | $4.7m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months2025-01-01 to 2025-09-28 | $13.9m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months2025-06-30 to 2025-09-28 | $33.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months2025-01-01 to 2025-09-28 | $103.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months2025-06-30 to 2025-09-28 | $15.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months2025-01-01 to 2025-09-28 | $62.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months2025-06-30 to 2025-09-28 | $11.3m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 9 months2025-01-01 to 2025-09-28 | $40.3m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months2025-06-30 to 2025-09-28 | $1.3m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months2025-01-01 to 2025-09-28 | $5.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months2025-06-30 to 2025-09-28 | −$806.0k | us-gaap:NetIncomeLoss |
| Net income | 9 months2025-01-01 to 2025-09-28 | $12.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months2025-06-30 to 2025-09-28 | −$0.01 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months2025-01-01 to 2025-09-28 | $0.11 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2025-06-30 to 2025-09-28 | −$0.01 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months2025-01-01 to 2025-09-28 | $0.11 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months2025-06-30 to 2025-09-28 | 119,405,911 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months2025-01-01 to 2025-09-28 | 119,810,987 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months2025-01-01 to 2025-09-28 | $40.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months2025-01-01 to 2025-09-28 | $10.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | At period end2025-09-28 | $50.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | At period end2025-09-28 | $316.1m | us-gaap:AssetsCurrent |
| Total assets | At period end2025-09-28 | $1.17bn | us-gaap:Assets |
| Current liabilities | At period end2025-09-28 | $113.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | At period end2025-09-28 | $725.4m | us-gaap:Liabilities |
| Long-term debt | At period end2025-09-28 | $528.9m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | At period end2025-09-28 | $6.7m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | At period end2025-09-28 | $439.7m | us-gaap:StockholdersEquity |
Source: SEC EDGAR, the filing index for accession 0001628280-25-050421. Last ingested by Listed: Oct 24, 2026, 15:15 ET. Listed shows no prices and gives no investment advice.