Holley Inc. — Call Transcript 2025

Good morning, ladies and gentlemen, and welcome to the conference call to discuss Holley's second quarter 2025 earnings results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions for asking questions will be provided at that time. We ask that participants limit themselves to one question and one related follow-up during the Q&A period. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Holley. As a reminder, this call is being recorded and will be made available for future playback. I would now like to introduce your host for today's call, Anthony Rozmus with Investor Relations. Please go ahead. Good morning and welcome to Holley's second quarter 2025 earnings conference call. On the call with me today are President and Chief Executive Officer, Matthew Stevenson and Chief Financial Officer, Jesse Weaver. This webcast and presentation material, including non-GAAP reconciliations, are available on our Investor Relations website. Our discussion today includes forward-looking statements that are based on our best view of the world and our businesses as we see them today and are subject to risks and uncertainties, including the ones described in our SEC filings. This morning, we'll review our financial results for the second quarter 2025 and discuss guidance for full year 2025. At the conclusion of the prepared remarks, we'll open the line up for questions. With that, I'll turn the call over to our CEO, Matthew Stevenson. Thank you, Anthony, and good morning, everyone. As we look back on our second quarter of 2025, I am happy to report that the momentum we began building more than 24 months ago continues to grow. It's been a highly productive quarter, one that not only reflects strong operational discipline but also the impact of staying focused on our strategic priorities. Thank you, as always, for your continued support as we navigate a constantly evolving consumer and macroeconomic environment. For the second straight quarter, our core business delivered solid growth. Just as a quick reminder, when we say core business, we're referring to results that exclude the businesses we divested and the product lines we phased out as part of last year's strategic rationalization efforts. This quarter, our team made strong progress across the board, with core growth showing up in every division of the company. What's especially encouraging is that we're again seeing this momentum in both our direct-to-consumer and business-to-business channels. That speaks to the strength and balance of our omnichannel strategy. As we emphasized many times before, our omnichannel approach is a cornerstone of our growth strategy as the leading consumer enthusiast platform and automotive performance aftermarket. We're committed to meeting customers wherever they choose to do business, whether it's through retailers, distributors, wholesalers, third-party marketplaces, installers, national retailers, or our own e-commerce platform. Our second quarter performance reflects the foundation we have built over the last two years in key areas like go-to-market execution, product innovation, digital capability, and operational excellence, all of which are now driving the progress we're making under our three-year strategic plan. With that foundation firmly in place, we're focused on keeping up the momentum and building on the progress we've already made. Before we get into the specifics of Q2 performance, I want to revisit something we discussed last quarter, and that's tariffs. I'm proud to say that the tariff mitigation plan we introduced in Q1 is working, thanks to the incredible effort and execution from teams across the company. This wasn't luck. It was a result of careful planning, strong cross-functional teamwork, and consistent hard work. From the initiatives we developed to lower our tariff exposure across the supply chain to the pricing strategies we rolled out this past spring, all of it has come together to form a smart, resilient response. Because of these efforts, we're currently not forecasting any meaningful impact to free cash flow or margins this year or next. This is a great example of how strong leadership, operational focus, and a culture of accountability can overcome major challenges and deliver real results. Now, let's turn to slide five, which includes our highlights for the second quarter of 2025. We continue to build momentum in Q2, delivering a solid 3.9% revenue growth in our core business across all divisions. This performance reflects the consistent execution of our strategy and the resilience of our operating model. Most notably, we achieved free cash flow of $35.7 million, marking the highest quarterly free cash flow generated in our history. This is a clear testament to both our disciplined capital management and the strong cash-generating power of the business. We continue to execute against our strategic framework, which drove approximately $27 million in revenue from key initiatives this quarter. This includes focused workstreams across our commercial and operational pillars that are accelerating profitable growth. Our growth remained broad-based, with expansion across more than 20 of our brands in both the direct-to-consumer and business-to-business channels. In the B2B channel, we further strengthened our relationships with key partners, driving approximately 6.5% growth in the channel. This growth stems from increased sales support, deeper integration with our partners, and a relentless focus on customer satisfaction. In direct-to-consumer, we saw an increase of 8.6% overall, with especially strong performance on third-party marketplaces like Amazon and eBay, which grew over 28%. These platforms continue to be a major growth lever for us as we meet customers where they prefer to shop. Product innovation remains the cornerstone of our performance. Combined with strategic pricing initiatives, our efforts contributed $10.8 million in incremental revenue this quarter. We continue to calibrate pricing to match customer value perception while ensuring competitiveness and profitability across all channels. Lastly, as I mentioned, we made significant strides in our supply chain initiatives, which are forecasted to effectively offset tariff-related pressures and help preserve margin stability. These efforts underscore our proactive approach to tackling issues head-on and getting in front of them before they impact the business. Let's turn to slide six, which features some more quantitative highlights from the second quarter of 2025. We achieved net sales of $166.7 million, reflecting a 3.9% increase in the core business compared to the prior year. This solid growth continues to validate the strength of our strategic execution and the dedication of our teams across all divisions. Our gross margins were 41.7%, up 26 basis points year-over-year, demonstrating continued stability and positive momentum even in the face of external cost pressures. The improvement is partially due to strategic product and pricing actions, as well as operational initiatives, including supply chain efficiency. Free cash flow, as I mentioned, reached $35.7 million, an increase of $11.3 million versus the prior year. This strong cash generation highlights the underlying strength of the business, aided by disciplined capital allocation and working capital management. Adjusted EBITDA margin came in at 21.9%, down 74 basis points year-over-year. This decline reflects the normalization following prior year's SKU rationalizations and divestitures, but it remains well within expectations given the shift in product mix and ongoing investments in innovation and growth. Regarding new product activity in Q2, we introduced several launches across our portfolio, and I'd like to highlight just a few standout examples. We launched a Terminator X Bluetooth module, enabling wireless engine tuning via a smartphone. It's quickly gaining traction with strong early demand, enhancing our EFI platform and driving mobile integrated growth. We also expanded our Arizona Desert Shocks Mesa 2.5 line by adding new applications to meet growing demand in the off-road market. These premium shocks deliver exceptional performance and durability, positioning ADS for continued growth with enthusiasts seeking race-proven technology for everyday builds. In our Euro segment, our APR brand introduced new high-performance exhaust systems for the Audi S4 and S5 platforms. These upgrades deliver improved sound, reduced back pressure, and weight savings, broadening our appeal in the premium European space. Additionally, we released new colorways for the Simpson Outlaw Bandit 3.0 motorcycle helmet, building on the popularity of this iconic model. The refreshed designs inject energy into a top-performing product and further strengthen our position in motorcycle safety. Together, these launches highlight a small example of our continued focus on innovation, consumer engagement, and expanding our leadership across key enthusiast categories. On the operational metrics, we also delivered significant progress in the quarter. We achieved a 2.2% year-over-year increase in the in-stock rates for our top 2,500 products, a $1 million improvement in operational efficiency, and a 17% year-over-year reduction in past dues. Additionally, we reduced inventory by approximately $9 million since the beginning of the year, contributing meaningfully to improved cash flow and working capital efficiency. On the marketing front, our focused promotional efforts continue to drive results. We recorded an 8.6% year-over-year increase in DTC sales, bolstered by third-party platform growth of more than 28%. Our earned media impressions reached 463 million from 657 media clips, and our social media following grew 2% over the previous year, reflecting deeper engagement with our enthusiast customer base. In summary, our second quarter performance demonstrates continued execution of our strategic priorities, driving growth, operational excellence, and shareholder value creation across every part of the organization. Let's take a closer look at some of the standout core business growth we saw across our divisions in Q2, shown on slide seven. In the Domestic Muscle vertical, we delivered 6% year-over-year growth, driven by sustained consumer demand and the enduring strength of our brands. Many brands within this division posted high single-digit growth in our core product categories, highlighting solid performance across the board. Our Modern Truck & Off-Road division led the way with an impressive 17% growth. This was fueled by standout results from several of our priority brands, including at least five of our power brands that recorded double-digit growth in their core businesses. The Euro & Import division experienced strong momentum as well, up 4%. Now, the Euro brands of Dinan and APR within this were up 20% combined. However, this growth was offset by year-over-year revenue timing shifts in our Import division, which moderated overall performance in this vertical. The Safety & Racing division reported 1% growth, but that figure doesn't fully reflect what's happening under the surface. Our Simpson and RaceQuip brands posted a combined 15% growth. Plus, the division is currently navigating a regulatory transition known as the SNELL cycle, which happens every five years and impacts automotive motorsports helmets. Distributors are limiting orders until the next certification, SA 2025 helmets, become available to enthusiasts in October. As a result, we anticipate a significant rebound in growth in the second half of the year. Overall, these results affirm the strength and the resilience of our core business. Our strategic focus on investing in power brands, streamlining accountability, and aligning resources is driving measurable success. Despite a challenging market environment, our commitment to brand leadership and disciplined execution continues to deliver sustainable core growth across our major divisions. On slide eight, we revisit the eight areas that form the foundation of our strategic framework, which we have reviewed in prior calls. At the center of this framework lie our steering principles. The first of these principles is fueling our teammates, which supports our ambition to establish Holley as a recognized, great place to work. Our focus remains on fostering a workplace where team members feel empowered, have meaningful opportunities for advancement, and look forward to being part of a dynamic and inclusive environment. Our second principle is supercharging our customer relationships, whether that's with our passionate consumers or our trusted B2B collaborators. This principle touches three vital components of the framework: building and delivering the premier consumer journey in our industry, becoming a trailblazing trusted partner to our B2B customers by finding innovative paths for shared growth, and bringing to market innovative new products that set the benchmark in their categories. We support these priorities by deliberately managing and merchandising our entire portfolio with clear differentiation. The third and final principle, accelerating profitable growth, focuses on strategic expansion into new global and adjacent markets, pursuing transformational M&A, and enabling reinvestment through continuous operational improvements. Together with the other initiatives, these actions drive us toward our overarching aim, delivering superior financial results. Now on to slide nine. I'm pleased to share the highlights and the achievements for the second quarter as captured in our updated strategic initiative tracker. Under our trailblazing trusted partner pillar encompassing our B2B efforts, we've seen another quarter of strong performance. Revenue from our top 50-plus accounts accelerated significantly, contributing $8.3 million in growth. Our Holley Pro Small Customer initiative also continued to gain momentum, adding $1.8 million in revenue, thanks to our focused sales team, proactive outreach, and deepened customer relationships. In total, these B2B sales initiatives contributed $13.2 million in incremental revenue in Q2. Turning to our premier consumer journey pillar, our e-commerce strategy remains a key driver of growth. Year to date, e-commerce revenue is up approximately $4 million. Our efforts on third-party platforms, especially Amazon, have been particularly successful, with over 50% growth in Amazon sales and over 40% growth across all three key platforms in the first half. These efforts alone added $2.2 million in incremental revenue during the second quarter. Innovation continues to be a cornerstone of our growth. We launched new products across all four divisions, delivering approximately $8 million in revenue. At the same time, our portfolio management strategies, including strategic pricing and optimization of our active portfolio, generated an additional $3 million in B2B sales. In total, this pillar added $11 million to our top line in Q2. Our international expansion efforts remain on track. The progress in Mexico has validated our product-market fit and our go-to-market strategy, setting a solid foundation for future growth. Additionally, we expanded our reach in the car dealer channel, with six more BMW dealers joining the Dinan program, bringing the total to 28 participating dealers. These combined initiatives, while still early in their adoption, generated $1.1 million in revenue for the quarter. We continue to make strong progress under our fund-to-growth pillar. In Q2 alone, we completed and implemented over $2.5 million in purchase savings projects and achieved more than $1 million in operational improvements. Together, these efforts resulted in $3.5 million in cost savings for the quarter. We're also proud of the ongoing progress we're making in strengthening our culture and employee engagement. As reported last quarter, we saw a 3% increase in our Great Place to Work Pulse survey scores, an encouraging sign of our efforts taking root. Looking ahead, we're excited to build on this momentum with our annual employee survey scheduled for later this fall. Additionally, through continued operational efficiencies, we remain on track to achieve our year-end target for revenue per employee. All told, we generated $27 million in revenue from key strategic initiatives and achieved $3.5 million in cost savings. In addition to advancing our strategic initiatives, we have continued to prioritize actions to mitigate the impacts of tariffs introduced since our last meeting. As we promised during our last earnings call, we would come back to you during this August call and provide greater clarity to the impact of tariffs to our business, both in 2025 and 2026. Today, we are going to do that. Let's walk through some more detail first on slide 10. During last quarter's call, we outlined our detailed, comprehensive plan to tackle tariffs, an effort we had already been driving through a swiftly established cross-functional project management office. To address the various aspects of tariff mitigation, we organized the work into five major workstreams: governance, products, logistics and supply chain, regulatory and classifications, and pricing and margin protection. Our approach was multifaceted, supported by daily meetings to maintain momentum, track progress, and ensure alignment across teams. Each workstream was intentionally structured to address a distinct set of challenges and opportunities, enabling a coordinated and effective response. As we highlighted, the product workstream was a particularly critical component of our overall strategy. It kicked off approximately 120 days ago with an ideation workshop involving 11 product teams, each led by dedicated team leaders. The workshop focused on identifying and prioritizing high-impact initiatives and building a consistent, executable playbook. That playbook included supplier negotiations, relocations, resourcing decisions, footprint analysis, and make-versus-buy evaluations. In addition, we verified product classifications to ensure compliance and to optimize how our products are coded. The collective focus, coordination, and tenacity across all teams have led to meaningful results, which I'll walk through next on slide 11. Through a combination of strategic negotiations with existing suppliers, targeted relocations, sourcing from new partners in lower-cost regions, and selective insourcing, we've executed on over $15 million in tariff mitigation opportunities through 2026. While disciplined execution will continue to be essential, we're confident in our strategy, our team's capabilities, and our abilities to successfully navigate this evolving landscape. In short, our response to the tariff environment has been both proactive and comprehensive. We launched dedicated workstreams, facilitated cross-functional workshops, secured optimized logistics solutions, brought in leading regulatory experts, and executed targeted pricing actions, all aimed at minimizing the financial impact of tariffs on our business. That said, we all understand that the tariff landscape remains highly fluid. However, based on the progress of our current mitigation efforts and pricing strategies, we are not projecting any adverse impact to free cash flow or margins in 2025 or 2026. With that, I'll now turn things over to Jesse, who will walk us through a detailed financial analysis and year-over-year comparison of our Q2 2025 performance, followed by a deeper look into the projected impact of our tariff mitigation strategy. Jesse. Thank you, Matt, and good morning, everyone. I'd like to start by providing an update on our progress against our financial priorities, then discuss our second quarter 2025 results, our updated view on the tariff impacts to free cash flow, and our refinements to our guidance. Moving to slide 13, we remain focused on our financial priorities, which are restoring historical profitability and optimizing working capital. Our keen focus on these financial priorities has allowed us to generate our strongest quarterly free cash flow results in the history of Holley, achieving approximately $35.7 million in Q2. We relentlessly worked towards restoring historical profitability and made progress towards our full-year operational efficiency targets again in the second quarter. We saved roughly an additional $1 million in the second quarter, primarily driven by a reduction in freight costs, which brought our year-to-date cost savings in 2025 to just over $2 million. As a reminder, we anticipate savings of $5 to $10 million through improved manufacturing efficiency, warranty and return policy compliance, and quality improvements to better the customer experience in 2025. In Q2, we made strong progress optimizing working capital by proactively managing inventory, by continuing to make improvements in our sign-up processes to build a more agile, demand-driven model. These efforts are aligning production with market needs, optimizing safety stock and lead times, and cutting slow-moving inventory, all while maintaining high service levels and boosting operational efficiencies. Through these efforts, we've been able to reduce inventory by more than $9 million year to date and are on track to achieve our year-end reduction target of $10 to $15 million. On slide 14, we'll walk through our key financial metrics for the second quarter. Net sales for the second quarter were $166.7 million versus $169.5 million in the same period a year ago. The decrease was primarily related to lower sales volume, partially offset by improved price realization. Excluding approximately $9 million of divestiture and strategic product rationalization sales from net sales for the second quarter of 2024, we achieved growth of roughly 3.9%, exceeding our expectations for the quarter. Core business growth once again came across all divisions and is a byproduct of the execution across all aspects of our strategic framework for 2025. Gross profit was $69.6 million in the quarter compared to $70.3 million in the same period last year. Gross margin for the quarter was 41.7%, an increase of 26 basis points versus 41.5% in the prior year. This increase was primarily due to significant clearance activity in the prior year and not repeated in 2025. SG&A, including R&D expenses for the second quarter, was $38 million versus $38.9 million in the same period for the prior year. Overall, salaries increased for the company in the second quarter of 2025 compared to the second quarter of 2024. The increase is due to the furlough that occurred in 2024 that was offset by a decrease of transformational consulting fees. Net income for the second quarter was $10.9 million versus net income of $17.1 million in the second quarter of 2024. Adjusted net income in the second quarter was $10.6 million versus adjusted net income of $12.6 million in the same period of last year. Adjusted EBITDA for the quarter was $36.4 million compared to $38.3 million in the prior year, primarily due to higher growth among distribution partners coupled with increased rebates and the absence of the furlough impact seen in 2024. Adjusted EBITDA margin was 21.9% versus 22.6% in the second quarter of 2024. On slide 15, you can see this quarter we delivered record quarterly free cash flow of $35.7 million compared to $24.4 million in free cash flow for the same quarter a year ago. This performance was driven by continued improvements in operational efficiency and successful optimization of working capital across the business. While we're proud of the strong free cash flow performance this quarter, we're also very mindful of the headwinds ahead, particularly the potential impact of recently implemented tariffs. With that in mind, let's turn to page 16, where we've outlined the expected minimal net impact of tariffs on our free cash flow. As Matt had mentioned earlier, our team has been relentlessly focused on mitigating the impact of tariffs through a comprehensive set of strategies. As you can see on 16, we have actions in motion that are expected to offset more than $15 million in additional tariff-related costs between 2025 and 2026. Despite ongoing inflationary pressures and a continually evolving tariff landscape, we remain proactive and disciplined in managing our operations. We project that the combination of our tariff mitigation initiatives and strategic pricing actions will position us to fully offset tariff-related headwinds in 2025. Looking further ahead into 2026, we expect net pricing gains and mitigation efforts to not only absorb anticipated tariff costs but also support our ability to maintain strong free cash flow generation, even in an environment of potentially lower volume. On slide 17, we reduced our covenant net leverage at the end of the second quarter to 4.22 times versus 4.32 times a quarter ago, which remains well under the five times covenant when the revolver is drawn. At the end of the quarter, there was no outstanding balance on our revolver, and we concluded the quarter with $63.8 million in cash and no expectation of drawing on the revolver in the near term. This brings our total net debt to just under $500 million for the quarter. As a team, we are pleased with our execution in the first half of the year. We've built on the success of Q1 with core business growth again in the second quarter. As we move into the second half of the year, we are keeping a close eye on a mixed economic landscape. However, we have more clarity on expected tariffs for 2025, though broader trade conditions remain fluid. Therefore, with sales trending flat to start Q3 and mixed macro signals, we're taking a measured approach to our guidance. Our updated full-year 2025 guidance reflects both the known effects of tariffs and consumer trends. We are tightening our 2025 revenue range to $580 million to $595 million, which implies approximately a 2.2% growth at the midpoint over the core business base of roughly $575 million in 2024. Additionally, we have tightened our range for our 2025 adjusted EBITDA guidance to $116 million to $127 million, from $113 million to $130 million. Our first half results were stronger than originally expected and a direct result of the team's execution upon our strategic framework. While we continue to operate in an uncertain macro environment, we delivered two consecutive quarters of core business growth. We continue to build on this momentum and have better visibility on the impacts of known tariffs today, which are captured in our 2025 guidance. While we remain mindful of the evolving environment and the fluid tariff situation, we are confident that the operational discipline and momentum we have built will continue to serve us well as we move through the balance of the year. This concludes our prepared remarks. We would now like to open the line up for questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Your first question comes from Brian McNamara with Canaccord Genuity. Please go ahead. Hey, good morning, guys. Congrats on the strong progress and thanks for taking the questions. First on pricing. How have your partners and enthusiasts overall responded to the price increases you put in and the change in tact in terms of approaching your resellers with the 60-day notice? With that, how would you characterize current sentiment in the marketplace? Has it improved with a little more certainty on tariffs? Any other color there would be helpful. Sure. Good morning, Brian, and thanks for the question. You know, when we look at just kind of that sentiment in June and just the overall out-the-door sales, they were strong in the marketplace. We notified our distributors in April that price increases would take effect roughly in the middle of June, and July is historically one of the softest months of the year. Generally speaking, the feedback was, you know, the pricing was in line or lower than competitors in the relative categories. Of course, just given how many categories we're present in, that wide range of competitive dynamics exists. Overall, our pricing was definitely in line with the competition. You know, we just got to see in terms of just that overall elasticity of industry demand, pricing, and discretionary spending, how that plays out once we get past the slower summer months and into more of the higher months of the year. Next question, Christian Carlino with JPMorgan. Please go ahead. Hi, good morning. Thanks for taking our questions. Follow up on the prior question. Similar to how you're moving some sourcing to vendors in lower-cost countries, what are your conversations like with the resellers? Are you winning share or shelf space because you're taking less price than the industry in addition to the channel expansion and product innovation work you've been doing? Hey, Christian, it's Jesse. It's a good question. I think all the indicators that we've got as we work much more closely with our distribution partners is that we are continuing to take share in the market. When we look at sort of our out-the-door growth relative to what the overall business is doing in these distribution partners, we continue to outperform there. That continued all the way up through our most recent data, which is June. I think to Matt's earlier point, the pricing we put in was in line, if not better, and that is certainly helping us kind of continue to remain and gain momentum here. That is helpful. Just given the full impact of the tariff cost increases, you know, should start to flow through in the second half. How are you thinking about gross margins for the year and maybe cadence over the back half? You know, understanding it's hard to predict consumer behavior and elasticities right now, but are you anticipating maybe higher prices overall, but key seasonal periods being more intense promotionally to maybe offset the impact to consumers' wallet? Just how you're thinking about that. We're not planning to do anything incremental from a promotional period. We've got a pretty strong partnership with our distribution partners on marketing calendar support in the back half. No intended changes there. We do anticipate, to your question on gross margins, to continue to maintain, if not increase, gross margins in the back half, just relative to the pricing that we had taken, obviously. I think our guidance in the back half kind of captures the squeeze on what you would expect in terms of margins there. Got it. Thank you very much. Thanks, Christian. Next question, Joseph Altobello with Raymond James. Please go ahead. Hey, good morning. This is Martin on for Joe. My first quick question here is regarding sort of inventory. You've reduced so far by $9 million. I was wondering if we can get an update on sell-through slash the sell-in? Yes, this is Jesse. I think, you know, we don't report out on the exact numbers we get from our distribution partners, but we're seeing really good numbers and results from them on the sell-out. That's kind of what we look at to understand just generally what the end user demand is. I think that that's a testament to our relative pricing, our continued enhancement in our partnerships with them, and just making sure that we're partnering with them to make sure their inventory levels are in a good spot. I feel like the end distribution partner indicators are continuing to be really strong for us, particularly relative to what the rest of their business is doing. Right. I just want to touch really quickly on this free cash flow net impact bridge. Very helpful, by the way. You mentioned 2025 net pricing slash volume is going to be about $3 million tailwind. Earlier in the preamble, you had mentioned that about $10.8 million in revenue was contributed from product innovation and strategic pricing. I also believe the PR said that product innovation was about $8 million, which implies that strategic pricing was about $2.8 million. Given that that's pretty close to that $3 million number, does that sort of imply that there's going to be lower volumes in the back half of the year? What should be the read-through through that? I think those are two different metrics, to be clear. The strategic pricing was an action that was taken earlier in the year to realign our channel margins with our distribution partners on some key product lines. Those aren't necessarily related. As it relates to your question on the back half, generally we feel like our visibility is much better than it was three months ago on the back half of the year. We're just, from a volumes perspective, as you can imply in the guidance, taking a pretty conservative view relative to the back half, just given everything we're seeing in the economic indicators generally around the consumer. What we are seeing now, we feel like demand's holding up and the back half, from what we can tell, is headed in the right direction to hit this guidance. Great. Thank you. Very helpful and good luck. Thank you. Next question, Phillip Blee with William Blair. Please proceed. Morning, Matt, Jesse. Thanks for the question. The product innovation growth is an interesting metric here. Just curious around the level of new products that you've launched year to date and then maybe how that would compare to plans for next year or just steady state going forward, assuming we're past a lot of the tariff-related trade disruptions. Yeah, good morning, Phillip. This is Matt. Thanks for the question. Phillip, we're really focused on quality versus quantity. I mean, we, of course, want to continue to drive the right innovations and, of course, increase the volume of those. When you think back to our strategic product rationalization that occurred, where we took out basically about 45% of the portfolio, there was a lot of work being done for innovations that really weren't moving the needle. Now we put in a very robust phase gate system with seven gates to make sure we're bringing those right innovations to markets that are really going to drive the top line forward and to underline this organic growth trajectory. Again, it's not about quantity, but for us, we want to continue to drive more revenue through innovation. Okay, makes sense. Great. Now that you have some comfort around tariff mitigation, core business seems to be moving in the right direction. How are you thinking about free cash flow and capital allocation in the second half of the year and maybe going forward? Just timeline around reaching leverage around three times. Thank you, guys. Yeah, great question, Phillip. We obviously don't guide on free cash flow. I think, as we've talked about historically, just given this guide, you can back into a free cash flow profile that would be about $40 to $50 million at the current interest rates. I think we're on track to be in that range with better free cash flow in the back half this year versus last year. Just as a reminder, this time last year in Q3 and Q4, we had some headwinds to the tune of $6 to $8 million in each quarter from AP process changes. We should continue to see positive free cash flow in the back half. Just in terms of capital allocation, we continue to maintain a pretty robust pipeline on M&A, but we are very conscientious on any transactions we look at as to the net leverage profile on the back end. In the absence of having a really good target in mind, we're going to continue to look at prepayment of debt like we've done historically. This year, obviously, with that cash flow we've talked about, around $23.8 million of it is used for the perpetual license on CATA Clean, which we look back and say has really been a really good deal and growth driver for us. Excellent. Thank you. Best of luck. Thanks, Phillip. Next question, Bret Jordan with Jefferies. Please go ahead. Hey, good morning, guys. This is Patrick, walking the line for Bret. Thanks for taking our questions. Hey, good morning, Patrick. On the new market growth, could you talk a bit about the trajectory of growth and moving forward in Mexico and potential size there, and maybe how that strategy differs from the growth strategy in the U.S.? I guess a quick follow-up there would be, is this the primary market expansion for the foreseeable future, or are you guys seeing any other markets that you have identified for potential growth? Yeah, Patrick, thanks for the question. This is Matt. Mexico is just a natural market, of course, for us, just the adjacency to the proximity to the U.S. and the amount of enthusiasts that are down there. That was something that was just not in focus in years past. How we look at the potential of Mexico, we would see that long term to be about 5% of the U.S. market is where we would see that. It's going to take some time to get there, right? It's really an all-new market entrance for us. It's everything from setting up distributors, setting up the proper product distribution, working with the national retailer footprint there. It's all going to take some time. In terms of other markets, you know, this is just a great market that we're spending the majority of our time on right now, again, for those reasons. There's a lot of enthusiasts around the globe, and we can continue to evaluate where it may make sense to plant a flag, so to speak, in a larger presence. Great. Very helpful. That's all for us. Thanks, guys. Thanks, Patrick. Next question, Mike Baker with D.A. Davidson. Please go ahead. Hey, thanks, guys. Can I ask you, Jesse, you said flat sales so far in the third quarter. What's the base? In other words, is that including or excluding, you know, some of the one-timers from a year ago? Hey, Michael. We didn't, we're trying not to speak specifically to the third quarter thus far, but I think what you implied from the script is kind of in line. Those trends we are seeing versus prior year, as well as for the back half, are embedded in our guidance. Your question around how does that compare to last year? I think to Matt's earlier comments, this is seasonally one of our lowest volume periods, and demand is holding up relative to the prior year. That's just on a gross basis. As we get into the back half, there's only about $3 million in each quarter related to divested businesses, and we're largely past the meaningful SKU rationalization that happened in the first half. Okay. Thanks for that. I also wanted to ask just a little bit more detail on unit versus price in terms of your, you know, if we use a 3.9% sales growth in the second quarter, is there a way to break out, you know, how much of that was price versus unit? Yeah, I think we put in the queue that, you know, actually volumes were pretty strong in the second quarter, with, you know, a portion of it coming from price and unit growth. I mean, year to date, unit growth has been, you know, positive, with some pricing, obviously, to kind of get you over the 3% on the core business. You know, we've been really, really pleased with how units have really picked up this year, year to date. As we mentioned, we're taking a bit of a conservative approach given what we're seeing in the economic indicators, and just the magnitude of the pricing across the market and in the economy on units for the back half. There is certainly some room for that to go north of what we're putting in our guidance. In other words, you raise prices, you're not necessarily seeing unit degradation, but you are assuming that to be conservative in the back half. We're taking a conservative approach to it, but this is a business that you don't get a lot of visibility. From what we can tell in our testing and trend evaluation and discussions with distribution partners, we feel like this is a good guide. Okay. Understood. Thank you. Next question, Joe Feldman with Telsey Advisory Group. Please go ahead. Yeah, thanks, guys, for taking the questions. I wanted to ask about just your view of the consumer at this point. I know you said summer's always a soft period and you pass through price increases now, so it's a little hard to tell. With the customer has been buying, at least in the second quarter, are you seeing people stepping up? Are they adjusting their spend? It sounds like unit sales are up, so I assume that's a good thing. People are kind of back at the projects. Just how do you view the consumer right now? Hey, good morning, Joe. It's Matt. Thanks for the question. As I commented, Joe, the out-the-door sell-out in June was really good, and generally speaking, to Jesse's points of what we saw on units for the first half of the year, there's a couple of components. Overall, the market's hanging in there, but more importantly, we're taking share, right? Now that you have that price increase that goes through in June, July typically is that softer, one of the softest months, just due to a lot of back-to-school, summer vacations, and things that go on. Right now we haven't seen anything meaningful one way or the other, but we'll get more color here as the third quarter plays out. As of right now, nothing meaningful one way or the other from what we've been seeing. Got it. Thanks. Maybe just a follow-up for Jesse. With regard to the guidance, I know you're not giving too many specifics, but are there any puts and takes we should think about in the second half? Is there anything unique about maybe third quarter versus fourth quarter this year, or are we safe to use kind of the last year kind of flow to get us to the numbers for the full year? Yeah, I would say just as a reminder, in the back half, usually Q3 is slightly lower than Q4. Just with our, you know, end-of-year holidays is a really big, you know, sales cycle for us. When you think about, you know, we're not going to give necessarily the quarterly guidance on the top line, but you know, it's usually around like a 48% in the third quarter, 49% in the third quarter, with slightly more, obviously, in the fourth. You know, we've talked about sort of our operational initiatives and the pricing, and a lot of that stuff is kind of helping bolster margin on a year-over-year basis as we go into the back half. Got it. Okay, thank you. Thanks, Joe. Good luck with the quarter. Thank you. Next question, Brian McNamara with Canaccord Genuity. Please go ahead. Hey, guys, thanks for the follow-up here. Great job on the tariff mitigation. Looking at slide 11, it looks like $8.5 million out of the $15 million in tariff mitigation is relocation with existing suppliers and sourcing with new suppliers in lower-cost countries. I was wondering if we could get a little color there specifically on how your exposures to, you know, China, maybe some of the higher-cost countries are changing, and then what kind of lower-cost countries you're kind of shifting to. China sourcing exposure is a consistent question we get from investors. Thanks. Yeah, Brian, I'd say our overall strategy had a number of facets to it, as you could see in the prepared material. Overall, we want to be in countries that have a more stable long-term relationship with the United States, and that's where we've been focusing on either relocating with our current suppliers or finding new suppliers in lower-cost countries. That's just been the main focus, mitigating that exposure in China. At risk of beating a dead horse on the H2 guide, maybe I'll try it a different way. A pulse for a big deceleration in organic sales, I think it's up less than 1% despite your lapping much easier comps. I know July is typically a slow month, and you mentioned it's flat. I guess why wouldn't all the heavy lifting you've done internally kind of help achieve a little bit better H2 growth, or is it just simply a conservatism on your part? Yeah, I think, Brian, you know, we all had been saying the back half is the biggest question mark, just given what we were all seeing in April with the consumer and the tariffs and the pricing flowing through. We were really just, to your point, taking a bit of a conservative view on what the units are going to do. I think we've all read the headlines of the pricing across the economy starting to actually flow through and what's going on with just employment. We're in the thick of all of that right now. If you give us a couple more months, obviously we'll be in a much better position. We're just not in the position where we feel like it's prudent to lean out until we know more. Fair enough. Thanks, guys. Appreciate it. Thanks, Brian. I would like to turn the floor over to Matthew Stevenson for closing remarks. All right. Thank you, Stacey. Slide 20 underscores the compelling investment thesis behind Holley Performance Brands. At the heart of this story is a passionate and deeply engaged automotive enthusiast community. For our customers, this is far more than a pastime. It's a lifestyle rooted in performance, personalization, and pride. With an addressable market exceeding $40 billion, Holley is uniquely positioned as the industry leader, powered by a portfolio of iconic brands recognized for decades of innovation and excellence. Our growth story is grounded in a proven track record of successful acquisitions and disciplined integration. We consistently create value by expanding our reach, enhancing capabilities, and unlocking synergies across the platform. Looking ahead, we see a transformative opportunity to redefine how both consumers and distribution partners interact with their brands. Through expanded digital capabilities and omnichannel engagement, we're building a new frontier that strengthens loyalty, accelerates conversion, and expands access. Now, as we emerge from our multi-year transformation and return to growth in our core business, our financial ambitions are clear. We remain focused on delivering sustainable organic growth, maintaining gross margins of 40%, and achieving adjusted EBITDA margins greater than 20%. At the same time, we are committed to generating strong, consistent free cash flow and to building a disciplined M&A platform that unlocks long-term value. Together, our powerful enthusiast ecosystem and Holley's trusted best-in-class brand portfolio represent a rare and differentiated investment opportunity. In closing, I want to thank our dedicated team members for their tireless efforts to commit to excellence, our loyal consumers who bring our brands to life, and our valued distribution partners, many of whom have been with us for decades. Your partnership and passion continue to drive Holley forward. I want to thank you for your attendance on our call today and wish you all a great morning. Thank you. This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.

Speaker 7: Good morning, ladies and gentlemen, and welcome to the conference call to discuss Holley's second quarter 2025 earnings results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions for asking questions will be provided at that time. We ask that participants limit themselves to one question and one related follow-up during the Q&A period. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Holley. As a reminder, this call is being recorded and will be made available for future playback. I would now like to introduce your host for today's call, Anthony Rozmus with Investor Relations. Please go ahead. Good morning, ladies and gentlemen, and welcome to the conference call to discuss Holley 's second quarter 2025 earnings results. good morning ladies and gentlemen and welcome to the conference call to discuss holley 's second quarter 2025 earnings results At this time, all participants are in a listen-only mode. at this time all participants are in a listen-only mode Later, we will conduct a question-and-answer session, and instructions for asking questions will be provided at that time. later we will conduct a question-and-answer session and instructions for asking questions will be provided at that time We ask that participants limit themselves to one question and one related follow-up during the Q&A period. we ask that participants limit themselves to one question and one related follow-up during the q&a period Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Holley . please be advised that reproduction of this call in whole or in part is not permitted without written authorization of holley As a reminder, this call is being recorded and will be made available for future playback. as a reminder this call is being recorded and will be made available for future playback I would now like to introduce your host for today's call, Anthony Rozmus with Investor Relations. i would now like to introduce your host for today's call anthony rozmus with investor relations Please go ahead. please go ahead

Speaker 9: Good morning and welcome to Holley's second quarter 2025 earnings conference call. On the call with me today are President and Chief Executive Officer, Matthew Stevenson and Chief Financial Officer, Jesse Weaver. This webcast and presentation material, including non-GAAP reconciliations, are available on our Investor Relations website. Our discussion today includes forward-looking statements that are based on our best view of the world and our businesses as we see them today and are subject to risks and uncertainties, including the ones described in our SEC filings. This morning, we'll review our financial results for the second quarter 2025 and discuss guidance for full year 2025. At the conclusion of the prepared remarks, we'll open the line up for questions. With that, I'll turn the call over to our CEO, Matthew Stevenson. Good morning and welcome to Holley 's second quarter 2025 earnings conference call. good morning and welcome to holley 's second quarter 2025 earnings conference call On the call with me today are President and Chief Executive Officer, Matthew Stevenson and Chief Financial Officer , Jesse Weaver. on the call with me today are president and chief executive officer matthew stevenson and chief financial officer , jesse weaver This webcast and presentation material, including non-GAAP reconciliations, are available on our Investor Relations website. this webcast and presentation material including non-gaap reconciliations are available on our investor relations website Our discussion today includes forward-looking statements that are based on our best view of the world and our businesses as we see them today and are subject to risks and uncertainties, including the ones described in our SEC filings. our discussion today includes forward-looking statements that are based on our best view of the world and our businesses as we see them today and are subject to risks and uncertainties including the ones described in our sec filings This morning, we'll review our financial results for the second quarter 2025 and discuss guidance for full year 2025. this morning we'll review our financial results for the second quarter 2025 and discuss guidance for full year 2025 At the conclusion of the prepared remarks, we'll open the line up for questions. at the conclusion of the prepared remarks we'll open the line up for questions With that, I'll turn the call over to our CEO, Matthew Stevenson. with that i'll turn the call over to our ceo matthew stevenson

Speaker 6: Thank you, Anthony, and good morning, everyone. As we look back on our second quarter of 2025, I am happy to report that the momentum we began building more than 24 months ago continues to grow. It's been a highly productive quarter, one that not only reflects strong operational discipline but also the impact of staying focused on our strategic priorities. Thank you, as always, for your continued support as we navigate a constantly evolving consumer and macroeconomic environment. For the second straight quarter, our core business delivered solid growth. Just as a quick reminder, when we say core business, we're referring to results that exclude the businesses we divested and the product lines we phased out as part of last year's strategic rationalization efforts. This quarter, our team made strong progress across the board, with core growth showing up in every division of the company. Thank you, Anthony, and good morning, everyone. thank you anthony and good morning everyone As we look back on our second quarter of 2025, I am happy to report that the momentum we began building more than 24 months ago continues to grow. as we look back on our second quarter of 2025 i am happy to report that the momentum we began building more than 24 months ago continues to grow It's been a highly productive quarter, one that not only reflects strong operational discipline but also the impact of staying focused on our strategic priorities. it's been a highly productive quarter one that not only reflects strong operational discipline but also the impact of staying focused on our strategic priorities Thank you, as always, for your continued support as we navigate a constantly evolving consumer and macroeconomic environment. thank you as always for your continued support as we navigate a constantly evolving consumer and macroeconomic environment For the second straight quarter, our core business delivered solid growth. for the second straight quarter our core business delivered solid growth Just as a quick reminder, when we say core business, we're referring to results that exclude the businesses we divested and the product lines we phased out as part of last year's strategic rationalization efforts. just as a quick reminder when we say core business we're referring to results that exclude the businesses we divested and the product lines we phased out as part of last year's strategic rationalization efforts This quarter, our team made strong progress across the board, with core growth showing up in every division of the company. this quarter our team made strong progress across the board with core growth showing up in every division of the company What's especially encouraging is that we're again seeing this momentum in both our direct-to-consumer and business-to-business channels. That speaks to the strength and balance of our omnichannel strategy. As we emphasized many times before, our omnichannel approach is a cornerstone of our growth strategy as the leading consumer enthusiast platform and automotive performance aftermarket. We're committed to meeting customers wherever they choose to do business, whether it's through retailers, distributors, wholesalers, third-party marketplaces, installers, national retailers, or our own e-commerce platform. Our second quarter performance reflects the foundation we have built over the last two years in key areas like go-to-market execution, product innovation, digital capability, and operational excellence, all of which are now driving the progress we're making under our three-year strategic plan. With that foundation firmly in place, we're focused on keeping up the momentum and building on the progress we've already made. What's especially encouraging is that we're again seeing this momentum in both our direct-to-consumer and business-to-business channels. what's especially encouraging is that we're again seeing this momentum in both our direct-to-consumer and business-to-business channels That speaks to the strength and balance of our omnichannel strategy. that speaks to the strength and balance of our omnichannel strategy As we emphasized many times before, our omnichannel approach is a cornerstone of our growth strategy as the leading consumer enthusiast platform and automotive performance aftermarket. as we emphasized many times before our omnichannel approach is a cornerstone of our growth strategy as the leading consumer enthusiast platform and automotive performance aftermarket We're committed to meeting customers wherever they choose to do business, whether it's through retailers, distributors, wholesalers, third-party marketplaces, installers, national retailers, or our own e-commerce platform. we're committed to meeting customers wherever they choose to do business whether it's through retailers distributors wholesalers third-party marketplaces installers national retailers or our own e-commerce platform Our second quarter performance reflects the foundation we have built over the last two years in key areas like go-to-market execution, product innovation, digital capability, and operational excellence, all of which are now driving the progress we're making under our three-year strategic plan. our second quarter performance reflects the foundation we have built over the last two years in key areas like go-to-market execution product innovation digital capability and operational excellence all of which are now driving the progress we're making under our three-year strategic plan With that foundation firmly in place, we're focused on keeping up the momentum and building on the progress we've already made. with that foundation firmly in place we're focused on keeping up the momentum and building on the progress we've already made Before we get into the specifics of Q2 performance, I want to revisit something we discussed last quarter, and that's tariffs. I'm proud to say that the tariff mitigation plan we introduced in Q1 is working, thanks to the incredible effort and execution from teams across the company. This wasn't luck. It was a result of careful planning, strong cross-functional teamwork, and consistent hard work. From the initiatives we developed to lower our tariff exposure across the supply chain to the pricing strategies we rolled out this past spring, all of it has come together to form a smart, resilient response. Because of these efforts, we're currently not forecasting any meaningful impact to free cash flow or margins this year or next. This is a great example of how strong leadership, operational focus, and a culture of accountability can overcome major challenges and deliver real results. Before we get into the specifics of Q2 performance, I want to revisit something we discussed last quarter, and that's tariffs. before we get into the specifics of q2 performance i want to revisit something we discussed last quarter and that's tariffs I'm proud to say that the tariff mitigation plan we introduced in Q1 is working, thanks to the incredible effort and execution from teams across the company. i'm proud to say that the tariff mitigation plan we introduced in q1 is working thanks to the incredible effort and execution from teams across the company This wasn't luck. this wasn't luck It was a result of careful planning, strong cross-functional teamwork, and consistent hard work. it was a result of careful planning strong cross-functional teamwork and consistent hard work From the initiatives we developed to lower our tariff exposure across the supply chain to the pricing strategies we rolled out this past spring, all of it has come together to form a smart, resilient response. from the initiatives we developed to lower our tariff exposure across the supply chain to the pricing strategies we rolled out this past spring all of it has come together to form a smart resilient response Because of these efforts, we're currently not forecasting any meaningful impact to free cash flow or margins this year or next. because of these efforts we're currently not forecasting any meaningful impact to free cash flow or margins this year or next This is a great example of how strong leadership, operational focus, and a culture of accountability can overcome major challenges and deliver real results. this is a great example of how strong leadership operational focus and a culture of accountability can overcome major challenges and deliver real results Now, let's turn to slide five, which includes our highlights for the second quarter of 2025. We continue to build momentum in Q2, delivering a solid 3.9% revenue growth in our core business across all divisions. This performance reflects the consistent execution of our strategy and the resilience of our operating model. Most notably, we achieved free cash flow of $35.7 million, marking the highest quarterly free cash flow generated in our history. This is a clear testament to both our disciplined capital management and the strong cash-generating power of the business. We continue to execute against our strategic framework, which drove approximately $27 million in revenue from key initiatives this quarter. This includes focused workstreams across our commercial and operational pillars that are accelerating profitable growth. Our growth remained broad-based, with expansion across more than 20 of our brands in both the direct-to-consumer and business-to-business channels. Now, let's turn to slide five, which includes our highlights for the second quarter of 2025. now let's turn to slide five which includes our highlights for the second quarter of 2025 We continue to build momentum in Q2, delivering a solid 3.9% revenue growth in our core business across all divisions. we continue to build momentum in q2 delivering a solid 3.9% revenue growth in our core business across all divisions This performance reflects the consistent execution of our strategy and the resilience of our operating model. this performance reflects the consistent execution of our strategy and the resilience of our operating model Most notably, we achieved free cash flow of $35.7 million, marking the highest quarterly free cash flow generated in our history. most notably we achieved free cash flow of $35.7 million marking the highest quarterly free cash flow generated in our history This is a clear testament to both our disciplined capital management and the strong cash-generating power of the business. this is a clear testament to both our disciplined capital management and the strong cash-generating power of the business We continue to execute against our strategic framework, which drove approximately $27 million in revenue from key initiatives this quarter. we continue to execute against our strategic framework which drove approximately $27 million in revenue from key initiatives this quarter This includes focused workstreams across our commercial and operational pillars that are accelerating profitable growth. this includes focused workstreams across our commercial and operational pillars that are accelerating profitable growth Our growth remained broad-based, with expansion across more than 20 of our brands in both the direct-to-consumer and business-to-business channels. our growth remained broad-based with expansion across more than 20 of our brands in both the direct-to-consumer and business-to-business channels In the B2B channel, we further strengthened our relationships with key partners, driving approximately 6.5% growth in the channel. This growth stems from increased sales support, deeper integration with our partners, and a relentless focus on customer satisfaction. In direct-to-consumer, we saw an increase of 8.6% overall, with especially strong performance on third-party marketplaces like Amazon and eBay, which grew over 28%. These platforms continue to be a major growth lever for us as we meet customers where they prefer to shop. Product innovation remains the cornerstone of our performance. Combined with strategic pricing initiatives, our efforts contributed $10.8 million in incremental revenue this quarter. We continue to calibrate pricing to match customer value perception while ensuring competitiveness and profitability across all channels. Lastly, as I mentioned, we made significant strides in our supply chain initiatives, which are forecasted to effectively offset tariff-related pressures and help preserve margin stability. In the B2B channel, we further strengthened our relationships with key partners, driving approximately 6.5% growth in the channel. in the b2b channel we further strengthened our relationships with key partners driving approximately 6.5% growth in the channel This growth stems from increased sales support, deeper integration with our partners, and a relentless focus on customer satisfaction. this growth stems from increased sales support deeper integration with our partners and a relentless focus on customer satisfaction In direct-to-consumer, we saw an increase of 8.6% overall, with especially strong performance on third-party marketplaces like Amazon and eBay, which grew over 28%. in direct-to-consumer we saw an increase of 8.6% overall with especially strong performance on third-party marketplaces like amazon and ebay which grew over 28% These platforms continue to be a major growth lever for us as we meet customers where they prefer to shop. these platforms continue to be a major growth lever for us as we meet customers where they prefer to shop Product innovation remains the cornerstone of our performance. product innovation remains the cornerstone of our performance Combined with strategic pricing initiatives, our efforts contributed $10.8 million in incremental revenue this quarter. combined with strategic pricing initiatives our efforts contributed $10.8 million in incremental revenue this quarter We continue to calibrate pricing to match customer value perception while ensuring competitiveness and profitability across all channels. we continue to calibrate pricing to match customer value perception while ensuring competitiveness and profitability across all channels Lastly, as I mentioned, we made significant strides in our supply chain initiatives, which are forecasted to effectively offset tariff-related pressures and help preserve margin stability. lastly as i mentioned we made significant strides in our supply chain initiatives which are forecasted to effectively offset tariff-related pressures and help preserve margin stability These efforts underscore our proactive approach to tackling issues head-on and getting in front of them before they impact the business. Let's turn to slide six, which features some more quantitative highlights from the second quarter of 2025. We achieved net sales of $166.7 million, reflecting a 3.9% increase in the core business compared to the prior year. This solid growth continues to validate the strength of our strategic execution and the dedication of our teams across all divisions. Our gross margins were 41.7%, up 26 basis points year-over-year, demonstrating continued stability and positive momentum even in the face of external cost pressures. The improvement is partially due to strategic product and pricing actions, as well as operational initiatives, including supply chain efficiency. Free cash flow, as I mentioned, reached $35.7 million, an increase of $11.3 million versus the prior year. These efforts underscore our proactive approach to tackling issues head-on and getting in front of them before they impact the business. these efforts underscore our proactive approach to tackling issues head-on and getting in front of them before they impact the business Let's turn to slide six, which features some more quantitative highlights from the second quarter of 2025. let's turn to slide six which features some more quantitative highlights from the second quarter of 2025 We achieved net sales of $166.7 million, reflecting a 3.9% increase in the core business compared to the prior year. we achieved net sales of $166.7 million reflecting a 3.9% increase in the core business compared to the prior year This solid growth continues to validate the strength of our strategic execution and the dedication of our teams across all divisions. this solid growth continues to validate the strength of our strategic execution and the dedication of our teams across all divisions Our gross margins were 41.7%, up 26 basis points year-over-year, demonstrating continued stability and positive momentum even in the face of external cost pressures. our gross margins were 41.7% up 26 basis points year-over-year demonstrating continued stability and positive momentum even in the face of external cost pressures The improvement is partially due to strategic product and pricing actions, as well as operational initiatives, including supply chain efficiency. the improvement is partially due to strategic product and pricing actions as well as operational initiatives including supply chain efficiency Free cash flow, as I mentioned, reached $35.7 million, an increase of $11.3 million versus the prior year. free cash flow as i mentioned reached $35.7 million an increase of $11.3 million versus the prior year This strong cash generation highlights the underlying strength of the business, aided by disciplined capital allocation and working capital management. Adjusted EBITDA margin came in at 21.9%, down 74 basis points year-over-year. This decline reflects the normalization following prior year's SKU rationalizations and divestitures, but it remains well within expectations given the shift in product mix and ongoing investments in innovation and growth. Regarding new product activity in Q2, we introduced several launches across our portfolio, and I'd like to highlight just a few standout examples. We launched a Terminator X Bluetooth module, enabling wireless engine tuning via a smartphone. It's quickly gaining traction with strong early demand, enhancing our EFI platform and driving mobile integrated growth. We also expanded our Arizona Desert Shocks Mesa 2.5 line by adding new applications to meet growing demand in the off-road market. This strong cash generation highlights the underlying strength of the business, aided by disciplined capital allocation and working capital management. this strong cash generation highlights the underlying strength of the business aided by disciplined capital allocation and working capital management Adjusted EBITDA margin came in at 21.9%, down 74 basis points year-over-year. adjusted ebitda margin came in at 21.9% down 74 basis points year-over-year This decline reflects the normalization following prior year's SKU rationalizations and divestitures, but it remains well within expectations given the shift in product mix and ongoing investments in innovation and growth. this decline reflects the normalization following prior year's sku rationalizations and divestitures but it remains well within expectations given the shift in product mix and ongoing investments in innovation and growth Regarding new product activity in Q2, we introduced several launches across our portfolio, and I'd like to highlight just a few standout examples. regarding new product activity in q2 we introduced several launches across our portfolio and i'd like to highlight just a few standout examples We launched a Terminator X Bluetooth module, enabling wireless engine tuning via a smartphone. we launched a terminator x bluetooth module enabling wireless engine tuning via a smartphone It's quickly gaining traction with strong early demand, enhancing our EFI platform and driving mobile integrated growth. it's quickly gaining traction with strong early demand enhancing our efi platform and driving mobile integrated growth We also expanded our Arizona Desert Shocks Mesa 2.5 line by adding new applications to meet growing demand in the off-road market. we also expanded our arizona desert shocks mesa 2.5 line by adding new applications to meet growing demand in the off-road market These premium shocks deliver exceptional performance and durability, positioning ADS for continued growth with enthusiasts seeking race-proven technology for everyday builds. In our Euro segment, our APR brand introduced new high-performance exhaust systems for the Audi S4 and S5 platforms. These upgrades deliver improved sound, reduced back pressure, and weight savings, broadening our appeal in the premium European space. Additionally, we released new colorways for the Simpson Outlaw Bandit 3.0 motorcycle helmet, building on the popularity of this iconic model. The refreshed designs inject energy into a top-performing product and further strengthen our position in motorcycle safety. Together, these launches highlight a small example of our continued focus on innovation, consumer engagement, and expanding our leadership across key enthusiast categories. On the operational metrics, we also delivered significant progress in the quarter. These premium shocks deliver exceptional performance and durability, positioning ADS for continued growth with enthusiasts seeking race-proven technology for everyday builds. these premium shocks deliver exceptional performance and durability positioning ads for continued growth with enthusiasts seeking race-proven technology for everyday builds In our Euro segment, our APR brand introduced new high-performance exhaust systems for the Audi S4 and S5 platforms. in our euro segment our apr brand introduced new high-performance exhaust systems for the audi s4 and s5 platforms These upgrades deliver improved sound, reduced back pressure, and weight savings, broadening our appeal in the premium European space. these upgrades deliver improved sound reduced back pressure and weight savings broadening our appeal in the premium european space Additionally, we released new colorways for the Simpson Outlaw Bandit 3.0 motorcycle helmet, building on the popularity of this iconic model. additionally we released new colorways for the simpson outlaw bandit 3.0 motorcycle helmet building on the popularity of this iconic model The refreshed designs inject energy into a top-performing product and further strengthen our position in motorcycle safety. the refreshed designs inject energy into a top-performing product and further strengthen our position in motorcycle safety Together, these launches highlight a small example of our continued focus on innovation, consumer engagement, and expanding our leadership across key enthusiast categories. together these launches highlight a small example of our continued focus on innovation consumer engagement and expanding our leadership across key enthusiast categories On the operational metrics, we also delivered significant progress in the quarter. on the operational metrics we also delivered significant progress in the quarter We achieved a 2.2% year-over-year increase in the in-stock rates for our top 2,500 products, a $1 million improvement in operational efficiency, and a 17% year-over-year reduction in past dues. Additionally, we reduced inventory by approximately $9 million since the beginning of the year, contributing meaningfully to improved cash flow and working capital efficiency. On the marketing front, our focused promotional efforts continue to drive results. We recorded an 8.6% year-over-year increase in DTC sales, bolstered by third-party platform growth of more than 28%. Our earned media impressions reached 463 million from 657 media clips, and our social media following grew 2% over the previous year, reflecting deeper engagement with our enthusiast customer base. In summary, our second quarter performance demonstrates continued execution of our strategic priorities, driving growth, operational excellence, and shareholder value creation across every part of the organization. We achieved a 2.2% year-over-year increase in the in-stock rates for our top 2,500 products, a $1 million improvement in operational efficiency, and a 17% year-over-year reduction in past dues. we achieved a 2.2% year-over-year increase in the in-stock rates for our top 2,500 products a $1 million improvement in operational efficiency and a 17% year-over-year reduction in past dues Additionally, we reduced inventory by approximately $9 million since the beginning of the year, contributing meaningfully to improved cash flow and working capital efficiency. additionally we reduced inventory by approximately $9 million since the beginning of the year contributing meaningfully to improved cash flow and working capital efficiency On the marketing front, our focused promotional efforts continue to drive results. on the marketing front our focused promotional efforts continue to drive results We recorded an 8.6% year-over-year increase in DTC sales, bolstered by third-party platform growth of more than 28%. we recorded an 8.6% year-over-year increase in dtc sales bolstered by third-party platform growth of more than 28% Our earned media impressions reached 463 million from 657 media clips, and our social media following grew 2% over the previous year, reflecting deeper engagement with our enthusiast customer base. our earned media impressions reached 463 million from 657 media clips and our social media following grew 2% over the previous year reflecting deeper engagement with our enthusiast customer base In summary, our second quarter performance demonstrates continued execution of our strategic priorities, driving growth, operational excellence, and shareholder value creation across every part of the organization. in summary our second quarter performance demonstrates continued execution of our strategic priorities driving growth operational excellence and shareholder value creation across every part of the organization Let's take a closer look at some of the standout core business growth we saw across our divisions in Q2, shown on slide seven. In the Domestic Muscle vertical, we delivered 6% year-over-year growth, driven by sustained consumer demand and the enduring strength of our brands. Many brands within this division posted high single-digit growth in our core product categories, highlighting solid performance across the board. Our Modern Truck & Off-Road division led the way with an impressive 17% growth. This was fueled by standout results from several of our priority brands, including at least five of our power brands that recorded double-digit growth in their core businesses. The Euro & Import division experienced strong momentum as well, up 4%. Now, the Euro brands of Dinan and APR within this were up 20% combined. Let's take a closer look at some of the standout core business growth we saw across our divisions in Q2, shown on slide seven. let's take a closer look at some of the standout core business growth we saw across our divisions in q2 shown on slide seven In the Domestic Muscle vertical, we delivered 6% year-over-year growth, driven by sustained consumer demand and the enduring strength of our brands. in the domestic muscle vertical we delivered 6% year-over-year growth driven by sustained consumer demand and the enduring strength of our brands Many brands within this division posted high single-digit growth in our core product categories, highlighting solid performance across the board. many brands within this division posted high single-digit growth in our core product categories highlighting solid performance across the board Our Modern Truck & Off-Road division led the way with an impressive 17% growth. our modern truck & off-road division led the way with an impressive 17% growth This was fueled by standout results from several of our priority brands, including at least five of our power brands that recorded double-digit growth in their core businesses. this was fueled by standout results from several of our priority brands including at least five of our power brands that recorded double-digit growth in their core businesses The Euro & Import division experienced strong momentum as well, up 4%. the euro & import division experienced strong momentum as well up 4% Now, the Euro brands of Dinan and APR within this were up 20% combined. now the euro brands of dinan and apr within this were up 20% combined However, this growth was offset by year-over-year revenue timing shifts in our Import division, which moderated overall performance in this vertical. The Safety & Racing division reported 1% growth, but that figure doesn't fully reflect what's happening under the surface. Our Simpson and RaceQuip brands posted a combined 15% growth. Plus, the division is currently navigating a regulatory transition known as the SNELL cycle, which happens every five years and impacts automotive motorsports helmets. Distributors are limiting orders until the next certification, SA 2025 helmets, become available to enthusiasts in October. As a result, we anticipate a significant rebound in growth in the second half of the year. Overall, these results affirm the strength and the resilience of our core business. Our strategic focus on investing in power brands, streamlining accountability, and aligning resources is driving measurable success. However, this growth was offset by year-over-year revenue timing shifts in our Import division, which moderated overall performance in this vertical. however this growth was offset by year-over-year revenue timing shifts in our import division which moderated overall performance in this vertical The Safety & Racing division reported 1% growth, but that figure doesn't fully reflect what's happening under the surface. the safety & racing division reported 1% growth but that figure doesn't fully reflect what's happening under the surface Our Simpson and RaceQuip brands posted a combined 15% growth. our simpson and racequip brands posted a combined 15% growth Plus, the division is currently navigating a regulatory transition known as the SNELL cycle, which happens every five years and impacts automotive motorsports helmets. plus the division is currently navigating a regulatory transition known as the snell cycle which happens every five years and impacts automotive motorsports helmets Distributors are limiting orders until the next certification, SA 2025 helmets, become available to enthusiasts in October. distributors are limiting orders until the next certification sa 2025 helmets become available to enthusiasts in october As a result, we anticipate a significant rebound in growth in the second half of the year. as a result we anticipate a significant rebound in growth in the second half of the year Overall, these results affirm the strength and the resilience of our core business. overall these results affirm the strength and the resilience of our core business Our strategic focus on investing in power brands, streamlining accountability, and aligning resources is driving measurable success. our strategic focus on investing in power brands streamlining accountability and aligning resources is driving measurable success Despite a challenging market environment, our commitment to brand leadership and disciplined execution continues to deliver sustainable core growth across our major divisions. On slide eight, we revisit the eight areas that form the foundation of our strategic framework, which we have reviewed in prior calls. At the center of this framework lie our steering principles. The first of these principles is fueling our teammates, which supports our ambition to establish Holley as a recognized, great place to work. Our focus remains on fostering a workplace where team members feel empowered, have meaningful opportunities for advancement, and look forward to being part of a dynamic and inclusive environment. Our second principle is supercharging our customer relationships, whether that's with our passionate consumers or our trusted B2B collaborators. Despite a challenging market environment, our commitment to brand leadership and disciplined execution continues to deliver sustainable core growth across our major divisions. despite a challenging market environment our commitment to brand leadership and disciplined execution continues to deliver sustainable core growth across our major divisions On slide eight, we revisit the eight areas that form the foundation of our strategic framework, which we have reviewed in prior calls. on slide eight we revisit the eight areas that form the foundation of our strategic framework which we have reviewed in prior calls At the center of this framework lie our steering principles. at the center of this framework lie our steering principles The first of these principles is fueling our teammates, which supports our ambition to establish Holley as a recognized, great place to work. the first of these principles is fueling our teammates which supports our ambition to establish holley as a recognized great place to work Our focus remains on fostering a workplace where team members feel empowered, have meaningful opportunities for advancement, and look forward to being part of a dynamic and inclusive environment. our focus remains on fostering a workplace where team members feel empowered have meaningful opportunities for advancement and look forward to being part of a dynamic and inclusive environment Our second principle is supercharging our customer relationships, whether that's with our passionate consumers or our trusted B2B collaborators. our second principle is supercharging our customer relationships whether that's with our passionate consumers or our trusted b2b collaborators This principle touches three vital components of the framework: building and delivering the premier consumer journey in our industry, becoming a trailblazing trusted partner to our B2B customers by finding innovative paths for shared growth, and bringing to market innovative new products that set the benchmark in their categories. We support these priorities by deliberately managing and merchandising our entire portfolio with clear differentiation. The third and final principle, accelerating profitable growth, focuses on strategic expansion into new global and adjacent markets, pursuing transformational M&A, and enabling reinvestment through continuous operational improvements. Together with the other initiatives, these actions drive us toward our overarching aim, delivering superior financial results. Now on to slide nine. I'm pleased to share the highlights and the achievements for the second quarter as captured in our updated strategic initiative tracker. This principle touches three vital components of the framework: building and delivering the premier consumer journey in our industry, becoming a trailblazing trusted partner to our B2B customers by finding innovative paths for shared growth, and bringing to market innovative new products that set the benchmark in their categories. this principle touches three vital components of the framework building and delivering the premier consumer journey in our industry becoming a trailblazing trusted partner to our b2b customers by finding innovative paths for shared growth and bringing to market innovative new products that set the benchmark in their categories We support these priorities by deliberately managing and merchandising our entire portfolio with clear differentiation. we support these priorities by deliberately managing and merchandising our entire portfolio with clear differentiation The third and final principle, accelerating profitable growth, focuses on strategic expansion into new global and adjacent markets, pursuing transformational M&A, and enabling reinvestment through continuous operational improvements. the third and final principle accelerating profitable growth focuses on strategic expansion into new global and adjacent markets pursuing transformational m&a and enabling reinvestment through continuous operational improvements Together with the other initiatives, these actions drive us toward our overarching aim, delivering superior financial results. together with the other initiatives these actions drive us toward our overarching aim delivering superior financial results Now on to slide nine. now on to slide nine I'm pleased to share the highlights and the achievements for the second quarter as captured in our updated strategic initiative tracker. i'm pleased to share the highlights and the achievements for the second quarter as captured in our updated strategic initiative tracker Under our trailblazing trusted partner pillar encompassing our B2B efforts, we've seen another quarter of strong performance. Revenue from our top 50-plus accounts accelerated significantly, contributing $8.3 million in growth. Our Holley Pro Small Customer initiative also continued to gain momentum, adding $1.8 million in revenue, thanks to our focused sales team, proactive outreach, and deepened customer relationships. In total, these B2B sales initiatives contributed $13.2 million in incremental revenue in Q2. Turning to our premier consumer journey pillar, our e-commerce strategy remains a key driver of growth. Year to date, e-commerce revenue is up approximately $4 million. Our efforts on third-party platforms, especially Amazon, have been particularly successful, with over 50% growth in Amazon sales and over 40% growth across all three key platforms in the first half. These efforts alone added $2.2 million in incremental revenue during the second quarter. Under our trailblazing trusted partner pillar encompassing our B2B efforts, we've seen another quarter of strong performance. under our trailblazing trusted partner pillar encompassing our b2b efforts we've seen another quarter of strong performance Revenue from our top 50-plus accounts accelerated significantly, contributing $8.3 million in growth. revenue from our top 50-plus accounts accelerated significantly contributing $8.3 million in growth Our Holley Pro Small Customer initiative also continued to gain momentum, adding $1.8 million in revenue, thanks to our focused sales team, proactive outreach, and deepened customer relationships. our holley pro small customer initiative also continued to gain momentum adding $1.8 million in revenue thanks to our focused sales team proactive outreach and deepened customer relationships In total, these B2B sales initiatives contributed $13.2 million in incremental revenue in Q2. in total these b2b sales initiatives contributed $13.2 million in incremental revenue in q2 Turning to our premier consumer journey pillar, our e-commerce strategy remains a key driver of growth. turning to our premier consumer journey pillar our e-commerce strategy remains a key driver of growth Year to date, e-commerce revenue is up approximately $4 million. year to date e-commerce revenue is up approximately $4 million Our efforts on third-party platforms, especially Amazon, have been particularly successful, with over 50% growth in Amazon sales and over 40% growth across all three key platforms in the first half. our efforts on third-party platforms especially amazon have been particularly successful with over 50% growth in amazon sales and over 40% growth across all three key platforms in the first half These efforts alone added $2.2 million in incremental revenue during the second quarter. these efforts alone added $2.2 million in incremental revenue during the second quarter Innovation continues to be a cornerstone of our growth. We launched new products across all four divisions, delivering approximately $8 million in revenue. At the same time, our portfolio management strategies, including strategic pricing and optimization of our active portfolio, generated an additional $3 million in B2B sales. In total, this pillar added $11 million to our top line in Q2. Our international expansion efforts remain on track. The progress in Mexico has validated our product-market fit and our go-to-market strategy, setting a solid foundation for future growth. Additionally, we expanded our reach in the car dealer channel, with six more BMW dealers joining the Dinan program, bringing the total to 28 participating dealers. These combined initiatives, while still early in their adoption, generated $1.1 million in revenue for the quarter. We continue to make strong progress under our fund-to-growth pillar. Innovation continues to be a cornerstone of our growth. innovation continues to be a cornerstone of our growth We launched new products across all four divisions, delivering approximately $8 million in revenue. we launched new products across all four divisions delivering approximately $8 million in revenue At the same time, our portfolio management strategies, including strategic pricing and optimization of our active portfolio, generated an additional $3 million in B2B sales. at the same time our portfolio management strategies including strategic pricing and optimization of our active portfolio generated an additional $3 million in b2b sales In total, this pillar added $11 million to our top line in Q2. in total this pillar added $11 million to our top line in q2 Our international expansion efforts remain on track. our international expansion efforts remain on track The progress in Mexico has validated our product-market fit and our go-to-market strategy, setting a solid foundation for future growth. the progress in mexico has validated our product-market fit and our go-to-market strategy setting a solid foundation for future growth Additionally, we expanded our reach in the car dealer channel, with six more BMW dealers joining the Dinan program, bringing the total to 28 participating dealers. additionally we expanded our reach in the car dealer channel with six more bmw dealers joining the dinan program bringing the total to 28 participating dealers These combined initiatives, while still early in their adoption, generated $1.1 million in revenue for the quarter. these combined initiatives while still early in their adoption generated $1.1 million in revenue for the quarter We continue to make strong progress under our fund-to-growth pillar. we continue to make strong progress under our fund-to-growth pillar In Q2 alone, we completed and implemented over $2.5 million in purchase savings projects and achieved more than $1 million in operational improvements. Together, these efforts resulted in $3.5 million in cost savings for the quarter. We're also proud of the ongoing progress we're making in strengthening our culture and employee engagement. As reported last quarter, we saw a 3% increase in our Great Place to Work Pulse survey scores, an encouraging sign of our efforts taking root. Looking ahead, we're excited to build on this momentum with our annual employee survey scheduled for later this fall. Additionally, through continued operational efficiencies, we remain on track to achieve our year-end target for revenue per employee. All told, we generated $27 million in revenue from key strategic initiatives and achieved $3.5 million in cost savings. In Q2 alone, we completed and implemented over $2.5 million in purchase savings projects and achieved more than $1 million in operational improvements. in q2 alone we completed and implemented over $2.5 million in purchase savings projects and achieved more than $1 million in operational improvements Together, these efforts resulted in $3.5 million in cost savings for the quarter. together these efforts resulted in $3.5 million in cost savings for the quarter We're also proud of the ongoing progress we're making in strengthening our culture and employee engagement. we're also proud of the ongoing progress we're making in strengthening our culture and employee engagement As reported last quarter, we saw a 3% increase in our Great Place to Work Pulse survey scores, an encouraging sign of our efforts taking root. as reported last quarter we saw a 3% increase in our great place to work pulse survey scores an encouraging sign of our efforts taking root Looking ahead, we're excited to build on this momentum with our annual employee survey scheduled for later this fall. looking ahead we're excited to build on this momentum with our annual employee survey scheduled for later this fall Additionally, through continued operational efficiencies, we remain on track to achieve our year-end target for revenue per employee. additionally through continued operational efficiencies we remain on track to achieve our year-end target for revenue per employee All told, we generated $27 million in revenue from key strategic initiatives and achieved $3.5 million in cost savings. all told we generated $27 million in revenue from key strategic initiatives and achieved $3.5 million in cost savings In addition to advancing our strategic initiatives, we have continued to prioritize actions to mitigate the impacts of tariffs introduced since our last meeting. As we promised during our last earnings call, we would come back to you during this August call and provide greater clarity to the impact of tariffs to our business, both in 2025 and 2026. Today, we are going to do that. Let's walk through some more detail first on slide 10. During last quarter's call, we outlined our detailed, comprehensive plan to tackle tariffs, an effort we had already been driving through a swiftly established cross-functional project management office. To address the various aspects of tariff mitigation, we organized the work into five major workstreams: governance, products, logistics and supply chain, regulatory and classifications, and pricing and margin protection. In addition to advancing our strategic initiatives, we have continued to prioritize actions to mitigate the impacts of tariffs introduced since our last meeting. in addition to advancing our strategic initiatives we have continued to prioritize actions to mitigate the impacts of tariffs introduced since our last meeting As we promised during our last earnings call, we would come back to you during this August call and provide greater clarity to the impact of tariffs to our business, both in 2025 and 2026. as we promised during our last earnings call we would come back to you during this august call and provide greater clarity to the impact of tariffs to our business both in 2025 and 2026 Today, we are going to do that. today we are going to do that Let's walk through some more detail first on slide 10. let's walk through some more detail first on slide 10 During last quarter's call, we outlined our detailed, comprehensive plan to tackle tariffs, an effort we had already been driving through a swiftly established cross-functional project management office. during last quarter's call we outlined our detailed comprehensive plan to tackle tariffs an effort we had already been driving through a swiftly established cross-functional project management office To address the various aspects of tariff mitigation, we organized the work into five major workstreams: governance, products, logistics and supply chain, regulatory and classifications, and pricing and margin protection. to address the various aspects of tariff mitigation we organized the work into five major workstreams governance products logistics and supply chain regulatory and classifications and pricing and margin protection Our approach was multifaceted, supported by daily meetings to maintain momentum, track progress, and ensure alignment across teams. Each workstream was intentionally structured to address a distinct set of challenges and opportunities, enabling a coordinated and effective response. As we highlighted, the product workstream was a particularly critical component of our overall strategy. It kicked off approximately 120 days ago with an ideation workshop involving 11 product teams, each led by dedicated team leaders. The workshop focused on identifying and prioritizing high-impact initiatives and building a consistent, executable playbook. That playbook included supplier negotiations, relocations, resourcing decisions, footprint analysis, and make-versus-buy evaluations. In addition, we verified product classifications to ensure compliance and to optimize how our products are coded. The collective focus, coordination, and tenacity across all teams have led to meaningful results, which I'll walk through next on slide 11. Our approach was multifaceted, supported by daily meetings to maintain momentum, track progress, and ensure alignment across teams. our approach was multifaceted supported by daily meetings to maintain momentum track progress and ensure alignment across teams Each workstream was intentionally structured to address a distinct set of challenges and opportunities, enabling a coordinated and effective response. each workstream was intentionally structured to address a distinct set of challenges and opportunities enabling a coordinated and effective response As we highlighted, the product workstream was a particularly critical component of our overall strategy. as we highlighted the product workstream was a particularly critical component of our overall strategy It kicked off approximately 120 days ago with an ideation workshop involving 11 product teams, each led by dedicated team leaders. it kicked off approximately 120 days ago with an ideation workshop involving 11 product teams each led by dedicated team leaders The workshop focused on identifying and prioritizing high-impact initiatives and building a consistent, executable playbook. the workshop focused on identifying and prioritizing high-impact initiatives and building a consistent executable playbook That playbook included supplier negotiations, relocations, resourcing decisions, footprint analysis, and make-versus-buy evaluations. that playbook included supplier negotiations relocations resourcing decisions footprint analysis and make-versus-buy evaluations In addition, we verified product classifications to ensure compliance and to optimize how our products are coded. in addition we verified product classifications to ensure compliance and to optimize how our products are coded The collective focus, coordination, and tenacity across all teams have led to meaningful results, which I'll walk through next on slide 11. the collective focus coordination and tenacity across all teams have led to meaningful results which i'll walk through next on slide 11 Through a combination of strategic negotiations with existing suppliers, targeted relocations, sourcing from new partners in lower-cost regions, and selective insourcing, we've executed on over $15 million in tariff mitigation opportunities through 2026. While disciplined execution will continue to be essential, we're confident in our strategy, our team's capabilities, and our abilities to successfully navigate this evolving landscape. In short, our response to the tariff environment has been both proactive and comprehensive. We launched dedicated workstreams, facilitated cross-functional workshops, secured optimized logistics solutions, brought in leading regulatory experts, and executed targeted pricing actions, all aimed at minimizing the financial impact of tariffs on our business. That said, we all understand that the tariff landscape remains highly fluid. However, based on the progress of our current mitigation efforts and pricing strategies, we are not projecting any adverse impact to free cash flow or margins in 2025 or 2026. Through a combination of strategic negotiations with existing suppliers, targeted relocations, sourcing from new partners in lower-cost regions, and selective insourcing, we've executed on over $15 million in tariff mitigation opportunities through 2026. through a combination of strategic negotiations with existing suppliers targeted relocations sourcing from new partners in lower-cost regions and selective insourcing we've executed on over $15 million in tariff mitigation opportunities through 2026 While disciplined execution will continue to be essential, we're confident in our strategy, our team's capabilities, and our abilities to successfully navigate this evolving landscape. while disciplined execution will continue to be essential we're confident in our strategy our team's capabilities and our abilities to successfully navigate this evolving landscape In short, our response to the tariff environment has been both proactive and comprehensive. in short our response to the tariff environment has been both proactive and comprehensive We launched dedicated workstreams, facilitated cross-functional workshops, secured optimized logistics solutions, brought in leading regulatory experts, and executed targeted pricing actions, all aimed at minimizing the financial impact of tariffs on our business. we launched dedicated workstreams facilitated cross-functional workshops secured optimized logistics solutions brought in leading regulatory experts and executed targeted pricing actions all aimed at minimizing the financial impact of tariffs on our business That said, we all understand that the tariff landscape remains highly fluid. that said we all understand that the tariff landscape remains highly fluid However, based on the progress of our current mitigation efforts and pricing strategies, we are not projecting any adverse impact to free cash flow or margins in 2025 or 2026. however based on the progress of our current mitigation efforts and pricing strategies we are not projecting any adverse impact to free cash flow or margins in 2025 or 2026 With that, I'll now turn things over to Jesse, who will walk us through a detailed financial analysis and year-over-year comparison of our Q2 2025 performance, followed by a deeper look into the projected impact of our tariff mitigation strategy. Jesse. With that, I'll now turn things over to Jesse, who will walk us through a detailed financial analysis and year-over-year comparison of our Q2 2025 performance, followed by a deeper look into the projected impact of our tariff mitigation strategy. with that i'll now turn things over to jesse who will walk us through a detailed financial analysis and year-over-year comparison of our q2 2025 performance followed by a deeper look into the projected impact of our tariff mitigation strategy Jesse. jesse

Speaker 2: Thank you, Matt, and good morning, everyone. I'd like to start by providing an update on our progress against our financial priorities, then discuss our second quarter 2025 results, our updated view on the tariff impacts to free cash flow, and our refinements to our guidance. Moving to slide 13, we remain focused on our financial priorities, which are restoring historical profitability and optimizing working capital. Our keen focus on these financial priorities has allowed us to generate our strongest quarterly free cash flow results in the history of Holley, achieving approximately $35.7 million in Q2. We relentlessly worked towards restoring historical profitability and made progress towards our full-year operational efficiency targets again in the second quarter. We saved roughly an additional $1 million in the second quarter, primarily driven by a reduction in freight costs, which brought our year-to-date cost savings in 2025 to just over $2 million. Thank you, Matt, and good morning, everyone. thank you matt and good morning everyone I'd like to start by providing an update on our progress against our financial priorities, then discuss our second quarter 2025 results, our updated view on the tariff impacts to free cash flow, and our refinements to our guidance. i'd like to start by providing an update on our progress against our financial priorities then discuss our second quarter 2025 results our updated view on the tariff impacts to free cash flow and our refinements to our guidance Moving to slide 13, we remain focused on our financial priorities, which are restoring historical profitability and optimizing working capital. moving to slide 13 we remain focused on our financial priorities which are restoring historical profitability and optimizing working capital Our keen focus on these financial priorities has allowed us to generate our strongest quarterly free cash flow results in the history of Holley , achieving approximately $35.7 million in Q2. our keen focus on these financial priorities has allowed us to generate our strongest quarterly free cash flow results in the history of holley achieving approximately $35.7 million in q2 We relentlessly worked towards restoring historical profitability and made progress towards our full-year operational efficiency targets again in the second quarter. we relentlessly worked towards restoring historical profitability and made progress towards our full-year operational efficiency targets again in the second quarter We saved roughly an additional $1 million in the second quarter, primarily driven by a reduction in freight costs, which brought our year-to-date cost savings in 2025 to just over $2 million. we saved roughly an additional $1 million in the second quarter primarily driven by a reduction in freight costs which brought our year-to-date cost savings in 2025 to just over $2 million As a reminder, we anticipate savings of $5 to $10 million through improved manufacturing efficiency, warranty and return policy compliance, and quality improvements to better the customer experience in 2025. In Q2, we made strong progress optimizing working capital by proactively managing inventory, by continuing to make improvements in our sign-up processes to build a more agile, demand-driven model. These efforts are aligning production with market needs, optimizing safety stock and lead times, and cutting slow-moving inventory, all while maintaining high service levels and boosting operational efficiencies. Through these efforts, we've been able to reduce inventory by more than $9 million year to date and are on track to achieve our year-end reduction target of $10 to $15 million. On slide 14, we'll walk through our key financial metrics for the second quarter. As a reminder, we anticipate savings of $5 to $10 million through improved manufacturing efficiency, warranty and return policy compliance, and quality improvements to better the customer experience in 2025. as a reminder we anticipate savings of $5 to $10 million through improved manufacturing efficiency warranty and return policy compliance and quality improvements to better the customer experience in 2025 In Q2, we made strong progress optimizing working capital by proactively managing inventory, by continuing to make improvements in our sign-up processes to build a more agile, demand-driven model. in q2 we made strong progress optimizing working capital by proactively managing inventory by continuing to make improvements in our sign-up processes to build a more agile demand-driven model These efforts are aligning production with market needs, optimizing safety stock and lead times, and cutting slow-moving inventory, all while maintaining high service levels and boosting operational efficiencies. these efforts are aligning production with market needs optimizing safety stock and lead times and cutting slow-moving inventory all while maintaining high service levels and boosting operational efficiencies Through these efforts, we've been able to reduce inventory by more than $9 million year to date and are on track to achieve our year-end reduction target of $10 to $15 million. through these efforts we've been able to reduce inventory by more than $9 million year to date and are on track to achieve our year-end reduction target of $10 to $15 million On slide 14, we'll walk through our key financial metrics for the second quarter. on slide 14 we'll walk through our key financial metrics for the second quarter Net sales for the second quarter were $166.7 million versus $169.5 million in the same period a year ago. The decrease was primarily related to lower sales volume, partially offset by improved price realization. Excluding approximately $9 million of divestiture and strategic product rationalization sales from net sales for the second quarter of 2024, we achieved growth of roughly 3.9%, exceeding our expectations for the quarter. Core business growth once again came across all divisions and is a byproduct of the execution across all aspects of our strategic framework for 2025. Gross profit was $69.6 million in the quarter compared to $70.3 million in the same period last year. Gross margin for the quarter was 41.7%, an increase of 26 basis points versus 41.5% in the prior year. This increase was primarily due to significant clearance activity in the prior year and not repeated in 2025. Net sales for the second quarter were $166.7 million versus $169.5 million in the same period a year ago. net sales for the second quarter were $166.7 million versus $169.5 million in the same period a year ago The decrease was primarily related to lower sales volume, partially offset by improved price realization. the decrease was primarily related to lower sales volume partially offset by improved price realization Excluding approximately $9 million of divestiture and strategic product rationalization sales from net sales for the second quarter of 2024, we achieved growth of roughly 3.9%, exceeding our expectations for the quarter. excluding approximately $9 million of divestiture and strategic product rationalization sales from net sales for the second quarter of 2024 we achieved growth of roughly 3.9% exceeding our expectations for the quarter Core business growth once again came across all divisions and is a byproduct of the execution across all aspects of our strategic framework for 2025. core business growth once again came across all divisions and is a byproduct of the execution across all aspects of our strategic framework for 2025 Gross profit was $69.6 million in the quarter compared to $70.3 million in the same period last year. gross profit was $69.6 million in the quarter compared to $70.3 million in the same period last year Gross margin for the quarter was 41.7%, an increase of 26 basis points versus 41.5% in the prior year. gross margin for the quarter was 41.7% an increase of 26 basis points versus 41.5% in the prior year This increase was primarily due to significant clearance activity in the prior year and not repeated in 2025. this increase was primarily due to significant clearance activity in the prior year and not repeated in 2025 SG&A, including R&D expenses for the second quarter, was $38 million versus $38.9 million in the same period for the prior year. Overall, salaries increased for the company in the second quarter of 2025 compared to the second quarter of 2024. The increase is due to the furlough that occurred in 2024 that was offset by a decrease of transformational consulting fees. Net income for the second quarter was $10.9 million versus net income of $17.1 million in the second quarter of 2024. Adjusted net income in the second quarter was $10.6 million versus adjusted net income of $12.6 million in the same period of last year. Adjusted EBITDA for the quarter was $36.4 million compared to $38.3 million in the prior year, primarily due to higher growth among distribution partners coupled with increased rebates and the absence of the furlough impact seen in 2024. SG&A, including R&D expenses for the second quarter, was $38 million versus $38.9 million in the same period for the prior year. sg&a including r&d expenses for the second quarter was $38 million versus $38.9 million in the same period for the prior year Overall, salaries increased for the company in the second quarter of 2025 compared to the second quarter of 2024. overall salaries increased for the company in the second quarter of 2025 compared to the second quarter of 2024 The increase is due to the furlough that occurred in 2024 that was offset by a decrease of transformational consulting fees. the increase is due to the furlough that occurred in 2024 that was offset by a decrease of transformational consulting fees Net income for the second quarter was $10.9 million versus net income of $17.1 million in the second quarter of 2024. net income for the second quarter was $10.9 million versus net income of $17.1 million in the second quarter of 2024 Adjusted net income in the second quarter was $10.6 million versus adjusted net income of $12.6 million in the same period of last year. adjusted net income in the second quarter was $10.6 million versus adjusted net income of $12.6 million in the same period of last year Adjusted EBITDA for the quarter was $36.4 million compared to $38.3 million in the prior year, primarily due to higher growth among distribution partners coupled with increased rebates and the absence of the furlough impact seen in 2024. adjusted ebitda for the quarter was $36.4 million compared to $38.3 million in the prior year primarily due to higher growth among distribution partners coupled with increased rebates and the absence of the furlough impact seen in 2024 Adjusted EBITDA margin was 21.9% versus 22.6% in the second quarter of 2024. On slide 15, you can see this quarter we delivered record quarterly free cash flow of $35.7 million compared to $24.4 million in free cash flow for the same quarter a year ago. This performance was driven by continued improvements in operational efficiency and successful optimization of working capital across the business. While we're proud of the strong free cash flow performance this quarter, we're also very mindful of the headwinds ahead, particularly the potential impact of recently implemented tariffs. With that in mind, let's turn to page 16, where we've outlined the expected minimal net impact of tariffs on our free cash flow. As Matt had mentioned earlier, our team has been relentlessly focused on mitigating the impact of tariffs through a comprehensive set of strategies. Adjusted EBITDA margin was 21.9% versus 22.6% in the second quarter of 2024. adjusted ebitda margin was 21.9% versus 22.6% in the second quarter of 2024 On slide 15, you can see this quarter we delivered record quarterly free cash flow of $35.7 million compared to $24.4 million in free cash flow for the same quarter a year ago. on slide 15 you can see this quarter we delivered record quarterly free cash flow of $35.7 million compared to $24.4 million in free cash flow for the same quarter a year ago This performance was driven by continued improvements in operational efficiency and successful optimization of working capital across the business. this performance was driven by continued improvements in operational efficiency and successful optimization of working capital across the business While we're proud of the strong free cash flow performance this quarter, we're also very mindful of the headwinds ahead, particularly the potential impact of recently implemented tariffs. while we're proud of the strong free cash flow performance this quarter we're also very mindful of the headwinds ahead particularly the potential impact of recently implemented tariffs With that in mind, let's turn to page 16, where we've outlined the expected minimal net impact of tariffs on our free cash flow. with that in mind let's turn to page 16 where we've outlined the expected minimal net impact of tariffs on our free cash flow As Matt had mentioned earlier, our team has been relentlessly focused on mitigating the impact of tariffs through a comprehensive set of strategies. as matt had mentioned earlier our team has been relentlessly focused on mitigating the impact of tariffs through a comprehensive set of strategies As you can see on 16, we have actions in motion that are expected to offset more than $15 million in additional tariff-related costs between 2025 and 2026. Despite ongoing inflationary pressures and a continually evolving tariff landscape, we remain proactive and disciplined in managing our operations. We project that the combination of our tariff mitigation initiatives and strategic pricing actions will position us to fully offset tariff-related headwinds in 2025. Looking further ahead into 2026, we expect net pricing gains and mitigation efforts to not only absorb anticipated tariff costs but also support our ability to maintain strong free cash flow generation, even in an environment of potentially lower volume. On slide 17, we reduced our covenant net leverage at the end of the second quarter to 4.22 times versus 4.32 times a quarter ago, which remains well under the five times covenant when the revolver is drawn. As you can see on 16, we have actions in motion that are expected to offset more than $15 million in additional tariff-related costs between 2025 and 2026. as you can see on 16 we have actions in motion that are expected to offset more than $15 million in additional tariff-related costs between 2025 and 2026 Despite ongoing inflationary pressures and a continually evolving tariff landscape, we remain proactive and disciplined in managing our operations. despite ongoing inflationary pressures and a continually evolving tariff landscape we remain proactive and disciplined in managing our operations We project that the combination of our tariff mitigation initiatives and strategic pricing actions will position us to fully offset tariff-related headwinds in 2025. we project that the combination of our tariff mitigation initiatives and strategic pricing actions will position us to fully offset tariff-related headwinds in 2025 Looking further ahead into 2026, we expect net pricing gains and mitigation efforts to not only absorb anticipated tariff costs but also support our ability to maintain strong free cash flow generation, even in an environment of potentially lower volume. looking further ahead into 2026 we expect net pricing gains and mitigation efforts to not only absorb anticipated tariff costs but also support our ability to maintain strong free cash flow generation even in an environment of potentially lower volume On slide 17, we reduced our covenant net leverage at the end of the second quarter to 4.22 times versus 4.32 times a quarter ago, which remains well under the five times covenant when the revolver is drawn. on slide 17 we reduced our covenant net leverage at the end of the second quarter to 4.22 times versus 4.32 times a quarter ago which remains well under the five times covenant when the revolver is drawn At the end of the quarter, there was no outstanding balance on our revolver, and we concluded the quarter with $63.8 million in cash and no expectation of drawing on the revolver in the near term. This brings our total net debt to just under $500 million for the quarter. As a team, we are pleased with our execution in the first half of the year. We've built on the success of Q1 with core business growth again in the second quarter. As we move into the second half of the year, we are keeping a close eye on a mixed economic landscape. However, we have more clarity on expected tariffs for 2025, though broader trade conditions remain fluid. Therefore, with sales trending flat to start Q3 and mixed macro signals, we're taking a measured approach to our guidance. At the end of the quarter, there was no outstanding balance on our revolver, and we concluded the quarter with $63.8 million in cash and no expectation of drawing on the revolver in the near term. at the end of the quarter there was no outstanding balance on our revolver and we concluded the quarter with $63.8 million in cash and no expectation of drawing on the revolver in the near term This brings our total net debt to just under $500 million for the quarter. this brings our total net debt to just under $500 million for the quarter As a team, we are pleased with our execution in the first half of the year. as a team we are pleased with our execution in the first half of the year We've built on the success of Q1 with core business growth again in the second quarter. we've built on the success of q1 with core business growth again in the second quarter As we move into the second half of the year, we are keeping a close eye on a mixed economic landscape. as we move into the second half of the year we are keeping a close eye on a mixed economic landscape However, we have more clarity on expected tariffs for 2025, though broader trade conditions remain fluid. however we have more clarity on expected tariffs for 2025 though broader trade conditions remain fluid Therefore, with sales trending flat to start Q3 and mixed macro signals, we're taking a measured approach to our guidance. therefore with sales trending flat to start q3 and mixed macro signals we're taking a measured approach to our guidance Our updated full-year 2025 guidance reflects both the known effects of tariffs and consumer trends. We are tightening our 2025 revenue range to $580 million to $595 million, which implies approximately a 2.2% growth at the midpoint over the core business base of roughly $575 million in 2024. Additionally, we have tightened our range for our 2025 adjusted EBITDA guidance to $116 million to $127 million, from $113 million to $130 million. Our first half results were stronger than originally expected and a direct result of the team's execution upon our strategic framework. While we continue to operate in an uncertain macro environment, we delivered two consecutive quarters of core business growth. We continue to build on this momentum and have better visibility on the impacts of known tariffs today, which are captured in our 2025 guidance. Our updated full-year 2025 guidance reflects both the known effects of tariffs and consumer trends. our updated full-year 2025 guidance reflects both the known effects of tariffs and consumer trends We are tightening our 2025 revenue range to $580 million to $595 million, which implies approximately a 2.2% growth at the midpoint over the core business base of roughly $575 million in 2024. we are tightening our 2025 revenue range to $580 million to $595 million which implies approximately a 2.2% growth at the midpoint over the core business base of roughly $575 million in 2024 Additionally, we have tightened our range for our 2025 adjusted EBITDA guidance to $116 million to $127 million, from $113 million to $130 million. additionally we have tightened our range for our 2025 adjusted ebitda guidance to $116 million to $127 million from $113 million to $130 million Our first half results were stronger than originally expected and a direct result of the team's execution upon our strategic framework. our first half results were stronger than originally expected and a direct result of the team's execution upon our strategic framework While we continue to operate in an uncertain macro environment, we delivered two consecutive quarters of core business growth. while we continue to operate in an uncertain macro environment we delivered two consecutive quarters of core business growth We continue to build on this momentum and have better visibility on the impacts of known tariffs today, which are captured in our 2025 guidance. we continue to build on this momentum and have better visibility on the impacts of known tariffs today which are captured in our 2025 guidance While we remain mindful of the evolving environment and the fluid tariff situation, we are confident that the operational discipline and momentum we have built will continue to serve us well as we move through the balance of the year. This concludes our prepared remarks. We would now like to open the line up for questions. While we remain mindful of the evolving environment and the fluid tariff situation, we are confident that the operational discipline and momentum we have built will continue to serve us well as we move through the balance of the year. while we remain mindful of the evolving environment and the fluid tariff situation we are confident that the operational discipline and momentum we have built will continue to serve us well as we move through the balance of the year This concludes our prepared remarks. this concludes our prepared remarks We would now like to open the line up for questions. we would now like to open the line up for questions

Speaker 7: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Your first question comes from Brian McNamara with Canaccord Genuity. Please go ahead. Thank you. thank you We will now be conducting a question and answer session. we will now be conducting a question and answer session If you would like to ask a question, please press star one on your telephone keypad. if you would like to ask a question please press star one on your telephone keypad A confirmation tone will indicate your line is in the question queue. a confirmation tone will indicate your line is in the question queue You may press star two to remove yourself from the queue. you may press star two to remove yourself from the queue For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. for participants using speaker equipment it may be necessary to pick up your handset before pressing the star keys Your first question comes from Brian McNamara with Canaccord Genuity. your first question comes from brian mcnamara with canaccord genuity Please go ahead. please go ahead

Speaker 11: Hey, good morning, guys. Congrats on the strong progress and thanks for taking the questions. First on pricing. How have your partners and enthusiasts overall responded to the price increases you put in and the change in tact in terms of approaching your resellers with the 60-day notice? With that, how would you characterize current sentiment in the marketplace? Has it improved with a little more certainty on tariffs? Any other color there would be helpful. Hey, good morning, guys. hey good morning guys Congrats on the strong progress and thanks for taking the questions. congrats on the strong progress and thanks for taking the questions First on pricing. first on pricing How have your partners and enthusiasts overall responded to the price increases you put in and the change in tact in terms of approaching your resellers with the 60-day notice? how have your partners and enthusiasts overall responded to the price increases you put in and the change in tact in terms of approaching your resellers with the 60-day notice With that, how would you characterize current sentiment in the marketplace? with that how would you characterize current sentiment in the marketplace Has it improved with a little more certainty on tariffs? has it improved with a little more certainty on tariffs Any other color there would be helpful. any other color there would be helpful

Speaker 6: Sure. Good morning, Brian, and thanks for the question. You know, when we look at just kind of that sentiment in June and just the overall out-the-door sales, they were strong in the marketplace. We notified our distributors in April that price increases would take effect roughly in the middle of June, and July is historically one of the softest months of the year. Generally speaking, the feedback was, you know, the pricing was in line or lower than competitors in the relative categories. Of course, just given how many categories we're present in, that wide range of competitive dynamics exists. Overall, our pricing was definitely in line with the competition. Sure. sure Good morning, Brian, and thanks for the question. good morning brian and thanks for the question You know, when we look at just kind of that sentiment in June and just the overall out-the-door sales, they were strong in the marketplace. you know when we look at just kind of that sentiment in june and just the overall out-the-door sales they were strong in the marketplace We notified our distributors in April that price increases would take effect roughly in the middle of June, and July is historically one of the softest months of the year. we notified our distributors in april that price increases would take effect roughly in the middle of june and july is historically one of the softest months of the year Generally speaking, the feedback was, you know, the pricing was in line or lower than competitors in the relative categories. generally speaking the feedback was you know the pricing was in line or lower than competitors in the relative categories Of course, just given how many categories we're present in, that wide range of competitive dynamics exists. of course just given how many categories we're present in that wide range of competitive dynamics exists Overall, our pricing was definitely in line with the competition. overall our pricing was definitely in line with the competition You know, we just got to see in terms of just that overall elasticity of industry demand, pricing, and discretionary spending, how that plays out once we get past the slower summer months and into more of the higher months of the year. You know, we just got to see in terms of just that overall elasticity of industry demand, pricing, and discretionary spending, how that plays out once we get past the slower summer months and into more of the higher months of the year. you know we just got to see in terms of just that overall elasticity of industry demand pricing and discretionary spending how that plays out once we get past the slower summer months and into more of the higher months of the year

Speaker 7: Next question, Christian Carlino with JPMorgan. Please go ahead. Next question, Christian Carlino with JPMorgan. next question christian carlino with jpmorgan Please go ahead. please go ahead

Speaker 8: Hi, good morning. Thanks for taking our questions. Follow up on the prior question. Similar to how you're moving some sourcing to vendors in lower-cost countries, what are your conversations like with the resellers? Are you winning share or shelf space because you're taking less price than the industry in addition to the channel expansion and product innovation work you've been doing? Hi, good morning. hi good morning Thanks for taking our questions. thanks for taking our questions Follow up on the prior question. follow up on the prior question Similar to how you're moving some sourcing to vendors in lower-cost countries, what are your conversations like with the resellers? similar to how you're moving some sourcing to vendors in lower-cost countries what are your conversations like with the resellers Are you winning share or shelf space because you're taking less price than the industry in addition to the channel expansion and product innovation work you've been doing? are you winning share or shelf space because you're taking less price than the industry in addition to the channel expansion and product innovation work you've been doing

Speaker 2: Hey, Christian, it's Jesse. It's a good question. I think all the indicators that we've got as we work much more closely with our distribution partners is that we are continuing to take share in the market. When we look at sort of our out-the-door growth relative to what the overall business is doing in these distribution partners, we continue to outperform there. That continued all the way up through our most recent data, which is June. I think to Matt's earlier point, the pricing we put in was in line, if not better, and that is certainly helping us kind of continue to remain and gain momentum here. Hey, Christian, it's Jesse. hey christian it's jesse It's a good question. it's a good question I think all the indicators that we've got as we work much more closely with our distribution partners is that we are continuing to take share in the market. i think all the indicators that we've got as we work much more closely with our distribution partners is that we are continuing to take share in the market When we look at sort of our out-the-door growth relative to what the overall business is doing in these distribution partners, we continue to outperform there. when we look at sort of our out-the-door growth relative to what the overall business is doing in these distribution partners we continue to outperform there That continued all the way up through our most recent data, which is June. that continued all the way up through our most recent data which is june I think to Matt's earlier point, the pricing we put in was in line, if not better, and that is certainly helping us kind of continue to remain and gain momentum here. i think to matt's earlier point the pricing we put in was in line if not better and that is certainly helping us kind of continue to remain and gain momentum here

Speaker 8: That is helpful. Just given the full impact of the tariff cost increases, you know, should start to flow through in the second half. How are you thinking about gross margins for the year and maybe cadence over the back half? You know, understanding it's hard to predict consumer behavior and elasticities right now, but are you anticipating maybe higher prices overall, but key seasonal periods being more intense promotionally to maybe offset the impact to consumers' wallet? Just how you're thinking about that. That is helpful. that is helpful Just given the full impact of the tariff cost increases, you know, should start to flow through in the second half. just given the full impact of the tariff cost increases you know should start to flow through in the second half How are you thinking about gross margins for the year and maybe cadence over the back half? how are you thinking about gross margins for the year and maybe cadence over the back half You know, understanding it's hard to predict consumer behavior and elasticities right now, but are you anticipating maybe higher prices overall, but key seasonal periods being more intense promotionally to maybe offset the impact to consumers' wallet? you know understanding it's hard to predict consumer behavior and elasticities right now but are you anticipating maybe higher prices overall but key seasonal periods being more intense promotionally to maybe offset the impact to consumers' wallet Just how you're thinking about that. just how you're thinking about that

Speaker 2: We're not planning to do anything incremental from a promotional period. We've got a pretty strong partnership with our distribution partners on marketing calendar support in the back half. No intended changes there. We do anticipate, to your question on gross margins, to continue to maintain, if not increase, gross margins in the back half, just relative to the pricing that we had taken, obviously. I think our guidance in the back half kind of captures the squeeze on what you would expect in terms of margins there. We're not planning to do anything incremental from a promotional period. we're not planning to do anything incremental from a promotional period We've got a pretty strong partnership with our distribution partners on marketing calendar support in the back half. we've got a pretty strong partnership with our distribution partners on marketing calendar support in the back half No intended changes there. no intended changes there We do anticipate, to your question on gross margins, to continue to maintain, if not increase, gross margins in the back half, just relative to the pricing that we had taken, obviously. we do anticipate to your question on gross margins to continue to maintain if not increase gross margins in the back half just relative to the pricing that we had taken obviously I think our guidance in the back half kind of captures the squeeze on what you would expect in terms of margins there. i think our guidance in the back half kind of captures the squeeze on what you would expect in terms of margins there

Speaker 8: Got it. Thank you very much. Got it. got it Thank you very much. thank you very much

Speaker 2: Thanks, Christian. Thanks, Christian. thanks christian

Speaker 7: Next question, Joseph Altobello with Raymond James. Please go ahead. Next question, Joseph Altobello with Raymond James. next question joseph altobello with raymond james Please go ahead. please go ahead

Speaker 10: Hey, good morning. This is Martin on for Joe. My first quick question here is regarding sort of inventory. You've reduced so far by $9 million. I was wondering if we can get an update on sell-through slash the sell-in? Hey, good morning. hey good morning This is Martin on for Joe. this is martin on for joe My first quick question here is regarding sort of inventory. my first quick question here is regarding sort of inventory You've reduced so far by $9 million. you've reduced so far by $9 million I was wondering if we can get an update on sell-through slash the sell-in? i was wondering if we can get an update on sell-through slash the sell-in

Speaker 2: Yes, this is Jesse. I think, you know, we don't report out on the exact numbers we get from our distribution partners, but we're seeing really good numbers and results from them on the sell-out. That's kind of what we look at to understand just generally what the end user demand is. I think that that's a testament to our relative pricing, our continued enhancement in our partnerships with them, and just making sure that we're partnering with them to make sure their inventory levels are in a good spot. I feel like the end distribution partner indicators are continuing to be really strong for us, particularly relative to what the rest of their business is doing. Yes, this is Jesse. yes this is jesse I think, you know, we don't report out on the exact numbers we get from our distribution partners, but we're seeing really good numbers and results from them on the sell-out. i think you know we don't report out on the exact numbers we get from our distribution partners but we're seeing really good numbers and results from them on the sell-out That's kind of what we look at to understand just generally what the end user demand is. that's kind of what we look at to understand just generally what the end user demand is I think that that's a testament to our relative pricing, our continued enhancement in our partnerships with them, and just making sure that we're partnering with them to make sure their inventory levels are in a good spot. i think that that's a testament to our relative pricing our continued enhancement in our partnerships with them and just making sure that we're partnering with them to make sure their inventory levels are in a good spot I feel like the end distribution partner indicators are continuing to be really strong for us, particularly relative to what the rest of their business is doing. i feel like the end distribution partner indicators are continuing to be really strong for us particularly relative to what the rest of their business is doing

Speaker 10: Right. I just want to touch really quickly on this free cash flow net impact bridge. Very helpful, by the way. You mentioned 2025 net pricing slash volume is going to be about $3 million tailwind. Earlier in the preamble, you had mentioned that about $10.8 million in revenue was contributed from product innovation and strategic pricing. I also believe the PR said that product innovation was about $8 million, which implies that strategic pricing was about $2.8 million. Given that that's pretty close to that $3 million number, does that sort of imply that there's going to be lower volumes in the back half of the year? What should be the read-through through that? Right. right I just want to touch really quickly on this free cash flow net impact bridge. i just want to touch really quickly on this free cash flow net impact bridge Very helpful, by the way. very helpful by the way You mentioned 2025 net pricing slash volume is going to be about $3 million tailwind. you mentioned 2025 net pricing slash volume is going to be about $3 million tailwind Earlier in the preamble, you had mentioned that about $10.8 million in revenue was contributed from product innovation and strategic pricing. earlier in the preamble you had mentioned that about $10.8 million in revenue was contributed from product innovation and strategic pricing I also believe the PR said that product innovation was about $8 million, which implies that strategic pricing was about $2.8 million. i also believe the pr said that product innovation was about $8 million which implies that strategic pricing was about $2.8 million Given that that's pretty close to that $3 million number, does that sort of imply that there's going to be lower volumes in the back half of the year? given that that's pretty close to that $3 million number does that sort of imply that there's going to be lower volumes in the back half of the year What should be the read-through through that? what should be the read-through through that

Speaker 2: I think those are two different metrics, to be clear. The strategic pricing was an action that was taken earlier in the year to realign our channel margins with our distribution partners on some key product lines. Those aren't necessarily related. As it relates to your question on the back half, generally we feel like our visibility is much better than it was three months ago on the back half of the year. We're just, from a volumes perspective, as you can imply in the guidance, taking a pretty conservative view relative to the back half, just given everything we're seeing in the economic indicators generally around the consumer. What we are seeing now, we feel like demand's holding up and the back half, from what we can tell, is headed in the right direction to hit this guidance. I think those are two different metrics, to be clear. i think those are two different metrics to be clear The strategic pricing was an action that was taken earlier in the year to realign our channel margins with our distribution partners on some key product lines. the strategic pricing was an action that was taken earlier in the year to realign our channel margins with our distribution partners on some key product lines Those aren't necessarily related. those aren't necessarily related As it relates to your question on the back half, generally we feel like our visibility is much better than it was three months ago on the back half of the year. as it relates to your question on the back half generally we feel like our visibility is much better than it was three months ago on the back half of the year We're just, from a volumes perspective, as you can imply in the guidance, taking a pretty conservative view relative to the back half, just given everything we're seeing in the economic indicators generally around the consumer. we're just from a volumes perspective as you can imply in the guidance taking a pretty conservative view relative to the back half just given everything we're seeing in the economic indicators generally around the consumer What we are seeing now, we feel like demand's holding up and the back half, from what we can tell, is headed in the right direction to hit this guidance. what we are seeing now we feel like demand's holding up and the back half from what we can tell is headed in the right direction to hit this guidance

Speaker 10: Great. Thank you. Very helpful and good luck. Great. great Thank you. thank you Very helpful and good luck. very helpful and good luck

Speaker 2: Thank you. Thank you. thank you

Speaker 7: Next question, Phillip Blee with William Blair. Please proceed. Next question, Phillip Blee with William Blair. next question phillip blee with william blair Please proceed. please proceed

Speaker 4: Morning, Matt, Jesse. Thanks for the question. The product innovation growth is an interesting metric here. Just curious around the level of new products that you've launched year to date and then maybe how that would compare to plans for next year or just steady state going forward, assuming we're past a lot of the tariff-related trade disruptions. Morning, Matt, Jesse. morning matt jesse Thanks for the question. thanks for the question The product innovation growth is an interesting metric here. the product innovation growth is an interesting metric here Just curious around the level of new products that you've launched year to date and then maybe how that would compare to plans for next year or just steady state going forward, assuming we're past a lot of the tariff-related trade disruptions. just curious around the level of new products that you've launched year to date and then maybe how that would compare to plans for next year or just steady state going forward assuming we're past a lot of the tariff-related trade disruptions

Speaker 6: Yeah, good morning, Phillip. This is Matt. Thanks for the question. Phillip, we're really focused on quality versus quantity. I mean, we, of course, want to continue to drive the right innovations and, of course, increase the volume of those. When you think back to our strategic product rationalization that occurred, where we took out basically about 45% of the portfolio, there was a lot of work being done for innovations that really weren't moving the needle. Now we put in a very robust phase gate system with seven gates to make sure we're bringing those right innovations to markets that are really going to drive the top line forward and to underline this organic growth trajectory. Again, it's not about quantity, but for us, we want to continue to drive more revenue through innovation. Yeah, good morning, Phillip. yeah good morning phillip This is Matt. this is matt Thanks for the question. thanks for the question Phillip, we're really focused on quality versus quantity. phillip we're really focused on quality versus quantity I mean, we, of course, want to continue to drive the right innovations and, of course, increase the volume of those. i mean we of course want to continue to drive the right innovations and of course increase the volume of those When you think back to our strategic product rationalization that occurred, where we took out basically about 45% of the portfolio, there was a lot of work being done for innovations that really weren't moving the needle. when you think back to our strategic product rationalization that occurred where we took out basically about 45% of the portfolio there was a lot of work being done for innovations that really weren't moving the needle Now we put in a very robust phase gate system with seven gates to make sure we're bringing those right innovations to markets that are really going to drive the top line forward and to underline this organic growth trajectory. now we put in a very robust phase gate system with seven gates to make sure we're bringing those right innovations to markets that are really going to drive the top line forward and to underline this organic growth trajectory Again, it's not about quantity, but for us, we want to continue to drive more revenue through innovation. again it's not about quantity but for us we want to continue to drive more revenue through innovation

Speaker 4: Okay, makes sense. Great. Now that you have some comfort around tariff mitigation, core business seems to be moving in the right direction. How are you thinking about free cash flow and capital allocation in the second half of the year and maybe going forward? Just timeline around reaching leverage around three times. Thank you, guys. Okay, makes sense. okay makes sense Great. great Now that you have some comfort around tariff mitigation, core business seems to be moving in the right direction. now that you have some comfort around tariff mitigation core business seems to be moving in the right direction How are you thinking about free cash flow and capital allocation in the second half of the year and maybe going forward? how are you thinking about free cash flow and capital allocation in the second half of the year and maybe going forward Just timeline around reaching leverage around three times. just timeline around reaching leverage around three times Thank you, guys. thank you guys

Speaker 2: Yeah, great question, Phillip. We obviously don't guide on free cash flow. I think, as we've talked about historically, just given this guide, you can back into a free cash flow profile that would be about $40 to $50 million at the current interest rates. I think we're on track to be in that range with better free cash flow in the back half this year versus last year. Just as a reminder, this time last year in Q3 and Q4, we had some headwinds to the tune of $6 to $8 million in each quarter from AP process changes. We should continue to see positive free cash flow in the back half. Just in terms of capital allocation, we continue to maintain a pretty robust pipeline on M&A, but we are very conscientious on any transactions we look at as to the net leverage profile on the back end. Yeah, great question, Phillip. yeah great question phillip We obviously don't guide on free cash flow. we obviously don't guide on free cash flow I think, as we've talked about historically, just given this guide, you can back into a free cash flow profile that would be about $40 to $50 million at the current interest rates. i think as we've talked about historically just given this guide you can back into a free cash flow profile that would be about $40 to $50 million at the current interest rates I think we're on track to be in that range with better free cash flow in the back half this year versus last year. i think we're on track to be in that range with better free cash flow in the back half this year versus last year Just as a reminder, this time last year in Q3 and Q4, we had some headwinds to the tune of $6 to $8 million in each quarter from AP process changes. just as a reminder this time last year in q3 and q4 we had some headwinds to the tune of $6 to $8 million in each quarter from ap process changes We should continue to see positive free cash flow in the back half. we should continue to see positive free cash flow in the back half Just in terms of capital allocation, we continue to maintain a pretty robust pipeline on M&A, but we are very conscientious on any transactions we look at as to the net leverage profile on the back end. just in terms of capital allocation we continue to maintain a pretty robust pipeline on m&a but we are very conscientious on any transactions we look at as to the net leverage profile on the back end In the absence of having a really good target in mind, we're going to continue to look at prepayment of debt like we've done historically. This year, obviously, with that cash flow we've talked about, around $23.8 million of it is used for the perpetual license on CATA Clean, which we look back and say has really been a really good deal and growth driver for us. In the absence of having a really good target in mind, we're going to continue to look at prepayment of debt like we've done historically. in the absence of having a really good target in mind we're going to continue to look at prepayment of debt like we've done historically This year, obviously, with that cash flow we've talked about, around $23.8 million of it is used for the perpetual license on CATA Clean, which we look back and say has really been a really good deal and growth driver for us. this year obviously with that cash flow we've talked about around $23.8 million of it is used for the perpetual license on cata clean which we look back and say has really been a really good deal and growth driver for us

Speaker 4: Excellent. Thank you. Best of luck. Excellent. excellent Thank you. thank you Best of luck. best of luck

Speaker 6: Thanks, Phillip. Thanks, Phillip. thanks phillip

Speaker 7: Next question, Bret Jordan with Jefferies. Please go ahead. Next question, Bret Jordan with Jefferies. next question bret jordan with jefferies Please go ahead. please go ahead

Speaker 5: Hey, good morning, guys. This is Patrick, walking the line for Bret. Thanks for taking our questions. Hey, good morning, guys. hey good morning guys This is Patrick, walking the line for Bret. this is patrick walking the line for bret Thanks for taking our questions. thanks for taking our questions

Speaker 2: Hey, good morning, Patrick. Hey, good morning, Patrick. hey good morning patrick

Speaker 5: On the new market growth, could you talk a bit about the trajectory of growth and moving forward in Mexico and potential size there, and maybe how that strategy differs from the growth strategy in the U.S.? I guess a quick follow-up there would be, is this the primary market expansion for the foreseeable future, or are you guys seeing any other markets that you have identified for potential growth? On the new market growth, could you talk a bit about the trajectory of growth and moving forward in Mexico and potential size there, and maybe how that strategy differs from the growth strategy in the U.S.? on the new market growth could you talk a bit about the trajectory of growth and moving forward in mexico and potential size there and maybe how that strategy differs from the growth strategy in the u.s I guess a quick follow-up there would be, is this the primary market expansion for the foreseeable future, or are you guys seeing any other markets that you have identified for potential growth? i guess a quick follow-up there would be is this the primary market expansion for the foreseeable future or are you guys seeing any other markets that you have identified for potential growth

Speaker 6: Yeah, Patrick, thanks for the question. This is Matt. Mexico is just a natural market, of course, for us, just the adjacency to the proximity to the U.S. and the amount of enthusiasts that are down there. That was something that was just not in focus in years past. How we look at the potential of Mexico, we would see that long term to be about 5% of the U.S. market is where we would see that. It's going to take some time to get there, right? It's really an all-new market entrance for us. It's everything from setting up distributors, setting up the proper product distribution, working with the national retailer footprint there. It's all going to take some time. In terms of other markets, you know, this is just a great market that we're spending the majority of our time on right now, again, for those reasons. Yeah, Patrick, thanks for the question. yeah patrick thanks for the question This is Matt. this is matt Mexico is just a natural market, of course, for us, just the adjacency to the proximity to the U.S. and the amount of enthusiasts that are down there. mexico is just a natural market of course for us just the adjacency to the proximity to the u.s and the amount of enthusiasts that are down there That was something that was just not in focus in years past. that was something that was just not in focus in years past How we look at the potential of Mexico, we would see that long term to be about 5% of the U.S. market is where we would see that. how we look at the potential of mexico we would see that long term to be about 5% of the u.s market is where we would see that It's going to take some time to get there, right? it's going to take some time to get there right It's really an all-new market entrance for us. it's really an all-new market entrance for us It's everything from setting up distributors, setting up the proper product distribution, working with the national retailer footprint there. it's everything from setting up distributors setting up the proper product distribution working with the national retailer footprint there It's all going to take some time. it's all going to take some time In terms of other markets, you know, this is just a great market that we're spending the majority of our time on right now, again, for those reasons. in terms of other markets you know this is just a great market that we're spending the majority of our time on right now again for those reasons There's a lot of enthusiasts around the globe, and we can continue to evaluate where it may make sense to plant a flag, so to speak, in a larger presence. There's a lot of enthusiasts around the globe, and we can continue to evaluate where it may make sense to plant a flag, so to speak, in a larger presence. there's a lot of enthusiasts around the globe and we can continue to evaluate where it may make sense to plant a flag so to speak in a larger presence

Speaker 5: Great. Very helpful. That's all for us. Thanks, guys. Great. great Very helpful. very helpful That's all for us. that's all for us Thanks, guys. thanks guys

Speaker 6: Thanks, Patrick. Thanks, Patrick. thanks patrick

Speaker 7: Next question, Mike Baker with D.A. Davidson. Please go ahead. Next question, Mike Baker with D.A. next question mike baker with d.a Davidson. davidson Please go ahead. please go ahead

Speaker 1: Hey, thanks, guys. Can I ask you, Jesse, you said flat sales so far in the third quarter. What's the base? In other words, is that including or excluding, you know, some of the one-timers from a year ago? Hey, thanks, guys. hey thanks guys Can I ask you, Jesse, you said flat sales so far in the third quarter. can i ask you jesse you said flat sales so far in the third quarter What's the base? what's the base In other words, is that including or excluding, you know, some of the one-timers from a year ago? in other words is that including or excluding you know some of the one-timers from a year ago

Speaker 2: Hey, Michael. We didn't, we're trying not to speak specifically to the third quarter thus far, but I think what you implied from the script is kind of in line. Those trends we are seeing versus prior year, as well as for the back half, are embedded in our guidance. Your question around how does that compare to last year? I think to Matt's earlier comments, this is seasonally one of our lowest volume periods, and demand is holding up relative to the prior year. That's just on a gross basis. As we get into the back half, there's only about $3 million in each quarter related to divested businesses, and we're largely past the meaningful SKU rationalization that happened in the first half. Hey, Michael. hey michael We didn't, we're trying not to speak specifically to the third quarter thus far, but I think what you implied from the script is kind of in line. we didn't we're trying not to speak specifically to the third quarter thus far but i think what you implied from the script is kind of in line Those trends we are seeing versus prior year, as well as for the back half, are embedded in our guidance. those trends we are seeing versus prior year as well as for the back half are embedded in our guidance Your question around how does that compare to last year? your question around how does that compare to last year I think to Matt's earlier comments, this is seasonally one of our lowest volume periods, and demand is holding up relative to the prior year. i think to matt's earlier comments this is seasonally one of our lowest volume periods and demand is holding up relative to the prior year That's just on a gross basis. that's just on a gross basis As we get into the back half, there's only about $3 million in each quarter related to divested businesses, and we're largely past the meaningful SKU rationalization that happened in the first half. as we get into the back half there's only about $3 million in each quarter related to divested businesses and we're largely past the meaningful sku rationalization that happened in the first half

Speaker 1: Okay. Thanks for that. I also wanted to ask just a little bit more detail on unit versus price in terms of your, you know, if we use a 3.9% sales growth in the second quarter, is there a way to break out, you know, how much of that was price versus unit? Okay. okay Thanks for that. thanks for that I also wanted to ask just a little bit more detail on unit versus price in terms of your, you know, if we use a 3.9% sales growth in the second quarter, is there a way to break out, you know, how much of that was price versus unit? i also wanted to ask just a little bit more detail on unit versus price in terms of your you know if we use a 3.9% sales growth in the second quarter is there a way to break out you know how much of that was price versus unit

Speaker 2: Yeah, I think we put in the queue that, you know, actually volumes were pretty strong in the second quarter, with, you know, a portion of it coming from price and unit growth. I mean, year to date, unit growth has been, you know, positive, with some pricing, obviously, to kind of get you over the 3% on the core business. You know, we've been really, really pleased with how units have really picked up this year, year to date. As we mentioned, we're taking a bit of a conservative approach given what we're seeing in the economic indicators, and just the magnitude of the pricing across the market and in the economy on units for the back half. There is certainly some room for that to go north of what we're putting in our guidance. Yeah, I think we put in the queue that, you know, actually volumes were pretty strong in the second quarter, with, you know, a portion of it coming from price and unit growth. yeah i think we put in the queue that you know actually volumes were pretty strong in the second quarter with you know a portion of it coming from price and unit growth I mean, year to date, unit growth has been, you know, positive, with some pricing, obviously, to kind of get you over the 3% on the core business. i mean year to date unit growth has been you know positive with some pricing obviously to kind of get you over the 3% on the core business You know, we've been really, really pleased with how units have really picked up this year, year to date. you know we've been really really pleased with how units have really picked up this year year to date As we mentioned, we're taking a bit of a conservative approach given what we're seeing in the economic indicators, and just the magnitude of the pricing across the market and in the economy on units for the back half. as we mentioned we're taking a bit of a conservative approach given what we're seeing in the economic indicators and just the magnitude of the pricing across the market and in the economy on units for the back half There is certainly some room for that to go north of what we're putting in our guidance. there is certainly some room for that to go north of what we're putting in our guidance

Speaker 1: In other words, you raise prices, you're not necessarily seeing unit degradation, but you are assuming that to be conservative in the back half. In other words, you raise prices, you're not necessarily seeing unit degradation, but you are assuming that to be conservative in the back half. in other words you raise prices you're not necessarily seeing unit degradation but you are assuming that to be conservative in the back half

Speaker 2: We're taking a conservative approach to it, but this is a business that you don't get a lot of visibility. From what we can tell in our testing and trend evaluation and discussions with distribution partners, we feel like this is a good guide. We're taking a conservative approach to it, but this is a business that you don't get a lot of visibility. we're taking a conservative approach to it but this is a business that you don't get a lot of visibility From what we can tell in our testing and trend evaluation and discussions with distribution partners, we feel like this is a good guide. from what we can tell in our testing and trend evaluation and discussions with distribution partners we feel like this is a good guide

Speaker 1: Okay. Understood. Thank you. Okay. okay Understood. understood Thank you. thank you

Speaker 7: Next question, Joe Feldman with Telsey Advisory Group. Please go ahead. Next question, Joe Feldman with Telsey Advisory Group. next question joe feldman with telsey advisory group Please go ahead. please go ahead

Speaker 3: Yeah, thanks, guys, for taking the questions. I wanted to ask about just your view of the consumer at this point. I know you said summer's always a soft period and you pass through price increases now, so it's a little hard to tell. With the customer has been buying, at least in the second quarter, are you seeing people stepping up? Are they adjusting their spend? It sounds like unit sales are up, so I assume that's a good thing. People are kind of back at the projects. Just how do you view the consumer right now? Yeah, thanks, guys, for taking the questions. yeah thanks guys for taking the questions I wanted to ask about just your view of the consumer at this point. i wanted to ask about just your view of the consumer at this point I know you said summer's always a soft period and you pass through price increases now, so it's a little hard to tell. i know you said summer's always a soft period and you pass through price increases now so it's a little hard to tell With the customer has been buying, at least in the second quarter, are you seeing people stepping up? with the customer has been buying at least in the second quarter are you seeing people stepping up Are they adjusting their spend? are they adjusting their spend It sounds like unit sales are up, so I assume that's a good thing. it sounds like unit sales are up so i assume that's a good thing People are kind of back at the projects. people are kind of back at the projects Just how do you view the consumer right now? just how do you view the consumer right now

Speaker 6: Hey, good morning, Joe. It's Matt. Thanks for the question. As I commented, Joe, the out-the-door sell-out in June was really good, and generally speaking, to Jesse's points of what we saw on units for the first half of the year, there's a couple of components. Overall, the market's hanging in there, but more importantly, we're taking share, right? Now that you have that price increase that goes through in June, July typically is that softer, one of the softest months, just due to a lot of back-to-school, summer vacations, and things that go on. Right now we haven't seen anything meaningful one way or the other, but we'll get more color here as the third quarter plays out. As of right now, nothing meaningful one way or the other from what we've been seeing. Hey, good morning, Joe. hey good morning joe It's Matt. it's matt Thanks for the question. thanks for the question As I commented, Joe, the out-the-door sell-out in June was really good, and generally speaking, to Jesse's points of what we saw on units for the first half of the year, there's a couple of components. as i commented joe the out-the-door sell-out in june was really good and generally speaking to jesse's points of what we saw on units for the first half of the year there's a couple of components Overall, the market's hanging in there, but more importantly, we're taking share, right? overall the market's hanging in there but more importantly we're taking share right Now that you have that price increase that goes through in June, July typically is that softer, one of the softest months, just due to a lot of back-to-school, summer vacations, and things that go on. now that you have that price increase that goes through in june july typically is that softer one of the softest months just due to a lot of back-to-school summer vacations and things that go on Right now we haven't seen anything meaningful one way or the other, but we'll get more color here as the third quarter plays out. right now we haven't seen anything meaningful one way or the other but we'll get more color here as the third quarter plays out As of right now, nothing meaningful one way or the other from what we've been seeing. as of right now nothing meaningful one way or the other from what we've been seeing

Speaker 3: Got it. Thanks. Maybe just a follow-up for Jesse. With regard to the guidance, I know you're not giving too many specifics, but are there any puts and takes we should think about in the second half? Is there anything unique about maybe third quarter versus fourth quarter this year, or are we safe to use kind of the last year kind of flow to get us to the numbers for the full year? Got it. got it Thanks. thanks Maybe just a follow-up for Jesse. maybe just a follow-up for jesse With regard to the guidance, I know you're not giving too many specifics, but are there any puts and takes we should think about in the second half? with regard to the guidance i know you're not giving too many specifics but are there any puts and takes we should think about in the second half Is there anything unique about maybe third quarter versus fourth quarter this year, or are we safe to use kind of the last year kind of flow to get us to the numbers for the full year? is there anything unique about maybe third quarter versus fourth quarter this year or are we safe to use kind of the last year kind of flow to get us to the numbers for the full year

Speaker 2: Yeah, I would say just as a reminder, in the back half, usually Q3 is slightly lower than Q4. Just with our, you know, end-of-year holidays is a really big, you know, sales cycle for us. When you think about, you know, we're not going to give necessarily the quarterly guidance on the top line, but you know, it's usually around like a 48% in the third quarter, 49% in the third quarter, with slightly more, obviously, in the fourth. You know, we've talked about sort of our operational initiatives and the pricing, and a lot of that stuff is kind of helping bolster margin on a year-over-year basis as we go into the back half. Yeah, I would say just as a reminder, in the back half, usually Q3 is slightly lower than Q4. yeah i would say just as a reminder in the back half usually q3 is slightly lower than q4 Just with our, you know, end-of-year holidays is a really big, you know, sales cycle for us. just with our you know end-of-year holidays is a really big you know sales cycle for us When you think about, you know, we're not going to give necessarily the quarterly guidance on the top line, but you know, it's usually around like a 48% in the third quarter, 49% in the third quarter, with slightly more, obviously, in the fourth. when you think about you know we're not going to give necessarily the quarterly guidance on the top line but you know it's usually around like a 48% in the third quarter 49% in the third quarter with slightly more obviously in the fourth You know, we've talked about sort of our operational initiatives and the pricing, and a lot of that stuff is kind of helping bolster margin on a year-over-year basis as we go into the back half. you know we've talked about sort of our operational initiatives and the pricing and a lot of that stuff is kind of helping bolster margin on a year-over-year basis as we go into the back half

Speaker 3: Got it. Okay, thank you. Got it. got it Okay, thank you. it okay thank you

Speaker 6: Thanks, Joe. Thanks, Joe. thanks joe

Speaker 3: Good luck with the quarter. Good luck with the quarter. good luck with the quarter

Speaker 2: Thank you. Thank you. thank you

Speaker 7: Next question, Brian McNamara with Canaccord Genuity. Please go ahead. Next question, Brian McNamara with Canaccord Genuity. next question brian mcnamara with canaccord genuity Please go ahead. please go ahead

Speaker 11: Hey, guys, thanks for the follow-up here. Great job on the tariff mitigation. Looking at slide 11, it looks like $8.5 million out of the $15 million in tariff mitigation is relocation with existing suppliers and sourcing with new suppliers in lower-cost countries. I was wondering if we could get a little color there specifically on how your exposures to, you know, China, maybe some of the higher-cost countries are changing, and then what kind of lower-cost countries you're kind of shifting to. China sourcing exposure is a consistent question we get from investors. Thanks. Hey, guys, thanks for the follow-up here. hey guys thanks for the follow-up here Great job on the tariff mitigation. great job on the tariff mitigation Looking at slide 11, it looks like $8.5 million out of the $15 million in tariff mitigation is relocation with existing suppliers and sourcing with new suppliers in lower-cost countries. looking at slide 11 it looks like $8.5 million out of the $15 million in tariff mitigation is relocation with existing suppliers and sourcing with new suppliers in lower-cost countries I was wondering if we could get a little color there specifically on how your exposures to, you know, China, maybe some of the higher-cost countries are changing, and then what kind of lower-cost countries you're kind of shifting to. i was wondering if we could get a little color there specifically on how your exposures to you know china maybe some of the higher-cost countries are changing and then what kind of lower-cost countries you're kind of shifting to China sourcing exposure is a consistent question we get from investors. china sourcing exposure is a consistent question we get from investors Thanks. thanks

Speaker 2: Yeah, Brian, I'd say our overall strategy had a number of facets to it, as you could see in the prepared material. Overall, we want to be in countries that have a more stable long-term relationship with the United States, and that's where we've been focusing on either relocating with our current suppliers or finding new suppliers in lower-cost countries. That's just been the main focus, mitigating that exposure in China. Yeah, Brian, I'd say our overall strategy had a number of facets to it, as you could see in the prepared material. yeah brian i'd say our overall strategy had a number of facets to it as you could see in the prepared material Overall, we want to be in countries that have a more stable long-term relationship with the United States, and that's where we've been focusing on either relocating with our current suppliers or finding new suppliers in lower-cost countries. overall we want to be in countries that have a more stable long-term relationship with the united states and that's where we've been focusing on either relocating with our current suppliers or finding new suppliers in lower-cost countries That's just been the main focus, mitigating that exposure in China. that's just been the main focus mitigating that exposure in china

Speaker 11: At risk of beating a dead horse on the H2 guide, maybe I'll try it a different way. A pulse for a big deceleration in organic sales, I think it's up less than 1% despite your lapping much easier comps. I know July is typically a slow month, and you mentioned it's flat. I guess why wouldn't all the heavy lifting you've done internally kind of help achieve a little bit better H2 growth, or is it just simply a conservatism on your part? At risk of beating a dead horse on the H2 guide, maybe I'll try it a different way. at risk of beating a dead horse on the h2 guide maybe i'll try it a different way A pulse for a big deceleration in organic sales, I think it's up less than 1% despite your lapping much easier comps. a pulse for a big deceleration in organic sales i think it's up less than 1% despite your lapping much easier comps I know July is typically a slow month, and you mentioned it's flat. i know july is typically a slow month and you mentioned it's flat I guess why wouldn't all the heavy lifting you've done internally kind of help achieve a little bit better H2 growth, or is it just simply a conservatism on your part? i guess why wouldn't all the heavy lifting you've done internally kind of help achieve a little bit better h2 growth or is it just simply a conservatism on your part

Speaker 2: Yeah, I think, Brian, you know, we all had been saying the back half is the biggest question mark, just given what we were all seeing in April with the consumer and the tariffs and the pricing flowing through. We were really just, to your point, taking a bit of a conservative view on what the units are going to do. I think we've all read the headlines of the pricing across the economy starting to actually flow through and what's going on with just employment. We're in the thick of all of that right now. If you give us a couple more months, obviously we'll be in a much better position. We're just not in the position where we feel like it's prudent to lean out until we know more. Yeah, I think, Brian, you know, we all had been saying the back half is the biggest question mark, just given what we were all seeing in April with the consumer and the tariffs and the pricing flowing through. yeah i think brian you know we all had been saying the back half is the biggest question mark just given what we were all seeing in april with the consumer and the tariffs and the pricing flowing through We were really just, to your point, taking a bit of a conservative view on what the units are going to do. we were really just to your point taking a bit of a conservative view on what the units are going to do I think we've all read the headlines of the pricing across the economy starting to actually flow through and what's going on with just employment. i think we've all read the headlines of the pricing across the economy starting to actually flow through and what's going on with just employment We're in the thick of all of that right now. we're in the thick of all of that right now If you give us a couple more months, obviously we'll be in a much better position. if you give us a couple more months obviously we'll be in a much better position We're just not in the position where we feel like it's prudent to lean out until we know more. we're just not in the position where we feel like it's prudent to lean out until we know more

Speaker 11: Fair enough. Thanks, guys. Appreciate it. Fair enough. fair enough Thanks, guys. thanks guys Appreciate it. appreciate it

Speaker 6: Thanks, Brian. Thanks, Brian. thanks brian

Speaker 7: I would like to turn the floor over to Matthew Stevenson for closing remarks. I would like to turn the floor over to Matthew Stevenson for closing remarks. i would like to turn the floor over to matthew stevenson for closing remarks

Speaker 6: All right. Thank you, Stacey. Slide 20 underscores the compelling investment thesis behind Holley Performance Brands. At the heart of this story is a passionate and deeply engaged automotive enthusiast community. For our customers, this is far more than a pastime. It's a lifestyle rooted in performance, personalization, and pride. With an addressable market exceeding $40 billion, Holley is uniquely positioned as the industry leader, powered by a portfolio of iconic brands recognized for decades of innovation and excellence. Our growth story is grounded in a proven track record of successful acquisitions and disciplined integration. We consistently create value by expanding our reach, enhancing capabilities, and unlocking synergies across the platform. Looking ahead, we see a transformative opportunity to redefine how both consumers and distribution partners interact with their brands. Through expanded digital capabilities and omnichannel engagement, we're building a new frontier that strengthens loyalty, accelerates conversion, and expands access. All right. all right Thank you, Stacey. thank you stacey Slide 20 underscores the compelling investment thesis behind Holley Performance Brands. slide 20 underscores the compelling investment thesis behind holley performance brands At the heart of this story is a passionate and deeply engaged automotive enthusiast community. at the heart of this story is a passionate and deeply engaged automotive enthusiast community For our customers, this is far more than a pastime. for our customers this is far more than a pastime It's a lifestyle rooted in performance, personalization, and pride. it's a lifestyle rooted in performance personalization and pride With an addressable market exceeding $40 billion, Holley is uniquely positioned as the industry leader, powered by a portfolio of iconic brands recognized for decades of innovation and excellence. with an addressable market exceeding $40 billion holley is uniquely positioned as the industry leader powered by a portfolio of iconic brands recognized for decades of innovation and excellence Our growth story is grounded in a proven track record of successful acquisitions and disciplined integration. our growth story is grounded in a proven track record of successful acquisitions and disciplined integration We consistently create value by expanding our reach, enhancing capabilities, and unlocking synergies across the platform. we consistently create value by expanding our reach enhancing capabilities and unlocking synergies across the platform Looking ahead, we see a transformative opportunity to redefine how both consumers and distribution partners interact with their brands. looking ahead we see a transformative opportunity to redefine how both consumers and distribution partners interact with their brands Through expanded digital capabilities and omnichannel engagement, we're building a new frontier that strengthens loyalty, accelerates conversion, and expands access. through expanded digital capabilities and omnichannel engagement we're building a new frontier that strengthens loyalty accelerates conversion and expands access Now, as we emerge from our multi-year transformation and return to growth in our core business, our financial ambitions are clear. We remain focused on delivering sustainable organic growth, maintaining gross margins of 40%, and achieving adjusted EBITDA margins greater than 20%. At the same time, we are committed to generating strong, consistent free cash flow and to building a disciplined M&A platform that unlocks long-term value. Together, our powerful enthusiast ecosystem and Holley's trusted best-in-class brand portfolio represent a rare and differentiated investment opportunity. In closing, I want to thank our dedicated team members for their tireless efforts to commit to excellence, our loyal consumers who bring our brands to life, and our valued distribution partners, many of whom have been with us for decades. Your partnership and passion continue to drive Holley forward. Now, as we emerge from our multi-year transformation and return to growth in our core business, our financial ambitions are clear. now as we emerge from our multi-year transformation and return to growth in our core business our financial ambitions are clear We remain focused on delivering sustainable organic growth, maintaining gross margins of 40%, and achieving adjusted EBITDA margins greater than 20%. we remain focused on delivering sustainable organic growth maintaining gross margins of 40% and achieving adjusted ebitda margins greater than 20% At the same time, we are committed to generating strong, consistent free cash flow and to building a disciplined M&A platform that unlocks long-term value. at the same time we are committed to generating strong consistent free cash flow and to building a disciplined m&a platform that unlocks long-term value Together, our powerful enthusiast ecosystem and Holley's trusted best-in-class brand portfolio represent a rare and differentiated investment opportunity. together our powerful enthusiast ecosystem and holley's trusted best-in-class brand portfolio represent a rare and differentiated investment opportunity In closing, I want to thank our dedicated team members for their tireless efforts to commit to excellence, our loyal consumers who bring our brands to life, and our valued distribution partners, many of whom have been with us for decades. in closing i want to thank our dedicated team members for their tireless efforts to commit to excellence our loyal consumers who bring our brands to life and our valued distribution partners many of whom have been with us for decades Your partnership and passion continue to drive Holley forward. your partnership and passion continue to drive holley forward I want to thank you for your attendance on our call today and wish you all a great morning. Thank you. I want to thank you for your attendance on our call today and wish you all a great morning. i want to thank you for your attendance on our call today and wish you all a great morning Thank you. thank you

Speaker 7: This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation. This concludes today's teleconference. this concludes today's teleconference You may disconnect your lines at this time, and thank you for your participation. you may disconnect your lines at this time and thank you for your participation