Good morning, ladies and gentlemen, and welcome to the conference call to discuss Holley Inc.'s fourth quarter and full year 2025 earnings results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session; 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 reproduction of this call in whole or in part is not permitted without written authorization of Holley Inc. And as a reminder, this call is being recorded and will be made available for future playback. I would now like to turn the call over to your host, Anthony Rozmus with Investor Relations. Anthony, please go ahead.

Good morning and welcome to Holley Inc.'s fourth quarter and full year 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 the presentation materials, 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 will review our financial results for the fourth quarter and full year 2025 and discuss guidance for the full year 2026. At the conclusion of the prepared remarks, we will open the line for questions. I will now turn the call over to our CEO, Matthew Stevenson.

Thank you, Anthony, and good morning to everyone joining us. As we reflect on 2025, I am pleased to report that our disciplined approach delivered strong fourth quarter results in a year of meaningful progress for Holley Inc. This was a pivotal year, and not because of one standout quarter but because of sustained performance across all four quarters. For the first time since 2021, we delivered full year net sales growth while achieving adjusted EBITDA margins above 20%, highlighting the earnings capability of our business model. Our core business generated net sales growth in every quarter of 2025, culminating in double-digit growth in the fourth quarter, our strongest performance of the year and clear evidence of accelerating momentum as we enter 2026. When we refer to core, we are excluding divested operations and strategically rationalized product lines. Four straight quarters of core growth demonstrate that the underlying business is performing and that our strategy is producing measurable results. Throughout the year, we operated with focus and rigor, driving volume-led growth, sharpening pricing execution, strengthening operational capabilities, and maintaining financial discipline. Full year net sales growth was driven primarily by volume, complemented by pricing, a balanced mix that reflects solid underlying demand for our leading brands. In the fourth quarter, we saw growth across B2B and direct-to-consumer channels, underscoring the resilience of our omni-channel platform and the strength of our relationships with distributors, e-tailers, marketplaces, installers, and our own digital ecosystem. This strategy centered on serving enthusiasts wherever they choose to engage drove growth across all four divisions and 22 key brands in 2025. Just as importantly, we reinforced our financial foundation. We generated meaningful free cash flow and ended the year with net leverage below the target we set out at the 2025, demonstrating balance sheet discipline and strong…

Thank you, Matt, and good morning, everyone. Before diving into the details, I want to reinforce Matt's earlier comments that we closed 2025 having achieved several meaningful financial milestones. We delivered four consecutive quarters of core business growth, and returned to full year reported net sales growth for the first time since 2021, driven by the focused execution of our strategy across both our D2C and B2B commercial engines. Importantly, the quality of this growth reflects the transformation of our company across virtually every department, creating a durable growth engine and a level of operational excellence that simply did not exist before. We also strengthened the balance sheet, completing $25 million of debt prepayments in 2025 and surpassing $100 million in total prepayments since September 2023. And importantly, we achieved full year adjusted EBITDA margins above 20% for the first time since 2021. Taken together, these milestones reflect tangible progress against the strategy. And with that context, I would like to walk through our progress in more detail, starting with an update on progress against our 2025 financial priorities on slide 12. Our efforts in 2025 remained centered on reinforcing the core strengths of our business, restoring historical profitability, improving working capital management, and deleveraging the balance sheet. On profitability, the team delivered $10 million in operational savings during the year, achieving the top end of our stated target. These results were driven by optimized staffing models and sustained efficiency gains across our manufacturing and distribution network. We also advanced facility consolidation and disciplined network-wide cost actions that further strengthened the structural profitability of the business and enhanced our operating foundation. Turning to working capital, excluding tariff impacts on product costs, we closed the year with a $9 million improvement, including $4.5 million realized in the fourth quarter alone. While…

Certainly. We will now be conducting a question-and-answer session. As a reminder, a confirmation tone will indicate your line is in the question queue. Our first question is coming from Brian McNamara from Canaccord Genuity. Your line is now live.

Hey, good morning, guys. Congrats on the strong year and the progress on your initiatives here. So market growth in 2025, can you guys quantify that and what your expectation is for 2026? I know I see a plus 4.3 at the midpoint for guidance versus your historical kind of mid single-digit market growth number? Just trying to assess relative conservatism here relative to market growth. Great. And then secondly, on pricing, 2025 volumes were better than we would have thought. Can you remind us of the timing and frequency of pricing you take in a typical year and how much pricing growth is contemplated in guidance? And is that 8.5 pricing you took last June kind of still working through the P&L? Thanks, guys. Yes, I will see.

Yes. I would say market growth last year, I mean, obviously we did pretty strong. And core growth of 6.6%. I want to say based on our intel from the market, out-the-door sales were probably in the 3% to 4% range. So we continued to take share throughout the year and I think that partnership with distribution partners is really paying off there. I would say for next year, Brian, our plan would indicate that the share gains continue, maybe not to the pace that we saw last year, but it is implicit in what we have guided to right now. That. Typically, the pricing cadence is middle of year. We did, obviously, in Q4, sorry, the end of Q2, take some price in the 8.75% and then the Q3 call, we talked about how it was not all completely flowing through. Obviously, we picked up more of that flow-through in Q4. And this year, we are recognizing the market probably does not have a stomach for the level of pricing that we took last year to kind of support the tariff impacts that we are all experiencing. We did take a modest price increase at the very beginning of the year, but I would suspect that that is going to be slightly offset with continued sort of partnership with distribution partners and selective channel margin enhancements to continue to drive growth. So not a lot anticipated there. Or price increase middle of the year at least at this point.

Thanks, Brian.

Thank you. Next question today is coming from Christian Carlino from JPMorgan. Your line is now live. Hi, good morning. Thanks for taking our question and congrats on a strong year. Could you talk about how you are thinking about elasticity as you annualize the impact of tariffs into the second half? Less apparent right now seeing that eight to nine points part because of B2B growing faster. But compared to your typical low single-digit price increases, as that normalizes over the year, to what extent are you assuming an improvement in unit trends to offset this as maybe real wages theoretically tick up later in the year? And just any broader comments on maybe cadence of the year would be helpful.

Yes, I would say, Christian, obviously, we talked about the strategy around the pricing increase to make sure we were able to maintain margin and free cash flow. And you can see in our guide, that is playing out. To your question around volume impacts, continuing to see on the out-the-door sales continued growth. I would say there has been in some select areas some volume implications there. But the team is maniacally focused on taking surgical pricing actions to address those things as they come up. You take a shot here and then you kind of refine along the way. I think as we talked about just in the previous question, we do anticipate some volume increases here to achieve our guidance. In terms of the actual cadence of the sales throughout the year, I think as we have talked about in the past, in a perfectly normal year, which no years we all know is perfectly normal, it would be about 52%, 48%. I think that is what we hit last year. Then just depending on inventory levels and how the weather is doing in a particular period, that could shift a bit. And I think you probably heard in my remarks Q1, with the January weather event and then a double whammy with early February weather event in the Northeast, I would say this year is probably going to shape up more like a 51/49 with more of the sales kind of shifting to the back half, but not to veer too far off from that.

Got it. That is really helpful. And I guess, could you, to the extent you can, quantify the impact from the weather so far this year? And then my question was going to be about are distributors ordering any more aggressively in anticipation of stronger demand during tax refund season or would you expect them to chase if they need to? And, I guess, what is your assessment of both channel inventory levels in terms of their need to potentially chase and then your own inventory levels in terms of your ability to fulfill that if they end up needing to chase inventory? Thanks.

Yeah. Sheila. You want to go for it? Yes. Christian, generally speaking, what we are seeing, to Jesse's point, is the out-the-doors are pretty healthy. With that said though, there were some weeks there in late January and early February that impacted all of us, including our distribution partners, quite significantly as people were bearing out from either ice or snow. And so if you take those out of the equation, like I said, the out-the-doors are pretty healthy. And then the month of March, just for the seasonality of the business, the month of March is a big month and at the same time we run a promotional event or marketing calendar to capture that demand as the season starts to pick up. Now in terms of any out of the ordinary stock-ups or anything for tax refund season or anything, we are not seeing anything out of the ordinary there. And then generally speaking, inventory levels, taking into consideration those weeks that were quite slow due to the weather conditions, they are a little heavier. But that would be the only real indication of impact on the inventory levels.

Got it. Thank you very much. Best of luck.

Thank you. Next question is coming from Bret Jordan from Jefferies. Your line is now live.

Hey, good morning, guys. Hey, Brett. Good morning. You commented on seeing some recent consumer improvement. I guess when you think about the four segments of the business, are any of those more cyclical than others? Is Euro and Import more of a luxury buyer who is less sensitive? I guess, when you look across the portfolio, are there areas that are brighter than others? And then within chemicals, I guess it looks like a sort of an expansion year for that. Could you talk about the TAM and sort of maybe the margin profile of that category and has it become a fifth segment? Or is this sort of just overlaid across the existing business lines?

Yes, Bret. And, you know, I think in Jesse's prepared remarks, she talked about that K economy. We see it in our portfolio. In the Euro business, you saw the robust growth there that we had in 2025, significant double digits there on the core up over 20%. And so those buyers of Euro cars tend to be more affluent. We are also seeing some of those patterns in our safety business around our Stilo brand, which is ultra premium. You almost consider them luxury helmets in the motorsports segment. We are seeing phenomenal growth on that segment as well. But generally speaking, things are still generally healthy across the portfolio per numbers that we provided there for 2025, but you are definitely seeing some spikes driven by more of that K economy phenomenon with a more affluent customer. Yes. We have actually bucketed it in our American Performance vertical under our accessories group, just because the kind of the legacy nature of some of our existing portfolio focuses there. But on chemicals, they are great margin products for us. And we just saw natural expansion opportunities based on our enthusiast consumer base. So we recently introduced the NOS Octane Booster, which is now getting placement in retailers, which is very exciting. And then as we get into 2026, in the back half of the year, we will introduce a new car care line, which with the reach we have with millions and millions of enthusiasts just makes complete sense. So we are really excited about that. And eventually, we will have a strategy; it takes a little longer to get into national retailers and such, but eventually that is the goal to get that on shelves as well as third-party marketplaces and our own e-commerce platform.

Okay. Great. Thank you.

Yes. Thanks, Bret.

Thank you. Our next question is coming from Joe Feldman from Telsey Advisory Group. Your line is now live.

Hey, guys. Good morning and congrats on the quarter and the year. Wanted to ask, can you share a little more color on the ERP and the WMS system? Maybe just remind us what is the plan for that this year, like, how that gets implemented, because, you know, occasionally, that can be a little bumpy and I know you guys said you have more work to do there. Just curious if you could share more thought on that. Okay. That is helpful. Thanks. And then with that, I know everybody asks about AI these days, so I figured I will ask too. But are you incorporating or will the new systems allow you to incorporate AI to maybe for better design or better, you know, demand visibility, things like that. Got it. Thank you. And then maybe just one quick one for Jesse. Well, I do not know it is quick, but can you share a little more color? You talked about, I guess, some operating expense savings. Presumably, does that mean we will see that line versus gross margin? Like, maybe you can share a little color on the collection for 2026, how those should shape up?

Yes, appreciate the question. Joe, this year, it is mostly just preparation alignment that also drives some capital expense in Jesse's outlook. Really for the implementation go-live more in early 2027. But right now, the team, of course, has a lot of work to be done prior to going live, and that investment will happen. But in terms of any potential business impact, our job, of course, is to make sure that does not happen, but that would not even be on the table here for 2026 regardless. Yes. I mean, the team is already using AI in various facets. But, yes, the more modern ERP will allow other API plug-ins and AI to continue to evolve our competencies around that. So that is one of the many benefits that we see in the new ERP implementation.

You are asking, Joe, where will the $5 million to $7 million in operation savings come in and the timing of that? Yeah. I mean, obviously, we do not break those out in our guidance, but it would be pretty much like the operating savings line is also kind of helping with mitigating some of any pressure that would be residual from tariff mitigation actions as well. So you will see most of that just flow through the gross margin line. And then on the SG&A side, it is just more the margin expansion there is just through leverage on fixed cost.

Got it. Okay. Thank you, guys. Good luck with this quarter and year.

Thank you. We have reached the end of our question-and-answer session. I would like to turn the floor back over for any further or closing comments.

All right. Thank you, Kevin. Slide 20 underscores a compelling investment narrative for Holley Inc. We operate in a nearly $40 billion passion-driven market where loyalty runs deep and performance matters. With a portfolio of iconic, innovation-led brands, Holley Inc. holds a clear leadership position. In addition, we have a proven track record of disciplined M&A and value creation through integration. Looking ahead, we see meaningful opportunity to expand our digital ecosystem, enhancing how enthusiasts and distribution partners engage with our brands and further strengthening our competitive advantage. Our long-term commitments are clear: deliver mid single-digit organic top line growth, maintain 40% gross margins, maintain at least 20% adjusted EBITDA margins, generate sustainable free cash flow, and pursue disciplined, value-creating acquisitions. In closing, 2025 was defined by consistency and discipline. We delivered core growth every quarter, expanded margins, generated meaningful free cash flow, and reduced leverage below our target, all while continuing to invest in innovation, customer relationships, and operational excellence. We enter 2026 with a stronger foundation, greater financial flexibility, and a clear focus on disciplined, profitable growth. Thank you to our team members, our passionate enthusiasts, and our longstanding distribution partners for the commitment that drives our collective success. We thank you for your participation today and have a great day. Thank you.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.