Holley Inc.

08/05/2026 | Press release | Distributed by Public on 08/05/2026 05:40

Quarterly Report for Quarter Ending June 28, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
Unless the context otherwise requires or indicates, references to "Holley," "we," "us," "our", and "the Company" in this section are to the business and operations of Holley Inc. and its subsidiaries. The following discussion and analysis should be read in conjunction with Holley's condensed consolidated financial statements and related notes thereto included in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties, and assumptions that could cause Holley's actual results to differ materially from management's expectations. Factors that could cause such differences are discussed herein and under the caption, "Cautionary Note Regarding Forward-Looking Statements."
Overview
We are a designer, marketer, and manufacturer of high-performance automotive aftermarket products serving car and truck enthusiasts, with sales, processing, and distribution facilities reaching most major markets in the United States, Canada, Europe, and China. Holley designs, markets, manufactures and distributes a diversified line of performance automotive products including fuel injection systems, tuners, exhaust products, carburetors, safety equipment and various other performance automotive products. Our products are designed to enhance street, off-road, recreational and competitive vehicle performance and safety.
Central to our business and growth strategy is a commitment to innovation. We have a history of developing innovative products, including new additions to existing product families, expansions of product lines, accessory offerings, and ventures into entirely new categories. We believe this strategic approach allows us to continually adapt to evolving consumer needs. Furthermore, strategic acquisitions have played a significant role in our evolution. These acquisitions have enabled us to expand our brand portfolio, enter new product categories and consumer segments, enhance DTC scale and connection, increase market share in existing product categories, and realize valuable revenue and cost synergies. While we anticipate continued organic growth, we intend to continue evaluating opportunities for strategic acquisitions that align with our current business, expanding our reach within the target market.
Factors Affecting our Performance
We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed above, under the caption, "Cautionary Note Regarding Forward-Looking Statements," in this Quarterly Report on Form 10-Q, under the caption, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 16, 2026, and in our subsequent filings with the SEC.
Business Environment
Our business and results of operations, financial condition, and liquidity are impacted by broad economic conditions including inflation, labor shortages, disruption of the supply chain, and tariffs, as well as by geopolitical events, including military conflicts (including the conflict in Ukraine, the conflict in the Middle East, and the possible expansion of such conflicts). Our operations have been adversely impacted, and may continue to be adversely impacted, by inflationary pressures primarily related to transportation, labor and component costs. In response to the global supply chain volatility and inflationary impacts, we have attempted to minimize potential adverse impacts on our business with cost savings initiatives, price increases to customers, and by increasing inventory levels of certain products and working closely with our suppliers and customers to minimize disruptions in delivering products to customers. Our profitability has been, and may continue to be, adversely affected by constrained consumer demand and a shift in sales mix to lower-margin products, which is offset by our cost cutting and operating efficiency gains. Should the ongoing macroeconomic conditions not improve, or worsen, or if our attempts to mitigate the impact on our supply chain, operations and costs is not successful, our business, results of operations and financial condition may be adversely affected.
Impact of Tariffs and International Trade Policy on Our Operations
The United States government has increased tariffs on certain goods imported from certain countries and regions, including China, Canada, Mexico, and the European Union. In response, some foreign governments
implemented retaliatory measures. These developments introduced new complexities to global supply chains. As discussed in our quarterly report on Form 10-Q for the quarter ended March 29, 2026, we believe Holley's business model and sourcing strategies have positioned us to manage these challenges effectively and we have proactively developed and implemented plans to mitigate their impact.
On February 20, 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). During the 26-week period ended June 28, 2026, we received approximately $11,057 as a refund on such tariffs, of which $1,719 was recorded as a reduction of inventory, $8,863 was recorded as other income and $475 was recorded as interest income. We continue to monitor and evaluate these developments in order to analyze their impact on our business and identify possible actions to minimize adverse effects. The ultimate availability, timing and amount of any other potential refunds on such tariffs, and the extent and duration of these tariffs, as well as their broader impact on macroeconomic conditions and our business, remain uncertain and will depend on a variety of factors outside of our control. Nevertheless, we remain committed to optimizing our operations, managing costs and leveraging our diversified supply chain to minimize the impact of tariffs on our results of operations and financial condition.
Known or Anticipated Trends
As part of our strategic plan, we have launched a portfolio rebalance initiative through which we expect to exit non-core, low profit businesses while reinvesting in targeted mergers and acquisitions that align with our strategic priorities. During the 26-week period ended June 28, 2026, we sold three brands, ADS, Speartech, and Drake Brands, comprised of Drake Classic, Scott Drake, Drake Muscle Cars, Drake Automotive Group, Drake Auto Group, and Brothers Trucks brands. We continue to evaluate additional divestiture and acquisition opportunities that meet our strategic and financial criteria. See Note 2, "Acquisition and Divestitures" in the Notes to the condensed consolidated financial statements included in this Quarterly Report for more details.
For a more complete discussion of the risks facing our business, including risks related to our ability to execute our business strategy and to successfully integrate acquisitions or achieve the expected benefits from divestitures, see "Part I, Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025.
Key Components of Results of Operations
Net Sales
The principal activity from which we generate our sales is the designing, marketing, manufacturing and distribution of performance aftermarket automotive parts for our end consumers. Sales are displayed net of rebates and sales returns allowances. Sales returns are recorded as a charge against gross sales in the period in which the related sales are recognized.
Cost of Goods Sold
Cost of goods sold consists primarily of the cost of purchased parts and manufactured products, including materials and direct labor costs. In addition, warranty, incoming shipping and handling and inspection and repair costs are also included within costs of goods sold. Reductions in the cost of inventory to its net realizable value are also a component of cost of goods sold.
Selling, General, and Administrative
Selling, general, and administrative costs consist of payroll and related personnel expenses, IT and office services, office rent expense and professional services. In addition, self-insurance, advertising, outgoing shipping costs, pre-production and start-up costs are also included within selling, general, and administrative. We have incurred additional expenses as a result of operating as a public company, including expenses necessary to comply with the rules and regulations applicable to companies listed on a national securities exchange and related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, as well as higher expenses for general and director and officer insurance, investor relations and other professional services.
Research and Development Costs
Research and development costs consist of payroll and related personnel, IT and office services and professional services related to research and development of new products and enhancements of current products.
Amortization of Intangible Assets
Amortization of intangible assets represents the non-cash expense related to the systematic write down of our definite-lived intangible assets.
Restructuring Costs
Restructuring costs include charges attributable to operational restructuring and integration activities, including professional and consulting services, termination related benefits, facilities relocation, and executive transition costs.
Loss on Sale of Assets
Loss on sale of assets relates to the loss incurred related to the sales of ADS, Speartech, and Drake Brands.
Interest Expense
Interest expense consists of interest due on the indebtedness under our credit facilities. Interest is based on SOFR or the base rate, at the Company's election, plus the applicable margin rate. As of June 28, 2026, $527.7 million was outstanding under our Credit Agreement.
Change in Fair Value of Warrant Liability
Change in fair value of warrant liability represents remeasurement gains or losses on outstanding warrant liabilities, driven primarily by changes in our stock price and related valuation inputs.
Change in Fair Value of Earn-out Liability
Change in fair value of earn-out liability reflects adjustments to contingent consideration based on revised expectations of earn-out performance and updated valuation assumptions.
Results of Operations
13-Week Period Ended June 28, 2026 Compared With 13-Week Period Ended June 29, 2025
The table below presents Holley's results of operations for the 13-week periods ended June 28, 2026 and June 29, 2025 (dollars in thousands):
For the thirteen weeks ended
June 28, 2026 June 29, 2025 Change ($) Change (%)
Net sales $ 172,007 $ 166,661 $ 5,346 3.2 %
Cost of goods sold 101,463 97,103 4,360 4.5 %
Gross profit 70,544 69,558 986 1.4 %
Selling, general, and administrative 40,427 32,954 7,473 22.7 %
Research and development costs 3,740 5,086 (1,346) (26.5) %
Amortization of intangible assets 3,416 3,350 66 2.0 %
Restructuring costs 840 355 485 136.7 %
Loss on sale of assets 28,259 - 28,259 n/a
Other operating (income) expense (8,903) 299 (9,202) n/a
Operating income 2,765 27,514 (24,749) (89.9) %
Change in fair value of warrant liability (548) (7) (541) n/a
Change in fair value of earn-out liability (1,258) (219) (1,039) n/a
Interest expense, net 8,201 13,374 (5,173) (38.7) %
Income (loss) before income taxes (3,630) 14,366 (17,996) (125.3) %
Income tax (benefit) expense (1,200) 3,503 (4,703) (134.3) %
Net income (loss) (2,430) 10,863 (13,293) (122.4) %
Foreign currency translation adjustment $ (1,869) $ 1,239 (3,108) (250.9) %
Total comprehensive income (loss) $ (4,299) $ 12,102 $ (16,401) (135.5) %
Net Sales
Net sales for the 13-week period ended June 28, 2026 increased $5.3 million, or 3.2%, to $172.0 million, as compared to $166.7 million for the 13-week period ended June 29, 2025. The increase was primarily driven by $4.7 million of incremental net sales from the HRX acquisition and improved price realization of approximately $10.0 million, partially offset by lower sales volume of approximately $9.4 million compared to the prior year period.
Cost of Goods Sold
Cost of goods sold for the 13-week period ended June 28, 2026 increased $4.4 million, or 4.5%, to $101.5 million, as compared to $97.1 million for the 13-week period ended June 29, 2025. The increase in cost of goods sold in the second quarter of 2026, a period in which product sales increased 3.2%, was driven by higher tariff-related costs, additional costs associated with the recent HRX acquisition, and a one-time adjustment related to the prior-year capitalization of tariff costs.
Gross Profit and Gross Margin
Gross profit for the 13-week period ended June 28, 2026 increased $1.0 million, or 1.4%, to $70.5 million, as compared to $69.6 million for the 13-week period ended June 29, 2025. Gross margin for the 13-week period ended June 28, 2026 was 41.0% as compared to a gross margin of 41.7% for the 13-week period ended June 29, 2025. Gross profit margin decreased due to higher tariff-related costs, a one-time adjustment related to the
prior-year capitalization of tariff costs, and fixed cost deleverage on lower net sales volume, partially offset by pricing actions and improvements in operating efficiency.
Selling, General and Administrative
Selling, general and administrative costs for the 13-week period ended June 28, 2026 increased $7.4 million, or 22.7%, to $40.4 million, as compared to $33.0 million for the 13-week period ended June 29, 2025. Selling, general and administrative costs expressed as a percentage of sales increased to 23.5% for the 13-week period ended June 28, 2026 compared to 19.8% for the 13-week period ended June 29, 2025. The increase in selling, general and administrative costs was due to increased legal fees related to the securities class action and increased insurance expenses, salaries and wages, and consulting fees related to our ongoing portfolio rebalancing initiative.
Research and Development Costs
Research and development costs for the 13-week period ended June 28, 2026 decreased to $3.7 million as compared to $5.1 million for the 13-week period ended June 29, 2025, primarily due to a decrease in salaries and consulting fees.
Amortization of Intangible Assets
Amortization of intangible assets remained steady at $3.4 million for the 13-week period ended June 28, 2026 and June 29, 2025.
Restructuring Costs
Restructuring costs for the 13-week period ended June 28, 2026 increased by $0.4 million to $0.8 million, as compared to $0.4 million for the 13-week period ended June 29, 2025, reflecting restructuring and integration activities associated with our implementation of resource allocation efforts in support of our portfolio rebalance initiative.
Loss on Sale of Assets
During the 13-week period ended June 28, 2026, the Company recognized a loss on the sale of assets of $28.3 million related to the sales of the ADS, Speartech, and Drake Brands.
Operating Income
As a result of factors described above, operating income for the 13-week period ended June 28, 2026 decreased $24.7 million, or 89.9%, to $2.8 million, as compared to $27.5 million for the 13-week period ended June 29, 2025.
Change in Fair Value of Warrant Liability
For the 13-week periods ended June 28, 2026 and June 29, 2025, we recognized a gain of $0.5 million and a gain of less than $0.1 million, respectively. The warrant liability reflects the fair value of the Warrants issued in connection with the Business Combination.
Change in Fair Value of Earn-Out Liability
For the 13-week periods ended June 28, 2026 and June 29, 2025, we recognized a gain of $1.3 million and a gain of $0.2 million, respectively. The earn-out liability reflects the fair value of the unvested Earn-Out Shares resulting from the Business Combination.
Interest Expense
Interest expense for the 13-week period ended June 28, 2026 decreased $5.2 million, or 38.7%, to $8.2 million, as compared to $13.4 million for the 13-week period ended June 29, 2025. The decrease was primarily
attributable to changes in the fair value of the interest rate collar, which decreased interest expense by $1.9 million during the 13-week period ended June 28, 2026, compared to an increase to interest expense of $1.4 million the 13-week period ended June 29, 2025. Additionally, the interest expense decrease resulted from a decrease in our outstanding debt balance.
Income (Loss) before Income Taxes
As a result of factors described above, we recognized $3.6 million of loss before income taxes and $14.4 million of income before income taxes for the 13-week periods ended June 28, 2026 and June 29, 2025, respectively.
Income Tax (Benefit) Expense
Income tax benefit for the 13-week period ended June 28, 2026 was $1.2 million, as compared to income tax expense of $3.5 million for the 13-week period ended June 29, 2025. Our effective tax rate for the 13-week period ended June 28, 2026 was 33.1%. The difference between the effective tax rate for the 13-week period ended June 28, 2026 and the federal statutory rate in 2026 was due to permanent differences related to changes in fair value of warrant and earn-out liabilities recognized during the period, the benefit from the foreign derived intangible income (FDII) deduction, federal research and development tax credits, state taxes, and the impact of foreign taxes in higher tax rate jurisdictions. The effective tax rate for the 13-week period ended June 29, 2025 was 24.4%. The difference between the effective tax rate for the 13-week period ended June 29, 2025 and the federal statutory rate in 2025 was due to federal research and development tax credits, the impact of foreign taxes in higher rate jurisdictions, and excess tax deficiencies from share based compensation recognized during the period.
Net Income (Loss) and Total Comprehensive (Loss) Income
As a result of factors described above, we recognized net loss of $2.4 million and net income of $10.9 million for the 13-week periods ended June 28, 2026 and June 29, 2025, respectively. Additionally, we recognized total comprehensive loss of $4.3 million for the 13-week period ended June 28, 2026, as compared to total comprehensive income of $12.1 million for the 13-week period ended June 29, 2025. Comprehensive income and loss includes the effect of foreign currency translation adjustments.
Results of Operations
26-Week Period Ended June 28, 2026 Compared With 26-Week Period Ended June 29, 2025
The table below presents Holley's results of operations for the 26-week periods ended June 28, 2026 and June 29, 2025 (dollars in thousands):
For the twenty-six weeks ended
June 28, 2026 June 29, 2025 Change ($) Change (%)
Net sales $ 319,337 $ 319,705 $ (368) (0.1) %
Cost of goods sold 188,057 186,059 1,998 1.1 %
Gross profit 131,280 133,646 (2,366) (1.8) %
Selling, general, and administrative 75,829 69,653 6,176 8.9 %
Research and development costs 7,736 9,179 (1,443) (15.7) %
Amortization of intangible assets 6,844 6,882 (38) (0.6) %
Restructuring costs 1,715 818 897 109.7 %
Loss on sale of assets 28,224 - 28,224 n/a
Other operating (income) expense (9,341) 257 (9,598) (3734.7) %
Operating income 20,273 46,857 (26,584) (56.7) %
Change in fair value of warrant liability (1,579) (80) (1,499) n/a
Change in fair value of earn-out liability (1,772) (404) (1,368) n/a
Interest expense, net 18,119 29,082 (10,963) (37.7) %
Income before income taxes 5,505 18,259 (12,754) (69.8) %
Income tax expense 679 4,579 (3,900) (85.2) %
Net income 4,826 13,680 (8,854) (64.7) %
Foreign currency translation adjustment $ (2,825) $ 954 (3,779) (396.2) %
Total comprehensive income $ 2,001 $ 14,634 $ (12,633) (86.3) %
Net Sales
Net sales for the 26-week period ended June 28, 2026 decreased $0.4 million, or 0.1%, to $319.3 million, as compared to $319.7 million for the 26-week period ended June 29, 2025. Lower sales volume resulted in a decrease of approximately $18.6 million, offset partially by HRX acquisition net sales and improved price realization totalling approximately $18.2 million compared to the prior year period.
Cost of Goods Sold
Cost of goods sold for the 26-week period ended June 28, 2026 increased $2.0 million, or 1.1%, to $188.1 million, as compared to $186.1 million for the 26-week period ended June 29, 2025. The increase in cost of goods sold in 2026, a period in which product sales decreased 0.1%, was primarily due to additional costs associated with the recent HRX acquisition and a one-time adjustment related to the prior-year capitalization of tariff costs.
Gross Profit and Gross Margin
Gross profit for the 26-week period ended June 28, 2026 decreased $2.3 million, or 1.8%, to $131.3 million, as compared to $133.6 million for the 26-week period ended June 29, 2025. Gross margin for the 26-week period ended June 28, 2026 was 41.1% as compared to a gross margin of 41.8% for the 26-week period ended June 29, 2025. Gross profit margin decreased slightly due to fixed cost deleverage on lower new sales volume, partially offset by pricing actions and improvements in operating efficiency.
Selling, General and Administrative
Selling, general and administrative costs for the 26-week period ended June 28, 2026 increased $6.1 million, or 8.9%, to $75.8 million, as compared to $69.7 million for the 26-week period ended June 29, 2025. Selling, general and administrative costs expressed as a percentage of sales increased to 23.7% for the 26-week period ended June 28, 2026 compared to 21.8% for the 26-week period ended June 29, 2025. The increase in selling, general and administrative costs was mainly driven by increases in salaries and equity compensation, related to an increase in administrative costs due to our recent acquisition and portfolio rebalance initiative, and an increase to insurance costs, related to the timing of renewal.
Research and Development Costs
Research and development costs for the 26-week period ended June 28, 2026 decreased to $7.7 million as compared to $9.2 million for the 26-week period ended June 29, 2025, primarily due to a decrease in salaries and consulting fees.
Amortization and Impairment of Intangible Assets
Amortization of intangible assets was $6.8 million for the 26-week period ended June 28, 2026 compared to $6.9 million for the 26-week period ended June 29, 2025.
Restructuring Costs
Restructuring costs for the 26-week period ended June 28, 2026 increased by $0.9 million to $1.7 million, as compared to $0.8 million for the 26-week period ended June 29, 2025, reflecting restructuring and integration activities associated with our implementation of resource allocation efforts in support of portfolio rebalancing.
Loss on Sale of Assets
During the 26-week period ended June 28, 2026, the Company recognized a loss on the sale of assets of $28.3 million related to the sales of the ADS, Speartech, and Drake Brands.
Operating Income
As a result of factors described above, operating income for the 26-week period ended June 28, 2026 decreased $26.6 million, or 56.7%, to $20.3 million, as compared to $46.9 million for the 26-week period ended June 29, 2025.
Change in Fair Value of Warrant Liability
For the 26-week periods ended June 28, 2026 and June 29, 2025, we recognized a gain of $1.6 million and a gain of $0.1 million, respectively. The warrant liability reflects the fair value of the Warrants issued in connection with the Business Combination.
Change in Fair Value of Earn-Out Liability
For the 26-week periods ended June 28, 2026 and June 29, 2025, we recognized a gain of $1.8 million and a gain of $0.4 million, respectively. The earn-out liability reflects the fair value of the unvested Earn-Out Shares resulting from the Business Combination.
Interest Expense
Interest expense for the 26-week period ended June 28, 2026 decreased $11.0 million, or 37.7%, to $18.1 million, as compared to $29.1 million for the 26-week period ended June 29, 2025. The decrease was primarily attributable to lower interest expense on outstanding debt due to a decrease in our debt balance as well as the favorable impact of the interest rate collar, which resulted in recognized interest income of $2.9 million and interest expense of $5.2 million related to the interest rate collar for 26-week periods ended June 28, 2026 and June 29, 2025, respectively.
Income before Income Taxes
As a result of factors described above, we recognized $5.5 million and $18.3 million of income before income taxes for the 26-week periods ended June 28, 2026 and June 29, 2025, respectively.
Income Tax Expense
Income tax expense for the 26-week period ended June 28, 2026 was $0.7 million, as compared to income tax expense of $4.6 million for the 26-week period ended June 29, 2025. Our effective tax rate for the 26-week period ended June 28, 2026 was 12.3%. The difference between the effective tax rate for the 26-week period ended June 28, 2026 and the federal statutory rate was due to permanent differences related to changes in fair value of the warrant and earn-out liabilities recognized during the period, state taxes, the impact of foreign taxes in higher tax rate jurisdictions. The effective tax rate for the 26-week period ended June 29, 2025 was 25.1%. The difference between the effective tax rate and the federal statutory rate in 2025 was due to federal research and development tax credits, the impact of foreign taxes in higher tax rate jurisdictions and excess tax deficiencies from share based compensation recognized during the period.
Net Income and Total Comprehensive Income
As a result of factors described above, we recognized net income of $4.8 million and $13.7 million for the 26-week periods ended June 28, 2026 and June 29, 2025, respectively. Additionally, we recognized total comprehensive income of $2.0 million for the 26-week period ended June 28, 2026, as compared to total comprehensive income of $14.6 million for the 26-week period ended June 29, 2025. Comprehensive income includes the effect of foreign currency translation adjustments.
Non-GAAP Financial Measures
We present certain information with respect to EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted EPS, and Free Cash Flow as supplemental measures of our operating performance and believe that such non-GAAP financial measures provide useful information to investors, because they exclude the impact of certain items that we do not consider indicative of our ongoing operating performance and we believe are useful in comparing our results of operations between periods. We believe that the presentation of such non-GAAP measures enhance the usefulness of our financial information by presenting measures that management uses internally to establish forecasts, budgets and operational goals to manage and monitor our business. We believe that these non-GAAP financial measures help to depict a more realistic representation of the performance of our underlying business, enabling us to evaluate and plan more effectively for the future.
EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted EPS, and Free Cash Flow are not prepared in accordance with U.S. GAAP and may be different from non-GAAP financial measures used by other companies. These measures should not be considered as measures of financial performance under U.S. GAAP, and the items excluded from or included in these metrics are significant components in understanding and assessing our financial performance. These metrics should not be considered as alternatives to net income, gross profit, net cash provided by operating activities, or any other performance measures, as applicable, derived in accordance with U.S. GAAP.
Adjusted EBITDA
We define EBITDA as earnings before depreciation, amortization of intangible assets, interest expense, and income tax expense. We define Adjusted EBITDA as EBITDA adjusted to exclude, to the extent applicable, acquisition and restructuring costs, which includes operational restructuring and integration activities, termination related benefits, facilities relocation, and executive transition costs; changes in the fair value of the warrant liability; changes in the fair value of the earn-out liability; equity-based compensation expense; notable items that we do not believe are reflective of our underlying operating performance, including litigation settlements, transformative consulting fees and certain costs incurred for advisory services related to identifying performance initiatives; and other expenses or gains, which includes gains or losses from disposal of fixed assets, franchise taxes, and gains or losses from foreign currency transactions. In addition, beginning with the quarter ended June 28, 2026, the Company has excluded from Adjusted EBITDA any tariff refund income
received in the quarter, as the refunds are non-recurring in nature for tariff costs incurred in the past and are not reflective of the Company's ongoing performance, such refunds are included in other operating income. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net sales.
The following unaudited table presents the reconciliation of net income, the most directly comparable GAAP measure, to EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin for the 13-week and 26-week periods ended June 28, 2026 and June 29, 2025 (dollars in thousands):
For the thirteen weeks ended For the twenty-six weeks ended
June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025
Net income (loss) $ (2,430) $ 10,863 $ 4,826 $ 13,680
Adjustments:
Depreciation 2,650 2,215 5,174 4,514
Amortization of intangible assets 3,417 3,350 6,844 6,882
Interest expense, net 8,201 13,374 18,119 29,082
Income tax (benefit) expense (1,200) 3,503 679 4,579
EBITDA 10,638 33,305 35,642 58,737
Change in fair value of warrant liability (548) (7) (1,579) (80)
Change in fair value of earn-out liability (1,258) (219) (1,772) (404)
Loss on sale of assets 28,259 - 28,224 -
Equity-based compensation expense 1,565 1,408 3,296 2,903
Restructuring costs 840 355 1,715 818
Notable items 3,161 1,287 4,889 1,484
Other operating (income) expense (8,903) 299 (9,341) 257
Adjusted EBITDA $ 33,754 $ 36,428 $ 61,074 $ 63,715
Net sales $ 172,007 $ 166,661 $ 319,337 $ 319,705
Net income (loss) margin (1.4 %) 6.5 % 1.5 % 4.3 %
Adjusted EBITDA Margin 19.6 % 21.9 % 19.1 % 19.9 %
Adjusted Net Income and Adjusted Diluted EPS
We define Adjusted Net Income as earnings excluding the effect of changes in the fair value of the warrant liability, changes in the fair value of the earn-out liability, impairment of goodwill and indefinite-lived intangible assets, loss on sale of assets, and gain or loss on the early extinguishment of debt. We define Adjusted Diluted EPS as Adjusted Net Income on a per share basis. Management uses these measures to focus on on-going operations and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present consolidated operating results. We believe that using this information, along with net income and net income per diluted share, provides for a more complete analysis of the results of operations.
The following unaudited tables present the reconciliation of net income and net income per diluted share, the most directly comparable GAAP measures, to Adjusted Net Income and Adjusted Diluted EPS for the 13-week and 26-week periods ended June 28, 2026 and June 29, 2025 (dollars in thousands):
For the thirteen weeks ended For the twenty-six weeks ended
June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025
Net income (loss) $ (2,430) $ 10,863 $ 4,826 $ 13,680
Special items:
Adjust for: Change in fair value of warrant liability
(548) (7) (1,579) (80)
Adjust for: Change in fair value of earn-out liability (1,258) (219) (1,772) (404)
Adjust for: Loss on sale of assets 28,259 - 28,224 -
Adjusted Net Income $ 24,023 $ 10,637 $ 29,699 $ 13,196
For the thirteen weeks ended For the twenty-six weeks ended
June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025
Net income (loss) per diluted share $ (0.02) $ 0.09 $ 0.04 $ 0.11
Special items:
Adjust for: Change in fair value of warrant liability
- - (0.01) -
Adjust for: Change in fair value of earn-out liability (0.01) - (0.01) -
Adjust for: Loss on sales of assets 0.23 - 0.23 -
Adjusted Diluted EPS $ 0.20 $ 0.09 $ 0.25 $ 0.11
Free Cash Flow
We define Free Cash Flow as net cash provided by operating activities minus cash payments for capital expenditures, net of dispositions. Management believes providing Free Cash Flow is useful for investors to understand our performance and results of cash generation after making capital investments required to support ongoing business operations.
The following unaudited table presents the reconciliation of net cash provided by operating activities, the most directly comparable GAAP measure, to Free Cash Flow for the 13-week and 26-week periods ended June 28, 2026 and June 29, 2025 (dollars in thousands):
For the thirteen weeks ended For the twenty-six weeks ended
June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025
Net cash provided by operating activities $ 47,111 $ 40,487 $ 44,254 $ 32,637
Capital expenditures (6,169) (4,828) (9,640) (7,808)
Free Cash Flow $ 40,942 $ 35,659 $ 34,614 $ 24,829
Liquidity and Capital Resources
Our primary cash needs are to support working capital, capital expenditures, acquisitions, and debt repayments. We have generally financed our historical needs with operating cash flows, capital contributions and borrowings under our credit facilities. These sources of liquidity may be impacted by various factors, including demand for
our products, investments made in acquired businesses, plant and equipment and other capital expenditures, and expenditures on general infrastructure and information technology.
On June 28, 2026, the Company had cash of $69.0 million and availability of $97.5 million under its $100.0 million senior secured revolving credit facility. As of June 28, 2026, the Company had $2.5 million in letters of credit outstanding under the revolving credit facility. On July 13, 2026, the Company repaid $15.0 million on the outstanding principal of its first lien term loan facility.
On March 18, 2026, the Company acquired HRX S.r.l., an Italian motorsports racewear brand, for a purchase price funded through a combination of borrowings under the Company's revolving credit facility and cash on hand. The acquisition impacted the Company's liquidity position as reflected in the June 28, 2026 cash and revolver balances noted above. The Company believes its existing cash balances, together with availability under its revolving credit facility, will be sufficient to fund its operating requirements, capital expenditures, and debt service obligations for the foreseeable future. See Note 2, "Acquisition and Divestitures" in the Notes to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information related to the Company's acquisition of HRX.
The Company is obligated under various operating leases for facilities, equipment and automobiles with estimated lease payments of approximately $4.6 million, including short term leases, due during the remainder of fiscal year 2026. See Note 16, "Lease Commitments" in the Notes to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information related to the Company's lease obligations.
See Note 7, "Debt" in the Notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further detail of our credit facility and the timing of principal maturities. As of June 28, 2026, based on the then current weighted average interest rate of 7.5%, expected interest payments associated with outstanding debt totaled approximately $20.4 million for the remainder of fiscal year 2026.
See Note 15, "Share Repurchase Program" in the Notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further detail of our share repurchase program. As of June 28, 2026, we had approximately $23.0 million remaining under the share repurchase program. The share repurchase plan does not require us to repurchase any specific number of shares, and we may terminate the repurchase plan at any time.
As discussed under "Business Environment" above, although the future impact of supply chain disruptions and inflationary pressures are highly uncertain, we believe that cash generated through our current operating performance, and our operating plans, cash position, and borrowings available under our revolving credit facility, will be sufficient to satisfy our liquidity needs and capital expenditure requirements for the next 12 months and thereafter for the foreseeable future.
Cash Flows
The following table provides a summary of cash flows from operating, investing, and financing activities for the periods presented (dollars in thousands):
26-week period ended June 28, 2026 Compared With 26-week period ended June 29, 2025
For the twenty-six weeks ended
June 28, 2026 June 29, 2025
Cash flows provided by operating activities $ 44,254 $ 32,637
Cash flows used in investing activities (6,029) (20,898)
Cash flows used in financing activities (6,129) (4,458)
Effect of foreign currency rate fluctuations on cash (307) 474
Net change in cash and cash equivalents $ 31,789 $ 7,755
Operating Activities. Net cash provided by operating activities for the 26-week period ended June 28, 2026 was $44.3 million compared to net cash provided by operating activities of $32.6 million for the 26-week period ended June 29, 2025. Cash provided by operating activities included, but not limited to, positive fluctuations from accounts receivable, inventory, accrued and other liabilities, and accrued interest of $12.1 million, $4.8 million, $2.5 million, and $3.3 million, respectively. Partially offsetting the increase were negative fluctuations in prepaids and other assets and accounts payable of $16.0 million and $5.6 million, respectively.
Investing Activities. Net cash used in investing activities for the 26-week periods ended June 28, 2026 and June 29, 2025 was $6.0 million and $20.9 million, respectively, primarily due to the cash payments related to the HRX acquisition in March 2026, the acquisition of the perpetual license agreement with Cataclean in January 2025, and other capital expenditures.
Financing Activities. Net cash used in financing activities for the 26-week periods ended June 28, 2026 was $6.1 million, which primarily reflects $1.6 million of principal payments on long-term debt, $2.5 million of stock-based award activities and $2.0 million of treasury stock purchases. Cash used in financing activities for the 26-week period ended June 29, 2025 was $4.5 million, which primarily reflects prepayments of principal of $3.6 million on the first lien term loan.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, sales, expenses and related disclosures. We evaluate our estimates, judgments and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. For a discussion of our critical accounting estimates, refer to the section entitled "Critical Accounting Estimates" in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 16, 2026. For further information see also Note 1, "Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies" in the Notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. There have been no material changes to the Company's critical accounting estimates included in our Annual Report on Form 10-K for the year ended December 31, 2025.
Recent Accounting Pronouncements
For a discussion of Holley's new or recently adopted accounting pronouncements, see Note 1, "Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies," in the Notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
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