Q4 2024 Holley Inc Earnings Call

Operator: Good morning, ladies and gentlemen, and welcome to the conference call to discuss Holly's fourth quarter and full year 2024 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 question during the Q&A period.

Good morning, ladies and gentlemen, and welcome to the conference call to discuss how these fourth quarter and full year 'twenty 'twenty four earnings results. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.

Chin for asking questions will be provided at that time, we ask that participants limit themselves to one question and one related follow up question during the Q&A period.

Operator: Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Holly. As a reminder, this call is being recorded and will be made available for future playback.

Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Holly.

As a reminder, this call is being recorded and will be made available for future playback.

Anthony Rozmus: I would now like to introduce your host for today's call, Anthony Rozmus, with Investor Relations. Please go ahead.

Speaker Change: I'd now like to introduce your host for today's call Anthony Erasmus with Investor Relations. Please go ahead.

Anthony Rozmus: Good morning, and welcome to Holley's fourth quarter and full year 2024 Earnings Conference Call.

Speaker Change: Good morning, and welcome to <unk> fourth quarter full year 2024 earnings conference call on the call with me today are president and Chief Executive Officer and.

Anthony Rozmus: On the call with me today are President and Chief Executive Officer Matt Stevenson and Chief Financial Officer Jesse Weaver.

Speaker Change: Chief Financial Officer, Jesse Weaver.

Anthony Rozmus: This webcast and the presentation materials, including non-GAAP reconciliations, are available on our Investor Relations website.

Speaker Change: Cash on the presentation materials, including non-GAAP reconciliations are available on our Investor Relations website.

Anthony Rozmus: 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 filing.

Speaker Change: 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.

Anthony Rozmus: This morning, we will review our financial results for the fourth quarter and full year 2024 and share our guidance for the full year 2025.

Speaker Change: Morning, We will review our financial results for the fourth quarter and full year 2024 and share our guidance for the full year 2025.

Anthony Rozmus: At the conclusion of the prepared remarks, we will open the call up for questions.

Speaker Change: At the conclusion of the prepared remarks, we will open the call up for questions with that I'll turn the call over to our CEO Steven.

Matthew Stevenson: With that, I'll turn the call over to our CEO, Matt Stevenson. Thank you, Anthony, and good morning, everyone. As we look back on the fourth quarter and present the final results for 2024, I'm excited to share the significant strides we've made in Holley's transformation. Your unwavering support has been crucial as we've navigated a challenging consumer environment. Yet despite these hurdles, we achieved remarkable milestones and I'm eager to highlight our success. Today we'll continue to provide concrete evidence of our transformation, even in a market environment that often obscures the extraordinary work happening within our company. We have assembled an exceptional leadership team and infused talent at various levels, creating a powerhouse organization poised to propel us toward becoming a billion-dollar enthusiast platform.

Steven: Thank you Anthony and good morning, everyone.

Steven: We look back on the fourth quarter and present the final results for 2024 I'm excited to share the significant strides we've made in the Hollies transformation.

Steven: Your unwavering support has been crucial as we've navigated a challenging consumer environment yet. Despite these hurdles, we achieved remarkable milestones and I'm eager to highlight our success.

Steven: Today, we will continue to provide concrete evidence of our transformation even in a market environment that often obscures the extraordinary work happening within our company.

Steven: We have assembled an exceptional leadership team and infused talent at various levels, creating a powerhouse organization poised to propel us towards becoming a 1 billion dollar enthusiasts platform.

Matthew Stevenson: Over the past year, we have consistently demonstrated that placing the right leaders in key positions has driven significant progress within our business. A prime example was the stellar performance of our digital and consumer experience teams, where our direct-to-consumer business experienced substantial year-over-year growth. This success was fueled by our ability to capture market share from other manufacturers through creating captivating consumer experiences, expertly merchandising and promoting our products, and leveraging best-in-class digital capabilities. We've also dedicated an immense energy to supporting our loyal distribution partners with a goal of driving their growth alongside ours in seizing market share by being the ultimate partner.

Steven: Over the past year, we have consistently demonstrated that placing the right leaders in key positions has driven significant progress within our business.

Steven: An example was the stellar performance of our digital consumer experience teams, where our direct to consumer business experienced substantial year over year growth.

Steven: This success was fueled by our ability to capture market share from other manufacturers through creating captivating consumer experiences expertly merchandising and promoting our products and leveraging best in class digital capabilities.

Steven: We've also dedicated an immense energy to supporting our loyal distribution partners with a goal of driving their growth alongside ours in seizing market share by being the ultimate partner.

Matthew Stevenson: Balancing channels is paramount, and we aim to meet consumers where they prefer to shop in this omni-channel environment. This includes our distributors, third-party marketplaces, installers, national retailers, and our own e-commerce platform. Each of these channels presents abundant opportunities for growth and further synergy. Throughout the year, we have demonstrated our commitment to building fundamental growth capabilities while maintaining rigorous financial discipline and making meaningful operational improvement. These efforts have included debt reduction, credit upgrades, a covenant-like credit agreement, and management of our interest rate exposure. We have also achieved significant operational improvements by eliminating non-value added costs, reducing past dues, and improving in-stock rates.

Steven: Balancing channels is Paramount and we aim to meet consumers, where they prefer to shop in this omni channel environment. This includes our distributors third party marketplaces installers national retailers and our own E. Commerce platform. Each of these channels presents abundant opportunities for growth and further synergies.

Steven: Throughout the year, we have demonstrated our commitment to building fundamental growth capabilities, while maintaining rigorous financial discipline and making meaningful operational improvements.

Steven: These efforts have included debt reduction credit upgrades are covenant light credit agreement and management of our interest rate exposure.

Steven: We have also achieved significant operational improvements by eliminating non value added costs, reducing past dues and improving in stock rates. These improvements have enabled us to reinvest in the business, while maintaining margins despite decreased market demand.

Matthew Stevenson: These improvements have enabled us to reinvest in the business while maintaining margins despite decreased market demand.

Matthew Stevenson: Before we get into the specific highlights for Q4 and the full year 2024 on slide five. I want to touch on what we are seeing regarding overall demand trends in our space. We remain cautious about consumer spending. During our last call, we noted significant optimism surrounding the election results in the new administration. However, as new policies were discussed post-election and eventually introduced in 2025, we have observed consumers holding back due to uncertainty, confusion, and most importantly, the continued high prices of household necessities. These high prices continue to plague middle-income consumers and make up a large part of our target demographic.

Steven: Before we get into the specific highlights for Q4 and the full year 2024 on slide five.

Steven: I wanted to touch on what were seeing regarding overall demand trends in our space.

Steven: We remain cautious about consumer spending during our last call. We noted significant optimism surrounding the election resulted in a new administration. However.

Steven: However, as new policies were discussed post election, and eventually introduced in 2025, we have observed consumers holding back due to uncertainty confusion and most importantly, the continued high prices of household necessities.

Steven: These high prices continue to plague middle income consumers, who make up a large part of our target demographic.

Matthew Stevenson: Generally, our market has reverted to the sentiment of summer of 2024, following a brief period of optimism in the late fall. We are hopeful this is a temporary situation and that the market will improve once the new policies from Washington are fully understood and assimilated by consumers and businesses. The trends we have seen early this year in 2025 have also been marked by colder weather that extended well into the Deep South. When it's that cold and normally temperate places that time of year, people work on their project cars a lot less.

Steven: Generally our market has reverted to the settlement of summer of 'twenty 'twenty four following.

Steven: Following a brief period of optimism in the late fall.

Steven: We are hopeful this is a temporary situation and that the market will improve once the new policies from Washington, or fully understood and assimilated by consumers and businesses.

Steven: The trends we have seen early this year in 2025 have also been marked by colder weather that extended well into the deep south when it's that cold and normally temporary places that time of year people work on the project cars a lot less.

Matthew Stevenson: We are taking all this into consideration regarding our guidance for 2025, which Jesse will share later in the call.

Steven: We are taking all this into consideration regarding our guidance for 2025, which Jesse will share later in the call.

Matthew Stevenson: Now turning to slide 5, which includes some highlights for the fourth quarter and full year 2024. Now, despite the challenging market, we continue to make substantial strides in our transformation, resulting in increased out-the-door share. This progress highlights the strength of our brands among consumers, the effectiveness of our marketing initiatives to continue to support distribution partners, and our enhanced direct-to-consumer marketing capabilities, combined, of course, with the elements of our transformation to drive growth. Extensive modifications, enhancements, and new capabilities to optimize our consumer journey have strengthened our brands and consumer engagement. These efforts have not only resulted in year-over-year direct consumer growth of 8%, but have also driven progress across all our channels.

Steven: Now turning to slide five which include some highlights for the fourth quarter and full year 2024.

Steven: Now despite the challenging market, we continue to make substantial strides in our transformation, resulting in increased out the door share.

Steven: This progress highlights the strength of our brands among consumers the effectiveness of our marketing initiatives to continue to support distribution partners and then our enhanced direct to consumer marketing capabilities.

Steven: Combined of course with the elements of our transformation to drive growth.

Steven: Extensive modifications enhancements and new capabilities to optimize our consumer journey have strengthened our brands and consumer engagement.

Steven: These efforts have not only resulted in year over year direct to consumer growth of 8%.

Steven: But I've also driven progress across all our channels.

Matthew Stevenson: This is evident with the growth of a significant portion of our portfolio of brands. We have seen year-over-year growth in 17 of our brands across all channels, with strong performance in both the direct-to-consumer and business-to-business segments, where we grew 32 and 16 brands respectively. The growth of a significant number of brands in the B2B channel is also a direct result of our increased sales support, which now covers nearly 80% of our B2B volume, ensuring comprehensive coverage for all our major B2B accounts. This enhanced support is a testament to our commitment to our partners. Another example of our renewed strategic partnerships is the 12% growth in the National Retailer Channel.

Steven: This is evident with the growth of a significant portion of our portfolio of brands.

Steven: We are seeing year over year growth in 17 of our brands across all channels with strong performance in both the direct to consumer and business to business segments, where we grew 32 and 16 brands respectively.

Steven: The growth of a significant number of brands in the BD channel is also a direct result of our increased sales support which now covers nearly 80% of our b to b volume, ensuring comprehensive coverage for our major <unk> accounts.

Steven: This enhanced support is a testament to our commitment to our partners.

Steven: Another example of our renewed strategic partnerships is a 12% growth in the national retailer channel.

Matthew Stevenson: driven by in-queue skew expansion and adoption at the customer level. This growth underscores the strength of our collaborations and our ability to meet evolving demands of our retail partners. Operational improvements have also been a key focus area, resulting in past year reductions every quarter in 2024. Most recently, we achieved a 22% year-over-year reduction, reflecting commitment to operational efficiency and excellence. We realized cost of service savings of $7.8 million in 2024, which has supported our gross margin expansion year over year. These savings are a direct result of our continuous efforts to optimize our operations and reduce costs.

Steven: Driven by in Q, SKU expansion and adoption at the customer level.

Steven: This growth underscores the strength of our collaborations and our ability to meet evolving demands of our retail partners.

Steven: Operational improvements have also been a key focus area, resulting in passenger reductions every quarter in 2024. Most recently, we achieved a 22% year over year reduction, reflecting our commitment to operational efficiency and excellence.

Steven: We realized cost of serve savings of $7 8 million in 2024, which has supported our gross margin expansion year over year.

Steven: These savings are a direct result of our continuous efforts to optimize our operations and reduce costs.

Matthew Stevenson: Another highlight we wanted to mention is our successful expansion into Mexico through the launch of our direct-to-distributor relationship. This expansion represents a significant milestone in our growth strategy and opens up new opportunities for us in the important Mexican market.

Steven: Another highlight we wanted to mention is our successful expansion into Mexico through the launch of our direct and distributor relationships.

Steven: This expansion represents a significant milestone in our growth strategy and opens up new opportunities for us in the important Mexican market.

Matthew Stevenson: Let's turn to slide six, which features some of the quantitative highlights from the fourth quarter and full year 2024. Net sales decreased roughly 10% to $140.1 million for Q4. declines in sales, our margins improved significantly, up 690 basis points year-over-year to 45.6%, showcasing our efforts around continuous improvement in our operations. That flowed through to our EBITDA margins, which were 20.8% for the quarter, up 250 basis points year-over-year. Free cash flow for the quarter was $1.8 million, a decrease of 28.1 compared to the prior year. However, this result was driven by a combination of factors, including lower volume, but the major contributor was a significant reduction of inventory levels in 2023 from the highly inflated levels of 2022, which generated a significant improvement in free cash flow during the fourth quarter of 2023.

Steven: Let's turn to slide six which featured some of the quantitative highlights from the fourth quarter and full year 2024.

Steven: Net sales decreased roughly 10% to $140 1 million for Q4, despite the declines.

Steven: Declines in sales or margins improved significantly up 690 basis points year over year to 45, 6% showcasing our efforts around continuous improvement in our operations.

Steven: That flowed through to our EBITDA margins, which were 28% for the quarter up 250 basis points year over year.

Steven: Free cash flow for the quarter was $1 8 million a decrease of $28 one compared to the prior year.

Steven: However, this result was driven by a combination of factors, including lower volume, but the major contributor was a significant reduction of inventory levels in 2023 from the highly inflated levels of 'twenty, two which generated a significant improvement in free cash flow during the fourth quarter of 2023.

Matthew Stevenson: On the product side, we launched several key products spanning our brand portfolio and divisions in the fourth quarter. Some highlights included expanding our solution selling approach around engine swaps and new offerings from our safety portfolio. We'll also discuss later in the call some of the exciting products that are already launching in Q1 of this year. As I mentioned previously, the continuous improvement of our operations is reflected in multiple key performance indicators for the full year. Our cost of service savings, which included improvements in our inbound and outbound logistics, generated $7.8 million in savings for 2024.

Steven: On the product side, we launched several key products spanning our brand portfolio and divisions in the fourth quarter. Some highlights included expanding our solutions selling approach or an engine swaps and new offerings from our safety portfolio.

Steven: We will also discuss later in the call some of the exciting products that are already launching in Q1 of this year.

Steven: As I mentioned previously the continuous improvement of our operations is reflected in a multiple key performance indicators for the full year.

Steven: Our cost to serve savings, which included improvements at our inbound and outbound logistics generated $7 8 million in savings for 2024.

Matthew Stevenson: By continuing to refine our forecasting and demand planning processes, we achieved a 1.5% increase in the in-stock rates of our top 2,500 products, reduced past dues by 22.3% year-over-year, and improved inventory returns by 0.1 times. Plus, we are making incredible strides in engaging with more consumers and promoting our fantastic products. In 2024, we hit a major milestone in our direct-to-consumer business, surpassing $100 million in sales on our e-commerce platform. This achievement is a testament to our relentless efforts and the passion and trust enthusiasts have in our brand. Now before our transformation, public relations wasn't a focus, but last year alone we generated 23 press releases that garnered an outstanding 2,904 articles about our company, our brands, and our products.

Steven: By continuing to refine our forecasting and demand planning processes, we achieved a one 5% increase in the in stock rates of our top 2500 products.

Steven: Reduced past dues by 22, 3% year over year and improved inventory turns by 0.1 times.

Steven: Plus we were making incredible strides and engage with more consumers and promoting our fantastic products.

In 2024, we hit a major milestone in our direct to consumer business, surpassing $100 million in sales.

Steven: Commerce platform. This achievement is a testament to our relentless efforts in Europe in the passion entrust enthusiasts have in our brands.

Steven: Now before our transformation poker relations wasn't a focus but last year alone. We generated 23 press releases that garner an outstanding 20, 904 articles about our company our brands and our products.

Matthew Stevenson: This resulted in an impressive 3.1 billion media impressions, showcasing the widespread recognition and interest in our offering. Our stellar enthusiast events, combined with our extensive presence on social media platforms, generated nearly $10 million in media value in 2024. These efforts have proven to be a highly cost-effective and authentic way to reach enthusiasts and spread the word about our amazing portfolio of brands and products.

Steven: This resulted in an impressive $3 1 billion media impressions showcasing the widespread recognition and interest in our offerings.

Steven: Our stellar enthusiast events combined with our extensive presence on social media platforms generating nearly $10 million in media value in 2020 for these.

Steven: These efforts have proven to be a highly cost effective and authentic way to reach enthusiast and spread the word about our amazing portfolio of brands and products.

Matthew Stevenson: We're excited about the momentum we've built and we look forward to continuing this journey of growth and engagement with our enthusiast community.

Steven: We're excited about the momentum we built and we look forward to continuing this journey of growth and engagement with our enthusiasm community.

Matthew Stevenson: Slide 7 is one we've been sharing with you in previous calls to highlight the great progress occurring in the transformation around key growth levels. First, let's touch on the work we did in 2024 to develop a high-performing team. We are a completely different organization than we were a year ago. The enhanced professionalism, experience, processes, and accountability we operate with now are on par with a Fortune 1000 company. We've added over 40 new leaders, completed the hiring of all critical level one and level two positions, and established a four-division structure with centers of excellence. We've excelled at bringing in new talent and seamlessly integrating them with the high performers already on the Holley team.

Steven: Slide seven is one we've been sharing with you in previous calls to highlight the great progress occurring in the transformation around key growth levers.

Steven: First let's touch on the work we did in 2024 to develop a high performing team.

Steven: We are a completely different organization than we were a year ago, the enhanced professionalism experienced processes and accountability. We operate with now are on par with a fortune 1000 company.

Steven: We've added over 40, new leaders completed the hiring of all critical level, one and level two positions and established afore division structure with centers of excellence.

Steven: We've excelled at bringing in new talent and seamlessly integrating them with a high performers already on the Holly team.

Matthew Stevenson: Additionally, we are committed to creating a great place to work for our environment for our employees, which includes enhancing the look and feel of our facilities. As part of this, we opened new offices in Bowling Green, Nashville, Tucson, and in Italy. Next, let's talk about digital modernization and consumer experience optimization. We've seen an impressive 8% year-over-year increase in our direct consumers. We've successfully launched a Product Master Data Warehouse and activated our HubSpot CRM platform, both critical elements for driving organic growth through improved product adoption by our B2B partners and enhanced cross-marketing abilities to our consumers.

Steven: Additionally, we are committed to creating a great place to work for environment for our employees, which includes enhancing the look and feel of our facilities as part of this we opened new offices in bowling Green Nashville, Tucson and in Italy.

Steven: Next let's talk about digital modernization and consumer experience optimization we've.

Steven: We've seen an impressive 8% year over year increase in our direct to consumer sales.

Steven: We successfully launched a product master data warehouse and activated our hubs bought CRM platform, both critical elements for driving organic growth through improved product adoption by our BTB partners.

Steven: And enhanced cross marketing abilities to our consumers.

Matthew Stevenson: Additionally, we've rolled out an annual marketing calendar targeting key buying periods and continue to bolster our highly enthusiastic trade show event. Moving on to B2B sales capabilities, we reorganized our sales organization and partnered with R&R to strengthen our distributor relationship. resulting in the growth of many brands in the B2B channel. Sales with national retailers surged by 12%, driven by renewed strategic partnerships and SKU expansion. Additionally, our Enhanced Safety Sales Group traveled over eight events and forged new partnerships in 2024, including those with NASCAR, IndyCar, and AMR Safety. In the area of product management innovation, we've implemented a phase gate system that has driven a remarkable 75% increase in new product revenue per SKU.

Steven: Additionally, we have rolled out an annual marketing calendar targeting key buying periods and continued to bolster our highly enthused and trade show events.

Steven: Moving on to <unk> sales capabilities, we reorganized our sales organization and partner with R&R to strengthen our distributor relationships, resulting in the growth of many brands in the <unk> channel.

Steven: Sales with national retailers served by 12% driven by renewed strategic partnerships and SKU expansion.

Steven: Additionally, our enhanced safety sales grew travelled over 80 events and forge new partnerships in 2024, including those with NASCAR Indy car and Amr's safety.

Steven: In the area of product management innovation, we've implemented a phase gate system that has driven a remarkable 75% increase in new product revenue per SKU.

Matthew Stevenson: We launch over 88 products in the year, with six achieving run rates of over $1 million. in first-year sales. Additionally, we streamline our product portfolio by removing another 12,000 underperforming SKUs. Lastly, our strategic pricing initiatives have been robust. We developed a framework to automate monthly competitive pricing fees for our top 500 SKUs and built in-house capabilities to monitor additional SKUs. We've begun the process of adjusting retail pricing to maximize elasticity for approximately 1,500 high-volume SKUs and effectively implemented a precision pricing model in July. Plus we've partnered with a third party to expand MAPS SKU monitoring and strengthen policy enforcement.

Steven: We launched over 88 products in the year with six achieving run rates of over $1 million.

Steven: In first year sales.

Steven: Additionally, we streamline our product portfolio by removing another 12000 underperforming skus.

Steven: Lastly, our strategic pricing initiatives had been robust we developed a framework to automate monthly competitive pricing feeds for our top 500, Skus and built in house capabilities to monitor additional skus.

Steven: We've begun the process of adjusting our retail pricing to maximize elasticity for approximately 500 high volume skus and effectively implemented versus and pricing model in July.

Steven: Plus we've partnered with a third party to expand map SKU monitoring and strengthened policy enforcement.

Matthew Stevenson: In 2024, we made dramatic progress across all key areas to unlock transformative growth for Holly.

Steven: In 2024, we've made dramatic progress across all key areas unlocked transformative growth for Holly.

Matthew Stevenson: Now going forward on slide eight, you can see a new framework we will be providing that tracks our progress against eight critical areas of our three-year plan developed late last year. Our Steering Principles are at the foundation of this framework. The first of these principles is fueling our teammates, which naturally leads to the goal of making Holley a designated great place to work. By creating an engagement workplace where employees have a voice, opportunities for growth, and work environment they're excited to come to every day. The second steering principle is supercharging our customer relationships, whether it's with our B2B partners or consumer enthusiasts.

Steven: Now going forward on slide eight you can see a new framework will be providing that tracks our progress against eight critical areas of our three year plan developed late last year.

Steven: Our steering principles are at the foundation of this framework. The first of these principles is fueling our teammates which naturally leads to the goal of making Hollywood designated great place to work by creating an engagement workplace.

Steven: Where employees of a voice.

Steven: <unk> for growth and working environment, they're excited to come to everyday.

Steven: The second is during principal supercharging, our customer relationships, whether it's with our <unk> to be.

Steven: Partners or our consumer enthusiasm this.

Matthew Stevenson: This includes the following three areas of the strategic framework. First, designing and implementing the premier consumer journey in our space. Second, being a trailblazing trusted partner for our B2B customers by delivering new and exciting ways to drive mutual growth. And third, launching innovative new products for all our customers that are the envy of their category. All of this is done while actively managing and merchandising our entire portfolio with clear differentiation. The final Steering Principle, Accelerating Profitable Growth, encompasses strategic areas such as expanding into new global and adjacent markets. transformational M&A, and funding our growth through improvements in our operation.

Steven: This includes the following three areas of the strategic framework.

Steven: Designing and implementing the mirror consumer journey in our space second being a trailblazing trusted partner for our <unk> customers by delivering new and exciting ways to drive mutual growth and third launching innovative new products for our customers that are the envy of the categories.

Steven: All of this is Don while actively managing and merchandising our entire portfolio with clear differentiation.

Steven: The final steering principle accelerating profitable growth encompasses strategic areas, such as expanding into new global adjacent markets.

Steven: Transformational M&A and funding our growth through improvements in our operations.

Matthew Stevenson: All these efforts, along with the others I mentioned, culminate in our ultimate goal of delivering superior financial results.

Steven: All of these efforts along with the others I mentioned culminate and our ultimate goal of delivering superior financial results.

Matthew Stevenson: We'll report back at future quarters on our progress in these key areas.

Steven: We will report back in future quarters on our progress in these key areas.

Matthew Stevenson: Until then, slide nine provides a sneak peek at some of the exciting product innovations occurring in the first quarter of 2025 across our four divisions. This concludes our solutions-focused approach with new modern truck and off-road performance packages. What sets us apart in the market is our ability to address more aspects of the vehicle than any other performance-focused company. These packages give us the unique opportunity to present customers with solutions designed to work together across many product categories. Customers want simplicity. Whether they wish to purchase the whole package now or have a roadmap for future upgrades, we are launching these solutions across our portfolio.

Steven: Until then slide nine provides a sneak peek at some of the exciting product innovations occurring in the first quarter of 2025 across our four divisions.

Steven: This includes our solutions focused approach with new modern truck and off road performance packages.

Steven: What sets us apart in the market is our ability to address more aspects of the vehicle than any other performance focused company.

Steven: These packages give us a unique opportunity to present customers with solutions designed to work together across many product categories.

Steven: Customers want simplicity, whether they wish to purchase the whole package now or have a roadmap for future upgrades. We are launching these solutions across our portfolio.

Matthew Stevenson: In our Euro division, we are launching an all-new proprietary inline tuning module. Certain enthusiasts prefer a plug-and-play tuning solution over reprogramming their ECU for added performance. Our new solution for the popular S58 engine, which fires BMW M2, M3, and M4, is already hit with enthusiasm. In our safety division, we also offer what many consider to be the gold standard in head and neck restraints, the HANS device, which helps reduce life-threatening injuries. We recently introduced the fourth generation of this product, which is significantly more comfortable for racers to wear. In domestic muscle, we continue our solutions approach by expanding our bundled product offerings around our Sniper II product line with the HyperSpark Bundle.

Steven: And our Euro Division, we are launching an all new proprietary inline tuning module certain enthusiasm prefer a plug and play tuning solution over reprogramming their ICU for added performance.

Steven: Our new slot solution for the popular S 58 engine, which powers BMW M. Two and three and four is already hit with enthusiasm.

Steven: And our safety Division, we also offer what many considered to be the gold standard in head and neck restraints, the Heinz device, which helps reduce life threatening injuries.

Steven: We recently introduced the fourth generation of this product, which is significantly more comfortable for races to wear.

Steven: In domestic muscle, we continue our solutions approach by expanding our bundled product offerings around our sniper two product line with the Hyperscale bundle.

Matthew Stevenson: This now includes the fuel injection system, display, distributor, ignition coil box, Bluetooth module, and other necessary hardware. Additionally, we're excited about expanding our chemical line, starting with an octane booster for racing applications under our legendary NOS brand. The initial feedback from Nashville retailers has been outstanding on this product.

Steven: This now includes the fuel injection system display distributor ignition coil box Bluetooth module another necessary hardware.

Steven: Additionally, we are excited about expanding our chemical line, starting with an octane booster for racing applications under our legendary Nols brand.

Steven: The initial feedback from national retailers has been outstanding on this product.

Matthew Stevenson: We look forward to providing you continued updates on our strategic framework during future earnings calls.

Steven: We look forward to providing you continued updates on our strategic framework during future earnings calls.

Jesse Weaver: Now, I'd like to hand the presentation over to Jesse, who has a lot of topics to cover during this morning's call, including details on our fourth quarter and full year 2024 results, and our outlook for 2025. Jesse.

Steven: Now I'd like to hand, the presentation over to Jessie, whereas a lot of topics to cover during this morning's call, including details on our fourth quarter and full year 2024 results and our outlook for 2025.

Steven: Jesse.

Jesse Weaver: Thank you, Matt, and good morning, everyone. I'd like to start by providing an overview of the fourth quarter and full year 24 financial results. On slide 11, I will also share an update on the progress we have made on our four financial priorities in 24, which, as a reminder, include restoring historical profitability, improving free cash flow, optimizing working capital, and reducing debt. While sales were challenged throughout the year by a combination of reseller destocking, industry demand headwinds, and the significant past-due burndown from 2023, the team was able to protect margins and sustain meaningful free cash flow by remaining focused on these critical priorities.

Jessie: Thank you, Matt and good morning, everyone I'd like to start by providing an overview of the fourth quarter and full year 'twenty for financial results on Slide 11, I'll also share an update on the progress we have made on our four financial priorities in 'twenty, four which as a reminder include restoring historical profitability improving free cash flow optimizing.

Steven: Working capital and reducing debt.

Steven: While sales were challenged throughout the year by a combination of reseller destocking industry demand headwinds and the significant past due burn down from 23. The team was able to protect margins to sustain meaningful free cash flow by remaining focused on these critical priorities.

Jesse Weaver: Through strategic identification of savings opportunities and maniacal focus on execution, we've been able to deliver nearly $8 million in year-over-year savings from the Cost to Serve program in 2025, which was above our original target of just over $5 million that we communicated at the beginning of the year. Cost to Serve combined with year-over-year inventory turn improvements, largely coming from the strategic product rationalization, of nearly 45% of our SKUs historically accounting for only 3% of total sales, helped with continued inventory optimization efforts, and played pivotal roles in helping us achieve approximately $42 million in free cash flow.

Steven: Through strategic identification of savings opportunities, a maniacal focus on execution, we've been able to deliver nearly $8 million in year over year savings from the cost to serve program and 25, which was above our original target of just over $5 million that we communicated at the beginning of the year.

Steven: Cost of serve combined with year over year inventory turn improvements largely coming from the strategic product rationalization of nearly 45% of our Skus historically accounting for only 3% of total sales health with continued inventory optimization efforts and played a pivotal role in helping us achieve approximately $42 million in free cash flow.

Jesse Weaver: By using the free cash flow to prepay $25 million on our term loan, and successfully exiting the covenant relief period, we will be able to receive upgrades from both Moody's and S&P during the year. I'm proud of the incredible business optimization work this team has been able to achieve over the past two years that supported these financial priorities. Consider that in 2022, Hollywood's essentially free cash flow neutral on a much higher revenue base. Now, this team, over the past two years, has been able to generate more than $125 million in free cash flow and prepay $75 million in debt on considerably lower volume due to the overall decrease in market demand.

Steven: But using the free cash flow to prepay $25 million on our term loan and successfully exiting the covenant relief period, we were able to receive upgrades from both Moody's and S&P during the year.

Steven: I am proud of the incredible business optimization work. This team has been able to achieve over the past two years that supported these financial priorities.

Steven: Consider that in 2022 Hollywood is essentially free cash flow neutral on a much higher revenue base now this team over the past two years has been able to generate more than $125 million in free cash flow and prepaid $75 million in debt are considerably lower volume due to the overall decrease in market demand.

Jesse Weaver: On slide 12, we'll walk through our key financial metrics for the fourth quarter. Net sales for the fourth quarter were at the high end of our guidance and delivered $140 million versus $156 million in the same period a year ago. Similar to Q3 net sales declines, Q4 was lapping continued reseller destocking and past-due burndown from the prior year, as well as macro market decline offset by highly shared growth. Given our improved working relationships with the distribution partners, we were able to work much more closely with our partners coming into the quarter and better align their order volumes in the fourth quarter with channel out-the-door sales.

Steven: On Slide 12, we'll walk through our key financial metrics for the fourth quarter.

Steven: Net sales for the fourth quarter were at the high end of our guidance and delivered $140 million versus $156 million in the same period a year ago.

Steven: Similar to Q3 net sales declines Q4 was lapping continued reseller destocking and past due burn down from the prior year as well as macro market decline offset by Holly share growth.

Steven: Given our improved working relationships with the distribution partners, we were able to work much more closely with our partners coming into the quarter and better align their order volumes in the fourth quarter the channel out the door sales.

Jesse Weaver: These efforts left Channel Inventory Levels in a much better position going into 2025 than we saw coming into 2024. Gross margin for the quarter was 45.6%, an increase of 690 basis points versus 38.7% in the prior year. Gross profit was $63.9 million in the quarter, compared to $60.3 million in the same period last year. This increase in margin was primarily due to benefits in purchasing price variance and cost-to-serve reductions in warranty returns, with partial offset by unfavorable flow-through of lower volume. SG&A, including R&D expenses for the fourth quarter, was $39.4 million versus $37.2 million in the same period for the prior year.

Steven: These efforts like channel inventory levels in a much better position going into 'twenty five than we saw coming into 2024.

Steven: Gross margin for the quarter was 45, 6% an increase of 690 basis points versus 38, 7% in the prior year.

Steven: Gross profit was $63 $9 million in the quarter compared to $60 3 million in the same period last year.

Steven: This increase in margin was primarily due to benefits and purchasing price variance and cost to serve reductions in warranty returns with partial offset by unfavorable flow through of lower volume.

Steven: SG&A, including R&D expenses for the fourth quarter was $39 4 million versus $37 2 million in the same period for the prior year. The slight increase in SG&A was primarily due to incremental marketing and one time transformative project expenses, partially offset by cost to serve efficiencies proactive furlough activities.

Jesse Weaver: The slight increase in SG&A was primarily due to incremental marketing and one-time transformative project expenses, partially offset by cost-to-serve efficiencies, proactive furlough activities, and lower equity and incentive compensation. Net loss for the fourth quarter was $37.8 million versus a net income of $1.2 million in the fourth quarter of 2023. Net loss includes non-cash goodwill and trademark impairment charges of $40.9 million and $7.7 million respectively. Adjusted net income in the fourth quarter was $12.6 million versus a loss of $543,000 in the same period of last year. Adjusted EBITDA for the fourth quarter was $29.1 million versus $28.5 million in the prior year.

Steven: And lower equity and incentive compensation.

Steven: Net loss for the fourth quarter was $37 8 million versus a net income of $1 2 million in the fourth quarter of 'twenty three.

Steven: Net loss includes noncash goodwill and trademark impairment charges of $40 9 million and $7 7 billion respectively. Adjusted.

Steven: Adjusted net income in the fourth quarter was $12 6 million versus a loss of 543000 in the same period of last year.

Steven: Adjusted EBITDA for the fourth quarter was $29 1 million versus $28 5 million in the prior year with the benefits coming from gross margin and partial offsets on SG&A. Adjusted EBITDA margin was up 250 basis points to $20 8 million versus 18, 3% in the fourth quarter of 2020.

Jesse Weaver: With the benefits coming from gross margin and partial offsets on SG&A, adjusted EBITDA margin was up 250 basis points to $20.8 million versus 18.3% in the fourth quarter of 2023. Turning to slide 13, you'll see free cash flow in the quarter was $1.8 million versus $29.9 million a year ago. For 2024, free cash flow totaled $42 million versus $88 million a year ago due to large inventory reductions in 2023 that were not repeated in 2024. As we previously outlined on the Q3 call, the change to our accounts payable process created delayed payments from the first half of the year that generated a free cash flow drag in the back half.

Steven: Three.

Steven: Turning to slide 13, Youll see free cash flow in the quarter was $1 8 million versus $29 9 million a year ago.

Steven: For 2020 for free cash flow totaled $42 million versus $88 million a year ago due to large inventories reductions in 'twenty three that were not repeated in 2024.

Steven: As we previous outlined on the Q3 call the change to our accounts payable process created delayed payments for the first half of the year that generated a free cash flow drag in the back half and Q4. These changes impacted free cash flow by approximately $7 9 million, but this was more of a timing issue within the year that had impact on the full year.

Jesse Weaver: In Q4, these changes impacted free cash flow by approximately $7.9 million, but this was more of a timing issue within the year than an impact on the full year. Adding back the impact from AP, we would have generated over $9 million of free cash flow for the quarter. Slide 14 highlights our progress on leverage during the quarter. At the end of the fourth quarter, net leverage was 4.17 times versus 4.21 times a year ago. Leverage improvement, quarter over quarter, was a combination of improvements in adjusted EBITDA in Q4 of 24 versus Q4 of 23. And quarter over quarter improvements in net leverage from pre-cash flow improvements within the quarter.

Steven: Adding back the impact from AP, we would've generated over $9 million of free cash flow for the quarter.

Steven: Slide 14 highlights our progress on leveraged during the quarter at the end of the fourth quarter net leverage was $4, one seven times versus $4, two one times a year ago.

Steven: Leverage improvement quarter over quarter was a combination of improvements in adjusted EBITDA in Q4 of 24 versus Q4 of 'twenty, three and quarter over quarter improvements in net leverage from free cash flow improvements within the quarter.

Jesse Weaver: We remain diligent in addressing our leverage and proactively protecting the balance sheet, which is why in the fourth quarter we work closely with our lenders to amend our senior secured revolving credit facility to a covenant light structure that only tests the covenant of five times net leverage when the revolver is drawn. The amendment also extends the maturity date through November of 29 and updates available borrowing to $100 million. In addition, we further hedged our interest rate exposure in this uncertain rate environment by entering into a second cashless collar that extends to the maturity date of our term loan of November of 2028.

Steven: We remain diligent and addressing our leverage and proactively protecting the balance sheet, which is why in the fourth quarter. We work closely with our lenders to amend our senior secured revolving credit facility to a covenant light structure that only test the covenant of five times net leverage when the revolver is drawn the amendment also extends the maturity date through November.

Steven: 29, and updates available borrowings to $100 million in.

Steven: In addition, we further hedged our interest rate exposure in this uncertain rate environment by entering into a second a cashless color that extend to the maturity date of our term loan of November 2028.

Jesse Weaver: Details on collar position can be found in the appendix of this earnings presentation.

Steven: Details on collar position can be found in the appendix of this earnings presentation.

Jesse Weaver: On slide 15, before discussing our full year results, I'd like to explain our adjusted EBITDA results on a like for like comparison basis to our full year guidance. Our prior Adjusted EBITDA guidance for the full year was $115 million to $120 million and excluded the non-cash impact of our strategic product rationalization efforts. In response to a letter from the SEC, we are no longer able to exclude the non-cash impact of the strategic product rationalization from our reported Adjusted EBITDA. What we are showing is how the four-year guidance at the end of Q3 would look reflecting this change, which has resulted in an adjusted range of $106.8 million to $111.8 million, which includes the impact of $8.2 million related to the product rationalization in the results.

Steven: On slide 15 before discussing our full year results I'd like to explain our adjusted EBITDA results on a like for like comparison basis to our full year guidance our prior.

Steven: Our adjusted EBITDA guidance for the full year was $115 million to $120 million and excluded the noncash impact our strategic product rationalization efforts in response to a letter from the SEC. We are no longer able to exclude the noncash impact of the strategic product rationalization from a reported it.

Steven: Adjusted EBITDA, what we are showing us how the full year guidance at the end of Q3 with book, reflecting this change which has resulted in an adjusted range of $106 8 million to $111 8 million, which includes the impact of $8 $2 million related to the product rationalization and.

Steven: The results.

Jesse Weaver: With that context, for the full year of 24, we delivered adjusted EBITDA of $110.5 million, including the $8.2 million of strategic product rationalization, and exceeding the midpoint of our adjusted guidance range. As our strategic product rationalization efforts concluded in the first quarter of 24, we will not experience the same impact on a go-forward basis.

Steven: With that context for the full year of 24, we delivered adjusted EBITDA of $110 5 million, including the $8 2 million of strategic product rationalization and exceeding the midpoint of our adjusted guidance range as our strategic product rationalization efforts concluded in the first quarter of 'twenty four.

Steven: We will not experience the same impact on a go forward basis.

Jesse Weaver: Now, moving on to financial results for full year 24, which is on slide 16. Net sales for 2024 were $602.2 million versus $659.7 million a year ago. The decline in net sales year over year was primarily driven by a combination of weaker demand from the soft market backdrop, reseller destocking throughout the year, and the net lap of meaningful past due burndown in 2023. Gross margin for 24 was 39.6%, an expansion of 80 basis points versus last year. The improvements in gross margin were largely driven by cost-to-serve efforts related to lower freight costs and improved warranty performance, as well as reduced write-downs for excess and obsolescence inventory, partially offset by $8.2 million related to the strategic product rationalization charge.

Steven: Now moving on to financial results for full year, 'twenty, four which is on slide 16.

Steven: Okay.

Steven: Net sales for 2024 were $602 2 million versus $659 7 million a year ago. The decline in net sales year over year was primarily driven by a combination of weaker demand from the soft market backdrop reseller destocking throughout the year and the net lap of meaningful past few burned down in 2023.

Steven: Gross margin for 24 was 39, 6% an expansion of 80 basis points versus last year. The improvement in gross margin were largely driven by cost to serve efforts related to lower freight costs and improved warranty performance as well as reduced write downs for excess and obsolescence inventory, partially offset by $8 2 million.

Steven: <unk> to the strategic product rationalization charge.

Jesse Weaver: SG&A, including R&D for 24, was $150.9 million versus $144.1 million from the prior year. The net increase in selling, general, and administrative costs was predominantly driven by an increase in marketing and advertising to support growth, reserves related to litigation settlements, and incremental spend related to strategic advisory services supporting the transformative initiative. Net loss for 24 was $23.2 million, which includes the non-cash goodwill and trademark impairment charges of $40.9 and $7.7 million, versus a net income of $19.2 million in 2023. On an adjusted net income basis, 24 was roughly flat year over year, delivering $24.8 million versus $25 million in 2023.

Steven: SG&A, including R&D for 24 was $150 9 million versus $144 1 million for the prior year.

Steven: Net increase in selling general and administrative costs was predominantly driven by an increase in marketing and advertising to support growth.

Steven: <unk> related to litigation settlements and incremental spend related to strategic advisory services supporting the transformative initiatives.

Steven: Net loss for 24 was $23 2 million, which includes the noncash goodwill and trademark impairment charges of $40 nine and $7 7 million versus a net income of $19 2 million and 23 on.

Steven: On an adjusted net income basis, 24 was roughly flat year over year, delivering $24 8 million versus 25 billion in 2023.

Jesse Weaver: Adjusted EBITDA for 2024 was $110.5 million, which, as I'd said before, includes the $8.2 million impact from the strategic product rationalization versus $130.9 million in the prior year. Adjusted EBITDA margin was 18.3%, which includes 135 basis points of impact from the strategic product rationalization versus 19.8% in 2023. As Matt discussed earlier, consumer confidence has softened since our last call.

Steven: Adjusted EBITDA for 2024 was $110 5 million, which as I've said before includes the $8 $2 million impact from the strategic product rationalization versus $130 9 million in the prior year.

Steven: Adjusted EBITDA margin was 18, 3%, which includes 135 basis points of impact from the strategic product rationalization versus 19, 8% in 2023.

Steven: As Matt discussed earlier consumer confidence has softened since our last call as we considered our outlook for 2025. It was important for us to be mindful of the broader consumer environment. So we've laid out a few important consumer indicators for this discussion on slide 17.

Jesse Weaver: As we considered our outlook for 2025, it was important for us to be mindful of the broader consumer environment, so he's laid out a few important consumer indicators for this discussion on slide 17. Inflation increased again in January, making the fourth consecutive month of rising prices. No doubt, this is negatively impacting consumer confidence and discretionary spending. Despite these consumer headwinds, with distribution inventory levels in a better position compared to last year, and no headwinds from past due normalization expected in 2025, we anticipate our transformative growth initiatives will drive core business growth, enabling us to gain share despite the potential softness in the market.

Steven: Inflation increased again in January making the fourth consecutive month of rising prices no doubt this is negatively impacting consumer confidence and discretionary spending.

Steven: Despite these consumer headwinds with distribution inventory levels in a better position compared to last year and no headwinds from past due normalization expected in 2025, we anticipate our transformative growth initiatives will drive core business growth, enabling us to gain share despite the potential softness in the market.

Jesse Weaver: Slide 18 provides a direct year-over-year comparison for revenue and EBITDA guidance for 25, excluding divested businesses and discontinued product lines through strategic product rationalization, as well as items of a one-time nature. Starting with revenue on the left side of the page, there will be a $13 million year-over-year reduction in revenue in 2025 from the divestiture of non-core businesses. In addition, discontinued products from our strategic product rationalization efforts reduced the revenue base by another $14 million in 2025. With these adjustments to the base, we are arriving at a continuing core business revenue for 24 of roughly $575 million as a baseline.

Steven: Slide 18 provides a direct year over year comparison for revenue and EBITDA guidance for 25, excluding divested businesses and discontinued product lines through strategic product rationalization as well as items of a onetime nature.

Steven: Starting with revenue on the left side of the page there will be a $13 million year over year reduction in revenue and 25 from the divestiture of noncore businesses.

Steven: In addition discontinued products from our strategic product rationalization efforts will reduce the revenue base by another $14 million in 2025 with these adjustments to the base. We are arriving at a continuing core business revenue for 24 of roughly $575 million as a baseline.

Jesse Weaver: Based on the transformative growth initiatives we have been developing over the last 18 months, we expect organic growth on the core business to be 0.8% to 4.3%, with a midpoint of approximately 2.5%. To help further guide you on these impacts on a year-over-year core business growth throughout the year, we've provided quarterly details of the divested businesses and clearance SKUs net sales contribution in the appendix.

Steven: Based on the transformative growth initiatives, we have been developing over the last 18 months, we expect organic growth in the core business to be 8% to four 3% with a midpoint of approximately two 5% to help further guide you on these impacts on a year over year core business growth throughout the year, we've provided quarterly details of the dive.

Steven: <unk> businesses and clearance Skus net sales contribution in the appendix.

Jesse Weaver: For Adjusted EBITDA, there are several notable items built into our full year 25 guidance. As we previously communicated, we took proactive steps to protect cash flow. We started to face lower than expected demand in the back half of 24. These efforts include furloughs and the suspension of the 401K match, which we are not planning to repeat in 25 and will have an approximately $3 million impact on the year. In addition, given that Adjusted EBITDA results fell below plan for the year, incentive compensation was impacted by approximately $2 million. It was built back into the guidance for 25.

Steven: For adjusted EBITDA. There are several notable items built into our full year 'twenty guidance as we previously communicated we took proactive steps to protect cash flow and we started to face lower than expected demand in the back half of 'twenty for these efforts include furloughs and the suspension of the four one K match, which we are not planning to.

Steven: And 25, it will have an approximately $3 million impact on the year. In addition, given that adjusted EBITDA results fell below plan for the year incentive compensation was impacted by approximately $2 million is built back into the guidance for 25.

Jesse Weaver: And lastly, in 2025, our SOX controls will be audited by our external auditors and given the historically lean nature of our operating staff, we are investing approximately $2 million in SOX-related investments to further enhance the maintenance and documentation of our control environment for external auditor review. Combined, these investments equate to roughly $7 million in additional expense in 2025. In addition to the flow-through on growth and core business revenue, there are multiple notable offsets to these investments that are supporting year-over-year growth and adjusted EBITDA for the year. The first offset is the net benefit of not repeating the strategic product rationalization effort that we concluded in 24.

Steven: And lastly in 2025, our Sox controls will be audited by our external auditors and given the historically lean nature of our operating staff. We are investing approximately $2 million in sox related investments to further enhance the maintenance and documentation of our control environment for external Auditor review combined these investments equate to.

Steven: The $7 million in additional expense in 2025.

Steven: In addition to the flow through on growth in core business revenue. There are multiple notable offsets to these investments that are supporting year over year growth in adjusted EBITDA for the year. The first offset as the net benefit of not repeating the strategic product rationalization effort that we concluded in 'twenty for.

Jesse Weaver: This benefit includes the add-back of $8.2 million related to the one-time non-cash write-down offset of $2 million from the standard margin benefit coming from the clearance sales of related SKUs. The second notable item is coming from continued efforts from our operations team to deliver an additional $8 to $10 million in year-over-year savings, which we've illustrated here would be offset by another $4 to $5 million in related inflation costs.

Steven: This benefit includes the add back of $8 $2 million related to the onetime noncash write down offset of $2 million from the standard margin benefit coming from the clearance sales of related Skus.

Steven: The second notable item is coming from continued efforts from our operations team to deliver an additional $8 million to $10 million in year over year savings, which we've illustrated here would be offset by another $4 million to $5 million and related inflation cost.

Jesse Weaver: Moving to slide 19, you'll find our complete guidance ranges for the full year. We expect 2025 revenue of $580 to $600 million, which as I noted before, implies a 2.5% growth at the midpoint over the core business base. The expectation based on current trends is that we will see most of the growth in the back half of the year. And our full year guidance implies a 51.5% to 52.5% first half sales trend with the balance coming in the back half. We expect 2025 adjusted EBITDA between $113 million and $130 million. Capital expenditures this year will be towards the top end of historical ranges as we make business enhancing ERP and WMS improvements to allow for ongoing business scalability, digital enhancements, and drive operational efficiency.

Steven: Moving to slide 19, you'll find our complete guidance ranges for the full year, we expect 2025 revenue of $580 to 600 million, which as I noted before it implies a two 5% growth at the midpoint over the core business space. The expectation based on current trends is that we will see most of the growth in the back half.

Steven: For the year and our full year guidance implies a 51.5% to 52.5% first half sales trends with the balance coming in the back half we.

Steven: We expect 2025, adjusted EBITDA between $113 million and $130 million cap.

Steven: Capital expenditures this year will be towards the top end of historical ranges as we make business enhancing ERP and WNS improvements to allow for ongoing business scalability digital enhancements and drive operational efficiency.

Jesse Weaver: As mentioned previously, we are facing a challenging backdrop for the consumer, but inherent in our guidance is our ability to continue to take share and grow the core business. Any further deterioration of the consumer may have an impact on our outlook as we continue to assess throughout the year. We acknowledge the tariff situation is fluid and its impact on our business, our customers, and suppliers. Our teams are monitoring the situation daily and have numerous alternative strategies available that we can execute. We've been working to remediate tariffs for over a year, given our cost-to-serve efforts, and have elevated efforts in the past few months.

Steven: As mentioned previously we are facing a challenging backdrop for the consumer but inherent in our guidance is our ability to continue to take share and grow the core business.

Steven: Any further deterioration in the consumer may have an impact on our outlook as we continue to assess throughout the year.

Steven: We acknowledged tariff situation is fluid and its impact on our business our customers and suppliers. Our teams are monitoring the situation daily and have numerous alternatives strategies available that we can execute we've been working to remediate tariffs for over a year given our cost to serve efforts that have elevated efforts in the past few months.

Jesse Weaver: Given widespread nature of the continuously evolving tariff environment, current guidance does not factor in potential impacts related to tariffs that we could not mitigate. As a reminder, the majority of our costs related to product production is U.S. based, with moderate overall exposure to tariffs. We believe that through careful planning and proactive strategies, we can effectively navigate incremental tariff actions through a combination of continued sourcing optimization and modest price increases when necessary, which is not reflected in our full year 25 guidance.

Steven: <unk>.

Steven: Given the widespread nature of the continuously evolving tariff environment current guidance does not factor in potential impacts related to tariffs that we cannot mitigate as a reminder, the majority of our costs related to product production is U S base with moderate overall exposure to tariffs.

Steven: We believe that through careful planning and proactive strategies, we can effectively navigate incremental tariff actions through a combination of continued sourcing optimization and modest price increases when necessary, which is not reflected in our full year 25 guidance and.

Jesse Weaver: And in closing, the progress made in the fourth quarter underscores our ability to drive meaningful change, even if it is more visible in our bottom line than in the top line. Furthermore, we remain committed to leveraging the free cash flow generation power of our business to either reduce leverage or to drive strategic profitable growth through acquisitions. Reinforcing our confidence in achieving at least 40% growth profit and 20% EBITDA margin targets. By maintaining a strategic approach, we are poised to unlock significant long-term value and deliver sustainable growth for our investors.

Steven: And in closing the progress made in the fourth quarter underscores our ability to drive meaningful change.

Steven: Even if it is more visible in our bottom line than in the topline. Furthermore, we remain committed to leveraging the free cash flow generation power of our business to either reduce leverage or drive strategic.

Steven: Strategic profitable growth through acquisitions, reinforcing our confidence in achieving at least 40% gross profit and 20% EBITDA margin targets by maintaining a strategic approach we are poised to unlock significant long term value and deliver sustainable growth for our investors. This concludes our prepared remarks, we'd now like to open up the <unk>.

Operator: This concludes our prepared remarks. We would now like to open up the line for questions. Thank you.

For questions.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. We ask that participants limit themselves to one question and one related follow-up question. One moment while we poll for questions.

Speaker Change: Thank you we will now be conducting a question and answer session. If he 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.

Speaker Change: May press Star two if he would like to remove your question from the queue for participants using speaker equipment may be necessary to pick up the handset before pressing the star keys.

Speaker Change: <unk> participants limit themselves to one question and one related follow up question, one moment, while we poll for questions.

Christian Carlino: Our first question is from Christian Carlino with J.P. Morgan. Please proceed. Hey guys, thanks for taking our question.

Christian: Our first question is from Christian <unk>.

Leno: Leno with J P. Morgan. Please proceed.

Speaker Change: Hey, guys. Thanks for taking our question.

Christian Carlino: Could you could you talk about the Mexico opportunity and just what excites you about that market in general? Like how big is the market? How does the car park differ from the US? I think it's an older car park. So does that play well into your assortment than just any other color there on the the distribution relationship with AutoZone?

Speaker Change: Could you talk about the Mexico opportunity and just what excites you about that market in general like how big is the market. How does the car park differ from the U S. I think it's an older car parks. So does that play well into your assortment and just any other color there on that.

Speaker Change: Distribution relationship with autosomal.

Speaker Change: Yeah.

Matthew Stevenson: Yeah, good morning, Christian. Thank you for the question. Yeah, so let's let's touch base on Mexico. Mexico is a market that obviously has a lot of interest in our products, but it was not something we were approaching directly. And so now with this new relationship with key distributors in Mexico, we're providing our products and communicating directly with those key distributors down there. And that market, yes, has some older car park, which is great for our carburetors and fuel injection lines and domestic muscle, but also just given the nature of the terrain there, they're seeing a lot of modifications in Jeeps, Broncos and other trucks.

Speaker Change: Yes, good morning Christian.

Speaker Change: Thank you for the question, yes, so, let's let's touch base on Mexico, Mexico is a market that obviously has a lot of interest in our products, but it was not something we are approaching directly and so now with this new relationship with key distributors in Mexico, we're providing our products and communicating directly with those key.

Speaker Change: <unk> down there and that market, yes, as some older car park, which is great for our carbonated and fuel injection lines and domestic muscle, but also just given the nature of the train there they're seeing a lot of modifications in jeeps Broncos and other trucks. So it's also a <unk>.

Matthew Stevenson: So it's also a great vertical relative to our modern truck and off road division. In terms of market size, we think that market somewhere between three and 5 billion in Mexico, the enthusiast market.

Speaker Change: Great vertical relative to our modern truck and off Road Division.

In terms of market size, we think that market is somewhere between three and $5 billion in Mexico. The enthusiast market and then related to Autozone Christian was your comment for the domestic market or the Mexican market or all of the above.

Matthew Stevenson: And then related to AutoZone, Christian, was your comment for the domestic market or the Mexican market or all the above? What was it about the Mexican market? But I guess I guess you could speak to all of the above. Okay, yeah, I mean, national retailers has been a focus of our B2B team. A lot of interest from the various national retailers to get our products and performance planograms on their shelves. And so we've been working with folks like AutoZone, both in the US and their team in Mexico, to make that happen and are seeing that growth within the channel.

Speaker Change: What was it about the Mexican market, but I guess I guess, you can speak to all of the above.

Speaker Change: Okay, Yeah, I mean national retailers has been a focus of our <unk> team.

Speaker Change: A lot of interest from the various national retailers to get our products and performance plan O grams on their shelves and so we've been working with folks like Autozone, both in the U S and their team in Mexico to make that happen and are seeing that growth within the channel. So it's a great opportunity for future growth, both domestically and in the Mexican market.

Christian Carlino: So it's great opportunity for for future growth, both domestically and in the Mexico Got it.

Christian Carlino: That's really helpful. And appreciate the margin bridge in the presentation. But I guess, could you sort of peel back the gross margin performance in the fourth quarter? Like, how much is that, you know, somewhat, how much of it is one time, if at all? And how should we think about the cadence over over 25? Just given you had some pretty wide variance and in 24, obviously, part of that is the strategic product rationalization, but just any, any color there on how we should think about it going forward.

Speaker Change: Got it that's really helpful and I appreciate the the margin bridge in the presentation, but I guess could you sort of Peel back the gross margin performance in the fourth quarter like how much is that.

Speaker Change: Somewhat how much of it as onetime if at all.

Speaker Change: And how should we be thinking about the cadence over over 25, and just given you had some pretty wide variance in 'twenty four obviously part of that is.

Speaker Change: This strategic product rationalization, but just any any color there on how should we should think about it going forward.

Jesse Weaver: Okay. Yeah, Christian, I mean, we haven't broken out sort of the details on the pieces of, you know, contribution on the gross margin front, but I think just based on the commentary, you can see that it's a combination of things. Obviously, our cost to serve efforts actually impact gross margin, which is a piece of it. That should continue. I think the purchasing price variance piece, which is just kind of lapping last year, we had some pretty meaningful headwinds, just I think just as a reminder, related to some of the things that we had experienced on the chip side.

Speaker Change: Yes, Christian I mean, we haven't broken out sort of the details on the pieces of contribution on the gross margin front, but I think just based on the commentary you can see that it's a combination of things obviously, our cost to serve efforts actually impact gross margin, which is a piece of it.

Speaker Change: That should continue I think the purchasing price variance piece, which is just kind of lapping last year, we had some pretty meaningful headwinds just I think just as a reminder related to some of the things that we had experienced on the chip side. So just from a onetime increase year over year that some of it and then I think continued improve.

Jesse Weaver: So just from a one-time increase here over a year, that's some of it. And then, you know, I think continued improvements that we've seen in D2C is part of the mixed piece here. But, you know, I would say when you look at our gross margin on an annualized basis, you're probably not going to see as much in Q4 as we saw this time. It's going to be a bit more balanced throughout the year. So that should help you on.

Speaker Change: <unk> that we've seen in D C. As part of the mix piece here, but you know I would say when you look at our gross margin on an annualized basis.

Speaker Change: And you're probably not going to see as much in Q4 as we saw this time, it's going to be a bit more balanced throughout the year. So that should help you on phasing.

Christian Carlino: Got it. That's very helpful.

Speaker Change: Got it that's very helpful best of luck.

Christian Carlino: Best of luck.

Speaker Change: Thanks Christian.

Joe Altobello: Our next question is from Joe Altobello with Raymond James. Thanks. Hey, guys.

Speaker Change: Our next question is from Joe <unk> with Raymond James. Please proceed.

Joe: Thanks, Hey, guys good morning.

Joe Altobello: Good morning. First question on the guidance, you mentioned that, you know, consumer confidence took a little bit of a dip here in Q1. I'm just curious, does your guidance for the year assume that gets better? Or are you assuming that we kind of remain at these levels for the balance of the year?

Speaker Change: Question on the guidance, you mentioned that consumer confidence took a little bit of a dip.

Speaker Change: Dip here in Q1 I'm just curious does your guidance for the year assume that gets better or are you assuming that we kind of remain at these levels for the balance of the year.

Jesse Weaver: Hey, Joe. It's Jesse. I think that, you know, part of the guidance would assume that things don't get worse. You know, things getting better would probably put us towards the top end on the growth range. You know, as you can tell in our guidance and in my commentary, most of this growth will be back half loaded, you know, partly because, you know, we're lapping in Q3, Q4 of last year, the destocking, as well as just giving our transformative initiatives a bit more time to take root. And then, you know, we called out sort of pulling out some of these skew rationalization things, even a lot of that was front end loaded.

Joe: Hey, Joe.

Speaker Change: Jesse I think that does.

Speaker Change: Part of the guidance would assume that things don't get worse.

Speaker Change: Things getting better would probably put us towards the top end on the growth.

Speaker Change: Range, you know as you can tell in our guidance and in my commentary and most of this growth will be back half loaded.

Speaker Change: Partly because we're lapping in Q3 Q4 of last year, the destocking as well as just giving our transformative initiatives a bit more time to take root and then we called out sort of pulling out some of the SKU rationalization things, even a lot of that was front end loaded.

Jesse Weaver: But even pulling that out, it still would probably be a flat first half, just at the midpoint of the guidance with mid-single digits in the back half.

Speaker Change: But even pulling that out it still would probably be a flat first half just at the midpoint of the guidance with mid single digits in the back half.

Joe Altobello: Yeah, okay, very helpful.

Speaker Change: Yeah, Okay very helpful. And then maybe second question it sounds like inventories in the channel are much healthier than they were a year ago.

Jesse Weaver: And maybe second question, it sounds like inventories in the channel are much healthier than they were a year ago. I guess first, would you assume, you know, sell in and sell through are sort of in alignment this year? And second, how would you assess the health of your of your distributors at this point? So on the first question, we're working much more closely with our distribution partners, Joe, as I commented, as it relates to Q4, just to make sure that we don't get in an over-inventoried or under-inventoried position with them. So it should marry up much more closely with the out-the-doors.

Speaker Change: First would you assume sell in and sell through sort of an alignment this year and second how would you assess the health of your of your distributors at this point.

Speaker Change: So on the first question.

Speaker Change: Working much more closely with our distribution partners, Joe as I commented as it relates to Q4 just to make sure that we don't get in an over inventoried or under inventoried position with them. So it should marry up much more closely with the out the doors.

Jesse Weaver: And then remind me of the second question, just more as it relates to their health overall. Yeah, exactly. Yep. Yeah, I would say that our key distribution partners are continuing to make investments in their business, seeing growth in the areas and partnering with us in ways that we've never seen before. I think obviously you've kind of got some shifting in the lower ranks, but one of the things that we've started to do is actually even focus on some of those, that next tier down that had not been shown the investment from Holley that we are showing now.

Speaker Change: And then remind me the second question just more as it relates to their health overall, yes, exactly yeah, Yeah, I would say that are our key distribution partners are.

Speaker Change: Continuing to make investments in their business seeing.

Speaker Change: Growth in the areas in partnering with us in ways that we've never seen before I think.

Speaker Change: Obviously, you've kind of got some shifting in the lower ranks, but what are the things that we've started to do is actually even focus on some of those that next tier down that had not been shown the investment from highly that we are showing now so we expect to see <unk> to be overall.

Jesse Weaver: So we expect to see B2B overall continue to show strength, which is the next sort of shoe to drop for us when it comes to driving growth, because I think the team's done a great job on D2C, and rebuilding the relationships with B2B takes a bit more time. It's like you lose that trust quickly, and it takes a lot more time to get it back. So I think we're in a much better place there.

Speaker Change: Continued to show strength, which is the next sort of shoe to drop for us when it comes to driving growth because I think the team's done a great job on <unk>.

Speaker Change: Rebuilding the relationships with <unk> takes a bit more time, it's like you lose that trust quickly and it takes a lot more time to get it back. So I think we're in a much better place there.

Joe Altobello: Got it. Thank you.

Speaker Change: Got it thank you.

Speaker Change: Thank you.

Brian McNamara: Our next question is from Brian McNamara with Canaccord Genuity. Hey, good morning, guys. Thanks for taking the question.

Speaker Change: Our next question is from Brian Mcnamara with Canaccord Genuity. Please proceed.

Brian McNamara: Hey, good morning, guys. Thanks for taking the questions.

Brian McNamara: Hey, good morning Brian. How should we think about Q1 sales? I know, Jesse, you just mentioned flat H1 and kind of mid-single H2, but reading between the lines in your prepared remarks, it sounds like you're expecting Q1 to be down, but a little more color there would be helpful. Yeah, Brian, you know, as we sit here today, we're trending flat for Q1 on that core business, which, you know, excludes that divested businesses in 24, as well as the discontinued product lines that, you know, Jesse mentioned in his prepared remarks. But you know, three weeks left to go, it's probably going to be plus or minus one to 2%.

Speaker Change: Good morning, Brian.

Speaker Change: How should we think about Q1 sales I know Jess you just mentioned flat H, one and kind of mid single H, two but reading between the lines in your prepared remarks. It sounds like you are expecting in Q1 to be down, but a little more color there would be helpful.

Speaker Change: Yes, Brian as we sit here today, we're trending flat for Q1 in that core business, which excludes the divested businesses in 'twenty four as well as the discontinued product lines that Jeff mentioned in his prepared remarks.

Speaker Change: Three weeks left to go is probably going to be plus or minus 1% to 2%.

Jesse Weaver: You know, with with the weeks left, and the team continues to, you know, pushes hard on the growth in it. Got it. And then you guys said in your prepared remark, like you kind of I remember the when you guys reported in November, we were at SEMA and like, you could just feel the buzz in the air. How much of like that mood changing is kind of factoring into your guidance today? Like, and I guess how temporary do you do you think this will be? Yeah, Brian, you know, as you said, in our prepared remarks, we commented on that, you know, there was definitely a lot of optimism, you know, coming out of SEMA.

Speaker Change: With the weeks left in the team continues to push as hard on the growth initiatives.

Speaker Change: Got it and then you guys said in your prepared remarks, you kind of I remember when you guys reported in November at Sema, and like you can just feel the buzz in the air how much of like that moods changing as kind of factoring into your guidance today.

Speaker Change: And I guess, how temporary do you think.

Speaker Change: This will be.

Brian: Yes, Brian.

Speaker Change: As you said in our prepared remarks, we commented on that there was definitely a lot of optimism.

Jesse Weaver: And I think you heard that from us in our call when we spoke shortly thereafter in November. And yeah, that momentum has definitely died down. And that is a factor in how we look at our guidance for 2025. And, you know, we're just hopeful, you know, as the policy settled down and people get more clarity, there's just a lot of unknown right now. And of course, you're seeing that uncertainty ripple through the, you know, consumer stocks out there. So, but we're optimistic in terms of the growth initiatives that we have going to be able to take share.

Brian: Coming out of Sema, and I think you heard that from us in our call. When we spoke shortly thereafter in November.

Brian: That momentum has definitely died down and that is a is a factor in how we look at our guidance for 2025, and we're just hopeful as a policy settle down and people get more clarity theres just a lot of unknown right down of course, youre seeing that uncertainty written ripple through the consumer stocks out there so.

Brian: But we're optimistic in terms of the growth initiatives that we have going to be able to take share. We offered a lot of proof points and the discussion today to build that confidence of the work. The team is doing and the success that we're having.

Matthew Stevenson: You know, we offered a lot of proof points in the discussion today to build that confidence of the work the team's doing and the success that we are having.

Jesse Weaver: And just one last quick one. Do we have an idea of what the actual market did overall last year? I think it was down like five ish percent through Q3 or something like that. Yeah, Brian, you know, the way we look at the market, our gauge on it was down somewhere between five to seven percent. And you know, of course, you know, our results were more than that based on the distributors normalizing their inventories level to market demand in that back half, you know, which we talked about on the call last time. So that's why, you know, you saw that decline more than the market last year, but as Jesse just referenced, our sell in and sell out is in a much better position and is starting to mirror each other at a number of the key distributors.

Speaker Change: And just one last quick one do we have an idea of what the actual market did overall last year I think it was down like five ish percent for Q3 or something like that.

Brian: Yes, Brian.

Brian: The way, we look at the market or gauge on it was down somewhere between 5% to 7% and of course our results were.

Brian: Than that based on the distributors normalizing their inventories levels to market demand in that back half.

Brian: We've talked about on the call last time. So that's why you saw that decline more than the market last year, but as Jess you just referenced our sell in and sell out is in a much better position and it is starting to mirror each other at a number of the key distributors.

Brian McNamara: Great. Thanks very much.

Brian: Great. Thank you very much.

Brian McNamara: Thanks, Brian.

Brian: Thanks, Ron.

Bret Jordan: Our next question is from Bret Jordan with Jeffries. Please proceed. Hey, good morning guys.

Speaker Change: Our next question is from Bret Jordan with Jefferies. Please proceed.

Bret Jordan: Good morning, guys.

Bret Jordan: Talk a little bit about the CataClean acquisition, and I guess you're doing the Octane Boost with NOS, so is that sort of a category that you're getting further into on additives and sort of the economic profile of that business? and I'm going to be buying a UK based additive company. Does that expand the opportunities over there? Yeah, Bret, you know, we see chemicals as a growth opportunity for us, and we're continuing to expand our portfolio around chemicals, focused, you know, with a performance aspect to it. So that new NOS, that's proprietary development that we're doing, that's not with any partner.

Bret Jordan: Rajeev talk a little bit about the <unk> acquisition, and I guess youre doing the octane boost with Nols. So is that sort of a category that you are getting further into on additives.

Bret Jordan: The economic profile of that business, and obviously buying a UK based additive company does that expand the opportunities over there.

Bret Jordan: Yes, Brett we see chemicals as a growth opportunity for us and we're continuing to expand our.

Bret Jordan: Portfolio around chemicals focused with a.

Bret Jordan: Performance aspect to it that new Nols is that proprietary development that we're doing that is not with any partner, but relative to <unk>. We've had an amazing partnership with the team in the U K.

Matthew Stevenson: But relative to CataClean, you know, we've had an amazing partnership with a team in the UK that is behind CataClean. And this was an opportunity just to extend our relationship in perpetuity, and that's a great product for us. And that product really allows us to build a beachhead to continue to grow our chemical expansion in national retailers and in other distributors.

Bret Jordan: That is behind <unk> and this was an opportunity just to extend our relationship in perpetuity and that's a great product for us and that product really allows us to build a beachhead to continue to grow our chemical expansion and national retailers and another distributors.

Matthew Stevenson: And then I guess as you talk about the consumer trends recently, I guess in the last couple of months specifically, is it is there a piece of the market that's that's more or less resilient in this backdrop of softening consumer sentiment is, you know, is modern truck outperforming some of the maybe more discretionary upfitting of American muscle? Or is it all pretty much soft in line? No, there's definitely variations in the portfolio. On the modern truck and off-road vertical, of course, 80% of the vehicles sold in the US are either truck, CUVs, or SUVs, right?

Bret Jordan: And then I guess as you talk about the consumer trends recently I guess in the last couple of months specifically is it is there a piece of the market.

Bret Jordan: More or less resilient in this backdrop of softening consumer sense of it is.

Bret Jordan: As modern truck outperforming some of that may be more discretionary outfitting of our American muscle or is it all pretty much soft in line.

Bret Jordan: No there's definitely variations in the portfolio.

Bret Jordan: On the modern truck and off road vertical of course, 80% of the vehicles sold in the U S are either trucks Suvs SUV right. So that just has a.

Matthew Stevenson: So that just has a natural push on it. Now, when we look across our portfolio, of course, we're seeing gains in some of the categories there, but also our safety portfolio, so great growth year over year, great growth in motorcycle. So it's a combination of the verticals, but also product innovation that we're driving in those sectors.

Bret Jordan: Natural push on it now when you look across our portfolio of course, we're seeing gains in some of the categories. There, but also our safety portfolio through great growth year over year.

Bret Jordan: Great growth in motorcycles. So it's a combination of the verticals, but also product innovation that we're driving in those sectors, but in general the market on the <unk>.

Matthew Stevenson: But in general, the market on what we call the four-digit items and higher is where we're seeing the most softness. OK, great.

Bret Jordan: What we call the four digit items and higher is where we're seeing the most softness.

Bret Jordan: Okay, great. Thank you.

Phillip Blee: As a reminder, there's star one on your telephone keypad if you would like to ask a question. Our next question is from Phillip Blee with William Blair. Please proceed. Morning, Matt, Jesse. Thanks for the question.

Speaker Change: As a reminder, this star one on your telephone keypad, if he would like to ask a question. Our next question is from Philip Lee with William Blair. Please proceed.

Philip Lee: Good morning, Matt Jesse Thanks.

Speaker Change: Thanks for the question.

Jesse Weaver: Can you provide maybe a bit more color on your core customer, any detail on regional concentrations or spread by income demographic, and maybe how these key cohorts have trended in the first quarter to date amid some of this noise compared to any bump that you saw in the fourth quarter. Hey, Phillip, it's Jesse. I would say just. Generally, the demographic data we have shows that our consumers are... modestly higher income, so just think $100,000 and above. In terms of like the level of depth and the demo research and things that you're talking about, that's something that we would be able to do as we get more mature in our CRM database to start to slice it that way.

Speaker Change: Yes.

Speaker Change: Can you provide maybe a bit more color on your core customer or any detail on regional concentrations are spread by income demographics and maybe how these key cohorts have trended in the first quarter to date amid some of this noise compared to any bump that you saw in the fourth quarter.

Speaker Change: Hey, Philip it's Jesse I would say just.

Jesse Weaver: Generally the demographic data we have shows that our consumers are.

Speaker Change: Modestly higher income so just think of 100000 and above.

Speaker Change: In terms of like the level of depth in the demo research and things that you're talking about that's something that we would be able to do as we get more mature in our CRM database to start to slice it that way at this moment, we're not able to kind of give that type of color.

Jesse Weaver: But at this moment, we're not able to kind of give that type of color. What I'll say is, you know, as we pointed to consumer confidence in particular, you know, in the near term, 6 to 12 months in this demo, I mean, that's one of the metrics that we look at that is showing a little bit of hesitancy just overall given the uncertainty in the market. But I don't think that's unexpected given all the news that we're reading right now. So all of that is kind of baked into our guide. And I think... Joe had asked previously, you know, assuming things don't get worse, we feel good that our initiatives will continue to, you know, exceed market expectations and gain share to help drive growth.

Speaker Change: What I'll say is.

Speaker Change: We pointed to consumer confidence and particular expectations of new car purchases in the near term six to 12 months in this demo I mean thats one of the metrics that we look at that is showing a little bit of hesitancy just overall given the uncertainty in the market, but I don't think thats unexpected given all of the.

Speaker Change: That we're reading right now so all of that is kind of baked into our guide and I think as Joe had asked previously.

Speaker Change: Assuming things don't get worse, we feel good that our initiatives will continue to exceed.

Speaker Change: Market expectations and gain share to help drive growth and this is something we're watching pretty regularly and obviously, we'll update you as we know more.

Phillip Blee: And this is something we're watching pretty regularly, and obviously we'll update you as we know more in the coming quarters. Okay, okay, great.

Speaker Change: In the coming quarters.

Speaker Change: Okay, Okay great.

Jesse Weaver: And then you spoke a bit about the strength and new product demand over the past year. Do you maybe quantify how much of a lift did that have to the total top line in 2024? And then how we should think about that level or impact of newness going into 2025? Thank you. Yeah, Phillip, I mean, I think as it relates to new product lift, I mean, you know, the team obviously demonstrated an ability to gain more efficiency on the new products that we were launching. We had, you know, multiple products that were a million dollars a year, an annual run rate out the gate.

Speaker Change: And then you spoke a bit about the strength of new product demand over the past year can you maybe quantify how much of a lift there that have good total topline in 2024, and then how we should think about that level are impacted newness coming into 2025. Thank you.

Speaker Change: Yeah, Phillip I mean, I think as it relates to new product lift I mean, the team obviously demonstrated an.

Speaker Change: <unk> ability to gain more efficiency on the new products that we're launching we had.

Speaker Change: Multiple products that were $1 million a year in annual run rate out the gate now the maturation on these things obviously, it's two to three years and we're bringing it closer to two with our improved launching.

Jesse Weaver: Now, the maturation on these things, obviously, is two to three years, and we're bringing it closer to two with our improved launching, but I would say, you know, continued efforts on that, that's going to be one of those things that's a flywheel that builds on itself over time, and, you know, I think going into this year, we're expecting some continued modest improvement in that area as the pipeline now has been refined over the past year, but I wouldn't say that, you know, it's the primary driver of the growth here in this moment. It will be long term.

Speaker Change: But I would say continued efforts on that that's going to be one of those things. It's a flywheel that builds on itself over time and.

Speaker Change: I think going into this year, we're expecting some continued modest improvement in that area as the pipeline now has been refined over the past year, but I wouldn't say that.

Speaker Change: It's the primary driver of the growth here in this moment it will be long term the bigger driver in the near term is just continuing to repair these <unk> relationships gain share and improve our strength with launching these new products.

Phillip Blee: The bigger driver in the near term is just continuing to repair these B2B relationships, gain share, and improve our strength with launching these new products. Excellent. Thank you guys. Best of luck. Thank you. Thanks for listening.

Speaker Change: Excellent. Thank you guys best of luck.

Speaker Change: Thank you thanks Sheila.

Matthew Stevenson: With no further questions in the queue, I would like to turn the floor back over to Matthew Stevenson for closing remarks. Okay, thank you, Sherri. Turn to slide 21, it highlights the compelling investment narrative we see surrounding Holley performance brands. This market, driven by automotive enthusiasts, is more than just a hobby. It's a passion and it's a way of life for our customers. We have a vast addressable market nearing $40 billion, and Holley leads the industry with a collection of storage brands known for their legacy of innovation. Our history is also marked by successful acquisitions and value creation through strategic integration.

Speaker Change: With no further questions in the queue I would like to turn the floor back over to Matthew Stevenson for closing remarks.

Okay. Thank you Sherri.

Speaker Change: Turning to slide 21, it highlights the compelling investment narrative, we see surrounding holiday performance brands. This market driven by automotive enthusiasts is more than just the hobby.

Speaker Change: It's a passion and as a way of life for our customers.

Speaker Change: We have a vast addressable market nearing $40 billion and how we lead the industry with a collection of storied brands known for their legacy of innovation.

Speaker Change: Our history is also marked by successful acquisitions and value creation through strategic integrations.

Matthew Stevenson: Additionally, we have a unique opportunity to create a new digital frontier that will transform how our consumers and distribution partners engage with their brands, giving us a competitive edge in fostering growth. As we emerge from this transformation, our commitment is to deliver stable, organic top-line growth of at least 6%, maintain 40% gross margin targets, and achieve greater than 20% adjusted EBITDA margin targets. We aim to generate sustainable free cash flow and establish a platform that unlocks value in strategic acquisition. The combination of our automotive enthusiast marketplace and Holley's distinguished brand portfolio presents an exceptional investment opportunity.

Speaker Change: Additionally, we have a unique opportunity to create a new digital frontier that will transform how are consumers and distribution partners engage with their brands, giving us a competitive edge and fostering growth.

Speaker Change: As we emerge from this transformation and our commitment is to deliver stable organic topline growth of at least 6% maintained 40% gross margin targets and achieved greater than 20% adjusted EBITDA margin targets.

Speaker Change: We aim to generate sustainable free cash flow and establishes a platform that unlocks value and strategic acquisitions.

Speaker Change: The combination of our automotive enthusiasm marketplace and highly distinguished brand portfolio presents an exceptional investment opportunity.

Matthew Stevenson: In closing, I want to express my sincere appreciation to our team members. for their dedication to serving our customers, to our remarkable consumers who support our brand. and to our distribution partners, many of whom have been integral to our success for many decades. Thank you for your attendance this morning and have a great day. Thank you.

Speaker Change: In closing I will.

Speaker Change: Wanted to express my sincere appreciation to our team members.

Speaker Change: For their dedication to serving our customers through our remarkable consumers who support our brands.

Speaker Change: And to our distribution partners, many of whom have been integrated to our success for many decades.

Speaker Change: Thank you for your attendance this morning and have a great day.

Operator: This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.

Speaker Change: Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

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