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Holley Reports Second Quarter 2022 Results

Supply chain disruptions, reseller de-stocking, and softer demand in certain categories cause headwinds

Holley Inc. (NYSE: HLLY), the largest and fastest growing platform serving performance automotive enthusiasts, today announced financial results for its second quarter ended July 3, 2022.

Second Quarter Highlights vs. Prior Year Period

  • Net Sales decreased 7.1% to $179.4 million compared to $193.0 million in the prior year’s second quarter
  • Gross Profit decreased 7.3% to $75.3 million compared to $81.2 million in the prior year’s second quarter
  • Net Income of $40.6 million, or $0.35 per diluted share, compared to $23.1 million, or $0.34 per diluted share, in the prior year’s second quarter
  • Adjusted Net Income1 of $13.2 million, compared to $23.1 million reported in the prior year’s second quarter
  • Adjusted EBITDA1 of $37.2 million compared to $54.1 million in the prior year’s second quarter

1See "Use and Reconciliation of Non-GAAP Financial Measures" below.

“Our financial results for the second quarter fell short of expectations primarily due to supply chain challenges including both (1) slower than expected production and movement of goods from global suppliers and (2) shortages in automotive-grade microchips that negatively impacted our ability to build and ship many or our most popular electronic products,” said Tom Tomlinson, Holley’s President and Chief Executive Officer. “We also saw meaningful reseller de-stocking in the quarter as resellers reduced their purchases well below their out-the-door sales of our products. These issues, against a backdrop of reduced discretionary consumer spending and the resultant softer demand we experienced in certain categories, caused us to reduce our outlook for the remainder of the year. We are slowing our spending in an effort to optimize our performance and stay ahead of what will likely be a challenging economic environment in the months ahead.”

Second Quarter 2022 Financial Results

Net sales decreased 7.1% to $179.4 million in the second quarter of 2022 compared to $193.0 million in the second quarter of 2021. Non-comparable sales associated with acquisitions contributed $9.4 million, or 4.8%, of year-over-year net sales growth in the second quarter. Sales excluding the impact of acquisitions decreased by $23.0 million, or 11.9%, more than offsetting the growth from the acquisitions. The decline in comparable sales was driven by reduced unit volumes, destocking from our resellers, and reduced consumer demand in certain categories including tuning.

Cost of goods sold decreased $7.7 million, or 6.9%, to $104.1 million, as compared to $111.8 million, for the second quarter of 2021 and is primarily attributable to the decrease in product sales. Gross profit for the second quarter of 2022 decreased $5.9 million, or 7.3%, to $75.3 million, as compared to $81.2 million for the second quarter of 2021. The decrease in gross profit was driven by the decrease in sales. Gross margin for the second quarter of 2022 was 42.0% compared to a gross margin of 42.1% for the second quarter of 2021.

Selling, general and administrative costs for the quarter increased $10.1 million to $36.3 million, representing an increase of 38.5% when compared to $26.2 million in 2021. Incremental SG&A from recent acquisitions were responsible for $1.4 million of the increase in the quarter. Additional cost drivers include an increase in non-cash compensation expense related to equity awards, increased administrative and sales personnel costs, reflecting company growth and the additional requirements of becoming a public company, and an increase in outbound shipping costs related to fuel cost inflation.

Net income for the second quarter of 2022 was $40.6 million compared to net income of $23.1 million in 2021. Net income for the second quarter of 2022 was favorably impacted by a $27.4 million non-cash decrease in liabilities for warrants and earn-out shares.

Adjusted for the special transaction and non-cash items noted above this quarter, Adjusted Net Income was $13.2 million, compared to last year’s Adjusted Net Income of $23.1 million. Reconciliation to GAAP Net Income is included in the “Use and Reconciliation of Non-GAAP Financial Measures” table below.

Adjusted EBITDA was $37.2 million in the second quarter of 2022 compared to $54.1 million in the second quarter last year. Reconciliation to GAAP Net Income is included in the “Use and Reconciliation of Non-GAAP Financial Measures” table below.

Diluted EPS of $0.35 for the second quarter of 2022 compared to $0.34 in 2021.

Full Year 2022 Outlook

Holley's current outlook for 2022:

  • Net Sales in the range of $700-$725 million
  • Adjusted EBITDA of $135-$145 million
  • Capital Expenditures in the range of $14-$16 million
  • Depreciation and Amortization Expense of $24-$26 million
  • Interest Expense in the range of $33-$35 million

“Our outlook for the full year 2022 is consistent with the previously communicated full year guidance issued on July 28, 2022, and reflects the current supply chain pressures, inventory, and demand trends we have seen in recent weeks,” said Dominic Bardos, Holley’s Chief Financial Officer. “We do not expect to fully resolve the supply chain and inventory issues that are impacting our sales in the near-term, and we have reduced our sales projections accordingly.”

Conference Call

A conference call and audio webcast has been scheduled for 8:30 a.m. Eastern Time today to discuss these results. Investors, analysts, and members of the media interested in listening to the live presentation are encouraged to join a webcast of the call available on the investor relations portion of the Company’s website at investor.holley.com. For those that cannot join the webcast, you can participate by dialing 877-407-4019 or 201-689-8337 using the access code of 13731249.

For those unable to participate, a telephone replay recording will be available until Thursday, August 18, 2022. To access the replay, please call 877-660-6853 or 201-612-7415 and enter confirmation code 13731249. A web-based archive of the conference call will also be available at the Company’s website.

About Holley Inc.

Holley Inc. (NYSE: HLLY) is a leading designer, marketer, and manufacturer of high-performance products for car and truck enthusiasts. Holley offers the largest portfolio of iconic brands that deliver innovation and inspiration to a large and diverse community of millions of avid automotive enthusiasts who are passionate about the performance and personalization of their classic and modern cars. Holley has disrupted the performance category by putting the enthusiast consumer first, developing innovative new products, and building a robust M&A process that has added meaningful scale and diversity to its platform. For more information on Holley, visit https://www.holley.com.

Forward-Looking Statements

Certain statements in this press release may be considered “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to future events or Holley’s future financial or operating performance. For example, projections of future revenue and adjusted EBITDA and other metrics are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expect,” “intend,” “will,” “estimate,” “anticipate,” “believe,” “predict,” “or” or the negatives of these terms or variations of them or similar terminology. Such forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These forward-looking statements are based upon estimates and assumptions that, while considered reasonable by Holley and its management, are inherently uncertain. Factors that may cause actual results to differ materially from current expectations include, but are not limited to: 1) the ability to recognize the anticipated benefits of the business combination with Empower LTD, which may be affected by, among other things, competition, the ability of the combined company to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its management and key employees; 2) costs related to the business combination and Holley becoming a public company; 3) disruptions to Holley's operations, including as a result of cybersecurity incidents; 4) changes in applicable laws or regulations; 5) the outcome of any legal proceedings that may be instituted against Holley; 6) general economic and political conditions, including political tensions and war (such as the ongoing conflict in Ukraine); 7) the possibility that Holley may be adversely affected by other economic, business and/or competitive factors; 8) Holley’s estimates of its financial performance; 9) the impact of the novel coronavirus disease pandemic and its effect on business and financial conditions; 10) our ability to anticipate and manage through disruptions and higher costs in manufacturing, supply chain, logistical operations, and shortages of certain company products in distribution channels; and 11) other risks and uncertainties set forth in the section entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in the Annual Report on Form 10-K for the year ended December 31, 2021 filed with the U.S. Securities and Exchange Commission (“SEC”) on March 15, 2022, and that are otherwise described or updated from time to time in Holley’s filings with the SEC. Although Holley believes the expectations reflected in the forward-looking statements are reasonable, nothing in this press release should be regarded as a representation by any person that the forward-looking statements or projections set forth herein will be achieved or that any of the contemplated results of such forward looking statements or projections will be achieved. There may be additional risks that Holley presently does not know or that Holley currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Holley undertakes any duty to update these forward-looking statements, except as otherwise required by law.

[Financial Tables to Follow]

HOLLEY INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

 

 

For the thirteen weeks ended

 

 

For the twenty-six weeks ended

 

 

 

July 3,

 

 

June 27,

 

 

 

 

 

 

 

 

July 3,

 

 

June 27,

 

 

 

 

 

 

 

 

 

2022

 

 

2021

 

 

Variance

($)

 

 

Variance

(%)

 

 

2022

 

 

2021

 

 

Variance

($)

 

 

Variance

(%)

 

Net Sales

 

$

179,420

 

 

$

193,041

 

 

$

(13,621

)

 

 

-7.1

%

 

$

379,475

 

 

$

353,373

 

 

$

26,102

 

 

 

7.4

%

Cost of Goods Sold

 

 

104,132

 

 

 

111,841

 

 

 

(7,709

)

 

 

-6.9

%

 

 

221,466

 

 

 

206,494

 

 

 

14,972

 

 

 

7.3

%

Gross Profit

 

 

75,288

 

 

 

81,200

 

 

 

(5,912

)

 

 

-7.3

%

 

 

158,009

 

 

 

146,879

 

 

 

11,130

 

 

 

7.6

%

Selling, General, and

Administrative

 

 

36,269

 

 

 

26,190

 

 

 

10,079

 

 

 

38.5

%

 

 

70,611

 

 

 

50,202

 

 

 

20,409

 

 

 

40.7

%

Research and

Development Costs

 

 

8,196

 

 

 

7,065

 

 

 

1,131

 

 

 

16.0

%

 

 

16,357

 

 

 

13,034

 

 

 

3,323

 

 

 

25.5

%

Amortization of

Intangible Assets

 

 

3,662

 

 

 

3,502

 

 

 

160

 

 

 

4.6

%

 

 

7,323

 

 

 

6,838

 

 

 

485

 

 

 

7.1

%

Acquisition and

Restructuring Costs

 

 

1,691

 

 

 

2,676

 

 

 

(985

)

 

 

-36.8

%

 

 

1,981

 

 

 

21,509

 

 

 

(19,528

)

 

 

-90.8

%

Related Party Acquisition

and Management Fee

Costs

 

 

 

 

 

1,658

 

 

 

(1,658

)

 

 

-100.0

%

 

 

 

 

 

2,539

 

 

 

(2,539

)

 

 

-100.0

%

Other Operating Expense

 

 

325

 

 

 

47

 

 

 

278

 

 

 

591.5

%

 

 

547

 

 

 

(86

)

 

 

633

 

 

 

-736.0

%

Operating Expense

 

 

50,143

 

 

 

41,138

 

 

 

9,005

 

 

 

21.9

%

 

 

96,819

 

 

 

94,036

 

 

 

2,783

 

 

 

3.0

%

Operating Income

 

 

25,145

 

 

 

40,062

 

 

 

(14,917

)

 

 

-37.2

%

 

 

61,190

 

 

 

52,843

 

 

 

8,347

 

 

 

15.8

%

Change in Fair Value of

Warrant Liability

 

 

(23,168

)

 

 

 

 

 

(23,168

)

 

 

nm

 

 

 

(20,941

)

 

 

 

 

 

(20,941

)

 

 

nm

 

Change in Fair Value of

Earn-Out Liability

 

 

(4,234

)

 

 

 

 

 

(4,234

)

 

 

nm

 

 

 

(1,853

)

 

 

 

 

 

(1,853

)

 

 

nm

 

Interest Expense

 

 

8,961

 

 

 

11,174

 

 

 

(2,213

)

 

 

-19.8

%

 

 

16,352

 

 

 

21,245

 

 

 

(4,893

)

 

 

-23.0

%

Non-Operating

(Income) Expense

 

 

(18,441

)

 

 

11,174

 

 

 

(29,615

)

 

 

-265.0

%

 

 

(6,442

)

 

 

21,245

 

 

 

(27,687

)

 

 

-130.3

%

Income Before Income Taxes

 

 

43,586

 

 

 

28,888

 

 

 

14,698

 

 

 

50.9

%

 

 

67,632

 

 

 

31,598

 

 

 

36,034

 

 

 

114.0

%

Income Tax Expense

 

 

3,023

 

 

 

5,790

 

 

 

(2,767

)

 

 

-47.8

%

 

 

10,211

 

 

 

10,556

 

 

 

(345

)

 

 

-3.3

%

Net Income

 

$

40,563

 

 

$

23,098

 

 

$

17,465

 

 

 

75.6

%

 

$

57,421

 

 

$

21,042

 

 

$

36,379

 

 

 

172.9

%

Comprehensive Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Currency

Translation Adjustment

 

 

501

 

 

 

35

 

 

 

466

 

 

 

nm

 

 

 

742

 

 

 

19

 

 

 

723

 

 

 

nm

 

Total Comprehensive

Income:

 

$

41,064

 

 

$

23,133

 

 

$

17,931

 

 

 

77.5

%

 

$

58,163

 

 

$

21,061

 

 

$

37,102

 

 

 

176.2

%

Common Share Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Net Income per

Share

 

$

0.35

 

 

$

0.34

 

 

$

0.01

 

 

 

2.9

%

 

$

0.49

 

 

$

0.31

 

 

$

0.18

 

 

 

58.1

%

Diluted Net Income per

Share

 

$

0.35

 

 

$

0.34

 

 

$

0.01

 

 

 

2.9

%

 

$

0.31

 

 

$

0.31

 

 

$

 

 

 

0.0

%

Weighted Average

Common Shares

Outstanding - Basic

 

 

116,932

 

 

 

67,674

 

 

 

49,258

 

 

 

72.8

%

 

 

116,398

 

 

 

67,674

 

 

 

48,724

 

 

 

72.0

%

Weighted Average

Common Shares

Outstanding - Diluted

 

 

117,115

 

 

 

67,674

 

 

 

49,441

 

 

 

73.1

%

 

 

117,344

 

 

 

67,674

 

 

 

49,670

 

 

 

73.4

%

nm - not meaningful

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HOLLEY INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands)

(Unaudited)

 

 

 

As of

 

 

As of

 

 

 

July 3,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

 

 

Total Current Assets

 

$

320,525

 

 

$

291,717

 

Property, Plant and Equipment, Net

 

 

56,009

 

 

 

51,495

 

Goodwill

 

 

417,339

 

 

 

411,383

 

Other Intangibles, Net

 

 

434,120

 

 

 

438,461

 

Right-of-Use Assets

 

 

32,762

 

 

 

 

Total Assets

 

$

1,260,755

 

 

$

1,193,056

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Total Current Liabilities

 

$

90,842

 

 

$

91,795

 

Long-Term Debt, Net of Current Portion

 

 

636,756

 

 

 

637,673

 

Deferred Taxes

 

 

68,955

 

 

 

70,045

 

Other Noncurrent Liabilities

 

 

79,835

 

 

 

89,056

 

Total Liabilities

 

 

876,388

 

 

 

888,569

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

12

 

 

 

12

 

Additional Paid-In Capital

 

 

351,422

 

 

 

329,705

 

Accumulated Other Comprehensive Gain (Loss)

 

 

486

 

 

 

(256

)

Retained Earnings (Accumulated Deficit)

 

 

32,447

 

 

 

(24,974

)

Total Stockholders' Equity

 

 

384,367

 

 

 

304,487

 

Total Liabilities and Stockholders' Equity

 

$

1,260,755

 

 

$

1,193,056

 

HOLLEY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

For the thirteen weeks

ended

 

 

For the twenty-six weeks

ended

 

 

 

July 3,

 

 

June 27,

 

 

July 3,

 

 

June 27,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

40,563

 

 

$

23,098

 

 

$

57,421

 

 

$

21,042

 

Adjustments to Reconcile to Net Cash

 

 

(12,665

)

 

 

8,882

 

 

 

1,335

 

 

 

32,964

 

Changes in Operating Assets and Liabilities

 

 

(25,416

)

 

 

(4,539

)

 

 

(37,925

)

 

 

(7,609

)

Net Cash from Operating Activities

 

 

2,482

 

 

 

27,441

 

 

 

20,831

 

 

 

46,397

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Expenditures, Net of Dispositions

 

 

(3,778

)

 

 

(3,752

)

 

 

(9,365

)

 

 

(6,856

)

Acquisitions

 

 

(12,460

)

 

 

(54,011

)

 

 

(14,077

)

 

 

(54,011

)

Net Cash from Investing Activities

 

 

(16,238

)

 

 

(57,763

)

 

 

(23,442

)

 

 

(60,867

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Change in Debt

 

 

189

 

 

 

(1,475

)

 

 

(3,099

)

 

 

(1,539

)

Proceeds from Issuance of Common Stock Due to Exercise of Warrants

 

 

383

 

 

 

 

 

 

383

 

 

 

 

Net Cash from Financing Activities

 

 

572

 

 

 

(1,475

)

 

 

(2,716

)

 

 

(1,539

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of Foreign Currency Rate Fluctuations on Cash

 

 

(342

)

 

 

 

 

 

(443

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Change in Cash and Cash Equivalents

 

 

(13,526

)

 

 

(31,797

)

 

 

(5,770

)

 

 

(16,009

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of Period

 

 

44,081

 

 

 

87,462

 

 

 

36,325

 

 

 

71,674

 

End of Period

 

$

30,555

 

 

$

55,665

 

 

$

30,555

 

 

$

55,665

 

Holley believes EBITDA, Adjusted EBITDA, Adjusted Net Income, and Organic Sales are useful to investors in evaluating the Company’s financial performance. In addition, Holley uses these measures internally to establish forecasts, budgets and operational goals to manage and monitor its business. Holley believes that these non-GAAP financial measures help to depict a more realistic representation of the performance of the underlying business, enabling the Company to evaluate and plan more effectively for the future.

HOLLEY INC.

USE AND RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(In thousands)

(Unaudited)

 

 

 

For the thirteen weeks

ended

 

 

For the twenty-six weeks

ended

 

 

 

July 3,

 

 

June 27,

 

 

July 3,

 

 

June 27,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net Income

 

$

40,563

 

 

$

23,098

 

 

$

57,421

 

 

$

21,042

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

8,961

 

 

 

11,174

 

 

 

16,352

 

 

 

21,245

 

Income Taxes

 

 

3,023

 

 

 

5,790

 

 

 

10,211

 

 

 

10,556

 

Depreciation

 

 

2,523

 

 

 

2,201

 

 

 

4,663

 

 

 

4,453

 

Amortization

 

 

3,662

 

 

 

3,502

 

 

 

7,323

 

 

 

6,838

 

EBITDA

 

 

58,732

 

 

 

45,765

 

 

 

95,970

 

 

 

64,134

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition and Restructuring Costs

 

 

1,691

 

 

 

2,676

 

 

 

1,981

 

 

 

4,336

 

Earn-Out from Simpson Acquisition

 

 

 

 

 

 

 

 

 

 

 

17,173

 

Change in Fair Value of Warrant Liability

 

 

(23,168

)

 

 

 

 

 

(20,941

)

 

 

 

Change in Fair Value of Earn-Out Liability

 

 

(4,234

)

 

 

 

 

 

(1,853

)

 

 

 

Equity-Based Compensation Expense

 

 

3,483

 

 

 

131

 

 

 

6,645

 

 

 

262

 

Related Party Acquisition and Management Fee Costs

 

 

 

 

 

1,658

 

 

 

 

 

 

2,539

 

Notable Items

 

 

378

 

 

 

3,862

 

 

 

884

 

 

 

9,575

 

Other Expense

 

 

325

 

 

 

47

 

 

 

547

 

 

 

(86

)

Adjusted EBITDA

 

$

37,207

 

 

$

54,139

 

 

$

83,233

 

 

$

97,933

 

 

 

For the thirteen weeks

ended

 

 

For the twenty-six weeks

ended

 

 

 

July 3,

 

 

June 27,

 

 

July 3,

 

 

June 27,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

40,563

 

 

$

23,098

 

 

$

57,421

 

 

$

21,042

 

Special items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjust for: Change in Fair Value of Warrant Liability

 

 

(23,168

)

 

 

 

 

 

(20,941

)

 

 

 

Adjust for: Change in Fair Value of Earn-Out Liability

 

 

(4,234

)

 

 

 

 

 

(1,853

)

 

 

 

Adjust for: Earn-Out from Simpson Acquisition

 

 

 

 

 

 

 

 

 

 

 

17,173

 

Adjusted Net Income

 

$

13,161

 

 

$

23,098

 

 

$

34,627

 

 

$

38,215

 

 

 

13 Weeks

Ended

 

 

 

July 3, 2022

 

Net Sales

 

 

179,420

 

Less: Sales from Acquisitions within 365 Days of Purchase (Non-Comparable to Prior Year)

 

 

(9,362

)

Organic Sales (Comparable to Prior Year Period Net Sales)

 

$

170,058

 

 

 

Full Year 2022

 

 

 

2022 Forecast

 

 

2022 Forecast

 

 

 

Low Range

 

 

High Range

 

Net Sales

 

$

700,000

 

 

$

725,000

 

Adjusted EBITDA

 

 

135,000

 

 

 

145,000

 

Depreciation and Amortization

 

 

24,000

 

 

 

26,000

 

Interest Expense

 

 

33,000

 

 

 

35,000

 

Capital Expenditures

 

 

14,000

 

 

 

16,000

 

Holley defines EBITDA as earnings before (a) interest expense, (b) income taxes and (c) depreciation and amortization. Holley defines Adjusted EBITDA as EBITDA plus (i) acquisition integration and restructuring costs, (ii) an adjustment in 2021 due to a change in the fair value of the Simpson acquisition contingent consideration payable, (iii) changes in the fair value of the warrant liability, (iv) changes in the fair value of the earn-out liability, (v) compensation expense related to equity awards, (vi) related party acquisition and management fee costs, (vii) notable items that in 2022 consist primarily of non-cash adjustments related to the adoption of ASC 842, "Leases," and in 2021 consist primarily of the amortization of the fair market value increase in inventory due to acquisitions, and (viii) other expenses, which includes losses from disposal of fixed assets and foreign currency transactions. We have included within the definition of Adjusted EBITDA the changes in the fair value of the warrant liability, changes in the fair value of the earn-out liability and losses from the early extinguishment of debt, as management believes such matters, when they occur, do not directly reflect the performance of the underlying business.

Holley calculates Adjusted Net Income by excluding the after-tax effect of items considered by management to be special items from the earnings reported under U.S. GAAP. Management uses this measure to focus on on-going operations, and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present consolidated operating results. Holley believes that using this information, along with net income, provides for a more complete analysis of the results of operations.

Organic sales, or sales excluding the impact of acquisitions, excludes the impact from sales from acquisitions within 365 days of the consummation of such acquisition. Holley believes organic sales provides investors with useful supplemental information regarding Holley's underlying sales trends.

EBITDA, Adjusted EBITDA, Adjusted Net Income, and organic sales are not prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and may be different from non-GAAP financial measures used by other companies. These measures should not be considered as measures of financial performance under GAAP, and the items excluded from or included in these metrics are significant components in understanding and assessing Holley’s financial performance. These metrics should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP.

A forecast for full year 2022 Adjusted EBITDA is provided on a non-GAAP basis only because certain information necessary to calculate the most comparable GAAP measure is unavailable due to the uncertainty and inherent difficulty of predicting the occurrence and the future financial statement impact of certain items. Therefore, as a result of the uncertainty and variability of the nature and amount of future adjustments, which could be significant, Holley is unable to provide a reconciliation of these measures without unreasonable effort.

Contacts

Investor Relations:

Ross Collins / Stephen Poe

Alpha IR Group

312-445-2870

HLLY@alpha-ir.com

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