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 Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 29, 2024

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________to__________

 

Commission file number: 001-39599

 

HOLLEY INC.

(Exact name of registrant as specified in its charter)

 

Delaware

87-1727560

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

2445 Nashville Road, Suite B1, Bowling Green, KY 42101

(Address of principal executive offices)

 

(270) 782-2900

(Registrants telephone number, including area code)

 

(Former name, former address and former fiscal year, if changed since last report) N/A

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

symbol(s)

 

Name of each exchange

on which registered

Common Stock, par value $0.0001

Warrants to purchase common stock

 

HLLY

HLLY WS

 

New York Stock Exchange

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 
       

Non-accelerated filer

  

Smaller reporting company

 
       
    

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes No ☒

 

There were 119,797,033 shares of Common Stock, including 1,093,750 restricted earn-out shares, par value $0.0001 per share, issued and outstanding as of November 6, 2024.

 

 

 

 
 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that are intended to enjoy the protection of the safe harbor for forward-looking statements provided by the Securities Act and Exchange Act, as well as protections afforded by other federal securities laws. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for the Company’s business. Forward-looking statements may be accompanied by words such as “believe,” “estimate,” “expect,” “project,” “forecast,” “may,” “will,” “should,” “seek,” “plan,” “scheduled,” “anticipate,” “intend” or similar expressions. These forward-looking statements are subject to various risks and uncertainties, many of which are outside our control. Therefore, you should not place undue reliance on such statements. Actual results could differ materially due to numerous factors, including but not limited to the Company’s ability to do any of the following:

 

 

execute its business strategy, including monetization of services provided and expansions in and into existing and new lines of business;

 

 

anticipate and manage through disruptions and higher costs in manufacturing, supply chain, logistical operations, and shortages of certain company products in distribution channels;

 

 

anticipate and manage through supply shortages of key component parts used in our products and the need to shift the mix of products offered in response thereto;

 

 

respond to the impact of geopolitical events, including military conflicts (including the conflict in Ukraine, the conflict in the Middle East, the possible expansion of such conflicts and potential geopolitical consequences), the interruption from catastrophic events and problems such as terrorism, and public health crises;

 

 

maintain key strategic relationships with partners and resellers;

 

 

anticipate and manage through the impact of elevated interest rate levels, which cause the cost of capital to increase, as well as respond to inflationary pressures;

 

 

enhance future operating and financial results, whether through anticipated organic or external growth initiatives or through the implementation of cost savings initiatives;

 

 

respond to uncertainties associated with product and service development and market acceptance;

 

 

anticipate and manage through increased constraints in consumer demand and/or shifts in the mix of products sold;

 

 

attract and retain qualified employees and key personnel;

 

 

protect and enhance the Company’s corporate reputation and brand awareness;

 

 

recognition of goodwill and other intangible asset impairment charges;

 

 

effectively respond to general economic and business conditions;

 

 

acquire and protect intellectual property;

 

 

collect, store, process and use personal and payment information and other consumer data;

 

 

comply with privacy and data protection laws and other legal obligations related to privacy, information security, and data protection;

 

 

manage the impact of any security breaches, cyber-attacks, or other cybersecurity threats or incidents, or the failure of any key information technology systems;

 

 

 

meet future liquidity requirements and comply with restrictive covenants related to long-term indebtedness;

 

 

obtain additional capital, including through the sale of equity or debt securities;

 

 

finance operations on an economically viable basis;

 

 

maintain Holley’s New York Stock Exchange (“NYSE”) listing of its common stock (“Common Stock”) and warrants to purchase Common Stock ("Warrants");

 

 

comply with existing and/or future laws and regulations applicable to our business, including laws and regulations related to environmental health and safety or climate-related disclosures;

 

 

respond to litigation, complaints, product liability claims and/or adverse publicity;

 

 

anticipate the significance and timing of contractual obligations;

 

 

anticipate the impact of, and response to, new accounting standards;

 

 

maintain proper and effective internal controls;

 

 

respond to the impact of changes in U.S. tax laws and regulations, including the impact on deferred tax assets;

 

 

anticipate the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”);

 

 

anticipate the impact of changes in consumer spending patterns, consumer preferences, local, regional and national economic conditions, crime, weather, and demographic trends; and

 

 

respond to other risks and factors, listed under the caption “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission (the "SEC") on March 14, 2024, and/or as disclosed in any subsequent filings with the SEC.

 

Forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q and our management’s expectations, forecasts and assumptions, and involve a number of judgements, risks and uncertainties, and actual results, developments and business decisions may differ materially from those envisaged by such forward-looking statements. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

 

 

PART I FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

HOLLEY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

 

  

As of

 
  

September 29, 2024

  

December 31, 2023

 

ASSETS

        

Cash and cash equivalents

 $50,751  $41,081 

Accounts receivable, less allowance for credit losses of $1,970 and $1,577 respectively

  44,492   48,360 

Inventory

  179,285   192,260 

Prepaids and other current assets

  16,332   15,665 

Assets held for sale

  7,696   - 

Total current assets

  298,556   297,366 

Property, plant, and equipment, net

  42,718   47,206 

Goodwill

  413,245   419,056 

Other intangibles assets, net

  398,804   410,465 

Right-of-use assets

  30,911   29,250 

Total assets

 $1,184,234  $1,203,343 

LIABILITIES AND STOCKHOLDERS' EQUITY

        

Accounts payable

 $52,738  $43,692 

Accrued interest

  487   455 

Accrued liabilities

  41,164   42,129 

Current portion of long-term debt

  7,479   7,461 

Total current liabilities

  101,868   93,737 

Long-term debt, net of current portion

  548,905   576,710 

Warrant liability

  813   8,383 

Earn-out liability

  1,138   3,479 

Deferred taxes

  45,008   53,542 

Other noncurrent liabilities

  27,759   26,341 

Total liabilities

  725,491   762,192 

Commitments and contingencies (Refer to Note 15 - Commitments and Contingencies)

          

Stockholders' equity:

        

Preferred stock, $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding on September 29, 2024 and December 31, 2023

      

Common stock, $0.0001 par value, 550,000,000 shares authorized, 118,703,283 and 117,707,280 shares issued and outstanding on September 29, 2024 and December 31, 2023, respectively

  12   12 

Additional paid-in capital

  376,670   373,869 

Accumulated other comprehensive loss

  (466)  (710)

Retained earnings

  82,527   67,980 

Total stockholders' equity

  458,743   441,151 

Total liabilities and stockholders' equity

 $1,184,234  $1,203,343 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

 

HOLLEY INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Net sales

  $ 134,038     $ 156,530     $ 462,170     $ 503,997  

Cost of goods sold

    81,732       98,156       287,512       308,162  

Gross profit

    52,306       58,374       174,658       195,835  

Selling, general, and administrative

    30,109       28,880       97,675       87,998  

Research and development costs

    4,620       6,100       13,743       18,935  

Amortization of intangible assets

    3,436       3,687       10,307       11,040  

Restructuring costs

    954       415       1,566       2,106  

Write-down of assets held-for-sale

    7,505       -       7,505       -  

Other operating expense

    119       (28 )     213       508  

Total operating expense

    46,743       39,054       131,009       120,587  

Operating income

    5,563       19,320       43,649       75,248  

Change in fair value of warrant liability

    (1,041 )     2,064       (7,570 )     5,516  

Change in fair value of earn-out liability

    (634 )     700       (2,341 )     2,089  

Loss on early extinguishment of debt

                141        

Interest expense, net

    15,010       13,712       39,192       41,909  

Total non-operating expense

    13,335       16,476       29,422       49,514  

Income (loss) before income taxes

    (7,772 )     2,844       14,227       25,734  

Income tax expense (benefit)

    (1,484 )     2,092       (320 )     7,756  

Net income (loss)

  $ (6,288 )   $ 752     $ 14,547     $ 17,978  

Comprehensive income (loss):

                               

Foreign currency translation adjustment

    386       (176 )     244       (103 )

Total comprehensive income (loss)

  $ (5,902 )   $ 576     $ 14,791     $ 17,875  

Common Share Data:

                               

Weighted average common shares outstanding - basic

    118,694,139       117,397,069       118,345,442       117,256,959  

Weighted average common shares outstanding - diluted

    118,694,139       119,245,956       119,153,568       118,119,501  

Basic net income (loss) per share

  $ (0.05 )   $ 0.01     $ 0.12     $ 0.15  

Diluted net income (loss) per share

  $ (0.05 )   $ 0.01     $ 0.12     $ 0.15  

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

 

HOLLEY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(in thousands, except share data)

(unaudited)

 

   

Common Stock

           

Accumulated

               
                   

Additional

   

Other

               
                   

Paid-In

   

Comprehensive

   

Retained

         
   

Shares

   

Amount

   

Capital

   

Loss

   

Earnings

   

Total

 

Balance at December 31, 2022

    117,147,997     $ 12     $ 368,122     $ (944 )   $ 48,800     $ 415,990  

Net income

                            4,247       4,247  

Equity compensation

                394                   394  

Foreign currency translation

                      (199 )           (199 )

Tax withholding related to vesting of restricted stock units

                (34 )                 (34 )

Issuance of shares for restricted stock units

    24,219                                

Balance at April 2, 2023

    117,172,216     $ 12     $ 368,482     $ (1,143 )   $ 53,047     $ 420,398  

Net income

                            12,979       12,979  

Equity compensation

                1,806                   1,806  

Foreign currency translation

                      272             272  

Tax withholding related to vesting of restricted stock units

                (39 )                 (39 )

Issuance of shares for restricted stock units

    77,638                                

Balance at July 3, 2023

    117,249,854       12       370,249       (871 )     66,026       435,416  

Net income

                            752       752  

Equity compensation

                2,970                   2,970  

Foreign currency translation

                      (176 )           (176 )

Tax withholding related to vesting of restricted stock units

                (1,061 )                 (1,061 )

Issuance of shares for restricted stock units

    223,268                                

Balance at October 1, 2023

    117,473,122       12       372,158       (1,047 )     66,778       437,901  
                                                 

Balance at December 31, 2023

    117,707,280     $ 12     $ 373,869     $ (710 )   $ 67,980     $ 441,151  

Net income

                            3,730       3,730  

Equity compensation

                1,141                   1,141  

Foreign currency translation

                      (186 )           (186 )

Tax withholding related to vesting of restricted stock units

                (921 )                 (921 )

Issuance of shares for restricted stock units

    604,061                                

Balance at March 31, 2024

    118,311,341     $ 12     $ 374,089     $ (896 )   $ 71,710     $ 444,915  

Net income

                            17,105       17,105  

Equity compensation

                1,621                   1,621  

Foreign currency translation

                      44             44  

Tax withholding related to vesting of restricted stock units

                (516 )                 (516 )

Issuance of shares for restricted stock units

    372,131                                

Balance at June 30, 2024

    118,683,472     $ 12     $ 375,194     $ (852 )   $ 88,815     $ 463,169  

Net loss

                            (6,288 )     (6,288 )

Equity compensation

                1,521                   1,521  

Foreign currency translation

                      386             386  

Tax withholding related to vesting of restricted stock units

                (45 )                 (45 )

Issuance of shares for restricted stock units

    19,811                                

Balance at September 29, 2024

    118,703,283     $ 12     $ 376,670     $ (466 )   $ 82,527     $ 458,743  

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

 

HOLLEY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

 

OPERATING ACTIVITIES:

               

Net income

  $ 14,547     $ 17,978  

Adjustments to reconcile net income to net cash from operating activities:

               

Depreciation

    7,364       7,738  

Amortization of intangible assets

    10,307       11,040  

Amortization of deferred loan costs

    1,314       1,339  

Amortization of right of use assets

    4,103       4,014  

Write-down of assets held-for-sale

    7,505       -  

Fair value adjustments to warrant liability

    (7,570 )     5,516  

Fair value adjustments to earn-out liability

    (2,341 )     2,089  

Fair value adjustments to interest rate collar

    (151 )     (3,185 )

Equity compensation

    4,283       5,170  

Change in deferred taxes

    (8,534 )     (8,616 )

Loss on early extinguishment of long-term debt

    141       -  

Gain on disposal of property, plant and equipment

    (568 )     (227 )

Provision for inventory reserves

    10,451       3,824  

Provision for credit losses

    528       744  

Change in operating assets and liabilities:

               

Accounts receivable

    3,359       (1,054 )

Inventories

    (2,303 )     21,046  

Prepaids and other current assets

    (653 )     4,862  

Accounts payable

    9,025       (5,413 )

Accrued interest

    32       (5,670 )

Accrued and other liabilities

    (8,066 )     (4,332 )

Net cash provided by operating activities

    42,773       56,863  

INVESTING ACTIVITIES:

               

Capital expenditures

    (4,372 )     (4,417 )

Proceeds from the disposal of fixed assets

    1,645       1,292  

Net cash used in investing activities

    (2,727 )     (3,125 )

FINANCING ACTIVITIES:

               

Principal payments on long-term debt

    (28,832 )     (40,437 )

Deferred financing fees

          (1,427 )

Payments from stock-based award activities

    (1,482 )     (1,134 )

Net cash used in financing activities

    (30,314 )     (42,998 )

Effect of foreign currency rate fluctuations on cash

    (62 )     (57 )

Net change in cash and cash equivalents

    9,670       10,683  

Cash and cash equivalents:

               

Beginning of period

    41,081       26,150  

End of period

  $ 50,751     $ 36,833  

Supplemental disclosures of cash flow information:

               

Cash paid for interest

  $ 39,453     $ 50,290  

Cash paid for income taxes

    7,596       16,041  

Supplemental non-cash investing activity:

               

Property and equipment additions included in accounts payable

  $ 168     $  

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

8

HOLLEY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)

 

 

1.

DESCRIPTION OF THE BUSINESS, BASIS OF PRESENTATION, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Holley Inc., a Delaware corporation headquartered in Bowling Green, Kentucky, conducts operations through its wholly owned subsidiaries. These operating subsidiaries are comprised of Holley Performance Products Inc., Hot Rod Brands, Inc., Simpson Safety Solutions, Inc., B&M Racing and Performance Products, Inc., and Speedshop.com, Inc. When used in these notes, the terms the “Company” or “Holley” mean Holley, Inc. and all entities included in its consolidated financial statements.

 

The Company designs, manufactures and distributes high-performance automotive products to car and truck enthusiasts primarily in the United States, Canada and Europe. The Company is a leading manufacturer of a diversified line of performance automotive products, including carburetors, fuel pumps, fuel injection systems, nitrous oxide injection systems, superchargers, exhaust headers, mufflers, distributors, ignition components, engine tuners and automotive performance plumbing products. The Company is also a leading manufacturer of exhaust products as well as shifters, converters, transmission kits, transmissions, tuners and automotive software. The Company’s products are designed to enhance street, off-road, recreational and competitive vehicle performance through increased horsepower, torque and drivability. The Company has locations in the United States, Canada, Italy and China.

 

Emerging Growth Company Status

 

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company is an emerging growth company, and, as such, has elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards.

 

Risks and Uncertainties

 

The Company's business and results of operations, financial condition, and liquidity are impacted by broad economic conditions, as well as by geopolitical events, including the conflict in Ukraine, the conflict in the Middle East, and the possible expansion of such conflicts and potential geopolitical consequences. The Company's business is impacted by various economic factors that affect both consumers and the automotive aftermarket industry, including but not limited to inflation, fuel costs, wage rates, supply chain disruptions, hiring, and other economic conditions. In response to inflationary impacts and supply chain disruptions, the Company has attempted to minimize potential adverse impacts on its business with cost savings initiatives, price increases to customers, and increased attention to maintaining appropriate inventory levels in the distribution channel. The Company's profitability has been, and may continue to be, adversely affected by constrained consumer demand, a shift in sales to lower-margin products, and demands on our performance that increase our costs. Should the ongoing macroeconomic conditions not improve, or worsen, or if the Company's attempt to mitigate the impact on its supply chain, operations and costs is not successful, the Company’s business, results of operations and financial condition may be adversely affected.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP" or “GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended  December 31, 2023, as filed with the SEC on March 14, 2024, in the Company’s annual report on Form 10-K. In management’s opinion, the unaudited interim condensed consolidated financial statements reflect all adjustments, which are of a normal and recurring nature, that are necessary for a fair presentation of financial results for the interim periods presented. Operating results for any quarter are not necessarily indicative of the results for the full fiscal year.

 

9

HOLLEY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)
 

The Company operates on a fiscal year that ends on  December 31. The three- and nine-month periods ended September 29, 2024 and October 1, 2023 each included 13 weeks and 39 weeks, respectively.

 

Principles of Consolidation

 

These unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.

 

Recent Accounting Pronouncements

 

Accounting Standards Not Yet Adopted

 

In  October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to SEC's Disclosure Update and Simplification Initiative. This ASU amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification. The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company will monitor the removal of various requirements from the current regulations in order to determine when to adopt the related amendments, but it does not anticipate that the adoption of the new guidance will have a material impact on the Company’s consolidated financial statements and related disclosures. The Company will continue to evaluate the impact of this guidance on its consolidated financial statements.

 

In  November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The standard requires interim and annual disclosure of significant segment expenses that are regularly provided to the chief operating decision-maker ("CODM") and included within the reported measure of a segment’s profit or loss, requires interim disclosures about a reportable segment’s profit or loss and assets that are currently required annually, requires disclosure of the position and title of the CODM, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, and contains other disclosure requirements. This ASU is effective for fiscal years beginning after  December 15, 2023 and interim periods within fiscal years beginning after  December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect of this new guidance on its consolidated financial statements and related disclosures.

 

In  December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires additional disclosures of various income tax components that affect the rate reconciliation based on the applicable taxing jurisdictions, as well as the qualitative and quantitative aspects of those components. The standard also requires information pertaining to taxes paid to be disaggregated for federal, state and foreign taxes, and contains other disclosure requirements. This ASU is effective for fiscal years beginning after  December 15, 2024 and interim periods within fiscal years beginning after  December 15, 2025, with early adoption permitted. The Company is currently evaluating the effect of this new guidance on its consolidated financial statements and related disclosures.

 

 

 

2.

INVENTORY

 

Inventories of the Company consisted of the following:

 

   

As of

 
   

September 29, 2024

   

December 31, 2023

 

Raw materials

  $ 59,071     $ 63,552  

Work-in-process

    19,669       22,619  

Finished goods

    100,545       106,089  
    $ 179,285     $ 192,260  

 

During the 39-week period ended September 29, 2024, the Company recognized a strategic product rationalization charge of $8,835, primarily due to product rationalization initiatives aimed at eliminating unprofitable or slow-moving stock keeping units.

 

10

HOLLEY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)
 
 

3.

PROPERTY, PLANT AND EQUIPMENT, NET

 

Property, plant and equipment of the Company consisted of the following:

 

  

As of

 
  

September 29, 2024

  

December 31, 2023

 

Land

 $1,230  $3,326 

Buildings and improvements

  11,936   11,404 

Machinery and equipment

  72,952   73,332 

Construction in process

  8,093   6,224 

Total property, plant and equipment

  94,211   94,286 

Less: accumulated depreciation

  51,493   47,080 

Property, plant and equipment, net

 $42,718  $47,206 

 

The Company’s long-lived assets by geographic locations are as follows:

 

  

As of

 
  

September 29, 2024

  

December 31, 2023

 

United States

 $39,716  $44,931 

International

  3,002   2,275 

Total property, plant and equipment, net

 $42,718  $47,206 

 

Assets Held for Sale

 

Assets held for sale includes the net book value of assets the Company plans to sell during the fourth quarter of 2024. Long-lived assets that meet the held for sale criteria are held for sale and reported at the lower of their carrying value or fair value, less estimated costs to sell.

 

During the 39-week period ended September 29, 2024, the Company entered into a letter of intent to sell certain assets and liabilities of Detroit Speed Engineering for $5,600. The Company adjusted the carrying value of the assets from $13,105 to the fair value of $5,600, and recognized a loss on held-for-sale assets for $7,505 in the condensed consolidated statements of comprehensive income for the 13-week and 39-week periods ended September 29, 2024. The Detroit Speed Assets are classified as assets held for sale in the condensed consolidated balance sheets as of  September 29, 2024 for $5,600. The Company expects for the sale to close during the fourth quarter of 2024. 

 

During the 39-week period ended September 29, 2024, the Company entered into an agreement to sell land at Porter Pike for $2,400. The land is classified as assets held for sale in the condensed consolidated balance sheets as of  September 29, 2024 for $2,096. The Company expects for the sale to close during the fourth quarter of 2024.  

 

As of September 29, 2024, the Company classified Detroit Speed Engineering and the Porter Pike land as held for sale. Assets held for sale at September 29, 2024 consisted of the following:

 

  

As of

 
  

September 29, 2024

 

Inventory

 $4,632 

Land

  2,096 

Machinery and equipment

  951 

Intangible assets

  17 

Assets Held for Sale

 $7,696 

 

 

4.

GOODWILL AND OTHER INTANGIBLE ASSETS

 

Goodwill represents the premium paid over the fair value of the net tangible and identifiable intangible assets acquired in the Company's business combinations. The Company impaired $5,810 of goodwill related to Detroit Speed Engineering during the 39-week period ended September 29, 2024. Refer to Note 3 "Property, Plant and Equipment, Net", for additional information.

 

No goodwill impairment charges were incurred during the 13-week and 39-week periods ended September 29, 2024 and October 1, 2023 other than the amount recognized related to Detroit Speed Engineering. Potential changes in the Company's costs and operating structure, the implementation of synergies, and overall performance in the automotive aftermarket industry, could negatively impact near-term cash-flow projections and could trigger a potential impairment of the Company's goodwill and / or indefinite-lived intangible assets. In addition, failure to execute the Company's strategic plans as well as increases in weighted average costs of capital could negatively impact the fair value of the reporting unit and increase the risk of future impairment charges. 

 

11

HOLLEY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)
 

Intangible assets consisted of the following:

 

  

September 29, 2024

 
  

Gross Carrying Amount

  

Accumulated Amortization

  

Net Carrying Value

 

Finite-lived intangible assets:

            

Customer relationships

 $269,950  $(64,397) $205,553 

Tradenames

  13,775   (6,112)  7,663 

Technology

  26,676   (14,899)  11,777 

Total finite-lived intangible assets

 $310,401  $(85,408) $224,993 
             

Indefinite-lived intangible assets:

            

Tradenames

 $173,811     $173,811 

 

  

December 31, 2023

 
  

Gross Carrying Amount

  

Accumulated Amortization

  

Net Carrying Value

 

Finite-lived intangible assets:

            

Customer relationships

 $269,950  $(55,732) $214,218 

Tradenames

  13,775   (5,569)  8,206 

Technology

  26,676   (13,800)  12,876 

Total finite-lived intangible assets

 $310,401  $(75,101) $235,300 
             

Indefinite-lived intangible assets:

            

Tradenames

 $175,165     $175,165 

 

The following outlines the estimated future amortization expense related to intangible assets held as of September 29, 2024:

 

2024 (excluding the thirty-nine weeks ended September 29, 2024)

 $3,436 

2025

  13,713 

2026

  13,608 

2027

  13,602 

2028

  13,602 

Thereafter

  167,032 

Total

 $224,993 

   

 

5.

ACCRUED LIABILITIES

 

Accrued liabilities of the Company consisted of the following:

 

   

As of

 
   

September 29, 2024

   

December 31, 2023

 

Accrued freight

  $ 2,727     $ 5,654  

Accrued employee compensation and benefits

    11,772       11,696  

Accrued returns and allowances

    12,583       11,267  

Accrued taxes

    212       1,475  

Current portion of operating lease liabilities

    4,302       4,948  

Accrued other

    9,568       7,089  

Total accrued liabilities

  $ 41,164     $ 42,129  

  

12

HOLLEY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)
  
 

6.

DEBT

 

Debt of the Company consisted of the following:

 

   

As of

 
   

September 29, 2024

   

December 31, 2023

 

First lien term loan due November 17, 2028

  $ 564,219     $ 592,505  

Other

    905       1,974  

Less unamortized debt issuance costs

    (8,740 )     (10,308 )
      556,384       584,171  

Less current portion of long-term debt

    (7,479 )     (7,461 )
    $ 548,905     $ 576,710  

 

On November 18, 2021, the Company entered into a credit facility with a syndicate of lenders and Wells Fargo Bank, N.A., as administrative agent for the lenders, letter of credit issuer and swing line lender (the "Credit Agreement"). The financing consisted of a seven-year $600,000 first lien term loan, a five-year $125,000 revolving credit facility, and a $100,000 delayed draw term loan. The proceeds of delayed draw loans made after closing were available to the Company to finance acquisitions. Upon the expiration of the delayed draw term loan in May 2022, the Company had drawn $57,000, which is included in the amount outstanding under the first lien term loan due November 17, 2028. Proceeds from the credit facility were used to repay in full the Company’s obligations under its previously existing first lien and second lien notes and to pay $13,413 in deferred financing fees related to the refinancing.

 

The revolving credit facility includes a letter of credit facility in the amount of $10,000, pursuant to which letters of credit may be issued as long as revolving loans may be advanced and subject to availability under the revolving credit facility. The Company had $2,150 in outstanding letters of credit on September 29, 2024.

 

The first lien term loan is to be repaid in quarterly payments of $1,643 through September 30, 2028 with the balance due upon maturity on November 17, 2028. The Company is required to make annual payments on the term loan in an amount equal to 50% of annual excess cash flow greater than $5,000, as defined in the Credit Agreement. This percentage requirement may decrease or be eliminated if certain leverage ratios are achieved. Based on the Company's results for 2023, no excess cash flow payment is required in 2024. Any such payments offset future mandatory quarterly payments. The Credit Agreement permits voluntary prepayments at any time, in whole or in part. The Company repurchased $25,000 outstanding principal on its first lien term loan at a discount to par during the 39-week period ended September 29, 2024.

 

As of September 29, 2024, amounts outstanding under the credit facility accrue interest at a rate equal to either the Secured Overnight Financing Rate ("SOFR") or base rate, at the Company's election, plus a specified margin. In the case of revolving credit loans and letter of credit fees, the specified margin is based on the Company's Total Leverage Ratio, as defined in the Credit Agreement. Commitment fees payable under the revolving credit facility are based on the Company's Total Leverage Ratio. On September 29, 2024, the weighted average interest rate on the Company's borrowings under the credit facility was 9.1%.

 

The Company has entered into an interest rate collar in the notional amount of $500,000 to hedge the Company's exposure to fluctuations in interest rates on its variable-rate debt. Refer to Note 8, "Derivative Instruments," for additional information. 

 

Obligations under the Credit Agreement are secured by substantially all of the Company’s assets, including a secured interest in the Company's headquarters, with a carrying value of $5,722. The Credit Agreement includes representations and warranties and affirmative and negative covenants customary for financings of this type, including, but not limited to, limitations on restricted payments, additional borrowings, additional investments, and asset sales.

 

13

HOLLEY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)
 

In February 2023, the Company entered into an amendment to the Credit Agreement which, among other things, increases the Total Leverage Ratio applicable under the Credit Agreement as of the quarter ending April 2, 2023 to initially 7.25:1.00, and provides for modified step-down levels for such covenant thereafter through the fiscal quarter ending June 30, 2024 (the “Covenant Relief Period”). As of June 30, 2024, the required Total Leverage Ratio was5.00:1.00.As a condition to the Covenant Relief Period, the Company also agreed to (i) a minimum liquidity test, (ii) an interest coverage test, (iii) an anti-cash hoarding test at any time revolving loans are outstanding, and (iv) additional reporting obligations. Under the amended Credit Agreement, the revolving credit facility contains a minimum liquidity financial covenant of $45,000, which includes unrestricted cash and any available borrowing capacity under the revolving credit facility. In April 2023, the Company entered into a second amendment to the Credit Agreement in which the interest rate on any outstanding borrowings under the Credit Agreement was changed from LIBOR to SOFR. In May 2023, the Company entered into a third amendment to the Credit Agreement in which certain defined terms were clarified. The Company incurred $1,427 of deferred financing fees related to these amendments. On September 29, 2024, the Company was in compliance with all financial covenants. 

 

Some of the lenders that are parties to the Credit Agreement, and their respective affiliates, have various relationships with the Company in the ordinary course of business involving the provision of financial services, including cash management, commercial banking, investment banking or other services.

 

Future maturities of long-term debt and amortization of debt issuance costs as of September 29, 2024 are as follows:

 

   

Debt

   

Debt Issuance Costs

 

2024 (excluding the thirty-nine weeks ended September 29, 2024)

  $ 3,510     $ 429  

2025

    7,253       1,876  

2026

    6,571       2,034  

2027

    6,571       2,209  

2028

    541,219       2,192  
    $ 565,124     $ 8,740  

 

 

7.

COMMON STOCK WARRANTS AND EARN-OUT LIABILITY

 

The Company consummated a business combination (the “Business Combination”) pursuant to that certain Agreement and Plan of Merger dated March 11, 2021 (the “Merger Agreement”), by and among Empower Ltd., (“Empower”), Empower Merger Sub I Inc., Empower Merger Sub II LLC, and Holley Intermediate Holdings, Inc. (“Holley Intermediate”) on July 16, 2021, (the “Closing” and such date, the “Closing Date”). Upon the Closing, there were 14,666,644 Warrants, consisting of 9,999,977 public warrants ("Public Warrants") and 4,666,667 private warrants ("Private Warrants" and together with the Public Warrants, the “Warrants”), outstanding to purchase shares of Common Stock that were issued by Empower prior to the Business Combination. Each Warrant entitles the registered holder to purchase one share of Common Stock at a price of $11.50 per share, subject to adjustments, provided that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the Warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities laws of the state of residence of the holder. The Warrants may be exercised only for a whole number of shares of Common Stock. The Warrants expire on July 16, 2026, the date that is five years after the Closing Date, or earlier upon redemption or liquidation. Additionally, the Private Warrants will be non-redeemable and are exercisable on a cashless basis so long as they are held by Empower Sponsor Holdings, LLC (the "Sponsor") or any of its permitted transferees. If the Private Warrants are held by someone other than the Sponsor or its permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

  

14

HOLLEY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)
 

The Company may redeem the Public Warrants at a price of $0.01 per warrant upon 30 days' notice if the closing price of Common Stock equals or exceeds $18.00 per share, subject to adjustments, on the trading day prior to the date on which notice of redemption is given, provided there is an effective registration statement and current prospectus in effect with respect to the ordinary shares underlying such Warrants throughout the 30-day redemption period. If the foregoing conditions are satisfied and the Company issues a notice of redemption of the Warrants, the Warrant holder is entitled to exercise his, her or its Warrant prior to the scheduled redemption date. Any such exercise requires the Warrant holder to pay the exercise price for each Warrant being exercised. Further, the Company may redeem the Public Warrants at a price of $0.10 per warrant upon 30 days' notice if the closing price of Common Stock equals or exceeds $10.00 per share, subject to adjustments, on the trading day prior to the date on which notice of redemption is given. Beginning on the date the notice of redemption is given until the Warrants are redeemed or exercised, holders may elect to exercise their Warrants on a cashless basis and receive that number of shares of Common Stock as determined by reference to a table in the warrant agreement.

 

During any period when the Company has failed to maintain an effective registration statement, warrant holders may exercise Warrants on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or another exemption, and the Company will use its commercially reasonable best efforts to register or qualify the shares under applicable blue-sky laws to the extent an exemption is not available.

 

The Company’s Warrants are accounted for as a liability in accordance with ASC 815-40 and are presented as a warrant liability on the balance sheet. The warrant liability was measured at fair value at inception and on a recurring basis, with changes in fair value recognized as non-operating expense. As of September 29, 2024 and  December 31, 2023, a warrant liability with a fair value of $813 and $8,383, respectively, was reflected as a long-term liability in the condensed consolidated balance sheet. A decrease of $1,041 and an increase of $2,064 in the fair value of the warrant liability was reflected as change in fair value of warrant liability in the condensed consolidated statements of comprehensive income for the 13-week periods ended September 29, 2024 and October 1, 2023, respectively. A decrease of $7,570 and an increase of $5,516 in the fair value of the warrant liability was reflected as change in fair value of warrant liability in the condensed consolidated statements of comprehensive income for the 39-week periods ended September 29, 2024 and October 1, 2023, respectively. 

 

Additionally, the Sponsor received 2,187,500 shares of Common Stock upon the Closing, which vest in two equal tranches upon achievement of certain market share price milestones during the earn-out period, as outlined in the Merger Agreement (the “Earn-Out Shares”). The first tranche of Earn-Out Shares vested during the first quarter of 2022. Upon vesting, the first tranche of 1,093,750 Earn-Out Shares were issued and a liability of $14,689, representing the fair value of the shares on the date of vesting, was reclassified from liabilities to equity. The remaining tranche of Earn-Out Shares will be forfeited if the applicable conditions are not satisfied before July 16, 2028 (seven years after the Closing Date). The unvested Earn-Out Shares are presented as an earn-out liability on the balance sheet and are remeasured at fair value with changes in fair value recognized as non-operating expense. As of September 29, 2024 and  December 31, 2023, an earn-out liability with a fair value of $1,138 and $3,479, respectively, was reflected as a long-term liability in the condensed consolidated balance sheet. A decrease of $634 and an increase of $700 in the fair value of the earn-out liability was reflected as change in fair value of earn-out liability in the condensed consolidated statements of comprehensive income for the 13-week periods ended September 29, 2024 and October 1, 2023, respectively. A decrease of $2,341 and an increase of $2,089 in the fair value of the earn-out liability was reflected as change in fair value of earn-out liability in the condensed consolidated statements of comprehensive income for the 39-week periods ended September 29, 2024 and October 1, 2023, respectively. 

 

 

8.

DERIVATIVE INSTRUMENTS

 

The Company from time to time enters into derivative financial instruments, such as interest rate collar agreements (each, a “Collar”), to manage its exposure to fluctuations in interest rates on the Company’s variable rate debt. On January 4, 2023, the Company entered into a Collar with Wells Fargo Bank, N.A. ("Wells Fargo") with a notional amount of $500,000 that expires on February 18, 2026. The Collar has a floor of 2.811% and a cap of 5% (based on three-month SOFR). The structure of this Collar is such that the Company receives an incremental amount if the Collar index exceeds the cap rate. Conversely, the Company pays an incremental amount to Wells Fargo if the Collar index falls below the floor rate. No payments are required if the Collar index falls between the cap and floor rates. 

 

As of September 29, 2024, the Company recognized a derivative liability of $1,013 for the Collar in other noncurrent assets on the condensed consolidated balance sheet. The Company recorded a net change in the fair value of the Collar as a decrease to interest expense of $2,204 and $151, for the 13-week and 39-week periods ended September 29, 2024, respectively. Cash receipts for the Collar totaled $412 and $1,280 for the 13-week and 39-week periods ended September 29, 2024, respectively.

 

The fair value of the Collar is determined using observable market-based inputs and the impact of credit risk on the derivative’s fair value (the creditworthiness of the Company’s counterparty for assets and the creditworthiness of the Company for liabilities) (a Level 2 measurement, as described in Note 9, "Fair Value Measurements").

 

15

HOLLEY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)
 
 

9.

FAIR VALUE MEASUREMENTS

 

The Company’s financial liabilities subject to fair value measurement on a recurring basis and the level of inputs used for such measurements were as follows:

 

   

Fair Value Measured on September 29, 2024

 
   

Level 1

   

Level 2

   

Level 3

   

Total

 

Liabilities:

                               

Warrant liability (Public)

  $ 548     $     $     $ 548  

Warrant liability (Private)

                265       265  

Earn-out liability

                1,138       1,138  

Interest rate collar liability

          1,013             1,013  

Total fair value liabilities

  $ 548     $ 1,013     $ 1,403     $ 2,964  

 

   

Fair Value Measured on December 31, 2023

 
   

Level 1

   

Level 2

   

Level 3

   

Total

 

Liabilities:

                               

Warrant liability (Public)

  $ 5,480     $     $     $ 5,480  

Warrant liability (Private)

                2,903       2,903  

Earn-out liability

                3,479       3,479  

Interest rate collar liability

          1,164             1,164  

Total fair value liabilities

  $ 5,480     $ 1,164     $ 6,382     $ 13,026  

 

As of September 29, 2024, the Company's derivative liabilities for its Private and Public Warrants, earn-out liability, and derivative asset for its Collar are measured at fair value on a recurring basis (see Note 7,Common Stock Warrants and Earn-Out Liability,” and Note 8, "Derivative Instruments," for more details). The fair values of the Private Warrants and earn-out liability are determined based on significant inputs not observable in the market (Level 3). The valuation of the Level 3 liabilities uses assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained. The Company uses a Monte Carlo simulation model to estimate the fair value of its Private Warrants and earn-out liability. The fair value of the Collar, which is included in other noncurrent assets on the condensed consolidated balance sheet, is determined based on models that reflect the contractual terms of the derivative, yield curves, and the credit quality of the counterparties. Inputs are generally observable and do not contain a high level of subjectivity (Level 2). The fair value of the Public Warrants is determined using publicly traded prices (Level 1). Changes in the fair value of the derivative liabilities related to Warrants and the earn-out liability are recognized as non-operating expense in the condensed consolidated statements of comprehensive income. Changes in the fair value of the Collar is recognized as an adjustment to interest expense in the condensed consolidated statements of comprehensive income. Changes in the fair value of the derivative liabilities related to Warrants and the earn-out liability and changes in the fair value of the Collar are recognized in net cash provided by operating activities on the condensed consolidated statements of cash flows.

 

The fair value of Private Warrants was estimated as of the measurement date using the Monte Carlo simulation model with the following assumptions:

 

   

September 29, 2024

   

December 31, 2023

 

Valuation date price

  $ 2.95     $ 4.87  

Strike price

  $ 11.50     $ 11.50  

Remaining life (in years)

    1.79       2.54  

Expected dividend

  $     $  

Risk-free interest rate

    3.65 %     4.01 %

Price threshold

  $ 18.00     $ 18.00  

 

16

HOLLEY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)
 

The fair value of the earn-out liability was estimated as of the measurement date using the Monte Carlo simulation model with the following assumptions:

 

   

September 29, 2024

   

December 31, 2023

 

Valuation date price

  $ 2.95     $ 4.87  

Expected term (in years)

    3.79       4.54  

Expected volatility

    63.64 %     67.20 %

Risk-free interest rate

    3.51 %     3.79 %

Price hurdle

  $ 15.00     $ 15.00  

   

As of September 29, 2024 and  December 31, 2023, the Company has accounts receivable, accounts payable and accrued expenses for which the carrying value approximates fair value due to the short-term nature of these instruments. The carrying value of the Company’s long-term debt approximates fair value as the rates used approximate the market rates currently available to the Company. Fair value measurements used in the impairment reviews of goodwill and intangible assets are Level 3 measurements.

 

The reconciliation of changes in Level 3 liabilities during the 39-week periods ended September 29, 2024 and October 1, 2023 is as follows:

 

   

Private Warrants

   

Earn-Out Liability

   

Total

 

Balance at December 31, 2022

  $ 1,581     $ 1,176     $ 2,757  

Losses included in earnings

    518       428       946  

Balance at October 1, 2023

  $ 2,099     $ 1,604     $ 3,703  
                         

Balance at December 31, 2023

  $ 2,903     $ 3,479     $ 6,382  

Gains included in earnings

    (2,638 )     (2,341 )     (4,979 )

Balance at September 29, 2024

  $ 265     $ 1,138     $ 1,403  

 

 

10.

REVENUE

 

The principal activity from which the Company generates its revenue is the manufacturing and distribution of after-market automotive parts for its customers, comprised of resellers and end users. The Company recognizes revenue at a point in time, rather than over time, as the performance obligation is satisfied when customer obtains control of the product upon title transfer and not as the product is manufactured or developed. The amount of revenue recognized is based on the purchase order price and adjusted for revenue allocated to variable consideration (i.e., estimated rebates, co-op advertising, etc.).

 

The Company collects sales tax and other taxes concurrent with revenue-producing activities which are excluded from revenue. Shipping and handling costs incurred after control of the product is transferred to our customers are treated as fulfillment costs and not a separate performance obligation.

 

The Company allows customers to return products when certain Company-established criteria are met. These sales returns are recorded as a charge against gross sales in the period in which the related sales are recognized, net of returns to stock. Returned products, which are recorded as inventories, are valued at the lower of cost or net realizable value. The physical condition and marketability of the returned products are the major factors considered in estimating realizable value. The Company also estimates expected sales returns and records the necessary adjustment as a charge against gross sales.

 

17

HOLLEY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)
 

The Company’s payment terms with customers are customary and vary by customer and geography but typically range from 30 to 365 days. The Company elected the practical expedient to disregard the possible existence of a significant financing component related to payment on contracts, as the Company expects that customers will pay for the products within one year. The Company has evaluated the terms of our arrangements and determined that they do not contain significant financing components. Additionally, as all contracts with customers have an expected duration of one year or less, the Company has elected the practical expedient to exclude disclosure of information regarding the aggregate amount and future timing of performance obligations that are unsatisfied or partially satisfied as of the end of the reporting period. The Company provides limited warranties on most of its products against certain manufacturing and other defects. Provisions for estimated expenses related to product warranty are made at the time products are sold. Refer to Note 15,Commitments and Contingencies” for more information.

 

The following table summarizes total revenue by product category.

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Electronic systems

  $ 57,716     $ 70,062     $ 193,211     $ 213,214  

Mechanical systems

    31,762       37,870       109,922       122,108  

Exhaust

    11,403       14,343       40,592       47,556  

Accessories

    20,333       21,788       68,146       75,635  

Safety

    12,824       12,467       50,299       45,484  

Net sales

  $ 134,038     $ 156,530     $ 462,170     $ 503,997  

 

The following table summarizes total revenue based on geographic location from which the product is shipped:

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

United States

  $ 130,459     $ 154,150     $ 447,206     $ 491,385  

Italy

    3,579       2,380       14,964       12,612  

Net sales

  $ 134,038     $ 156,530     $ 462,170     $ 503,997  

 

 

11.

INCOME TAXES

 

The Company's effective income tax rate is based on expected income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. For interim financial reporting, the Company estimates the annual income tax rate based on projected taxable income for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate. The Company refines the estimates of the year's taxable income as new information becomes available, including actual year-to-date financial results. This continual estimation process often results in a change to the expected effective income tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected income tax rate. Significant judgment is required in determining the effective tax rate and in evaluating tax positions.

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Income tax expense (benefit)

  $ (1,484 )   $ 2,092     $ (320 )   $ 7,756  

Effective tax rate

    19.1 %     73.6 %     (2.2 )%     30.1 %

 

For the 13-week period ended September 29, 2024, the Company's effective tax rate of 19.1% differed from the 21% federal statutory rate primarily due to permanent differences related to changes in fair value of the warrant and earn-out liabilities recognized during the period and the impact of foreign taxes in higher tax rate jurisdictions. For the 13-week period ended October 1, 2023, the Company’s effective tax rate of 73.6% differed from the 21% federal statutory rate primarily due to permanent differences related to changes in the fair value of the warrant and earn-out liabilities recognized during the period. 

 

For the 39-week period ended September 29, 2024, the Company's effective tax rate of -2.2% differed from the 21% federal statutory rate primarily due to permanent differences related to changes in fair value of the warrant and earn-out liabilities recognized during the period, federal research and development tax credits, and the impact of foreign taxes in higher tax rate jurisdictions. In addition, the Company incurred expenses related to product rationalization that were determined to be significant and infrequent in nature; therefore, the full tax benefit of these expenses was recorded during the year as a discrete adjustment. For the 39-week period ended October 1, 2023, the Company’s effective tax rate of 30.1% differed from the 21% federal statutory rate primarily due to permanent differences related to changes in the fair value of the warrant and earn-out liabilities recognized during the period. 

 

18

HOLLEY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)
   
 

12.

EARNINGS PER SHARE

 

The following table sets forth the calculation of basic and diluted earnings per share:

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Numerator:

                               

Net income (loss)

  $ (6,288 )   $ 752     $ 14,547     $ 17,978  

Denominator:

                               

Weighted average common shares outstanding - basic

    118,694,139       117,397,069       118,345,442       117,256,959  

Dilutive effect of potential common shares from RSUs

          1,848,887       740,025       862,542  

Dilutive effect of potential common shares from PSUs

                68,101        

Weighted average common shares outstanding - diluted

    118,694,139       119,245,956       119,153,568       118,119,501  

Earnings per share:

                               

Basic

  $ (0.05 )   $ 0.01     $ 0.12     $ 0.15  

Diluted

  $ (0.05 )   $ 0.01     $ 0.12     $ 0.15  

 

The following outstanding shares of Common Stock equivalents were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive. Warrants to purchase shares of Common Stock having an exercise price greater than the average share market price are excluded from the calculation of diluted earnings per share. 

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Anti-dilutive shares excluded from calculation of diluted EPS:

                               

Warrants

    14,633,311       14,633,311       14,633,311       14,633,311  

Stock options

    454,064       922,228       454,064       922,228  

Restricted stock units

    557,828       175,783       557,828       175,783  

Performance stock units

    2,087,400       2,177,462       2,087,400       2,177,462  

Unvested Earn-Out Shares

    1,093,750       1,093,750       1,093,750       1,093,750  

Total anti-dilutive shares

    18,826,353       19,002,534       18,826,353       19,002,534  

  

 

13.

EQUITY-BASED COMPENSATION PLANS [OPEN]

 

In 2021, the Company adopted the 2021 Omnibus Incentive Plan (the “2021 Plan”), under which awards, including stock options, restricted stock units ("RSUs") and performance stock units ("PSUs") may be granted to employees and non-employee directors. The 2021 Plan authorized 8,850,000 shares of Common Stock to be available for award grants. As of September 29, 2024, 4,685,932 shares of Common Stock remained available for future issuance under the 2021 Plan. On June 6, 2023, the Company granted 1,000,000 RSUs and 1,520,000 PSUs to its new President and Chief Executive Officer. These awards were granted outside of the 2021 Plan as employment inducement awards and did not require shareholder approval under the rules of the NYSE or otherwise. 

 

Equity-based compensation expense included the following components:

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Restricted stock units

  $ 944     $ 1,331     $ 2,686     $ 3,146  

Performance stock units

    491       1,322       1,376       1,696  

Stock options

    86       317       221       328  

 

All equity-based compensation expenses are recorded in selling, general and administrative costs in the condensed consolidated statements of comprehensive income.

 

19

HOLLEY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)
 

Restricted Stock Awards

 

RSUs and PSUs are collectively referred to as "Restricted Stock Awards". The Compensation Committee has awarded RSUs to select employees and non-employee directors and has awarded PSUs to select employees. The RSUs vest ratably over one to four years of continued employment. The grant date fair value of a time-based award or a performance-based award without a market condition is equal to the market price of Common Stock on the grant date and is recognized over the requisite service period. The grant date fair value of a performance-based award with a market condition is determined using a Monte Carlo simulation and is recognized over the requisite service period. On  September 29, 2024, there was $7,887 of unrecognized compensation cost related to unvested Restricted Stock Awards that is expected to be recognized over a remaining weighted average period of 1.9 years.

 

The weighted-average grant-date fair value of Restricted Stock Awards granted during the 39-week periods ended September 29, 2024 and October 1, 2023, was $3.83 and $2.76, respectively. The fair value of Restricted Stock Awards vested and converted to shares of Common Stock during the 39-week periods ended September 29, 2024 and October 1, 2023, was $5,190 and $685, respectively.

 

The following table summarizes Restricted Stock Award for the 39-week period ended September 29, 2024:

 

   

Unvested Restricted Stock Awards

 
           

Weighted Average

 
   

Number of RSAs

   

Grant Date Fair Value

 

Balance on December 31, 2023

    4,904,801     $ 2.86  

Granted

    1,504,665       3.83  

Vested

    (1,356,007 )     3.04  

Forfeited

    (713,838 )     3.39  

Balance on September 29, 2024

    4,339,621     $ 3.14  

 

Performance-based Restricted Stock Units

 

The PSUs granted under the 2021 Plan represent shares of Common Stock that are potentially issuable in the future based on a combination of performance and service requirements. On March 4, 2024, the Company granted 340,895 PSUs under the 2021 Plan to key employees with a grant date fair value of $4.22 and on March 18, 2024, the Company granted an additional 26,020 PSUs with a grant date fair value of $4.25. On April 1, the Company granted 5,654 PSUs with a grant date fair value of $4.49; on April 8, the Company granted 30,544 PSUs with a grant date fair value of $4.44; on April 15, the Company granted 36,144 PSUs with a grant date fair value of $4.15; on April 29, the Company granted 28,741 PSUs with a grant date fair value of $4.05; on May 13, the Company granted 14,138 PSUs with a grant date fair value of $3.93; on July 22, the Company granted 25,195 PSUs with a grant date fair value of $3.67; and on August 19, the Company granted 1,965 PSUs with a grant date fair value of $3.09.  The PSUs granted to employees were based on salary and include annual net sales and adjusted EBITDA growth targets with threshold and stretch goals. The awards vest ratably over three years, subject to the employee’s continuous employment through the vesting date and the level of performance achieved. The number of PSUs granted reflects the target number able to be earned under a given award. Non-vested PSU compensation expense is based on the most recent performance assumption available and is adjusted as assumptions change. The fair value of a PSU at the grant date is equal to the market price of Common Stock on the grant date. The cost estimates for PSU grants represent initial target awards until the Company can reasonably forecast the financial performance of each PSU award grant. The actual number of shares of Common Stock to be issued at the end of each performance period will range from 0% to 150% of the initial target awards.

 

Stock Options

 

Stock option grants have an exercise price at least equal to the market value of the underlying Common Stock on the date of grant, have ten-year terms, and vest ratably over three years of continued employment. In general, vested options expire if not exercised within 90 days of termination of service. Compensation expense for stock options is recorded based on straight-line amortization of the grant date fair value over the requisite service period. As of September 29, 2024, there was $120 of unrecognized compensation cost related to unvested stock options that is expected to be recognized over a remaining weighted-average period of 0.4 years.

 

20

HOLLEY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)
 

The following table summarizes stock option activity for the 39-week period ended September 29, 2024:

 

                   

Weighted Average

 
           

Weighted

   

Remaining

 
   

Number of

   

Average

   

Contractual

 
   

Stock Options

   

Exercise Price

   

Term (years)

 

Options outstanding on December 31, 2023

    886,046     $ 10.97          

Forfeited

    (134,066 )     11.03          

Expired

    (297,916 )     10.90          

Options outstanding on September 29, 2024

    454,064     $ 11.01       6.87  

Options exercisable on September 29, 2024

    302,705     $ 11.01       7.13  

 

 

14.

LEASE COMMITMENTS

 

The Company leases retail stores, manufacturing, distribution, engineering, and research and development facilities, office space, equipment, and automobiles under operating lease agreements. Leases have remaining lease terms of one to 10 years, inclusive of renewal options that the Company is reasonably certain to exercise.

 

The following table summarizes operating lease assets and obligations, and provides information associated with the measurement of operating lease obligations.

 

   

As of

 
   

September 29, 2024

   

December 31, 2023

 

Assets:

               

Operating right of use assets

  $ 30,911     $ 29,250  

Liabilities:

               

Current operating lease liabilities - Accrued liabilities

  $ 4,302     $ 4,948  

Long-term operating lease liabilities

    27,759       25,177  

Total lease liabilities

  $ 32,061     $ 30,125  

Lease term and discount rate

               

Weighted average remaining lease term (in years)

    6.7       7.2  

Weighted average discount rate

    6.29 %     6.21 %

 

The following summarizes the components of operating lease expense and provides supplemental cash flow information for operating leases:

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Components of lease expense:

                               

Operating lease expense

  $ 1,840     $ 1,630     $ 5,346     $ 4,923  

Short-term lease expense

    510       521       1,214       1,499  

Variable lease expense

    68       88       254       257  

Total lease expense

  $ 2,418     $ 2,239     $ 6,814     $ 6,679  

Supplemental cash flow information related to leases:

                               

Cash paid for amounts included in measurement of operating lease liabilities

  $ 1,613     $ 1,720     $ 5,280     $ 3,471  

Right-of-use assets obtained in exchange for new operating lease liabilities

    2,582       2,354       6,958       2,354  

Decapitalization of right-of-use assets upon lease termination or modification

    14       154       1,374       154  

 

21

HOLLEY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)
 

The following table summarizes the maturities of the Company's operating lease liabilities as of September 29, 2024:

 

2024 (excluding the thirty-nine weeks ended September 29, 2024)

  $ 1,601  

2025

    6,363  

2026

    5,972  

2027

    5,992  

2028

    5,562  

Thereafter

    14,157  

Total lease payments

    39,647  

Less imputed interest

    (7,586 )

Present value of lease liabilities

  $ 32,061  

 

 

15.

COMMITMENTS AND CONTINGENCIES

 

Litigation 

 

The Company is a party to various lawsuits and claims in the normal course of business, as well as the putative securities class action described below. While the lawsuits and claims against the Company cannot be predicted with certainty, management believes that the ultimate resolution of such matters will not have a material effect on the consolidated financial position or liquidity of the Company; however, in light of the inherent uncertainties involved in such lawsuits and claims, some of which  may be beyond the Company’s control, an adverse outcome in one or more of these matters could be material to the Company’s results of operations or cash flows for any particular reporting period. The Company has established loss provision for matters in which losses are probable and can be reasonably estimated. Although management will continue to reassess the estimated liability based on future developments, an objective assessment of such claims may not always be predictive of the outcome and actual results may vary from current estimates.

 

A putative securities class action was filed on  November 6, 2023, against the Company, Tom Tomlinson (the Company’s former Director, President, and Chief Executive Officer), and Dominic Bardos (the Company’s former Chief Financial Officer) in the United States District Court for the Western District of Kentucky (the “Complaint”) and is captioned City of Fort Lauderdale General Employees’ Retirement System v. Holley, Inc., f/k/a Empower LTD., Tom Tomlinson, and Dominic Bardos, Civil Action No. 1:23-cv-148-S.

 

On  February 26, 2024, the court appointed City of Fort Lauderdale General Employees’ Retirement System to serve as lead plaintiff to prosecute claims on behalf of a proposed class of stockholders who purchased or otherwise acquired Holley securities between  July 21, 2021 and  February 6, 2023. On April 26, 2024, lead plaintiff filed an amended complaint, adding Vinod Nimmagadda (the Company’s Executive Vice President of Corporate Development and New Ventures) as a defendant. Lead plaintiff alleges that statements made regarding the Company’s business, operations, and prospects violated Sections 10(b), Section 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 and seeks class certification, damages, interest, attorneys’ fees, and other relief. The Company filed a motion to dismiss on June 28, 2024.

 

Due to the early stage of this proceeding, we cannot reasonably estimate the potential range of loss, if any. The Company disputes the allegations and intends to vigorously defend against them.

 

22

HOLLEY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)
 

Product Warranties

 

The Company generally warrants its products against certain manufacturing and other defects. These product warranties are provided for specific periods of time depending on the nature of the product. The accrued product warranty costs are based primarily on historical experience of actual warranty claims and are recorded at the time of the sale.

 

The following table provides the changes in the Company's accrual for product warranties, which is classified as a component of accrued liabilities in the condensed consolidated balance sheets.

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Beginning balance

  $ 6,046     $ 3,876     $ 3,325     $ 3,584  

Accrued for current year warranty claims

    2,542       3,005       9,289       9,472  

Settlement of warranty claims

    (2,400 )     (2,857 )     (6,426 )     (9,032 )

Ending balance

  $ 6,188     $ 4,024     $ 6,188     $ 4,024  

 

Employee Savings Plans 

 

The Company has a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code that covers United States-based employees.United States-based eligible employees may contribute up to the current statutory limits under the Internal Revenue Service regulations. Holley matches employee contributions to the 401(k) Plan up to 3.5% each pay period, and an additional discretionary match of up to 1.5% is made based on company performance targets. The Company also has a defined-contribution saving plan for Canada-based employees. Canada-based eligible employees may contribute up to the current statutory limits for a Registered Retirement Savings Plan. Holley matches employee contributions to the Group Savings Plan up to 3.0% each pay period, and an additional discretionary match of up to 1.5% is made based on company performance targets.  

 

During the 13-week periods ended September 29, 2024 and October 1, 2023, the Company made matching contributions under the savings plans totaling $39 and $562, respectively. During the 39-week periods ended September 29, 2024 and October 1, 2023, the Company made matching contributions under the savings plans totaling $1,168 and $1,702, respectively. The decrease in the Company made matching contributions during the 13-week period ended September 29, 2024 is due to the Company's suspension of the 401(k) match.

 

 

23

   
 
 

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.

 

Unless the context requires otherwise, references to Holley, we, us, our and the Company in this section are to the business and operations of Holley Inc. and its subsidiaries unless the context otherwise indicates. The following discussion and analysis should be read in conjunction with Holleys condensed consolidated financial statements and related notes thereto included in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties, and assumptions that could cause Holleys actual results to differ materially from managements expectations. Factors that could cause such differences are discussed herein and under the caption, Cautionary Note Regarding Forward-Looking Statements.

 

Overview

 

We are a leading designer, marketer, and manufacturer of high performance automotive aftermarket products serving car and truck enthusiasts, with sales, processing, and distribution facilities reaching most major markets in the United States, Canada, Europe and China. We design, market, manufacture and distribute a diversified line of performance automotive products including fuel injection systems, tuners, exhaust products, carburetors, safety equipment and various other performance automotive products. Our products are designed to enhance street, off-road, recreational and competitive vehicle performance and safety. 

 

Innovation is at the core of our business and growth strategy. We have a history of developing innovative products, including new products in existing product families, product line expansions, and accessories, as well as products that bring us into new categories. We have thoughtfully expanded our product portfolio over time to adapt to consumer needs.

 

In addition, we have historically used strategic acquisitions to (i) expand our brand portfolio, (ii) enter new product categories and consumer segments, (iii) increase direct-to-consumer scale and connection, (iv) expand share in current product categories and (v) realize value-enhancing revenue and cost synergies. While we believe our business is positioned for continued organic growth, we intend to continue evaluating opportunities for strategic acquisitions that would complement our current business and expand our addressable target market.

 

Factors Affecting our Performance

 

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed above, under the caption, "Cautionary Note Regarding Forward-Looking Statements," in this Quarterly Report on Form 10-Q, under the caption, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 14, 2024, and in our subsequent filings with the SEC.

 

Business Environment

 

Our business and results of operations, financial condition, and liquidity are impacted by broad economic conditions, as well as by geopolitical events, including the conflict in Ukraine, the conflict in the Middle East, and the possible expansion of such conflicts and potential geopolitical consequences. Our business is impacted by various economic factors that affect both consumers and the automotive industry, including by not limited to inflation, fuel costs, wage rates, supply chain disruptions, hiring, and other economic conditions. In response to inflationary impacts and supply chain disruptions, we have attempted to minimize potential adverse impacts on our business with cost savings initiatives, price increases to customers, and increased attention to maintaining appropriate inventory levels in the distribution channel. Our profitability has been, and may continue to be, adversely affected by constrained consumer demand, a shift in sales to lower-margin products, and demands on our performance that increase our costs. Should the ongoing macroeconomic conditions not improve, or worsen, or if our attempt to mitigate the impact on our supply chain, operations and costs is not successful, our business, results of operations and financial condition may be adversely affected.

 

Key Components of Results of Operations

 

Net Sales

 

The principal activity from which we generate sales is the designing, marketing, manufacturing and distribution of performance after-market automotive parts for our end consumers. Sales are displayed net of rebates and sales returns allowances. Sales returns are recorded as a charge against gross sales in the period in which the related sales are recognized.

 

 

Cost of Goods Sold

 

Cost of goods sold consists primarily of the cost of purchased parts and manufactured products, including materials and direct labor costs. In addition, warranty, incoming shipping and handling and inspection and repair costs are also included within costs of goods sold. Reductions in the cost of inventory to its net realizable value are also a component of cost of goods sold.

 

Selling, General, and Administrative

 

Selling, general, and administrative costs consist of payroll and related personnel expenses, IT and office services, office rent expense and professional services. In addition, self-insurance, advertising, research and development, outgoing shipping costs, pre-production and start-up costs are also included within selling, general, and administrative. 

 

Restructuring Costs

 

Restructuring costs include charges attributable to operational restructuring and integration activities, including professional and consulting services; termination related benefits; facilities relocation; and executive transition costs. 

 

Interest Expense

 

Interest expense consists of interest due on the indebtedness under our credit facilities. Interest is based on SOFR or the base rate, at the Company's election, plus the applicable margin rate. As of September 29, 2024, $564.2 million was outstanding under our Credit Agreement.

 

 

Results of Operations

 

13-Week Period Ended September 29, 2024 Compared With 13-Week Period Ended October 1, 2023

 

The table below presents Holley’s results of operations for the 13-week periods ended September 29, 2024 and October 1, 2023 (dollars in thousands):

 

   

For the thirteen weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

Change ($)

   

Change (%)

 

Net sales

  $ 134,038     $ 156,530     $ (22,492 )     (14.4 )%

Cost of goods sold

    81,732       98,156       (16,424 )     (16.7 )%

Gross profit

    52,306       58,374       (6,068 )     (10.4 )%

Selling, general, and administrative

    30,109       28,880       1,229       4.3 %

Research and development costs

    4,620       6,100       (1,480 )     (24.3 )%

Amortization of intangible assets

    3,436       3,687       (251 )     (6.8 )%

Restructuring costs

    954       415       539       129.9 %

Write-down of assets held-for-sale

    7,505             7,505       100.0 %

Other operating expense

    119       (28 )     147       n/a  

Operating income

    5,563       19,320       (13,757 )     (71.2 )%

Change in fair value of warrant liability

    (1,041 )     2,064       (3,105 )     n/a  

Change in fair value of earn-out liability

    (634 )     700       (1,334 )     n/a  

Interest expense

    15,010       13,712       1,298       9.5 %

Income (loss) before income taxes

    (7,772 )     2,844       (10,616 )     (373.3 )%

Income tax expense (benefit)

    (1,484 )     2,092       (3,576 )     (170.9 )%

Net income (loss)

    (6,288 )     752       (7,040 )     (936.2 )%

Foreign currency translation adjustment

    386       (176 )     562       (319.3 )%

Total comprehensive income (loss)

  $ (5,902 )   $ 576     $ (6,478 )     (1,124.7 )%

 

Net Sales

 

Net sales for the 13-week period ended September 29, 2024 decreased $22.5 million, or 14.4%, to $134.0 million, as compared to $156.5 million for the 13-week period ended October 1, 2023. Lower sales volume resulted in a decrease of approximately $24.4 million, offset partially by improved price realization of approximately $1.9 million compared to the prior year period. Major categories driving the comparable year-over-year results include a decrease in electronic systems sales of $12.3 million (17.6% category decline), a decrease in exhaust sales of $2.9 million (20.5% category decline), a decrease in mechanical systems sales of $6.1 million (16.1% category decline) and a decrease in accessories sales of $1.5 million (6.7% category decline).  Partially offset by an increase in safety sales of $0.3 million (2.9% category incline). 

 

 

Cost of Goods Sold

 

Cost of goods sold for the 13-week period ended September 29, 2024 decreased $16.4 million, or 16.7%, to $81.7 million, as compared to $98.2 million for the 13-week period ended October 1, 2023. The decrease in cost of goods sold in 2024, a period in which product sales decreased 14.4%, was impacted by lower freight costs and product mix. 

 

Gross Profit and Gross Margin

 

Gross profit for the 13-week period ended September 29, 2024  decreased  $6.1 million , or 10.4% , to $52.3 million , as compared to $58.4 million  for the 13-week period ended October 1, 2023 . Gross margin for the 13-week period ended September 29, 2024  was  39.0%  as compared to a gross margin of 37.3%  for the 13-week period ended October 1, 2023 . Gross profit margin slightly increased due to our continued efforts to improve operational efficiencies primarily through a combination of  improvements in freight costs, reduced purchasing price variance, warranty improvements and lower write-downs from E&O.

 

Selling, General and Administrative

 

Selling, general and administrative costs for the 13-week period ended September 29, 2024 increased $1.2 million, or 4.3%, to $30.1 million, as compared to $28.9 million for the 13-week period ended October 1, 2023. Selling, general and administrative costs expressed as a percentage of sales increased to 22.5% for the 13-week period ended September 29, 2024 compared to 18.5% for the 13-week period ended October 1, 2023. The increase in selling, general and administrative costs was driven by $1.0 million of transformation related non-recurring advisory costs to execute on the strategic transformation initiatives.

 

Research and Development Costs

 

Research and development costs for the 13-week period ended September 29, 2024 decreased to $4.6 million as compared to $6.1 million for the 13-week period ended October 1, 2023, primarily due to headcount reductions, reflecting the implementation of resource allocation efforts in support of portfolio development optimization. Further, the decrease is due to the Company's realignment of employees' roles and responsibilities from selling, general and administrative to research and development.

 

Amortization and Impairment of Intangible Assets

 

Amortization of intangible assets was $3.4 million for the 13-week period ended September 29, 2024 compared to $3.7 million for the 13-week period ended October 1, 2023. 

 

Restructuring Costs

 

Restructuring costs for the 13-week period ended September 29, 2024 increased by $0.5 million to $1.0 million, as compared to $0.4 million for the 13-week period ended October 1, 2023, reflecting restructuring and integration activities associated with our implementation of resource allocation efforts in support of portfolio development optimization.

 

Write-Down of Assets Held-For-Sale

 

Write-down of assets held-for-sale for the 13-week period ended September 29, 2024 relates to the anticipated sale of Detroit Speed Engineering, reflecting a $7.5 million loss after adjusting the assets from carrying value to fair value. For the 13-week period ended September 29, 2024, the Company entered into a definitive purchase agreement to sell Detroit Speed Engineering, and as such in accordance with U.S. GAAP, the Company recognized a write-down of these assets. The sale is expected to close in the fourth quarter of 2024.

 

Operating Income

 

As a result of factors described above, operating income for the 13-week period ended September 29, 2024 decreased $13.8 million, or 71.2%, to $5.6 million, as compared to $19.3 million for the 13-week period ended October 1, 2023.

 

Change in Fair Value of Warrant Liability

 

For the 13-week period ended September 29, 2024, we recognized a gain of $1.0 million from the change in fair value of the warrant liability. For the 13-week period ended October 1, 2023, we recognized a loss of $2.1 million from the change in fair value of the warrant liability, due to our stock price. The warrant liability reflects the fair value of the Warrants issued in connection with the Business Combination.

 

Change in Fair Value of Earn-Out Liability

 

For the 13-week period ended September 29, 2024, we recognized a gain of $0.6 million from the change in fair value of the earn-out liability. For the 13-week period ended October 1, 2023, we recognized a loss of $0.7 million, from the change in fair value of the earn-out liability, due to our stock price. The earn-out liability reflects the fair value of the unvested Earn-Out Shares resulting from the Business Combination. 

 

 

Interest Expense

 

Interest expense for the 13-week period ended September 29, 2024 increased $1.3 million, or 9.5%, to $15.0 million, as compared to $13.7 million for the 13-week period ended October 1, 2023, reflecting the negative impact of the interest rate collar. The Company recognized $2.2 million of interest expense and $1.1 million in interest income related to the interest rate collar for 13-week periods ended September 29, 2024 and October 1, 2023, respectively.

 

Income (Loss) before Income Taxes

 

As a result of factors described above, we recognized $7.8 million of loss before income taxes for the 13-week period ended September 29, 2024, as compared to income before income taxes of $2.8 million for the 13-week period ended October 1, 2023.

 

Income Tax Expense (Benefit)

 

Income tax benefit for the 13-week period ended September 29, 2024 was $1.5 million, as compared to income tax expense of $2.1 million for the 13-week period ended October 1, 2023. Our effective tax rate for the 13-week period ended September 29, 2024 was 19.1%. The difference between the effective tax rate for the 13-week period ended September 29, 2024 and the federal statutory rate in 2024 was due to permanent differences related to changes in fair value of the warrant and earn-out liabilities recognized during the period and the impact of foreign taxes in higher tax rate jurisdictions. The effective tax rate for the 13-week period ended October 1, 2023 was 73.6%. The difference between the effective tax rate and the federal statutory rate in 2023 was primarily due to permanent differences resulting from the change in fair value of the warrant and earn-out liabilities.

 

Net Income (Loss) and Total Comprehensive Income (Loss)

 

As a result of factors described above, we recognized net loss of $6.3 million for the 13-week period ended September 29, 2024, as compared to net income of $0.8 million for the 13-week period ended October 1, 2023. Additionally, we recognized total comprehensive loss of $5.9 million for the 13-week period ended September 29, 2024, as compared to total comprehensive income of $0.6 million for the 13-week period ended October 1, 2023. Comprehensive income includes the effect of foreign currency translation adjustments.

 

39-Week Period Ended September 29, 2024 Compared With 39-Week Period Ended October 1, 2023

 

The table below presents Holley’s results of operations for the 39-week periods ended September 29, 2024 and October 1, 2023 (dollars in thousands):

 

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

Change ($)

   

Change (%)

 

Net sales

  $ 462,170     $ 503,997     $ (41,827 )     (8.3 )%

Cost of goods sold

    287,512       308,162       (20,650 )     (6.7 )%

Gross profit

    174,658       195,835       (21,177 )     (10.8 )%

Selling, general, and administrative

    97,675       87,998       9,677       11.0 %

Research and development costs

    13,743       18,935       (5,192 )     (27.4 )%

Amortization of intangible assets

    10,307       11,040       (733 )     (6.6 )%

Restructuring costs

    1,566       2,106       (540 )     (25.6 )%

Write-down of assets held-for-sale

    7,505             7,505       100.0 %

Other operating expense

    213       508       (295 )     n/a  

Operating income

    43,649       75,248       (31,599 )     (42.0 )%

Change in fair value of warrant liability

    (7,570 )     5,516       (13,086 )     n/a  

Change in fair value of earn-out liability

    (2,341 )     2,089       (4,430 )     n/a  

Loss on early extinguishment of debt

    141             141       n/a  

Interest expense

    39,192       41,909       (2,717 )     (6.5 )%

Income before income taxes

    14,227       25,734       (11,507 )     (44.7 )%

Income tax expense (benefit)

    (320 )     7,756       (8,076 )     (104.1 )%

Net income

    14,547       17,978       (3,431 )     (19.1 )%

Foreign currency translation adjustment

    244       (103 )     347       (336.9 )%

Total comprehensive income

  $ 14,791     $ 17,875     $ (3,084 )     (17.3 )%

 

Net Sales

 

Net sales for the 39-week period ended September 29, 2024 decreased $41.8 million, or 8.3%, to $462.1 million, as compared to $504.0 million for the 39-week period ended October 1, 2023. Lower sales volume resulted in a decrease of approximately $50.2 million offset partially by improved price realization of approximately $8.3 million compared to the prior year period. Major categories driving the comparable year-over-year results include a decrease in mechanical systems sales of $12.2 million (10.0% category decline), a decrease in electronic systems sales of $20.0 million (9.4% category decline), a decrease in exhaust sales of $7.0 million (14.6% category decline), and a decrease in accessories sales of $7.4 million (9.9% category decline). An increase in safety sales of $4.8 million (10.6% category incline) partially offset the decrease in electronic systems, exhaust and accessories sales.

 

 

Cost of Goods Sold

 

Cost of goods sold for the 39-week period ended September 29, 2024 decreased $20.6 million, or 6.7%, to $287.5 million, as compared to $308.1 million for the 39-week period ended October 1, 2023. The decrease in cost of goods sold in 2024, resulted from a 8.3% decrease in product sales and lower freight costs, partially offset by $8.8 million of strategic product rationalization charge that is part of a portfolio transformation aimed at eliminating unprofitable or slow-moving stock keeping units ("SKUs").  

 

Gross Profit and Gross Margin

 

Gross profit for the  39-week period ended September 29, 2024 decreased  $21.1 million , or  10.8% , to  $174.7 million , as compared to  $195.8 million  for the 39-week period ended October 1, 2023 . Gross margin for the  39-week period ended September 29, 2024 was  37.8%  as compared to a gross margin of  38.9%  for the 39-week period ended October 1, 2023 . Gross profit margin declined primarily due to a strategic product rationalization charge driven by initiatives, which was partially offset by improvements in freight costs, purchasing price variance, warranty improvements and lower write-downs from E&O.  After adjusting for the $8.8 million of a strategic product rationalization charge , Adjusted Gross Margin for the year was  39.7% for the  39-week period ended September 29, 2024 compared to  38.7%  for the 39-week period ended October 1, 2023
 

Selling, General and Administrative

 

Selling, general and administrative costs for the 39-week period ended September 29, 2024 increased $9.6 million, or 11.0%, to $97.7 million, as compared to $88.0 million for the 39-week period ended October 1, 2023. Selling, general and administrative costs expressed as a percentage of sales increased to 21.1% for the 39-week period ended September 29, 2024 compared to 17.5% for the 39-week period ended October 1, 2023. The increase in selling, general and administrative costs was driven by a $2 million reserve related to litigation settlements, a $3.0 million increase in wages, and $4.5 million of costs incurred for advisory services related to supporting transformation initiatives. The increase in wages is offset by a reduction in research and development costs due to the Company's realignment of employees' roles and responsibilities from selling, general and administrative to research and development.

 

Research and Development Costs

 

Research and development costs for the 39-week period ended September 29, 2024 decreased to $13.7 million as compared to $18.9 million for the 39-week period ended October 1, 2023, primarily due to headcount reductions, reflecting the implementation of resource allocation efforts in support of portfolio development optimization. Further, the decrease is due to the Company's realignment of employees' roles and responsibilities from selling, general and administrative to research and development.

 

Amortization and Impairment of Intangible Assets

 

Amortization of intangible assets was $10.3 million for the 39-week period ended September 29, 2024 compared to $11.0 million for the 39-week period ended October 1, 2023

 

Restructuring Costs

 

Restructuring costs for the 39-week period ended September 29, 2024 decreased by $0.5 million to $1.6 million, as compared to $2.1 million for the 39-week period ended October 1, 2023, reflecting a reduction in restructuring and integration activities associated with acquisitions.

 

Write-Down of Assets Held-For-Sale

 

Write-down of assets held-for-sale for the 39-week period ended September 29, 2024 relates to the anticipated sale of Detroit Speed Engineering, reflecting a $7.5 million loss after adjusting the assets from carrying value to fair value. For the 39-week period ended September 29, 2024, the Company entered into a definitive purchase agreement to sell Detroit Speed Engineering, and as such in accordance with U.S. GAAP, the Company recognized a write-down of these assets. The sale is expected to be completed in the fourth quarter of 2024.

 

Operating Income

 

As a result of factors described above, operating income for the 39-week period ended September 29, 2024 decreased $31.6 million, or 42.0%, to $43.7 million, as compared to $75.2 million for the 39-week period ended October 1, 2023.

 

Change in Fair Value of Warrant Liability

 

For the 39-week period ended September 29, 2024, we recognized a gain of $7.6 million from the change in fair value of the warrant liability. For the 39-week period ended October 1, 2023, we recognized a loss of $5.5 million from the change in fair value of the warrant liability. The warrant liability reflects the fair value of the Warrants issued in connection with the Business Combination.

 

Change in Fair Value of Earn-Out Liability

 

For the 39-week period ended September 29, 2024, we recognized a gain of $2.3 million from the change in fair value of the earn-out liability. For the 39-week period ended October 1, 2023, we recognized a loss of $2.1 million, from the change in fair value of the earn-out liability. The earn-out liability reflects the fair value of the unvested Earn-Out Shares resulting from the Business Combination. 

 

 

Interest Expense

 

Interest expense for the 39-week period ended September 29, 2024 decreased $2.7 million, or 6.5%, to $39.2 million, as compared to $41.9 million for the 39-week period ended October 1, 2023, reflecting lower outstanding debt balances, offset in part by a higher effective interest rate on outstanding debt. The Company recognized $0.2 million and $3.2 million of interest income related to the interest rate collar for 39-week periods ended September 29, 2024 and October 1, 2023, respectively.

 

Income before Income Taxes

 

As a result of factors described above, we recognized $14.2 million of income before income taxes for the 39-week period ended September 29, 2024, as compared to income before income taxes of $25.7 million for the 39-week period ended October 1, 2023.

 

Income Tax Expense (Benefit)

 

Income tax benefit for the 39-week period ended September 29, 2024 was $0.3 million, as compared to income tax expense of $7.8 million for the 39-week period ended October 1, 2023. Our effective tax rate for the 39-week period ended September 29, 2024 was -2.2%. The difference between the effective tax rate for the 39-week period ended September 29, 2024 and the federal statutory rate in 2024 was due to permanent differences related to changes in fair value of the warrant and earn-out liabilities recognized during the period, federal research and development tax credits, and the impact of foreign taxes in higher tax rate jurisdictions. In addition, the company incurred expenses related to strategic product rationalization charge that were determined to be significant and infrequent in nature, therefore, the full tax benefit of these expenses was recorded during the year as a discrete adjustment. The effective tax rate for the 39-week period ended October 1, 2023 was 30.1%. The difference between the effective tax rate and the federal statutory rate in 2023 was primarily due to permanent differences resulting from the change in fair value of the warrant and earn-out liabilities.

 

Net Income and Total Comprehensive Income 

 

As a result of factors described above, we recognized net income of $14.5 million for the 39-week period ended September 29, 2024, as compared to net income of $18.0 million for the 39-week period ended October 1, 2023. Additionally, we recognized total comprehensive income of $14.8 million for the 39-week period ended September 29, 2024, as compared to total comprehensive income of $17.9 million for the 39-week period ended October 1, 2023. Comprehensive income includes the effect of foreign currency translation adjustments.

 

Non-GAAP Financial Measures

 

We present certain information with respect to EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit, Adjusted Gross Margin, Adjusted Net Income, Adjusted Diluted EPS, and Free Cash Flow as supplemental measures of our operating performance and believe that such non-GAAP financial measures are useful to investors in evaluating our financial performance and in comparing our financial results between periods because they exclude the impact of certain items that we do not consider indicative of our ongoing operating performance. We believe that the presentation of these non-GAAP financial measures enhances the usefulness of our financial information by presenting measures that management uses internally to establish forecasts, budgets and operational goals to manage and monitor our business. We believe that these non-GAAP financial measures help to depict a more realistic representation of the performance of our underlying business, enabling us to evaluate and plan more effectively for the future. 

 

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit, Adjusted Gross Margin, Adjusted Net Income, Adjusted Diluted EPS, and Free Cash Flow are not prepared in accordance with 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 our financial performance. These metrics should not be considered as alternatives to net income, gross profit, net cash provided by operating activities, or any other performance measures, as applicable, derived in accordance with GAAP.

 

 

Adjusted EBITDA

 

We define EBITDA as earnings before depreciation, amortization of intangible assets, interest expense, and income tax expense. We define Adjusted EBITDA as EBITDA adjusted to exclude, to the extent applicable, restructuring costs, which includes operational restructuring and integration activities, termination related benefits, facilities relocation, and executive transition costs; changes in the fair value of the warrant liability; changes in the fair value of the earn-out liability; equity-based compensation expense; strategic product rationalization charges primarily due to  initiatives that are part of a portfolio transformation aimed at eliminating unprofitable or slow-moving SKUs; loss on sale of assets; gain or loss on the early extinguishment of debt; notable items that we do not believe are reflective of our underlying operating performance, including litigation settlements and certain costs incurred for advisory services related to identifying performance initiatives; and other expenses or gains, which includes gains or losses from disposal of fixed assets, franchise taxes, and gains or losses from foreign currency transactions. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net sales.

 

The following unaudited table presents the reconciliation of net income, the most directly comparable GAAP measure, to EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin for the 13-week and 39-week periods ended September 29, 2024 and October 1, 2023 (dollars in thousands):

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Net income

  $ (6,288 )   $ 752     $ 14,547     $ 17,978  

Adjustments:

                               

Depreciation

    2,231       2,785       7,364       7,738  

Amortization of intangible assets

    3,436       3,687       10,307       11,040  

Interest expense, net

    15,010       13,712       39,192       41,909  

Income tax expense

    (1,484 )     2,092       (320 )     7,756  

EBITDA

    12,905       23,028       71,090       86,421  

Change in fair value of warrant liability

    (1,041 )     2,064       (7,570 )     5,516  

Change in fair value of earn-out liability

    (634 )     700       (2,341 )     2,089  

Equity-based compensation expense

    1,521       2,970       4,283       5,170  

Strategic product rationalization charge

                8,835       (800 )

Write-down of assets held-for-sale

    7,505             7,505        

Loss on early extinguishment of debt

                141        

Restructuring costs

    954       415       1,566       2,106  

Notable items

    785       556       6,479       564  

Other expense

    119       (28 )     213       508  

Adjusted EBITDA

  $ 22,114     $ 29,705     $ 90,201     $ 101,574  

Net sales

  $ 134,038     $ 156,530     $ 462,170     $ 503,997  

Net income margin

    -4.7 %     0.5 %     3.1 %     3.6 %

Adjusted EBITDA Margin

    16.5 %     19.0 %     19.5 %     20.2 %

 

Adjusted Gross Profit and Adjusted Gross Margin

 

We define adjusted gross profit as gross profit excluding strategic product rationalization charges primarily due to initiatives that are part of a portfolio transformation aimed at eliminating unprofitable or slow-moving SKUs. We define Adjusted Gross Margin as Adjusted Gross Profit divided by net sales. 

 

The following unaudited table presents the reconciliation of gross profit, the most directly comparable GAAP measure, to Adjusted Gross Profit and Adjusted Gross Margin for the 13-week and 39-week periods ended September 29, 2024 and October 1, 2023 (dollars in thousands):

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Gross profit

  $ 52,306     $ 58,374       174,658       195,835  

Adjust for: Strategic product rationalization charge

                8,835       (800 )

Adjusted Gross Profit

  $ 52,306     $ 58,374       183,493       195,035  

Net sales

  $ 134,038     $ 156,530     $ 462,170     $ 503,997  

Gross margin

    39.0 %     37.3 %     37.8 %     38.9 %

Adjusted Gross Margin

    39.0 %     37.3 %     39.7 %     38.7 %

 

 

On October 15, 2024, the Company received a comment letter from the Staff of the SEC’s Division of Corporation Finance (the “Staff”) related to our Annual Report on Form 10-K for the year ended December 31, 2023 and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2024. The Staff’s letter included a comment relating to two of our non-GAAP measures, Adjusted EBITDA and Adjusted Gross Profit, seeking an explanation why the adjustment for inventory charges included in each of those measures does not represent costs that are normal operating costs of the business. We are in the process of preparing a response and intend to work with the Staff to address the comment. If the Staff were to object to our continued inclusion of the adjustment for such inventory charges, the “Strategic product rationalization charge” reported above will be removed from our presentation of Adjusted EBITDA and Adjusted Gross Profit and such measures will decrease accordingly.

 

Adjusted Net Income and Adjusted Diluted EPS

 

We define Adjusted Net Income as earnings excluding the after-tax effect of changes in the fair value of the warrant liability, changes in the fair value of the earn-out liability, and gain or loss on the early extinguishment of debt. We define Adjusted Diluted EPS as Adjusted Net Income on a per share basis. Management uses these measures to focus on on-going operations and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present consolidated operating results. We believe that using this information, along with net income and net income per diluted share, provides for a more complete analysis of the results of operations.

 

The following unaudited tables present the reconciliation of net income and net income per diluted share, the most directly comparable GAAP measures, to Adjusted Net Income and Adjusted Diluted EPS for the 13-week and 39-week periods ended September 29, 2024 and October 1, 2023 (dollars in thousands):

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Net income

  $ (6,288 )   $ 752     $ 14,547     $ 17,978  

Special items:

                               

Adjust for: Change in fair value of Warrant liability

    (1,041 )     2,064       (7,570 )     5,516  

Adjust for: Change in fair value of earn-out liability

    (634 )     700       (2,341 )     2,089  

Adjust for: Write-down of assets held-for-sale

    7,505             7,505        

Adjust for: Loss on early extinguishment of debt

                141        

Adjusted Net Income (Loss)

  $ (458 )   $ 3,516     $ 12,282     $ 25,583  

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Net income per diluted share

  $ (0.05 )   $ 0.01     $ 0.12     $ 0.15  

Special items:

                               

Adjust for: Change in fair value of Warrant liability

    (0.01 )     0.02       (0.06 )     0.05  

Adjust for: Change in fair value of earn-out liability

    (0.01 )     0.01       (0.02 )     0.02  

Adjust for: Write-down of assets held-for-sale

    0.06       -       0.06       -  

Adjust for: Loss on early extinguishment of debt

                       

Adjusted Diluted EPS

  $ (0.01 )   $ 0.04     $ 0.10     $ 0.22  

 

We define Free Cash Flow as net cash provided by operating activities minus cash payments for capital expenditures, net of dispositions. Management believes providing Free Cash Flow is useful for investors to understand our performance and results of cash generation after making capital investments required to support ongoing business operations. 

 

The following unaudited table presents the reconciliation of net cash provided by operating activities, the most directly comparable GAAP measure, to Free Cash Flow for the 13-week and 39-week periods ended September 29, 2024 and October 1, 2023 (dollars in thousands):

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Net cash provided by operating activities

  $ (1,748 )   $ 22,480     $ 42,773     $ 56,863  

Capital expenditures

    (1,727 )     (1,679 )     (4,372 )     (4,417 )

Proceeds from the disposal of fixed assets

    1,416       936       1,645       1,292  

Free Cash Flow

  $ (2,059 )   $ 21,737     $ 40,046     $ 53,738  

 

 

Liquidity and Capital Resources

 

Our primary cash needs are to support working capital, capital expenditures, acquisitions, and debt repayments. We have generally financed our historical needs with operating cash flows, capital contributions and borrowings under our credit facilities. These sources of liquidity may be impacted by various factors, including demand for our products, investments made in acquired businesses, plant and equipment and other capital expenditures, and expenditures on general infrastructure and information technology.

 

As of September 29, 2024, the Company had cash of $50.8 million and availability of $122.8 million under its revolving credit facility. The Company has a senior secured revolving credit facility with $125 million in borrowing capacity. As of September 29, 2024, the Company had $2.2 million in letters of credit outstanding under the revolving credit facility. In February 2023, the Company entered into an amendment to its Credit Agreement which, among other things, contains a minimum liquidity financial covenant of $45 million, which includes unrestricted cash and any available borrowing capacity under the revolving credit facility. The amendment also increased the Total Leverage Ratio applicable under the Credit Agreement as of the fiscal quarter ending April 2, 2023, to initially 7.25:1.00, and provides for modified step-down levels for such covenant thereafter through the fiscal quarter ending June 30, 2024. During the 39-week period ended September 29, 2024, the Company successfully exited the Covenant Relief Period.

 

The Company is obligated under various operating leases for facilities, equipment and automobiles with estimated lease payments of approximately $1.6 million, including short term leases, due during the remainder of fiscal year 2024. See Note 14, "Lease Commitments" in the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for additional information related to the Company’s lease obligations.

 

Holley's capital expenditures are primarily related to ongoing maintenance and improvements, including investments related to upgrading and maintaining our information technology systems, tooling for new products, vehicles for product development, and machinery and equipment for operations. We expect capital expenditures in the range of $6 million to $8 million in fiscal year 2024.

 

See Note 6, "Debt" in the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further detail of our credit facility and the timing of principal maturities. As of September 29, 2024, based on the then current weighted average interest rate of 9.1%, expected interest payments associated with outstanding debt totaled approximately $13.1 million for the remainder of fiscal year 2024. 

 

As discussed under “Business Environment” above, although the future impact of supply chain disruptions and inflationary pressures are highly uncertain, we believe that cash generated through our current operating performance, and our operating plans, cash position, and borrowings available under our revolving credit facility, will be sufficient to satisfy our liquidity needs and capital expenditure requirements for the next 12 months and thereafter for the foreseeable future.

 

 

Cash Flows

 

The following table provides a summary of cash flows from operating, investing, and financing activities for the periods presented (dollars in thousands):

 

39-week period ended September 29, 2024 Compared With 39-week period ended October 1, 2023

 

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

 

Cash flows provided by operating activities

  $ 42,773     $ 56,863  

Cash flows used in investing activities

    (2,727 )     (3,125 )

Cash flows used in financing activities

    (30,314 )     (42,998 )

Effect of foreign currency rate fluctuations on cash

    (62 )     (57 )

Net increase in cash and cash equivalents

  $ 9,670     $ 10,683  

 

Operating Activities. Net cash provided by operating activities for the 39-week period ended September 29, 2024 was $42.8 million compared to net cash provided by operating activities of $56.9 million for the 39-week period ended October 1, 2023. Significant changes in the year-over-year change in working capital activity included negative fluctuations in inventories of $23.4 million. Partially offsetting the decrease was a positive fluctuation from accounts payable of $14.4 million. The change in inventory reflects the impact of fluctuations in sales while changes in accounts payable are impacted by the timing of payments.

 

Investing Activities. Cash used in investing activities for the 39-week periods ended September 29, 2024 and October 1, 2023 were $2.7 million and $3.1 million, respectively, due to capital expenditures.

 

Financing Activities. Cash used in financing activities for the 39-week period ended September 29, 2024 was $30.3 million, which primarily reflects $28.8 million in principal payments on long-term debt. The principal payments of long-term debt during the 39-week period ended September 29, 2024 include the repurchase of $25.0 million outstanding principal on the first lien term loan. Cash used in financing activities for the 39-week period ended October 1, 2023 was $43.0 million, which primarily reflects principal payments on long-term debt and deferred financing fees.

 

Critical Accounting Estimates

 

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, sales, expenses and related disclosures. We evaluate our estimates, judgements and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. For a discussion of our critical accounting estimates, refer to the section entitled “Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 14, 2024. For further information see also Note 1, “Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies” in the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. There have been no material changes to the Company’s critical accounting estimates included in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

Recent Accounting Pronouncements

 

For a discussion of Holley’s new or recently adopted accounting pronouncements, see Note 1, “Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies,” in the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Interest Rate Risk. Holley is exposed to market risk in the normal course of business due to the Company’s ongoing investing and financing activities. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. Holley has established policies and procedures governing the Company’s management of market risks and the use of financial instruments to manage exposure to such risks. When appropriate, the Company uses derivative financial instruments to mitigate the risk from its interest rate exposure. The Company's interest rate collar is intended to mitigate some of the effects of increases in interest rates. As of September 29, 2024, a total of $564.2 million of term loan and revolver borrowings were subject to variable interest rates, with a weighted average borrowing rate of 9.1%. A hypothetical 100 basis point increase in interest rates would result in an approximately $0.6 million increase in annual interest expense, while a hypothetical 100 basis point decrease in interest rates would result in an approximately $4.1 million decrease to Holley’s annual interest expense.

 

Credit and other Risks. Holley is exposed to credit risk associated with cash and cash equivalents and trade receivables. As of September 29, 2024, the majority of the Company’s cash and cash equivalents consisted of cash balances in an overnight sweep account where funds are transferred to an interest-bearing deposit account that is insured by the Federal Deposit Insurance Corporation ("FDIC"). The FDIC insures financial institution deposits up to $250 thousand. Holley maintains deposits in certain accounts which exceed the insurance coverage provided on such deposits. The Company does not believe that its cash equivalents present significant credit risks because the counterparties to the instruments consist of major financial institutions. Substantially all trade receivable balances of the business are unsecured. The credit risk with respect to trade receivables is concentrated by the number of significant customers that the Company has in its customer base and a prolonged economic downturn could increase exposure to credit risk on the Company’s trade receivables. To manage exposure to such risks, Holley performs ongoing credit evaluations of the Company’s customers and maintains an allowance for potential credit losses.

 

Exchange Rate Sensitivity. As of September 29, 2024, the Company is exposed to changes in foreign currency exchange rates. While historically this exposure to changes in foreign currency exchange rates has not had a material effect on the Company’s financial condition or results of operations, foreign currency fluctuations could have a material adverse effect on business and results of operations in the future. Historically, Holley’s primary exposure has been related to transactions denominated in the Euro and Canadian dollars. The majority of the Company’s sales, both domestically and internationally, are denominated in U.S. Dollars. Historically, the majority of the Company’s expenses have also been in U.S. Dollars, and we have been somewhat insulated from currency fluctuations. However, Holley may be exposed to greater exchange rate sensitivity in the future. Currently, the Company does not hedge foreign currency exposure; however, the Company may consider strategies to mitigate foreign currency exposure in the future if deemed necessary.

 

Item 4. Controls and Procedures.

 

Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of September 29, 2024 to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

 

 

Part II - Other Information

 

Item 1. Legal Proceedings

 

See Litigation in Note 15 “Commitments and Contingencies” to the Condensed Consolidated Financial Statements, which is incorporated by reference in this Item 1. Legal Proceedings.

 

Item 1A. Risk Factors

 

We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially affect our operations. Factors that could materially affect our actual results, levels of activity, performance or achievements include, but are not limited to, those under the caption “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 14, 2024. Such risks, uncertainties and other factors may cause our actual results, performance, and achievements to be materially different from those expressed or implied by our forward-looking statements. If any of these risks or events occur, our business, financial condition or results of operations may be adversely affected.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

 

Item 5. Other Information

 

Trading Plans

 

During the fiscal quarter ended September 29, 2024, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).

 

 

 

Item 6. Exhibits

 

Exhibit No.

 

Description

2.1

 

Agreement and Plan of Merger, dated as of March 11, 2021, by and among Empower Ltd., Empower Merger Sub I Inc., Empower Merger Sub II LLC and Holley Intermediate Holdings, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the SEC on March 12, 2021).

3.1

 

Certificate of Incorporation of the Company, dated July 16, 2021 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed with the SEC on July 21, 2021).

3.2

 

Amended and Restated By-Laws of the Company, dated August 8, 2023 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed with the SEC on August 9, 2023).

31.1

 

Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act

31.2

 

Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act

32.1

 

Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

 

Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

 

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL Document and include in Exhibit 101)

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Holley Inc.

 

/s/ Jesse Weaver

Jesse Weaver

Chief Financial Officer (Duly Authorized Officer)

 
November 8, 2024

 

37

Exhibit 31.1

 

CERTIFICATIONS

 

I, Matthew Stevenson, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Holley Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

/s/ Matthew Stevenson

Matthew Stevenson

President and Chief Executive Officer

 

November 8, 2024

 

 

Exhibit 31.2

 

CERTIFICATIONS

 

I, Jesse Weaver, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Holley Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

/s/ Jesse Weaver

Jesse Weaver

Chief Financial Officer

 

November 8, 2024

 

 

Exhibit 32.1

 

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

 

In connection with the Quarterly Report of Holley Inc. (the "Company") on Form 10-Q for the period ended September 29, 2024, as filed with the Securities and Exchange Commission (the "Report"), I, Matthew Stevenson, President and Chief Executive Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

/s/ Matthew Stevenson

Matthew Stevenson

President and Chief Executive Officer

 
November 8, 2024

 

 

 

A signed original of this statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

 

 

Exhibit 32.2

 

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

 

In connection with the Quarterly Report of Holley Inc. (the "Company") on Form 10-Q for the period ended September 29, 2024, as filed with the Securities and Exchange Commission (the "Report"), I, Jesse Weaver, Chief Financial Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

/s/ Jesse Weaver

Jesse Weaver

Chief Financial Officer

 
November 8, 2024

 

 

 

A signed original of this statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

 

 
v3.24.3
Document And Entity Information - shares
9 Months Ended
Sep. 29, 2024
Nov. 06, 2024
Document Information [Line Items]    
Entity Central Index Key 0001822928  
Entity Registrant Name Holley Inc.  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2024  
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 29, 2024  
Document Transition Report false  
Entity File Number 001-39599  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 87-1727560  
Entity Address, Address Line One 2445 Nashville Road, Suite B1  
Entity Address, City or Town Bowling Green  
Entity Address, State or Province KY  
Entity Address, Postal Zip Code 42101  
City Area Code 270  
Local Phone Number 782-2900  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company true  
Entity Ex Transition Period false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   119,797,033
Warrant [Member]    
Document Information [Line Items]    
Title of 12(b) Security Warrants to purchase common stock  
Trading Symbol HLLY WS  
Security Exchange Name NYSE  
Common Stock [Member]    
Document Information [Line Items]    
Title of 12(b) Security Common Stock, par value $0.0001  
Trading Symbol HLLY  
Security Exchange Name NYSE  
v3.24.3
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Sep. 29, 2024
Dec. 31, 2023
ASSETS    
Cash and cash equivalents $ 50,751 $ 41,081
Accounts receivable, less allowance for credit losses of $1,970 and $1,577 respectively 44,492 48,360
Inventory 179,285 192,260
Prepaids and other current assets 16,332 15,665
Assets held for sale 7,696 0
Total current assets 298,556 297,366
Property, plant, and equipment, net 42,718 47,206
Goodwill 413,245 419,056
Other intangibles assets, net 398,804 410,465
Right-of-use assets 30,911 29,250
Total assets 1,184,234 1,203,343
LIABILITIES AND STOCKHOLDERS' EQUITY    
Accounts payable 52,738 43,692
Accrued interest 487 455
Accrued liabilities 41,164 42,129
Current portion of long-term debt 7,479 7,461
Total current liabilities 101,868 93,737
Long-term debt, net of current portion 548,905 576,710
Warrant liability 813 8,383
Earn-out liability 1,138 3,479
Deferred taxes 45,008 53,542
Other noncurrent liabilities 27,759 26,341
Total liabilities 725,491 762,192
Commitments and contingencies (Refer to Note 15 - Commitments and Contingencies)
Stockholders' equity:    
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding on September 29, 2024 and December 31, 2023 0 0
Common stock, $0.0001 par value, 550,000,000 shares authorized, 118,703,283 and 117,707,280 shares issued and outstanding on September 29, 2024 and December 31, 2023, respectively 12 12
Additional paid-in capital 376,670 373,869
Accumulated other comprehensive loss (466) (710)
Retained earnings 82,527 67,980
Total stockholders' equity 458,743 441,151
Total liabilities and stockholders' equity $ 1,184,234 $ 1,203,343
v3.24.3
Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($)
$ in Thousands
Sep. 29, 2024
Dec. 31, 2023
Accounts Receivable, Allowance for Credit Loss, Current $ 1,970 $ 1,577
Preferred Stock, Par or Stated Value Per Share (in dollars per share) $ 0.0001 $ 0.0001
Preferred Stock, Shares Authorized (in shares) 5,000,000 5,000,000
Preferred Stock, Shares Issued (in shares) 0 0
Preferred Stock, Shares Outstanding (in shares) 0 0
Common Stock, Par or Stated Value Per Share (in dollars per share) $ 0.0001 $ 0.0001
Common Stock, Shares Authorized (in shares) 550,000,000 550,000,000
Common Stock, Shares, Issued (in shares) 118,703,283 117,707,280
Common Stock, Shares, Outstanding (in shares) 118,703,283 117,707,280
v3.24.3
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 29, 2024
Oct. 01, 2023
Sep. 29, 2024
Oct. 01, 2023
Net sales $ 134,038 $ 156,530 $ 462,170 $ 503,997
Cost of goods sold 81,732 98,156 287,512 308,162
Gross profit 52,306 58,374 174,658 195,835
Selling, general, and administrative 30,109 28,880 97,675 87,998
Research and development costs 4,620 6,100 13,743 18,935
Amortization of intangible assets 3,436 3,687 10,307 11,040
Restructuring costs 954 415 1,566 2,106
Write-down of assets held-for-sale 7,505 0 7,505 0
Other operating expense 119 (28) 213 508
Total operating expense 46,743 39,054 131,009 120,587
Operating income 5,563 19,320 43,649 75,248
Fair value adjustments to warrant liability (1,041) 2,064 (7,570) 5,516
Fair value adjustments to earn-out liability (634) 700 (2,341) 2,089
Loss on early extinguishment of long-term debt 0 0 141 0
Interest expense, net (15,010) (13,712) (39,192) (41,909)
Total non-operating expense 13,335 16,476 29,422 49,514
Income (loss) before income taxes (7,772) 2,844 14,227 25,734
Income tax expense (benefit) (1,484) 2,092 (320) 7,756
Net income (loss) (6,288) 752 14,547 17,978
Comprehensive income (loss):        
Foreign currency translation adjustment 386 (176) 244 (103)
Total comprehensive income (loss) $ (5,902) $ 576 $ 14,791 $ 17,875
Common Share Data:        
Weighted average common shares outstanding - basic (in shares) 118,694,139 117,397,069 118,345,442 117,256,959
Weighted average common shares outstanding - diluted (in shares) 118,694,139 119,245,956 119,153,568 118,119,501
Basic net income (loss) per share (in dollars per share) $ (0.05) $ 0.01 $ 0.12 $ 0.15
Diluted net income (loss) per share (in dollars per share) $ (0.05) $ 0.01 $ 0.12 $ 0.15
v3.24.3
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)
$ in Thousands
Common Stock [Member]
Additional Paid-in Capital [Member]
AOCI Attributable to Parent [Member]
Retained Earnings [Member]
Total
Balance (in shares) at Dec. 31, 2022 117,147,997        
Balance at Dec. 31, 2022 $ 12 $ 368,122 $ (944) $ 48,800 $ 415,990
Net income (loss) 0 0 0 4,247 4,247
Equity compensation 0 394 0 0 394
Foreign currency translation adjustment 0 0 (199) 0 (199)
Tax withholding related to vesting of restricted stock units $ 0 (34) 0 0 (34)
Issuance of shares for restricted stock units (in shares) 24,219        
Issuance of shares for restricted stock units $ 0 0 0 0 0
Balance (in shares) at Apr. 02, 2023 117,172,216        
Balance at Apr. 02, 2023 $ 12 368,482 (1,143) 53,047 420,398
Balance (in shares) at Dec. 31, 2022 117,147,997        
Balance at Dec. 31, 2022 $ 12 368,122 (944) 48,800 415,990
Net income (loss)         17,978
Foreign currency translation adjustment         (103)
Balance (in shares) at Oct. 01, 2023 117,473,122        
Balance at Oct. 01, 2023 $ 12 372,158 (1,047) 66,778 437,901
Balance (in shares) at Apr. 02, 2023 117,172,216        
Balance at Apr. 02, 2023 $ 12 368,482 (1,143) 53,047 420,398
Net income (loss) 0 0 0 12,979 12,979
Equity compensation 0 1,806 0 0 1,806
Foreign currency translation adjustment 0 0 272 0 272
Tax withholding related to vesting of restricted stock units $ 0 (39) 0 0 (39)
Issuance of shares for restricted stock units (in shares) 77,638        
Issuance of shares for restricted stock units $ 0 0 0 0 0
Balance (in shares) at Jul. 02, 2023 117,249,854        
Balance at Jul. 02, 2023 $ 12 370,249 (871) 66,026 435,416
Net income (loss) 0 0 0 752 752
Equity compensation 0 2,970 0 0 2,970
Foreign currency translation adjustment 0 0 (176) 0 (176)
Tax withholding related to vesting of restricted stock units $ 0 (1,061) 0 0 (1,061)
Issuance of shares for restricted stock units (in shares) 223,268        
Issuance of shares for restricted stock units $ 0 0 0 0 0
Balance (in shares) at Oct. 01, 2023 117,473,122        
Balance at Oct. 01, 2023 $ 12 372,158 (1,047) 66,778 437,901
Balance (in shares) at Dec. 31, 2023 117,707,280        
Balance at Dec. 31, 2023 $ 12 373,869 (710) 67,980 441,151
Net income (loss) 0 0 0 3,730 3,730
Equity compensation 0 1,141 0 0 1,141
Foreign currency translation adjustment 0 0 (186) 0 (186)
Tax withholding related to vesting of restricted stock units $ 0 (921) 0 0 (921)
Issuance of shares for restricted stock units (in shares) 604,061        
Issuance of shares for restricted stock units $ 0 0 0 0 0
Balance (in shares) at Mar. 31, 2024 118,311,341        
Balance at Mar. 31, 2024 $ 12 374,089 (896) 71,710 444,915
Balance (in shares) at Dec. 31, 2023 117,707,280        
Balance at Dec. 31, 2023 $ 12 373,869 (710) 67,980 441,151
Net income (loss)         14,547
Foreign currency translation adjustment         244
Balance at Sep. 29, 2024         458,743
Balance (in shares) at Mar. 31, 2024 118,311,341        
Balance at Mar. 31, 2024 $ 12 374,089 (896) 71,710 444,915
Net income (loss) 0 0 0 17,105 17,105
Equity compensation 0 1,621 0 0 1,621
Foreign currency translation adjustment 0 0 44 0 44
Tax withholding related to vesting of restricted stock units $ 0 (516) 0 0 (516)
Issuance of shares for restricted stock units (in shares) 372,131        
Issuance of shares for restricted stock units $ 0 0 0 0 0
Balance (in shares) at Jun. 30, 2024 118,683,472        
Balance at Jun. 30, 2024 $ 12 375,194 (852) 88,815 463,169
Net income (loss)         (6,288)
Foreign currency translation adjustment         386
Balance at Sep. 29, 2024         458,743
Balance (in shares) at Jun. 30, 2024 118,683,472        
Balance at Jun. 30, 2024 $ 12 375,194 (852) 88,815 463,169
Net income (loss) 0 0 0 (6,288) (6,288)
Equity compensation 0 1,521 0 0 1,521
Foreign currency translation adjustment 0 0 386 0 386
Tax withholding related to vesting of restricted stock units $ 0 (45) 0 0 (45)
Issuance of shares for restricted stock units (in shares) 19,811        
Issuance of shares for restricted stock units $ 0 0 0 0 0
Balance (in shares) at Sep. 30, 2024 118,703,283        
Balance at Sep. 30, 2024 $ 12 $ 376,670 $ (466) $ 82,527 $ 458,743
v3.24.3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
9 Months Ended
Sep. 29, 2024
Oct. 01, 2023
OPERATING ACTIVITIES:    
Net income $ 14,547 $ 17,978
Adjustments to reconcile net income to net cash from operating activities:    
Depreciation 7,364 7,738
Amortization of intangible assets 10,307 11,040
Amortization of deferred loan costs 1,314 1,339
Amortization of right of use assets 4,103 4,014
Write-down of assets held-for-sale 7,505 0
Fair value adjustments to warrant liability (7,570) 5,516
Fair value adjustments to earn-out liability (2,341) 2,089
Fair value adjustments to interest rate collar (151) (3,185)
Equity compensation 4,283 5,170
Change in deferred taxes (8,534) (8,616)
Loss on early extinguishment of long-term debt 141 0
Gain on disposal of property, plant and equipment (568) (227)
Provision for inventory reserves 10,451 3,824
Provision for credit losses 528 744
Accounts receivable 3,359 (1,054)
Inventories (2,303) 21,046
Prepaids and other current assets (653) 4,862
Accounts payable 9,025 (5,413)
Accrued interest 32 (5,670)
Accrued and other liabilities (8,066) (4,332)
Net cash provided by operating activities 42,773 56,863
INVESTING ACTIVITIES:    
Capital expenditures (4,372) (4,417)
Proceeds from the disposal of fixed assets 1,645 1,292
Net cash used in investing activities (2,727) (3,125)
FINANCING ACTIVITIES:    
Deferred financing fees 0 (1,427)
Payments from stock-based award activities (1,482) (1,134)
Net cash used in financing activities (30,314) (42,998)
Effect of foreign currency rate fluctuations on cash (62) (57)
Net change in cash and cash equivalents 9,670 10,683
Beginning of period 41,081 26,150
End of period 50,751 36,833
Supplemental disclosures of cash flow information:    
Cash paid for interest 39,453 50,290
Cash paid for income taxes 7,596 16,041
Property and equipment additions included in accounts payable 168 0
Principal Payment [Member]    
FINANCING ACTIVITIES:    
Principal payments on long-term debt $ (28,832) $ (40,437)
v3.24.3
Note 1 - Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies
9 Months Ended
Sep. 29, 2024
Notes to Financial Statements  
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1.

DESCRIPTION OF THE BUSINESS, BASIS OF PRESENTATION, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Holley Inc., a Delaware corporation headquartered in Bowling Green, Kentucky, conducts operations through its wholly owned subsidiaries. These operating subsidiaries are comprised of Holley Performance Products Inc., Hot Rod Brands, Inc., Simpson Safety Solutions, Inc., B&M Racing and Performance Products, Inc., and Speedshop.com, Inc. When used in these notes, the terms the “Company” or “Holley” mean Holley, Inc. and all entities included in its consolidated financial statements.

 

The Company designs, manufactures and distributes high-performance automotive products to car and truck enthusiasts primarily in the United States, Canada and Europe. The Company is a leading manufacturer of a diversified line of performance automotive products, including carburetors, fuel pumps, fuel injection systems, nitrous oxide injection systems, superchargers, exhaust headers, mufflers, distributors, ignition components, engine tuners and automotive performance plumbing products. The Company is also a leading manufacturer of exhaust products as well as shifters, converters, transmission kits, transmissions, tuners and automotive software. The Company’s products are designed to enhance street, off-road, recreational and competitive vehicle performance through increased horsepower, torque and drivability. The Company has locations in the United States, Canada, Italy and China.

 

Emerging Growth Company Status

 

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company is an emerging growth company, and, as such, has elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards.

 

Risks and Uncertainties

 

The Company's business and results of operations, financial condition, and liquidity are impacted by broad economic conditions, as well as by geopolitical events, including the conflict in Ukraine, the conflict in the Middle East, and the possible expansion of such conflicts and potential geopolitical consequences. The Company's business is impacted by various economic factors that affect both consumers and the automotive aftermarket industry, including but not limited to inflation, fuel costs, wage rates, supply chain disruptions, hiring, and other economic conditions. In response to inflationary impacts and supply chain disruptions, the Company has attempted to minimize potential adverse impacts on its business with cost savings initiatives, price increases to customers, and increased attention to maintaining appropriate inventory levels in the distribution channel. The Company's profitability has been, and may continue to be, adversely affected by constrained consumer demand, a shift in sales to lower-margin products, and demands on our performance that increase our costs. Should the ongoing macroeconomic conditions not improve, or worsen, or if the Company's attempt to mitigate the impact on its supply chain, operations and costs is not successful, the Company’s business, results of operations and financial condition may be adversely affected.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP" or “GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended  December 31, 2023, as filed with the SEC on March 14, 2024, in the Company’s annual report on Form 10-K. In management’s opinion, the unaudited interim condensed consolidated financial statements reflect all adjustments, which are of a normal and recurring nature, that are necessary for a fair presentation of financial results for the interim periods presented. Operating results for any quarter are not necessarily indicative of the results for the full fiscal year.

 

The Company operates on a fiscal year that ends on  December 31. The three- and nine-month periods ended September 29, 2024 and October 1, 2023 each included 13 weeks and 39 weeks, respectively.

 

Principles of Consolidation

 

These unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.

 

Recent Accounting Pronouncements

 

Accounting Standards Not Yet Adopted

 

In  October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to SEC's Disclosure Update and Simplification Initiative. This ASU amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification. The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company will monitor the removal of various requirements from the current regulations in order to determine when to adopt the related amendments, but it does not anticipate that the adoption of the new guidance will have a material impact on the Company’s consolidated financial statements and related disclosures. The Company will continue to evaluate the impact of this guidance on its consolidated financial statements.

 

In  November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The standard requires interim and annual disclosure of significant segment expenses that are regularly provided to the chief operating decision-maker ("CODM") and included within the reported measure of a segment’s profit or loss, requires interim disclosures about a reportable segment’s profit or loss and assets that are currently required annually, requires disclosure of the position and title of the CODM, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, and contains other disclosure requirements. This ASU is effective for fiscal years beginning after  December 15, 2023 and interim periods within fiscal years beginning after  December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect of this new guidance on its consolidated financial statements and related disclosures.

 

In  December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires additional disclosures of various income tax components that affect the rate reconciliation based on the applicable taxing jurisdictions, as well as the qualitative and quantitative aspects of those components. The standard also requires information pertaining to taxes paid to be disaggregated for federal, state and foreign taxes, and contains other disclosure requirements. This ASU is effective for fiscal years beginning after  December 15, 2024 and interim periods within fiscal years beginning after  December 15, 2025, with early adoption permitted. The Company is currently evaluating the effect of this new guidance on its consolidated financial statements and related disclosures.

v3.24.3
Note 2 - Inventory
9 Months Ended
Sep. 29, 2024
Notes to Financial Statements  
Inventory Disclosure [Text Block]

2.

INVENTORY

 

Inventories of the Company consisted of the following:

 

   

As of

 
   

September 29, 2024

   

December 31, 2023

 

Raw materials

  $ 59,071     $ 63,552  

Work-in-process

    19,669       22,619  

Finished goods

    100,545       106,089  
    $ 179,285     $ 192,260  

 

During the 39-week period ended September 29, 2024, the Company recognized a strategic product rationalization charge of $8,835, primarily due to product rationalization initiatives aimed at eliminating unprofitable or slow-moving stock keeping units.

 

v3.24.3
Note 3 - Property, Plant and Equipment, Net
9 Months Ended
Sep. 29, 2024
Notes to Financial Statements  
Property, Plant and Equipment Disclosure [Text Block]

3.

PROPERTY, PLANT AND EQUIPMENT, NET

 

Property, plant and equipment of the Company consisted of the following:

 

  

As of

 
  

September 29, 2024

  

December 31, 2023

 

Land

 $1,230  $3,326 

Buildings and improvements

  11,936   11,404 

Machinery and equipment

  72,952   73,332 

Construction in process

  8,093   6,224 

Total property, plant and equipment

  94,211   94,286 

Less: accumulated depreciation

  51,493   47,080 

Property, plant and equipment, net

 $42,718  $47,206 

 

The Company’s long-lived assets by geographic locations are as follows:

 

  

As of

 
  

September 29, 2024

  

December 31, 2023

 

United States

 $39,716  $44,931 

International

  3,002   2,275 

Total property, plant and equipment, net

 $42,718  $47,206 

 

Assets Held for Sale

 

Assets held for sale includes the net book value of assets the Company plans to sell during the fourth quarter of 2024. Long-lived assets that meet the held for sale criteria are held for sale and reported at the lower of their carrying value or fair value, less estimated costs to sell.

 

During the 39-week period ended September 29, 2024, the Company entered into a letter of intent to sell certain assets and liabilities of Detroit Speed Engineering for $5,600. The Company adjusted the carrying value of the assets from $13,105 to the fair value of $5,600, and recognized a loss on held-for-sale assets for $7,505 in the condensed consolidated statements of comprehensive income for the 13-week and 39-week periods ended September 29, 2024. The Detroit Speed Assets are classified as assets held for sale in the condensed consolidated balance sheets as of  September 29, 2024 for $5,600. The Company expects for the sale to close during the fourth quarter of 2024. 

 

During the 39-week period ended September 29, 2024, the Company entered into an agreement to sell land at Porter Pike for $2,400. The land is classified as assets held for sale in the condensed consolidated balance sheets as of  September 29, 2024 for $2,096. The Company expects for the sale to close during the fourth quarter of 2024.  

 

As of September 29, 2024, the Company classified Detroit Speed Engineering and the Porter Pike land as held for sale. Assets held for sale at September 29, 2024 consisted of the following:

 

  

As of

 
  

September 29, 2024

 

Inventory

 $4,632 

Land

  2,096 

Machinery and equipment

  951 

Intangible assets

  17 

Assets Held for Sale

 $7,696 

 

v3.24.3
Note 4 - Goodwill and Other Intangible Assets
9 Months Ended
Sep. 29, 2024
Notes to Financial Statements  
Goodwill and Intangible Assets Disclosure [Text Block]

4.

GOODWILL AND OTHER INTANGIBLE ASSETS

 

Goodwill represents the premium paid over the fair value of the net tangible and identifiable intangible assets acquired in the Company's business combinations. The Company impaired $5,810 of goodwill related to Detroit Speed Engineering during the 39-week period ended September 29, 2024. Refer to Note 3 "Property, Plant and Equipment, Net", for additional information.

 

No goodwill impairment charges were incurred during the 13-week and 39-week periods ended September 29, 2024 and October 1, 2023 other than the amount recognized related to Detroit Speed Engineering. Potential changes in the Company's costs and operating structure, the implementation of synergies, and overall performance in the automotive aftermarket industry, could negatively impact near-term cash-flow projections and could trigger a potential impairment of the Company's goodwill and / or indefinite-lived intangible assets. In addition, failure to execute the Company's strategic plans as well as increases in weighted average costs of capital could negatively impact the fair value of the reporting unit and increase the risk of future impairment charges. 

 

Intangible assets consisted of the following:

 

  

September 29, 2024

 
  

Gross Carrying Amount

  

Accumulated Amortization

  

Net Carrying Value

 

Finite-lived intangible assets:

            

Customer relationships

 $269,950  $(64,397) $205,553 

Tradenames

  13,775   (6,112)  7,663 

Technology

  26,676   (14,899)  11,777 

Total finite-lived intangible assets

 $310,401  $(85,408) $224,993 
             

Indefinite-lived intangible assets:

            

Tradenames

 $173,811     $173,811 

 

  

December 31, 2023

 
  

Gross Carrying Amount

  

Accumulated Amortization

  

Net Carrying Value

 

Finite-lived intangible assets:

            

Customer relationships

 $269,950  $(55,732) $214,218 

Tradenames

  13,775   (5,569)  8,206 

Technology

  26,676   (13,800)  12,876 

Total finite-lived intangible assets

 $310,401  $(75,101) $235,300 
             

Indefinite-lived intangible assets:

            

Tradenames

 $175,165     $175,165 

 

The following outlines the estimated future amortization expense related to intangible assets held as of September 29, 2024:

 

2024 (excluding the thirty-nine weeks ended September 29, 2024)

 $3,436 

2025

  13,713 

2026

  13,608 

2027

  13,602 

2028

  13,602 

Thereafter

  167,032 

Total

 $224,993 

   

v3.24.3
Note 5 - Accrued Liabilities
9 Months Ended
Sep. 29, 2024
Notes to Financial Statements  
Accrued Liabilities Disclosure [Text Block]

5.

ACCRUED LIABILITIES

 

Accrued liabilities of the Company consisted of the following:

 

   

As of

 
   

September 29, 2024

   

December 31, 2023

 

Accrued freight

  $ 2,727     $ 5,654  

Accrued employee compensation and benefits

    11,772       11,696  

Accrued returns and allowances

    12,583       11,267  

Accrued taxes

    212       1,475  

Current portion of operating lease liabilities

    4,302       4,948  

Accrued other

    9,568       7,089  

Total accrued liabilities

  $ 41,164     $ 42,129  

  

v3.24.3
Note 6 - Debt
9 Months Ended
Sep. 29, 2024
Notes to Financial Statements  
Debt Disclosure [Text Block]

6.

DEBT

 

Debt of the Company consisted of the following:

 

   

As of

 
   

September 29, 2024

   

December 31, 2023

 

First lien term loan due November 17, 2028

  $ 564,219     $ 592,505  

Other

    905       1,974  

Less unamortized debt issuance costs

    (8,740 )     (10,308 )
      556,384       584,171  

Less current portion of long-term debt

    (7,479 )     (7,461 )
    $ 548,905     $ 576,710  

 

On November 18, 2021, the Company entered into a credit facility with a syndicate of lenders and Wells Fargo Bank, N.A., as administrative agent for the lenders, letter of credit issuer and swing line lender (the "Credit Agreement"). The financing consisted of a seven-year $600,000 first lien term loan, a five-year $125,000 revolving credit facility, and a $100,000 delayed draw term loan. The proceeds of delayed draw loans made after closing were available to the Company to finance acquisitions. Upon the expiration of the delayed draw term loan in May 2022, the Company had drawn $57,000, which is included in the amount outstanding under the first lien term loan due November 17, 2028. Proceeds from the credit facility were used to repay in full the Company’s obligations under its previously existing first lien and second lien notes and to pay $13,413 in deferred financing fees related to the refinancing.

 

The revolving credit facility includes a letter of credit facility in the amount of $10,000, pursuant to which letters of credit may be issued as long as revolving loans may be advanced and subject to availability under the revolving credit facility. The Company had $2,150 in outstanding letters of credit on September 29, 2024.

 

The first lien term loan is to be repaid in quarterly payments of $1,643 through September 30, 2028 with the balance due upon maturity on November 17, 2028. The Company is required to make annual payments on the term loan in an amount equal to 50% of annual excess cash flow greater than $5,000, as defined in the Credit Agreement. This percentage requirement may decrease or be eliminated if certain leverage ratios are achieved. Based on the Company's results for 2023, no excess cash flow payment is required in 2024. Any such payments offset future mandatory quarterly payments. The Credit Agreement permits voluntary prepayments at any time, in whole or in part. The Company repurchased $25,000 outstanding principal on its first lien term loan at a discount to par during the 39-week period ended September 29, 2024.

 

As of September 29, 2024, amounts outstanding under the credit facility accrue interest at a rate equal to either the Secured Overnight Financing Rate ("SOFR") or base rate, at the Company's election, plus a specified margin. In the case of revolving credit loans and letter of credit fees, the specified margin is based on the Company's Total Leverage Ratio, as defined in the Credit Agreement. Commitment fees payable under the revolving credit facility are based on the Company's Total Leverage Ratio. On September 29, 2024, the weighted average interest rate on the Company's borrowings under the credit facility was 9.1%.

 

The Company has entered into an interest rate collar in the notional amount of $500,000 to hedge the Company's exposure to fluctuations in interest rates on its variable-rate debt. Refer to Note 8, "Derivative Instruments," for additional information. 

 

Obligations under the Credit Agreement are secured by substantially all of the Company’s assets, including a secured interest in the Company's headquarters, with a carrying value of $5,722. The Credit Agreement includes representations and warranties and affirmative and negative covenants customary for financings of this type, including, but not limited to, limitations on restricted payments, additional borrowings, additional investments, and asset sales.

 

In February 2023, the Company entered into an amendment to the Credit Agreement which, among other things, increases the Total Leverage Ratio applicable under the Credit Agreement as of the quarter ending April 2, 2023 to initially 7.25:1.00, and provides for modified step-down levels for such covenant thereafter through the fiscal quarter ending June 30, 2024 (the “Covenant Relief Period”). As of June 30, 2024, the required Total Leverage Ratio was5.00:1.00.As a condition to the Covenant Relief Period, the Company also agreed to (i) a minimum liquidity test, (ii) an interest coverage test, (iii) an anti-cash hoarding test at any time revolving loans are outstanding, and (iv) additional reporting obligations. Under the amended Credit Agreement, the revolving credit facility contains a minimum liquidity financial covenant of $45,000, which includes unrestricted cash and any available borrowing capacity under the revolving credit facility. In April 2023, the Company entered into a second amendment to the Credit Agreement in which the interest rate on any outstanding borrowings under the Credit Agreement was changed from LIBOR to SOFR. In May 2023, the Company entered into a third amendment to the Credit Agreement in which certain defined terms were clarified. The Company incurred $1,427 of deferred financing fees related to these amendments. On September 29, 2024, the Company was in compliance with all financial covenants. 

 

Some of the lenders that are parties to the Credit Agreement, and their respective affiliates, have various relationships with the Company in the ordinary course of business involving the provision of financial services, including cash management, commercial banking, investment banking or other services.

 

Future maturities of long-term debt and amortization of debt issuance costs as of September 29, 2024 are as follows:

 

   

Debt

   

Debt Issuance Costs

 

2024 (excluding the thirty-nine weeks ended September 29, 2024)

  $ 3,510     $ 429  

2025

    7,253       1,876  

2026

    6,571       2,034  

2027

    6,571       2,209  

2028

    541,219       2,192  
    $ 565,124     $ 8,740  

 

v3.24.3
Note 7 - Common Stock Warrants and Earn-out Liability
9 Months Ended
Sep. 29, 2024
Notes to Financial Statements  
Warrant Liability [Text Block]

7.

COMMON STOCK WARRANTS AND EARN-OUT LIABILITY

 

The Company consummated a business combination (the “Business Combination”) pursuant to that certain Agreement and Plan of Merger dated March 11, 2021 (the “Merger Agreement”), by and among Empower Ltd., (“Empower”), Empower Merger Sub I Inc., Empower Merger Sub II LLC, and Holley Intermediate Holdings, Inc. (“Holley Intermediate”) on July 16, 2021, (the “Closing” and such date, the “Closing Date”). Upon the Closing, there were 14,666,644 Warrants, consisting of 9,999,977 public warrants ("Public Warrants") and 4,666,667 private warrants ("Private Warrants" and together with the Public Warrants, the “Warrants”), outstanding to purchase shares of Common Stock that were issued by Empower prior to the Business Combination. Each Warrant entitles the registered holder to purchase one share of Common Stock at a price of $11.50 per share, subject to adjustments, provided that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the Warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities laws of the state of residence of the holder. The Warrants may be exercised only for a whole number of shares of Common Stock. The Warrants expire on July 16, 2026, the date that is five years after the Closing Date, or earlier upon redemption or liquidation. Additionally, the Private Warrants will be non-redeemable and are exercisable on a cashless basis so long as they are held by Empower Sponsor Holdings, LLC (the "Sponsor") or any of its permitted transferees. If the Private Warrants are held by someone other than the Sponsor or its permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

  

The Company may redeem the Public Warrants at a price of $0.01 per warrant upon 30 days' notice if the closing price of Common Stock equals or exceeds $18.00 per share, subject to adjustments, on the trading day prior to the date on which notice of redemption is given, provided there is an effective registration statement and current prospectus in effect with respect to the ordinary shares underlying such Warrants throughout the 30-day redemption period. If the foregoing conditions are satisfied and the Company issues a notice of redemption of the Warrants, the Warrant holder is entitled to exercise his, her or its Warrant prior to the scheduled redemption date. Any such exercise requires the Warrant holder to pay the exercise price for each Warrant being exercised. Further, the Company may redeem the Public Warrants at a price of $0.10 per warrant upon 30 days' notice if the closing price of Common Stock equals or exceeds $10.00 per share, subject to adjustments, on the trading day prior to the date on which notice of redemption is given. Beginning on the date the notice of redemption is given until the Warrants are redeemed or exercised, holders may elect to exercise their Warrants on a cashless basis and receive that number of shares of Common Stock as determined by reference to a table in the warrant agreement.

 

During any period when the Company has failed to maintain an effective registration statement, warrant holders may exercise Warrants on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or another exemption, and the Company will use its commercially reasonable best efforts to register or qualify the shares under applicable blue-sky laws to the extent an exemption is not available.

 

The Company’s Warrants are accounted for as a liability in accordance with ASC 815-40 and are presented as a warrant liability on the balance sheet. The warrant liability was measured at fair value at inception and on a recurring basis, with changes in fair value recognized as non-operating expense. As of September 29, 2024 and  December 31, 2023, a warrant liability with a fair value of $813 and $8,383, respectively, was reflected as a long-term liability in the condensed consolidated balance sheet. A decrease of $1,041 and an increase of $2,064 in the fair value of the warrant liability was reflected as change in fair value of warrant liability in the condensed consolidated statements of comprehensive income for the 13-week periods ended September 29, 2024 and October 1, 2023, respectively. A decrease of $7,570 and an increase of $5,516 in the fair value of the warrant liability was reflected as change in fair value of warrant liability in the condensed consolidated statements of comprehensive income for the 39-week periods ended September 29, 2024 and October 1, 2023, respectively. 

 

Additionally, the Sponsor received 2,187,500 shares of Common Stock upon the Closing, which vest in two equal tranches upon achievement of certain market share price milestones during the earn-out period, as outlined in the Merger Agreement (the “Earn-Out Shares”). The first tranche of Earn-Out Shares vested during the first quarter of 2022. Upon vesting, the first tranche of 1,093,750 Earn-Out Shares were issued and a liability of $14,689, representing the fair value of the shares on the date of vesting, was reclassified from liabilities to equity. The remaining tranche of Earn-Out Shares will be forfeited if the applicable conditions are not satisfied before July 16, 2028 (seven years after the Closing Date). The unvested Earn-Out Shares are presented as an earn-out liability on the balance sheet and are remeasured at fair value with changes in fair value recognized as non-operating expense. As of September 29, 2024 and  December 31, 2023, an earn-out liability with a fair value of $1,138 and $3,479, respectively, was reflected as a long-term liability in the condensed consolidated balance sheet. A decrease of $634 and an increase of $700 in the fair value of the earn-out liability was reflected as change in fair value of earn-out liability in the condensed consolidated statements of comprehensive income for the 13-week periods ended September 29, 2024 and October 1, 2023, respectively. A decrease of $2,341 and an increase of $2,089 in the fair value of the earn-out liability was reflected as change in fair value of earn-out liability in the condensed consolidated statements of comprehensive income for the 39-week periods ended September 29, 2024 and October 1, 2023, respectively. 

v3.24.3
Note 8 - Derivative Instruments
9 Months Ended
Sep. 29, 2024
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]

8.

DERIVATIVE INSTRUMENTS

 

The Company from time to time enters into derivative financial instruments, such as interest rate collar agreements (each, a “Collar”), to manage its exposure to fluctuations in interest rates on the Company’s variable rate debt. On January 4, 2023, the Company entered into a Collar with Wells Fargo Bank, N.A. ("Wells Fargo") with a notional amount of $500,000 that expires on February 18, 2026. The Collar has a floor of 2.811% and a cap of 5% (based on three-month SOFR). The structure of this Collar is such that the Company receives an incremental amount if the Collar index exceeds the cap rate. Conversely, the Company pays an incremental amount to Wells Fargo if the Collar index falls below the floor rate. No payments are required if the Collar index falls between the cap and floor rates. 

 

As of September 29, 2024, the Company recognized a derivative liability of $1,013 for the Collar in other noncurrent assets on the condensed consolidated balance sheet. The Company recorded a net change in the fair value of the Collar as a decrease to interest expense of $2,204 and $151, for the 13-week and 39-week periods ended September 29, 2024, respectively. Cash receipts for the Collar totaled $412 and $1,280 for the 13-week and 39-week periods ended September 29, 2024, respectively.

 

The fair value of the Collar is determined using observable market-based inputs and the impact of credit risk on the derivative’s fair value (the creditworthiness of the Company’s counterparty for assets and the creditworthiness of the Company for liabilities) (a Level 2 measurement, as described in Note 9, "Fair Value Measurements").

 

v3.24.3
Note 9 - Fair Value Measurements
9 Months Ended
Sep. 29, 2024
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

9.

FAIR VALUE MEASUREMENTS

 

The Company’s financial liabilities subject to fair value measurement on a recurring basis and the level of inputs used for such measurements were as follows:

 

   

Fair Value Measured on September 29, 2024

 
   

Level 1

   

Level 2

   

Level 3

   

Total

 

Liabilities:

                               

Warrant liability (Public)

  $ 548     $     $     $ 548  

Warrant liability (Private)

                265       265  

Earn-out liability

                1,138       1,138  

Interest rate collar liability

          1,013             1,013  

Total fair value liabilities

  $ 548     $ 1,013     $ 1,403     $ 2,964  

 

   

Fair Value Measured on December 31, 2023

 
   

Level 1

   

Level 2

   

Level 3

   

Total

 

Liabilities:

                               

Warrant liability (Public)

  $ 5,480     $     $     $ 5,480  

Warrant liability (Private)

                2,903       2,903  

Earn-out liability

                3,479       3,479  

Interest rate collar liability

          1,164             1,164  

Total fair value liabilities

  $ 5,480     $ 1,164     $ 6,382     $ 13,026  

 

As of September 29, 2024, the Company's derivative liabilities for its Private and Public Warrants, earn-out liability, and derivative asset for its Collar are measured at fair value on a recurring basis (see Note 7,Common Stock Warrants and Earn-Out Liability,” and Note 8, "Derivative Instruments," for more details). The fair values of the Private Warrants and earn-out liability are determined based on significant inputs not observable in the market (Level 3). The valuation of the Level 3 liabilities uses assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained. The Company uses a Monte Carlo simulation model to estimate the fair value of its Private Warrants and earn-out liability. The fair value of the Collar, which is included in other noncurrent assets on the condensed consolidated balance sheet, is determined based on models that reflect the contractual terms of the derivative, yield curves, and the credit quality of the counterparties. Inputs are generally observable and do not contain a high level of subjectivity (Level 2). The fair value of the Public Warrants is determined using publicly traded prices (Level 1). Changes in the fair value of the derivative liabilities related to Warrants and the earn-out liability are recognized as non-operating expense in the condensed consolidated statements of comprehensive income. Changes in the fair value of the Collar is recognized as an adjustment to interest expense in the condensed consolidated statements of comprehensive income. Changes in the fair value of the derivative liabilities related to Warrants and the earn-out liability and changes in the fair value of the Collar are recognized in net cash provided by operating activities on the condensed consolidated statements of cash flows.

 

The fair value of Private Warrants was estimated as of the measurement date using the Monte Carlo simulation model with the following assumptions:

 

   

September 29, 2024

   

December 31, 2023

 

Valuation date price

  $ 2.95     $ 4.87  

Strike price

  $ 11.50     $ 11.50  

Remaining life (in years)

    1.79       2.54  

Expected dividend

  $     $  

Risk-free interest rate

    3.65 %     4.01 %

Price threshold

  $ 18.00     $ 18.00  

 

The fair value of the earn-out liability was estimated as of the measurement date using the Monte Carlo simulation model with the following assumptions:

 

   

September 29, 2024

   

December 31, 2023

 

Valuation date price

  $ 2.95     $ 4.87  

Expected term (in years)

    3.79       4.54  

Expected volatility

    63.64 %     67.20 %

Risk-free interest rate

    3.51 %     3.79 %

Price hurdle

  $ 15.00     $ 15.00  

   

As of September 29, 2024 and  December 31, 2023, the Company has accounts receivable, accounts payable and accrued expenses for which the carrying value approximates fair value due to the short-term nature of these instruments. The carrying value of the Company’s long-term debt approximates fair value as the rates used approximate the market rates currently available to the Company. Fair value measurements used in the impairment reviews of goodwill and intangible assets are Level 3 measurements.

 

The reconciliation of changes in Level 3 liabilities during the 39-week periods ended September 29, 2024 and October 1, 2023 is as follows:

 

   

Private Warrants

   

Earn-Out Liability

   

Total

 

Balance at December 31, 2022

  $ 1,581     $ 1,176     $ 2,757  

Losses included in earnings

    518       428       946  

Balance at October 1, 2023

  $ 2,099     $ 1,604     $ 3,703  
                         

Balance at December 31, 2023

  $ 2,903     $ 3,479     $ 6,382  

Gains included in earnings

    (2,638 )     (2,341 )     (4,979 )

Balance at September 29, 2024

  $ 265     $ 1,138     $ 1,403  

 

v3.24.3
Note 10 - Revenue
9 Months Ended
Sep. 29, 2024
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

10.

REVENUE

 

The principal activity from which the Company generates its revenue is the manufacturing and distribution of after-market automotive parts for its customers, comprised of resellers and end users. The Company recognizes revenue at a point in time, rather than over time, as the performance obligation is satisfied when customer obtains control of the product upon title transfer and not as the product is manufactured or developed. The amount of revenue recognized is based on the purchase order price and adjusted for revenue allocated to variable consideration (i.e., estimated rebates, co-op advertising, etc.).

 

The Company collects sales tax and other taxes concurrent with revenue-producing activities which are excluded from revenue. Shipping and handling costs incurred after control of the product is transferred to our customers are treated as fulfillment costs and not a separate performance obligation.

 

The Company allows customers to return products when certain Company-established criteria are met. These sales returns are recorded as a charge against gross sales in the period in which the related sales are recognized, net of returns to stock. Returned products, which are recorded as inventories, are valued at the lower of cost or net realizable value. The physical condition and marketability of the returned products are the major factors considered in estimating realizable value. The Company also estimates expected sales returns and records the necessary adjustment as a charge against gross sales.

 

The Company’s payment terms with customers are customary and vary by customer and geography but typically range from 30 to 365 days. The Company elected the practical expedient to disregard the possible existence of a significant financing component related to payment on contracts, as the Company expects that customers will pay for the products within one year. The Company has evaluated the terms of our arrangements and determined that they do not contain significant financing components. Additionally, as all contracts with customers have an expected duration of one year or less, the Company has elected the practical expedient to exclude disclosure of information regarding the aggregate amount and future timing of performance obligations that are unsatisfied or partially satisfied as of the end of the reporting period. The Company provides limited warranties on most of its products against certain manufacturing and other defects. Provisions for estimated expenses related to product warranty are made at the time products are sold. Refer to Note 15,Commitments and Contingencies” for more information.

 

The following table summarizes total revenue by product category.

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Electronic systems

  $ 57,716     $ 70,062     $ 193,211     $ 213,214  

Mechanical systems

    31,762       37,870       109,922       122,108  

Exhaust

    11,403       14,343       40,592       47,556  

Accessories

    20,333       21,788       68,146       75,635  

Safety

    12,824       12,467       50,299       45,484  

Net sales

  $ 134,038     $ 156,530     $ 462,170     $ 503,997  

 

The following table summarizes total revenue based on geographic location from which the product is shipped:

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

United States

  $ 130,459     $ 154,150     $ 447,206     $ 491,385  

Italy

    3,579       2,380       14,964       12,612  

Net sales

  $ 134,038     $ 156,530     $ 462,170     $ 503,997  

 

v3.24.3
Note 11 - Income Taxes
9 Months Ended
Sep. 29, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

11.

INCOME TAXES

 

The Company's effective income tax rate is based on expected income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. For interim financial reporting, the Company estimates the annual income tax rate based on projected taxable income for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate. The Company refines the estimates of the year's taxable income as new information becomes available, including actual year-to-date financial results. This continual estimation process often results in a change to the expected effective income tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected income tax rate. Significant judgment is required in determining the effective tax rate and in evaluating tax positions.

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Income tax expense (benefit)

  $ (1,484 )   $ 2,092     $ (320 )   $ 7,756  

Effective tax rate

    19.1 %     73.6 %     (2.2 )%     30.1 %

 

For the 13-week period ended September 29, 2024, the Company's effective tax rate of 19.1% differed from the 21% federal statutory rate primarily due to permanent differences related to changes in fair value of the warrant and earn-out liabilities recognized during the period and the impact of foreign taxes in higher tax rate jurisdictions. For the 13-week period ended October 1, 2023, the Company’s effective tax rate of 73.6% differed from the 21% federal statutory rate primarily due to permanent differences related to changes in the fair value of the warrant and earn-out liabilities recognized during the period. 

 

For the 39-week period ended September 29, 2024, the Company's effective tax rate of -2.2% differed from the 21% federal statutory rate primarily due to permanent differences related to changes in fair value of the warrant and earn-out liabilities recognized during the period, federal research and development tax credits, and the impact of foreign taxes in higher tax rate jurisdictions. In addition, the Company incurred expenses related to product rationalization that were determined to be significant and infrequent in nature; therefore, the full tax benefit of these expenses was recorded during the year as a discrete adjustment. For the 39-week period ended October 1, 2023, the Company’s effective tax rate of 30.1% differed from the 21% federal statutory rate primarily due to permanent differences related to changes in the fair value of the warrant and earn-out liabilities recognized during the period. 

 

v3.24.3
Note 12 - Earnings Per Share
9 Months Ended
Sep. 29, 2024
Notes to Financial Statements  
Earnings Per Share [Text Block]

12.

EARNINGS PER SHARE

 

The following table sets forth the calculation of basic and diluted earnings per share:

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Numerator:

                               

Net income (loss)

  $ (6,288 )   $ 752     $ 14,547     $ 17,978  

Denominator:

                               

Weighted average common shares outstanding - basic

    118,694,139       117,397,069       118,345,442       117,256,959  

Dilutive effect of potential common shares from RSUs

          1,848,887       740,025       862,542  

Dilutive effect of potential common shares from PSUs

                68,101        

Weighted average common shares outstanding - diluted

    118,694,139       119,245,956       119,153,568       118,119,501  

Earnings per share:

                               

Basic

  $ (0.05 )   $ 0.01     $ 0.12     $ 0.15  

Diluted

  $ (0.05 )   $ 0.01     $ 0.12     $ 0.15  

 

The following outstanding shares of Common Stock equivalents were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive. Warrants to purchase shares of Common Stock having an exercise price greater than the average share market price are excluded from the calculation of diluted earnings per share. 

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Anti-dilutive shares excluded from calculation of diluted EPS:

                               

Warrants

    14,633,311       14,633,311       14,633,311       14,633,311  

Stock options

    454,064       922,228       454,064       922,228  

Restricted stock units

    557,828       175,783       557,828       175,783  

Performance stock units

    2,087,400       2,177,462       2,087,400       2,177,462  

Unvested Earn-Out Shares

    1,093,750       1,093,750       1,093,750       1,093,750  

Total anti-dilutive shares

    18,826,353       19,002,534       18,826,353       19,002,534  

  

v3.24.3
Note 13 - Equity-based Compensation Plans
9 Months Ended
Sep. 29, 2024
Notes to Financial Statements  
Shareholders' Equity and Share-Based Payments [Text Block]

13.

EQUITY-BASED COMPENSATION PLANS [OPEN]

 

In 2021, the Company adopted the 2021 Omnibus Incentive Plan (the “2021 Plan”), under which awards, including stock options, restricted stock units ("RSUs") and performance stock units ("PSUs") may be granted to employees and non-employee directors. The 2021 Plan authorized 8,850,000 shares of Common Stock to be available for award grants. As of September 29, 2024, 4,685,932 shares of Common Stock remained available for future issuance under the 2021 Plan. On June 6, 2023, the Company granted 1,000,000 RSUs and 1,520,000 PSUs to its new President and Chief Executive Officer. These awards were granted outside of the 2021 Plan as employment inducement awards and did not require shareholder approval under the rules of the NYSE or otherwise. 

 

Equity-based compensation expense included the following components:

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Restricted stock units

  $ 944     $ 1,331     $ 2,686     $ 3,146  

Performance stock units

    491       1,322       1,376       1,696  

Stock options

    86       317       221       328  

 

All equity-based compensation expenses are recorded in selling, general and administrative costs in the condensed consolidated statements of comprehensive income.

 

Restricted Stock Awards

 

RSUs and PSUs are collectively referred to as "Restricted Stock Awards". The Compensation Committee has awarded RSUs to select employees and non-employee directors and has awarded PSUs to select employees. The RSUs vest ratably over one to four years of continued employment. The grant date fair value of a time-based award or a performance-based award without a market condition is equal to the market price of Common Stock on the grant date and is recognized over the requisite service period. The grant date fair value of a performance-based award with a market condition is determined using a Monte Carlo simulation and is recognized over the requisite service period. On  September 29, 2024, there was $7,887 of unrecognized compensation cost related to unvested Restricted Stock Awards that is expected to be recognized over a remaining weighted average period of 1.9 years.

 

The weighted-average grant-date fair value of Restricted Stock Awards granted during the 39-week periods ended September 29, 2024 and October 1, 2023, was $3.83 and $2.76, respectively. The fair value of Restricted Stock Awards vested and converted to shares of Common Stock during the 39-week periods ended September 29, 2024 and October 1, 2023, was $5,190 and $685, respectively.

 

The following table summarizes Restricted Stock Award for the 39-week period ended September 29, 2024:

 

   

Unvested Restricted Stock Awards

 
           

Weighted Average

 
   

Number of RSAs

   

Grant Date Fair Value

 

Balance on December 31, 2023

    4,904,801     $ 2.86  

Granted

    1,504,665       3.83  

Vested

    (1,356,007 )     3.04  

Forfeited

    (713,838 )     3.39  

Balance on September 29, 2024

    4,339,621     $ 3.14  

 

Performance-based Restricted Stock Units

 

The PSUs granted under the 2021 Plan represent shares of Common Stock that are potentially issuable in the future based on a combination of performance and service requirements. On March 4, 2024, the Company granted 340,895 PSUs under the 2021 Plan to key employees with a grant date fair value of $4.22 and on March 18, 2024, the Company granted an additional 26,020 PSUs with a grant date fair value of $4.25. On April 1, the Company granted 5,654 PSUs with a grant date fair value of $4.49; on April 8, the Company granted 30,544 PSUs with a grant date fair value of $4.44; on April 15, the Company granted 36,144 PSUs with a grant date fair value of $4.15; on April 29, the Company granted 28,741 PSUs with a grant date fair value of $4.05; on May 13, the Company granted 14,138 PSUs with a grant date fair value of $3.93; on July 22, the Company granted 25,195 PSUs with a grant date fair value of $3.67; and on August 19, the Company granted 1,965 PSUs with a grant date fair value of $3.09.  The PSUs granted to employees were based on salary and include annual net sales and adjusted EBITDA growth targets with threshold and stretch goals. The awards vest ratably over three years, subject to the employee’s continuous employment through the vesting date and the level of performance achieved. The number of PSUs granted reflects the target number able to be earned under a given award. Non-vested PSU compensation expense is based on the most recent performance assumption available and is adjusted as assumptions change. The fair value of a PSU at the grant date is equal to the market price of Common Stock on the grant date. The cost estimates for PSU grants represent initial target awards until the Company can reasonably forecast the financial performance of each PSU award grant. The actual number of shares of Common Stock to be issued at the end of each performance period will range from 0% to 150% of the initial target awards.

 

Stock Options

 

Stock option grants have an exercise price at least equal to the market value of the underlying Common Stock on the date of grant, have ten-year terms, and vest ratably over three years of continued employment. In general, vested options expire if not exercised within 90 days of termination of service. Compensation expense for stock options is recorded based on straight-line amortization of the grant date fair value over the requisite service period. As of September 29, 2024, there was $120 of unrecognized compensation cost related to unvested stock options that is expected to be recognized over a remaining weighted-average period of 0.4 years.

 

The following table summarizes stock option activity for the 39-week period ended September 29, 2024:

 

                   

Weighted Average

 
           

Weighted

   

Remaining

 
   

Number of

   

Average

   

Contractual

 
   

Stock Options

   

Exercise Price

   

Term (years)

 

Options outstanding on December 31, 2023

    886,046     $ 10.97          

Forfeited

    (134,066 )     11.03          

Expired

    (297,916 )     10.90          

Options outstanding on September 29, 2024

    454,064     $ 11.01       6.87  

Options exercisable on September 29, 2024

    302,705     $ 11.01       7.13  

 

v3.24.3
Note 14 - Lease Commitments
9 Months Ended
Sep. 29, 2024
Notes to Financial Statements  
Lessee, Operating Leases [Text Block]

14.

LEASE COMMITMENTS

 

The Company leases retail stores, manufacturing, distribution, engineering, and research and development facilities, office space, equipment, and automobiles under operating lease agreements. Leases have remaining lease terms of one to 10 years, inclusive of renewal options that the Company is reasonably certain to exercise.

 

The following table summarizes operating lease assets and obligations, and provides information associated with the measurement of operating lease obligations.

 

   

As of

 
   

September 29, 2024

   

December 31, 2023

 

Assets:

               

Operating right of use assets

  $ 30,911     $ 29,250  

Liabilities:

               

Current operating lease liabilities - Accrued liabilities

  $ 4,302     $ 4,948  

Long-term operating lease liabilities

    27,759       25,177  

Total lease liabilities

  $ 32,061     $ 30,125  

Lease term and discount rate

               

Weighted average remaining lease term (in years)

    6.7       7.2  

Weighted average discount rate

    6.29 %     6.21 %

 

The following summarizes the components of operating lease expense and provides supplemental cash flow information for operating leases:

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Components of lease expense:

                               

Operating lease expense

  $ 1,840     $ 1,630     $ 5,346     $ 4,923  

Short-term lease expense

    510       521       1,214       1,499  

Variable lease expense

    68       88       254       257  

Total lease expense

  $ 2,418     $ 2,239     $ 6,814     $ 6,679  

Supplemental cash flow information related to leases:

                               

Cash paid for amounts included in measurement of operating lease liabilities

  $ 1,613     $ 1,720     $ 5,280     $ 3,471  

Right-of-use assets obtained in exchange for new operating lease liabilities

    2,582       2,354       6,958       2,354  

Decapitalization of right-of-use assets upon lease termination or modification

    14       154       1,374       154  

 

The following table summarizes the maturities of the Company's operating lease liabilities as of September 29, 2024:

 

2024 (excluding the thirty-nine weeks ended September 29, 2024)

  $ 1,601  

2025

    6,363  

2026

    5,972  

2027

    5,992  

2028

    5,562  

Thereafter

    14,157  

Total lease payments

    39,647  

Less imputed interest

    (7,586 )

Present value of lease liabilities

  $ 32,061  

 

v3.24.3
Note 15 - Commitments and Contingencies
9 Months Ended
Sep. 29, 2024
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]

15.

COMMITMENTS AND CONTINGENCIES

 

Litigation 

 

The Company is a party to various lawsuits and claims in the normal course of business, as well as the putative securities class action described below. While the lawsuits and claims against the Company cannot be predicted with certainty, management believes that the ultimate resolution of such matters will not have a material effect on the consolidated financial position or liquidity of the Company; however, in light of the inherent uncertainties involved in such lawsuits and claims, some of which  may be beyond the Company’s control, an adverse outcome in one or more of these matters could be material to the Company’s results of operations or cash flows for any particular reporting period. The Company has established loss provision for matters in which losses are probable and can be reasonably estimated. Although management will continue to reassess the estimated liability based on future developments, an objective assessment of such claims may not always be predictive of the outcome and actual results may vary from current estimates.

 

A putative securities class action was filed on  November 6, 2023, against the Company, Tom Tomlinson (the Company’s former Director, President, and Chief Executive Officer), and Dominic Bardos (the Company’s former Chief Financial Officer) in the United States District Court for the Western District of Kentucky (the “Complaint”) and is captioned City of Fort Lauderdale General Employees’ Retirement System v. Holley, Inc., f/k/a Empower LTD., Tom Tomlinson, and Dominic Bardos, Civil Action No. 1:23-cv-148-S.

 

On  February 26, 2024, the court appointed City of Fort Lauderdale General Employees’ Retirement System to serve as lead plaintiff to prosecute claims on behalf of a proposed class of stockholders who purchased or otherwise acquired Holley securities between  July 21, 2021 and  February 6, 2023. On April 26, 2024, lead plaintiff filed an amended complaint, adding Vinod Nimmagadda (the Company’s Executive Vice President of Corporate Development and New Ventures) as a defendant. Lead plaintiff alleges that statements made regarding the Company’s business, operations, and prospects violated Sections 10(b), Section 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 and seeks class certification, damages, interest, attorneys’ fees, and other relief. The Company filed a motion to dismiss on June 28, 2024.

 

Due to the early stage of this proceeding, we cannot reasonably estimate the potential range of loss, if any. The Company disputes the allegations and intends to vigorously defend against them.

 

Product Warranties

 

The Company generally warrants its products against certain manufacturing and other defects. These product warranties are provided for specific periods of time depending on the nature of the product. The accrued product warranty costs are based primarily on historical experience of actual warranty claims and are recorded at the time of the sale.

 

The following table provides the changes in the Company's accrual for product warranties, which is classified as a component of accrued liabilities in the condensed consolidated balance sheets.

 

   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Beginning balance

  $ 6,046     $ 3,876     $ 3,325     $ 3,584  

Accrued for current year warranty claims

    2,542       3,005       9,289       9,472  

Settlement of warranty claims

    (2,400 )     (2,857 )     (6,426 )     (9,032 )

Ending balance

  $ 6,188     $ 4,024     $ 6,188     $ 4,024  

 

Employee Savings Plans 

 

The Company has a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code that covers United States-based employees.United States-based eligible employees may contribute up to the current statutory limits under the Internal Revenue Service regulations. Holley matches employee contributions to the 401(k) Plan up to 3.5% each pay period, and an additional discretionary match of up to 1.5% is made based on company performance targets. The Company also has a defined-contribution saving plan for Canada-based employees. Canada-based eligible employees may contribute up to the current statutory limits for a Registered Retirement Savings Plan. Holley matches employee contributions to the Group Savings Plan up to 3.0% each pay period, and an additional discretionary match of up to 1.5% is made based on company performance targets.  

 

During the 13-week periods ended September 29, 2024 and October 1, 2023, the Company made matching contributions under the savings plans totaling $39 and $562, respectively. During the 39-week periods ended September 29, 2024 and October 1, 2023, the Company made matching contributions under the savings plans totaling $1,168 and $1,702, respectively. The decrease in the Company made matching contributions during the 13-week period ended September 29, 2024 is due to the Company's suspension of the 401(k) match.

 

 

v3.24.3
Insider Trading Arrangements
9 Months Ended
Sep. 29, 2024
Insider Trading Arr Line Items  
Material Terms of Trading Arrangement [Text Block]

Item 5. Other Information

 

Trading Plans

 

During the fiscal quarter ended September 29, 2024, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).

Rule 10b5-1 Arrangement Adopted [Flag] false
Non-Rule 10b5-1 Arrangement Adopted [Flag] false
Rule 10b5-1 Arrangement Terminated [Flag] false
Non-Rule 10b5-1 Arrangement Terminated [Flag] false
v3.24.3
Significant Accounting Policies (Policies)
9 Months Ended
Sep. 29, 2024
Accounting Policies [Abstract]  
Emerging Growth Company [Policy Text Block]

Emerging Growth Company Status

 

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company is an emerging growth company, and, as such, has elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards.

 

Risks And Uncertainties [Policy Text Block]

Risks and Uncertainties

 

The Company's business and results of operations, financial condition, and liquidity are impacted by broad economic conditions, as well as by geopolitical events, including the conflict in Ukraine, the conflict in the Middle East, and the possible expansion of such conflicts and potential geopolitical consequences. The Company's business is impacted by various economic factors that affect both consumers and the automotive aftermarket industry, including but not limited to inflation, fuel costs, wage rates, supply chain disruptions, hiring, and other economic conditions. In response to inflationary impacts and supply chain disruptions, the Company has attempted to minimize potential adverse impacts on its business with cost savings initiatives, price increases to customers, and increased attention to maintaining appropriate inventory levels in the distribution channel. The Company's profitability has been, and may continue to be, adversely affected by constrained consumer demand, a shift in sales to lower-margin products, and demands on our performance that increase our costs. Should the ongoing macroeconomic conditions not improve, or worsen, or if the Company's attempt to mitigate the impact on its supply chain, operations and costs is not successful, the Company’s business, results of operations and financial condition may be adversely affected.

 

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP" or “GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended  December 31, 2023, as filed with the SEC on March 14, 2024, in the Company’s annual report on Form 10-K. In management’s opinion, the unaudited interim condensed consolidated financial statements reflect all adjustments, which are of a normal and recurring nature, that are necessary for a fair presentation of financial results for the interim periods presented. Operating results for any quarter are not necessarily indicative of the results for the full fiscal year.

 

The Company operates on a fiscal year that ends on  December 31. The three- and nine-month periods ended September 29, 2024 and October 1, 2023 each included 13 weeks and 39 weeks, respectively.

 

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

 

These unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.

 

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

 

Accounting Standards Not Yet Adopted

 

In  October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to SEC's Disclosure Update and Simplification Initiative. This ASU amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification. The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company will monitor the removal of various requirements from the current regulations in order to determine when to adopt the related amendments, but it does not anticipate that the adoption of the new guidance will have a material impact on the Company’s consolidated financial statements and related disclosures. The Company will continue to evaluate the impact of this guidance on its consolidated financial statements.

 

In  November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The standard requires interim and annual disclosure of significant segment expenses that are regularly provided to the chief operating decision-maker ("CODM") and included within the reported measure of a segment’s profit or loss, requires interim disclosures about a reportable segment’s profit or loss and assets that are currently required annually, requires disclosure of the position and title of the CODM, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, and contains other disclosure requirements. This ASU is effective for fiscal years beginning after  December 15, 2023 and interim periods within fiscal years beginning after  December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect of this new guidance on its consolidated financial statements and related disclosures.

 

In  December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires additional disclosures of various income tax components that affect the rate reconciliation based on the applicable taxing jurisdictions, as well as the qualitative and quantitative aspects of those components. The standard also requires information pertaining to taxes paid to be disaggregated for federal, state and foreign taxes, and contains other disclosure requirements. This ASU is effective for fiscal years beginning after  December 15, 2024 and interim periods within fiscal years beginning after  December 15, 2025, with early adoption permitted. The Company is currently evaluating the effect of this new guidance on its consolidated financial statements and related disclosures.

v3.24.3
Note 2 - Inventory (Tables)
9 Months Ended
Sep. 29, 2024
Notes Tables  
Schedule of Inventory, Current [Table Text Block]
   

As of

 
   

September 29, 2024

   

December 31, 2023

 

Raw materials

  $ 59,071     $ 63,552  

Work-in-process

    19,669       22,619  

Finished goods

    100,545       106,089  
    $ 179,285     $ 192,260  
v3.24.3
Note 3 - Property, Plant and Equipment, Net (Tables)
9 Months Ended
Sep. 29, 2024
Notes Tables  
Property, Plant and Equipment [Table Text Block]
  

As of

 
  

September 29, 2024

  

December 31, 2023

 

Land

 $1,230  $3,326 

Buildings and improvements

  11,936   11,404 

Machinery and equipment

  72,952   73,332 

Construction in process

  8,093   6,224 

Total property, plant and equipment

  94,211   94,286 

Less: accumulated depreciation

  51,493   47,080 

Property, plant and equipment, net

 $42,718  $47,206 
Long-Lived Assets by Geographic Areas [Table Text Block]
  

As of

 
  

September 29, 2024

  

December 31, 2023

 

United States

 $39,716  $44,931 

International

  3,002   2,275 

Total property, plant and equipment, net

 $42,718  $47,206 
Disposal Groups, Including Discontinued Operations [Table Text Block]
  

As of

 
  

September 29, 2024

 

Inventory

 $4,632 

Land

  2,096 

Machinery and equipment

  951 

Intangible assets

  17 

Assets Held for Sale

 $7,696 
v3.24.3
Note 4 - Goodwill and Other Intangible Assets (Tables)
9 Months Ended
Sep. 29, 2024
Notes Tables  
Schedule of Intangible Assets [Table Text Block]
  

September 29, 2024

 
  

Gross Carrying Amount

  

Accumulated Amortization

  

Net Carrying Value

 

Finite-lived intangible assets:

            

Customer relationships

 $269,950  $(64,397) $205,553 

Tradenames

  13,775   (6,112)  7,663 

Technology

  26,676   (14,899)  11,777 

Total finite-lived intangible assets

 $310,401  $(85,408) $224,993 
             

Indefinite-lived intangible assets:

            

Tradenames

 $173,811     $173,811 
  

December 31, 2023

 
  

Gross Carrying Amount

  

Accumulated Amortization

  

Net Carrying Value

 

Finite-lived intangible assets:

            

Customer relationships

 $269,950  $(55,732) $214,218 

Tradenames

  13,775   (5,569)  8,206 

Technology

  26,676   (13,800)  12,876 

Total finite-lived intangible assets

 $310,401  $(75,101) $235,300 
             

Indefinite-lived intangible assets:

            

Tradenames

 $175,165     $175,165 
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

2024 (excluding the thirty-nine weeks ended September 29, 2024)

 $3,436 

2025

  13,713 

2026

  13,608 

2027

  13,602 

2028

  13,602 

Thereafter

  167,032 

Total

 $224,993 
v3.24.3
Note 5 - Accrued Liabilities (Tables)
9 Months Ended
Sep. 29, 2024
Notes Tables  
Schedule of Accrued Liabilities [Table Text Block]
   

As of

 
   

September 29, 2024

   

December 31, 2023

 

Accrued freight

  $ 2,727     $ 5,654  

Accrued employee compensation and benefits

    11,772       11,696  

Accrued returns and allowances

    12,583       11,267  

Accrued taxes

    212       1,475  

Current portion of operating lease liabilities

    4,302       4,948  

Accrued other

    9,568       7,089  

Total accrued liabilities

  $ 41,164     $ 42,129  
v3.24.3
Note 6 - Debt (Tables)
9 Months Ended
Sep. 29, 2024
Notes Tables  
Schedule of Debt [Table Text Block]
   

As of

 
   

September 29, 2024

   

December 31, 2023

 

First lien term loan due November 17, 2028

  $ 564,219     $ 592,505  

Other

    905       1,974  

Less unamortized debt issuance costs

    (8,740 )     (10,308 )
      556,384       584,171  

Less current portion of long-term debt

    (7,479 )     (7,461 )
    $ 548,905     $ 576,710  
Schedule of Maturities of Long-Term Debt [Table Text Block]
   

Debt

   

Debt Issuance Costs

 

2024 (excluding the thirty-nine weeks ended September 29, 2024)

  $ 3,510     $ 429  

2025

    7,253       1,876  

2026

    6,571       2,034  

2027

    6,571       2,209  

2028

    541,219       2,192  
    $ 565,124     $ 8,740  
v3.24.3
Note 9 - Fair Value Measurements (Tables)
9 Months Ended
Sep. 29, 2024
Notes Tables  
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]
   

Fair Value Measured on September 29, 2024

 
   

Level 1

   

Level 2

   

Level 3

   

Total

 

Liabilities:

                               

Warrant liability (Public)

  $ 548     $     $     $ 548  

Warrant liability (Private)

                265       265  

Earn-out liability

                1,138       1,138  

Interest rate collar liability

          1,013             1,013  

Total fair value liabilities

  $ 548     $ 1,013     $ 1,403     $ 2,964  
   

Fair Value Measured on December 31, 2023

 
   

Level 1

   

Level 2

   

Level 3

   

Total

 

Liabilities:

                               

Warrant liability (Public)

  $ 5,480     $     $     $ 5,480  

Warrant liability (Private)

                2,903       2,903  

Earn-out liability

                3,479       3,479  

Interest rate collar liability

          1,164             1,164  

Total fair value liabilities

  $ 5,480     $ 1,164     $ 6,382     $ 13,026  
Fair Value Measurement Inputs and Valuation Techniques [Table Text Block]
   

September 29, 2024

   

December 31, 2023

 

Valuation date price

  $ 2.95     $ 4.87  

Strike price

  $ 11.50     $ 11.50  

Remaining life (in years)

    1.79       2.54  

Expected dividend

  $     $  

Risk-free interest rate

    3.65 %     4.01 %

Price threshold

  $ 18.00     $ 18.00  
   

September 29, 2024

   

December 31, 2023

 

Valuation date price

  $ 2.95     $ 4.87  

Expected term (in years)

    3.79       4.54  

Expected volatility

    63.64 %     67.20 %

Risk-free interest rate

    3.51 %     3.79 %

Price hurdle

  $ 15.00     $ 15.00  
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]
   

Private Warrants

   

Earn-Out Liability

   

Total

 

Balance at December 31, 2022

  $ 1,581     $ 1,176     $ 2,757  

Losses included in earnings

    518       428       946  

Balance at October 1, 2023

  $ 2,099     $ 1,604     $ 3,703  
                         

Balance at December 31, 2023

  $ 2,903     $ 3,479     $ 6,382  

Gains included in earnings

    (2,638 )     (2,341 )     (4,979 )

Balance at September 29, 2024

  $ 265     $ 1,138     $ 1,403  
v3.24.3
Note 10 - Revenue (Tables)
9 Months Ended
Sep. 29, 2024
Notes Tables  
Revenue from External Customers by Products and Services [Table Text Block]
   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Electronic systems

  $ 57,716     $ 70,062     $ 193,211     $ 213,214  

Mechanical systems

    31,762       37,870       109,922       122,108  

Exhaust

    11,403       14,343       40,592       47,556  

Accessories

    20,333       21,788       68,146       75,635  

Safety

    12,824       12,467       50,299       45,484  

Net sales

  $ 134,038     $ 156,530     $ 462,170     $ 503,997  
Revenue from External Customers by Geographic Areas [Table Text Block]
   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

United States

  $ 130,459     $ 154,150     $ 447,206     $ 491,385  

Italy

    3,579       2,380       14,964       12,612  

Net sales

  $ 134,038     $ 156,530     $ 462,170     $ 503,997  
v3.24.3
Note 11 - Income Taxes (Tables)
9 Months Ended
Sep. 29, 2024
Notes Tables  
Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]
   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Income tax expense (benefit)

  $ (1,484 )   $ 2,092     $ (320 )   $ 7,756  

Effective tax rate

    19.1 %     73.6 %     (2.2 )%     30.1 %
v3.24.3
Note 12 - Earnings Per Share (Tables)
9 Months Ended
Sep. 29, 2024
Notes Tables  
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]
   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Numerator:

                               

Net income (loss)

  $ (6,288 )   $ 752     $ 14,547     $ 17,978  

Denominator:

                               

Weighted average common shares outstanding - basic

    118,694,139       117,397,069       118,345,442       117,256,959  

Dilutive effect of potential common shares from RSUs

          1,848,887       740,025       862,542  

Dilutive effect of potential common shares from PSUs

                68,101        

Weighted average common shares outstanding - diluted

    118,694,139       119,245,956       119,153,568       118,119,501  

Earnings per share:

                               

Basic

  $ (0.05 )   $ 0.01     $ 0.12     $ 0.15  

Diluted

  $ (0.05 )   $ 0.01     $ 0.12     $ 0.15  
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]
   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Anti-dilutive shares excluded from calculation of diluted EPS:

                               

Warrants

    14,633,311       14,633,311       14,633,311       14,633,311  

Stock options

    454,064       922,228       454,064       922,228  

Restricted stock units

    557,828       175,783       557,828       175,783  

Performance stock units

    2,087,400       2,177,462       2,087,400       2,177,462  

Unvested Earn-Out Shares

    1,093,750       1,093,750       1,093,750       1,093,750  

Total anti-dilutive shares

    18,826,353       19,002,534       18,826,353       19,002,534  
v3.24.3
Note 13 - Equity-based Compensation Plans (Tables)
9 Months Ended
Sep. 29, 2024
Notes Tables  
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Table Text Block]
   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Restricted stock units

  $ 944     $ 1,331     $ 2,686     $ 3,146  

Performance stock units

    491       1,322       1,376       1,696  

Stock options

    86       317       221       328  
Schedule of Nonvested Restricted Stock Units Activity [Table Text Block]
   

Unvested Restricted Stock Awards

 
           

Weighted Average

 
   

Number of RSAs

   

Grant Date Fair Value

 

Balance on December 31, 2023

    4,904,801     $ 2.86  

Granted

    1,504,665       3.83  

Vested

    (1,356,007 )     3.04  

Forfeited

    (713,838 )     3.39  

Balance on September 29, 2024

    4,339,621     $ 3.14  
Share-Based Payment Arrangement, Option, Activity [Table Text Block]
                   

Weighted Average

 
           

Weighted

   

Remaining

 
   

Number of

   

Average

   

Contractual

 
   

Stock Options

   

Exercise Price

   

Term (years)

 

Options outstanding on December 31, 2023

    886,046     $ 10.97          

Forfeited

    (134,066 )     11.03          

Expired

    (297,916 )     10.90          

Options outstanding on September 29, 2024

    454,064     $ 11.01       6.87  

Options exercisable on September 29, 2024

    302,705     $ 11.01       7.13  
v3.24.3
Note 14 - Lease Commitments (Tables)
9 Months Ended
Sep. 29, 2024
Notes Tables  
Schedule of Operating Lease Assets and Obligations [Table Text Block]
   

As of

 
   

September 29, 2024

   

December 31, 2023

 

Assets:

               

Operating right of use assets

  $ 30,911     $ 29,250  

Liabilities:

               

Current operating lease liabilities - Accrued liabilities

  $ 4,302     $ 4,948  

Long-term operating lease liabilities

    27,759       25,177  

Total lease liabilities

  $ 32,061     $ 30,125  

Lease term and discount rate

               

Weighted average remaining lease term (in years)

    6.7       7.2  

Weighted average discount rate

    6.29 %     6.21 %
Lease, Cost [Table Text Block]
   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Components of lease expense:

                               

Operating lease expense

  $ 1,840     $ 1,630     $ 5,346     $ 4,923  

Short-term lease expense

    510       521       1,214       1,499  

Variable lease expense

    68       88       254       257  

Total lease expense

  $ 2,418     $ 2,239     $ 6,814     $ 6,679  

Supplemental cash flow information related to leases:

                               

Cash paid for amounts included in measurement of operating lease liabilities

  $ 1,613     $ 1,720     $ 5,280     $ 3,471  

Right-of-use assets obtained in exchange for new operating lease liabilities

    2,582       2,354       6,958       2,354  

Decapitalization of right-of-use assets upon lease termination or modification

    14       154       1,374       154  
Lessee, Operating Lease, Liability, to be Paid, Maturity [Table Text Block]

2024 (excluding the thirty-nine weeks ended September 29, 2024)

  $ 1,601  

2025

    6,363  

2026

    5,972  

2027

    5,992  

2028

    5,562  

Thereafter

    14,157  

Total lease payments

    39,647  

Less imputed interest

    (7,586 )

Present value of lease liabilities

  $ 32,061  
v3.24.3
Note 15 - Commitments and Contingencies (Tables)
9 Months Ended
Sep. 29, 2024
Notes Tables  
Schedule of Product Warranty Liability [Table Text Block]
   

For the thirteen weeks ended

   

For the thirty-nine weeks ended

 
   

September 29, 2024

   

October 1, 2023

   

September 29, 2024

   

October 1, 2023

 

Beginning balance

  $ 6,046     $ 3,876     $ 3,325     $ 3,584  

Accrued for current year warranty claims

    2,542       3,005       9,289       9,472  

Settlement of warranty claims

    (2,400 )     (2,857 )     (6,426 )     (9,032 )

Ending balance

  $ 6,188     $ 4,024     $ 6,188     $ 4,024  
v3.24.3
Note 2 - Inventory (Details Textual) - USD ($)
$ in Thousands
9 Months Ended
Sep. 29, 2024
Oct. 01, 2023
Inventory Write-down $ 10,451 $ 3,824
Inventory Related To Acquisitions And Product Rationalization Initiatives [Member]    
Inventory Write-down $ 8,835  
v3.24.3
Note 2 - Inventory - Schedule of Inventory (Details) - USD ($)
$ in Thousands
Sep. 29, 2024
Dec. 31, 2023
Raw materials $ 59,071 $ 63,552
Work-in-process 19,669 22,619
Finished goods 100,545 106,089
Inventory, Net $ 179,285 $ 192,260
v3.24.3
Note 3 - Property, Plant and Equipment, Net (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 29, 2024
Oct. 01, 2023
Sep. 29, 2024
Oct. 01, 2023
Dec. 31, 2023
Disposal Group, Not Discontinued Operation, Loss (Gain) on Write-down $ 7,505 $ 0 $ 7,505 $ 0  
Asset, Held-for-Sale, Not Part of Disposal Group, Current 7,696   7,696   $ 0
Disposal Group, Held-for-Sale or Disposed of by Sale, Not Discontinued Operations [Member]          
Asset, Held-for-Sale, Not Part of Disposal Group, Current 7,696   7,696    
Disposal Group, Held-for-Sale or Disposed of by Sale, Not Discontinued Operations [Member] | Detroit Speed Engineering [Member]          
Disposal Group, Including Discontinued Operation, Consideration 5,600   5,600    
Disposal Group, Including Discontinued Operation, Assets         $ 13,105
Assets, Fair Value Disclosure 5,600   5,600    
Disposal Group, Not Discontinued Operation, Loss (Gain) on Write-down 7,505   7,505    
Asset, Held-for-Sale, Not Part of Disposal Group, Current 5,600   5,600    
Disposal Group, Held-for-Sale or Disposed of by Sale, Not Discontinued Operations [Member] | Land at Porter Pike [Member]          
Disposal Group, Including Discontinued Operation, Consideration 2,400   2,400    
Asset, Held-for-Sale, Not Part of Disposal Group, Current $ 2,096   $ 2,096    
v3.24.3
Note 3 - Property, Plant and Equipment, Net - Schedule of Property, Plant, and Equipment (Details) - USD ($)
$ in Thousands
Sep. 29, 2024
Dec. 31, 2023
Property, Plant, and Equipment, Gross $ 94,211 $ 94,286
Less: accumulated depreciation 51,493 47,080
Property, plant and equipment, net 42,718 47,206
Land [Member]    
Property, Plant, and Equipment, Gross 1,230 3,326
Building and Building Improvements [Member]    
Property, Plant, and Equipment, Gross 11,936 11,404
Machinery and Equipment [Member]    
Property, Plant, and Equipment, Gross 72,952 73,332
Construction in Progress [Member]    
Property, Plant, and Equipment, Gross $ 8,093 $ 6,224
v3.24.3
Note 3 - Property, Plant and Equipment, Net - Schedule of Long-lived Assets by Geographic Locations (Details) - USD ($)
$ in Thousands
Sep. 29, 2024
Dec. 31, 2023
Property, plant, and equipment, net $ 42,718 $ 47,206
UNITED STATES    
Property, plant, and equipment, net 39,716 44,931
Non-US [Member]    
Property, plant, and equipment, net $ 3,002 $ 2,275
v3.24.3
Note 3 - Property, Plant and Equipment, Net - Assets Held for Sale (Details) - USD ($)
$ in Thousands
Sep. 29, 2024
Dec. 31, 2023
Assets Held for Sale $ 7,696 $ 0
Disposal Group, Held-for-Sale or Disposed of by Sale, Not Discontinued Operations [Member]    
Inventory 4,632  
Intangible assets 17  
Assets Held for Sale 7,696  
Disposal Group, Held-for-Sale or Disposed of by Sale, Not Discontinued Operations [Member] | Land [Member]    
Property, plant and equipment 2,096  
Disposal Group, Held-for-Sale or Disposed of by Sale, Not Discontinued Operations [Member] | Machinery and Equipment [Member]    
Property, plant and equipment $ 951  
v3.24.3
Note 4 - Goodwill and Other Intangible Assets (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 29, 2024
Oct. 01, 2023
Oct. 01, 2023
Goodwill, Impairment Loss   $ 0 $ 0
Detroit Speed Engineering [Member] | Disposal Group, Held-for-Sale or Disposed of by Sale, Not Discontinued Operations [Member]      
Goodwill, Impairment Loss $ 5,810    
v3.24.3
Note 4 - Goodwill and Other Intangible Assets - Summary of Intangible Assets (Details) - USD ($)
$ in Thousands
Sep. 29, 2024
Dec. 31, 2023
Finite-Lived Intangible Assets, Gross $ 310,401 $ 310,401
Finite-Lived Intangible Assets, Accumulated Amortization (85,408) (75,101)
Finite-Lived Intangible Assets, Net 224,993 235,300
Trade Names 1 [Member]    
Tradenames 173,811 175,165
Customer Relationships [Member]    
Finite-Lived Intangible Assets, Gross 269,950 269,950
Finite-Lived Intangible Assets, Accumulated Amortization (64,397) (55,732)
Finite-Lived Intangible Assets, Net 205,553 214,218
Trade Names [Member]    
Finite-Lived Intangible Assets, Gross 13,775 13,775
Finite-Lived Intangible Assets, Accumulated Amortization (6,112) (5,569)
Finite-Lived Intangible Assets, Net 7,663 8,206
Technology-Based Intangible Assets [Member]    
Finite-Lived Intangible Assets, Gross 26,676 26,676
Finite-Lived Intangible Assets, Accumulated Amortization (14,899) (13,800)
Finite-Lived Intangible Assets, Net $ 11,777 $ 12,876
v3.24.3
Note 4 - Goodwill and Other Intangible Assets - Schedule of Finite-lived Intangible Assets, Future Amortization Expense (Details) - USD ($)
$ in Thousands
Sep. 29, 2024
Dec. 31, 2023
2024 (excluding the thirty-nine weeks ended September 29, 2024) $ 3,436  
2025 13,713  
2026 13,608  
2027 13,602  
2028 13,602  
Thereafter 167,032  
Total $ 224,993 $ 235,300
v3.24.3
Note 5 - Accrued Liabilities - Accrued Liabilities (Details) - USD ($)
$ in Thousands
Sep. 29, 2024
Dec. 31, 2023
Accrued freight $ 2,727 $ 5,654
Accrued employee compensation and benefits 11,772 11,696
Accrued returns and allowances 12,583 11,267
Accrued taxes 212 1,475
Current portion of operating lease liabilities 4,302 4,948
Accrued other 9,568 7,089
Total accrued liabilities $ 41,164 $ 42,129
v3.24.3
Note 6 - Debt (Details Textual)
$ in Thousands
9 Months Ended
Nov. 18, 2021
USD ($)
Sep. 29, 2024
USD ($)
Jun. 30, 2024
Dec. 31, 2023
USD ($)
Feb. 28, 2023
USD ($)
Jan. 04, 2023
USD ($)
May 31, 2022
USD ($)
Property, Plant and Equipment, Net   $ 42,718   $ 47,206      
The Credit Agreement [Member] | Asset Pledged as Collateral [Member] | Corporate Headquarters [Member]              
Property, Plant and Equipment, Net   5,722          
Interest Rate Contract [Member] | Designated as Hedging Instrument [Member]              
Derivative, Notional Amount   500,000       $ 500,000  
Revolving Credit Facility [Member]              
Debt Instrument, Term (Year) 5 years            
Line of Credit Facility, Maximum Borrowing Capacity $ 125,000            
Letter of Credit [Member]              
Line of Credit Facility, Maximum Borrowing Capacity   10,000          
Letters of Credit Outstanding, Amount   $ 2,150          
Delayed Draw Term Loan (DDTL) [Member]              
Debt Instrument, Face Amount 100,000            
Debt Instrument, Withdrawn Amount             $ 57,000
First Lien Note Due November 17, 2028 [Member]              
Debt Issuance Costs, Gross             $ 13,413
First Lien Note Due November 17, 2028 [Member] | Term Loan [Member]              
Debt Instrument, Face Amount 600,000            
First Lien Note Due November 17, 2028 [Member] | Delayed Draw Term Loan (DDTL) [Member]              
Debt Instrument, Periodic Payment, Principal $ 1,643            
Debt Instrument, Periodic Payment, Percentage of Annual Excess Cash FLow   50.00%          
Repayments of Long-Term Debt   $ 25,000          
The Credit Agreement [Member]              
Debt Issuance Costs, Gross         $ 1,427    
Debt, Weighted Average Interest Rate   9.10%          
Debt Instrument, Covenant, Consolidated Net Leverage Ratio     5   7.25    
Debt Instrument, Covenant, Minimum Liquidity         $ 45,000    
v3.24.3
Note 6 - Debt - Schedule of Debt (Details) - USD ($)
$ in Thousands
Sep. 29, 2024
Dec. 31, 2023
Long-Term Debt, Gross $ 565,124  
Other 905 $ 1,974
Less unamortized debt issuance costs (8,740) (10,308)
Long-Term Debt 556,384 584,171
Less current portion of long-term debt (7,479) (7,461)
Long-Term Debt, Excluding Current Maturities 548,905 576,710
First Lien Note Due November 17, 2028 [Member]    
Long-Term Debt, Gross $ 564,219 $ 592,505
v3.24.3
Note 6 - Debt - Future Maturities of Long-term Debt and Amortization of Debt Issuance Cost (Details) - USD ($)
$ in Thousands
Sep. 29, 2024
Dec. 31, 2023
2024 (excluding the thirty-nine weeks ended September 29, 2024), future maturities $ 3,510  
2024 (excluding the thirty-nine weeks ended September 29, 2024) 429  
2025, future maturities 7,253  
2025, debt issuance costs amortization 1,876  
2026, future maturities 6,571  
2026, debt issuance costs amortization 2,034  
2027, future maturities 6,571  
2027, debt issuance costs amortization 2,209  
2028, future maturities 541,219  
2028, debt issuance costs amortization 2,192  
Future maturities 565,124  
Debt Issuance Cost Amortization $ 8,740 $ 10,308
v3.24.3
Note 7 - Common Stock Warrants and Earn-out Liability (Details Textual) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 9 Months Ended
Jul. 16, 2021
Sep. 29, 2024
Oct. 01, 2023
Apr. 03, 2022
Sep. 29, 2024
Oct. 01, 2023
Sep. 30, 2024
Dec. 31, 2023
Oct. 09, 2021
Class of Warrant or Right, Outstanding (in shares)                 14,666,644
Warrant Liability   $ 813     $ 813     $ 8,383  
Fair Value Adjustment of Warrants   (1,041) $ 2,064   (7,570) $ 5,516      
Business Combination, Contingent Consideration, Liability, Noncurrent   1,138     1,138     3,479  
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability   (634) 700   (2,341) 2,089      
Empower Sponsor Holdings LLC [Member]                  
Business Combination, Contingent Consideration, Liability, Noncurrent             $ 1,138 $ 3,479  
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability   $ (634) $ 700   $ (2,341) $ 2,089      
Empower Sponsor Holdings LLC [Member] | Earn Out Shares [Member]                  
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in shares) 2,187,500                
Empower Sponsor Holdings LLC [Member] | Tranche One [Member]                  
Stock Issued During Period, Shares, Acquisitions (in shares)       1,093,750          
Stock Issued During Period, Value, Acquisitions       $ 14,689          
Public Warrants [Member]                  
Class of Warrant or Right, Outstanding (in shares)                 9,999,977
Public Warrants [Member] | Measurement Input, Share Price [Member]                  
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)                 $ 0.01
Share Price (in dollars per share)                 18
Public Warrants [Member] | Measurement Input Share Price1 [Member]                  
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)                 0.1
Share Price (in dollars per share)                 $ 10
Private Placement Warrants [Member]                  
Class of Warrant or Right, Outstanding (in shares)                 4,666,667
Private and Public Warrants [Member]                  
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right (in shares)                 1
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)                 $ 11.5
Warrants and Rights Outstanding, Term (Year)                 5 years
v3.24.3
Note 8 - Derivative Instruments (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 29, 2024
Sep. 29, 2024
Oct. 01, 2023
Jan. 04, 2023
Unrealized Gain (Loss) on Derivatives   $ 151 $ 3,185  
Designated as Hedging Instrument [Member] | Interest Rate Contract [Member]        
Derivative, Notional Amount $ 500,000 500,000   $ 500,000
Derivative, Floor Interest Rate       2.811%
Derivative, Cap Interest Rate       5.00%
Derivative Liability 1,013 1,013    
Unrealized Gain (Loss) on Derivatives (2,204) (151)    
Payments for (Proceeds from) Hedge, Investing Activities $ (412) $ (1,280)    
v3.24.3
Note 9 - Fair Value Measurements - Schedule of Value Assets and Liabilities Measured on Recurring Basis (Details) - Fair Value, Recurring [Member] - USD ($)
$ in Thousands
Sep. 29, 2024
Dec. 31, 2023
Liability $ 2,964 $ 13,026
Fair Value, Inputs, Level 1 [Member]    
Liability 548 5,480
Fair Value, Inputs, Level 2 [Member]    
Liability 1,013 1,164
Fair Value, Inputs, Level 3 [Member]    
Liability 1,403 6,382
Warrant Liability Public Warrants [Member]    
Liability 548 5,480
Warrant Liability Public Warrants [Member] | Fair Value, Inputs, Level 1 [Member]    
Liability 548 5,480
Warrant Liability Public Warrants [Member] | Fair Value, Inputs, Level 2 [Member]    
Liability 0 0
Warrant Liability Public Warrants [Member] | Fair Value, Inputs, Level 3 [Member]    
Liability 0 0
Warrant Liability Private Placement Warrants [Member]    
Liability 265 2,903
Warrant Liability Private Placement Warrants [Member] | Fair Value, Inputs, Level 1 [Member]    
Liability 0 0
Warrant Liability Private Placement Warrants [Member] | Fair Value, Inputs, Level 2 [Member]    
Liability 0 0
Warrant Liability Private Placement Warrants [Member] | Fair Value, Inputs, Level 3 [Member]    
Liability 265 2,903
Earn Out Liability [Member]    
Liability 1,138 3,479
Earn Out Liability [Member] | Fair Value, Inputs, Level 1 [Member]    
Liability 0 0
Earn Out Liability [Member] | Fair Value, Inputs, Level 2 [Member]    
Liability 0 0
Earn Out Liability [Member] | Fair Value, Inputs, Level 3 [Member]    
Liability 1,138 3,479
Interest Rate Collar Liability [Member]    
Liability 1,013 1,164
Interest Rate Collar Liability [Member] | Fair Value, Inputs, Level 1 [Member]    
Liability 0 0
Interest Rate Collar Liability [Member] | Fair Value, Inputs, Level 2 [Member]    
Liability 1,013 1,164
Interest Rate Collar Liability [Member] | Fair Value, Inputs, Level 3 [Member]    
Liability $ 0 $ 0
v3.24.3
Note 9 - Fair Value Measurements - Summary of Assumptions for Estimated Fair Value Using Monte Carlo Simulation Model (Details) - Monte Carlo Simulation Model [Member]
Sep. 29, 2024
Dec. 31, 2023
Measurement Input, Share Price [Member] | Earn Out Liability [Member]    
Alternative Investment, Measurement Input 2.95 4.87
Measurement Input, Share Price [Member] | Warrant Liability Private Placement Warrants [Member]    
Alternative Investment, Measurement Input 2.95 4.87
Measurement Input Strike Price [Member] | Warrant Liability Private Placement Warrants [Member]    
Alternative Investment, Measurement Input 11.5 11.5
Measurement Input, Expected Term [Member] | Earn Out Liability [Member]    
Alternative Investment, Measurement Input 3.79 4.54
Measurement Input, Expected Term [Member] | Warrant Liability Private Placement Warrants [Member]    
Alternative Investment, Measurement Input 1.79 2.54
Measurement Input, Price Volatility [Member] | Earn Out Liability [Member]    
Alternative Investment, Measurement Input 0.6364 0.672
Measurement Input, Risk Free Interest Rate [Member] | Earn Out Liability [Member]    
Alternative Investment, Measurement Input 0.0351 0.0379
Measurement Input, Risk Free Interest Rate [Member] | Warrant Liability Private Placement Warrants [Member]    
Alternative Investment, Measurement Input 0.0365 0.0401
Measurement Input Price Hurdle One [Member] | Earn Out Liability [Member]    
Alternative Investment, Measurement Input 15 15
Measurement Input Price Threshold [Member] | Warrant Liability Private Placement Warrants [Member]    
Alternative Investment, Measurement Input 18 18
v3.24.3
Note 9 - Fair Value Measurements - Reconciliation of Changes (Details) - USD ($)
$ in Thousands
9 Months Ended
Sep. 29, 2024
Oct. 01, 2023
Balance $ 6,382 $ 2,757
Losses included in earnings (4,979) 946
Balance 1,403 3,703
Private Placement Warrants [Member]    
Balance 2,903 1,581
Losses included in earnings (2,638) 518
Balance 265 2,099
Earn Out Liability [Member]    
Balance 3,479 1,176
Losses included in earnings (2,341) 428
Balance $ 1,138 $ 1,604
v3.24.3
Note 10 - Revenue - Summary of Revenue by Product Category (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 29, 2024
Oct. 01, 2023
Sep. 29, 2024
Oct. 01, 2023
Net sales $ 134,038 $ 156,530 $ 462,170 $ 503,997
Electronic Systems [Member]        
Net sales 57,716 70,062 193,211 213,214
Mechanical System [Member]        
Net sales 31,762 37,870 109,922 122,108
Exhaust [Member]        
Net sales 11,403 14,343 40,592 47,556
Accessories [Member]        
Net sales 20,333 21,788 68,146 75,635
Safety [Member]        
Net sales $ 12,824 $ 12,467 $ 50,299 $ 45,484
v3.24.3
Note 10 - Revenue - Summary of Revenue Based on Geographic Location (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 29, 2024
Oct. 01, 2023
Sep. 29, 2024
Oct. 01, 2023
Net sales $ 134,038 $ 156,530 $ 462,170 $ 503,997
UNITED STATES        
Net sales 130,459 154,150 447,206 491,385
ITALY        
Net sales $ 3,579 $ 2,380 $ 14,964 $ 12,612
v3.24.3
Note 11 - Income Taxes (Details Textual)
3 Months Ended 9 Months Ended
Sep. 29, 2024
Oct. 01, 2023
Sep. 29, 2024
Oct. 01, 2023
Effective Income Tax Rate Reconciliation, Percent 19.10% 73.60% (2.20%) 30.10%
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent 21.00% 21.00% 21.00% 21.00%
v3.24.3
Note 11 - Income Taxes - Schedule of Provision and Effective Tax rates (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 29, 2024
Oct. 01, 2023
Sep. 29, 2024
Oct. 01, 2023
Income tax expense (benefit) $ (1,484) $ 2,092 $ (320) $ 7,756
Effective tax rate 19.10% 73.60% (2.20%) 30.10%
v3.24.3
Note 12 - Earnings Per Share - Schedule of Basic and Diluted Earning Per Share (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 29, 2024
Oct. 01, 2023
Sep. 29, 2024
Oct. 01, 2023
Net income (loss) $ (6,288) $ 752 $ 14,547 $ 17,978
Weighted average common shares outstanding - basic (in shares) 118,694,139 117,397,069 118,345,442 117,256,959
Weighted average common shares outstanding - diluted (in shares) 118,694,139 119,245,956 119,153,568 118,119,501
Earnings per share:        
Basic net income (loss) per share (in dollars per share) $ (0.05) $ 0.01 $ 0.12 $ 0.15
Diluted net income (loss) per share (in dollars per share) $ (0.05) $ 0.01 $ 0.12 $ 0.15
Restricted Stock Units (RSUs) [Member]        
Dilutive effect of potential common shares from share-based payment arrangement (in shares) 0 1,848,887 740,025 862,542
Performance Shares [Member]        
Dilutive effect of potential common shares from share-based payment arrangement (in shares) 0 0 68,101 0
v3.24.3
Note 12 - Earnings Per Share - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares
3 Months Ended 9 Months Ended
Sep. 29, 2024
Oct. 01, 2023
Sep. 29, 2024
Oct. 01, 2023
Antidilutive Securities Excluded from Computation of Earnings Per Share (in shares) 18,826,353 19,002,534 18,826,353 19,002,534
Warrant [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share (in shares) 14,633,311 14,633,311 14,633,311 14,633,311
Share-Based Payment Arrangement, Option [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share (in shares) 454,064 922,228 454,064 922,228
Restricted Stock Units (RSUs) [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share (in shares) 557,828 175,783 557,828 175,783
Performance Shares [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share (in shares) 2,087,400 2,177,462 2,087,400 2,177,462
Earn Out Shares [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share (in shares) 1,093,750 1,093,750 1,093,750 1,093,750
v3.24.3
Note 13 - Equity-based Compensation Plans (Details Textual) - USD ($)
$ / shares in Units, $ in Thousands
9 Months Ended
Aug. 19, 2024
Jul. 22, 2024
May 13, 2024
Apr. 29, 2024
Apr. 15, 2024
Apr. 08, 2024
Apr. 01, 2024
Mar. 18, 2024
Mar. 04, 2024
Jun. 06, 2023
Sep. 29, 2024
Oct. 01, 2023
Sep. 30, 2024
Dec. 31, 2021
Restricted Stock Units (RSUs) [Member]                            
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)                     1,504,665      
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount                     $ 7,887      
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)                     1 year 10 months 24 days      
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share)                     $ 3.83 $ 2.76    
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value                     $ 5,190 $ 685    
Restricted Stock Units (RSUs) [Member] | Minimum [Member]                            
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period (Year)                     1 year      
Restricted Stock Units (RSUs) [Member] | Maximum [Member]                            
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period (Year)                     4 years      
Restricted Stock Units (RSUs) [Member] | President [Member]                            
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)                   1,000,000        
Performance Shares [Member]                            
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares) 1,965 25,195 14,138 28,741 36,144 30,544 5,654 26,020 340,895          
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period (Year)                     3 years      
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share) $ 3.09 $ 3.67 $ 3.93 $ 4.05 $ 4.15 $ 4.44 $ 4.49 $ 4.25 $ 4.22          
Performance Shares [Member] | Minimum [Member]                            
Share-based Compensation Arrangement, Vesting Award Rights, Percentage of Initial Target Awards                     0.00%      
Performance Shares [Member] | Maximum [Member]                            
Share-based Compensation Arrangement, Vesting Award Rights, Percentage of Initial Target Awards                     150.00%      
Performance Shares [Member] | President [Member]                            
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)                   1,520,000        
Share-Based Payment Arrangement [Member]                            
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount                     $ 120      
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)                     4 months 24 days      
Share-Based Compensation Arrangement by Share-Based Payment Award, Expiration Period (Year)                     10 years      
Share-Based Payment Arrangement [Member] | Minimum [Member]                            
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period (Year)                     3 years      
The 2021 Omnibus Incentive Plan [Member]                            
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Authorized (in shares)                           8,850,000
Common Stock, Capital Shares Reserved for Future Issuance (in shares)                         4,685,932  
v3.24.3
Note 13 - Equity-based Compensation Plans - Schedule of Components of Equity-based Compensation Expense (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 29, 2024
Oct. 01, 2023
Sep. 29, 2024
Oct. 01, 2023
Restricted Stock Units (RSUs) [Member]        
Share-Based Payment Arrangement, Expense $ 944 $ 1,331 $ 2,686 $ 3,146
Performance Shares [Member]        
Share-Based Payment Arrangement, Expense 491 1,322 1,376 1,696
Share-Based Payment Arrangement, Option [Member]        
Share-Based Payment Arrangement, Expense $ 86 $ 317 $ 221 $ 328
v3.24.3
Note 13 - Equity-based Compensation Plans - Summary of Restricted Stock Units Activity (Details) - Restricted Stock Units (RSUs) [Member] - $ / shares
9 Months Ended
Sep. 29, 2024
Oct. 01, 2023
Balance (in shares) 4,904,801  
Balance (in dollars per share) $ 2.86  
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares) 1,504,665  
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share) $ 3.83 $ 2.76
Vested, shares (in shares) (1,356,007)  
Vested, weighted average grant date fair value (in dollars per share) $ 3.04  
Forfeited, shares (in shares) (713,838)  
Forfeited, weighted average grant date fair value (in dollars per share) $ 3.39  
Balance (in shares) 4,339,621  
Balance (in dollars per share) $ 3.14  
v3.24.3
Note 13 - Equity-based Compensation Plans - Summary of Stock Option Activity (Details)
9 Months Ended
Sep. 29, 2024
$ / shares
shares
Options outstanding, shares (in shares) | shares 886,046
Options outstanding, weighted average exercise price (in dollars per share) | $ / shares $ 10.97
Forfeited, shares (in shares) | shares (134,066)
Forfeited, weighted average exercise price (in dollars per share) | $ / shares $ 11.03
Expired, shares (in shares) | shares (297,916)
Expired, weighted average exercise price (in dollars per share) | $ / shares $ 10.9
Options outstanding, shares (in shares) | shares 454,064
Options outstanding, weighted average exercise price (in dollars per share) | $ / shares $ 11.01
Options outstanding, weighted average remaining contractual term (Year) 6 years 10 months 13 days
Options exercisable, shares (in shares) | shares 302,705
Options exercisable, weighted average exercise price (in dollars per share) | $ / shares $ 11.01
Options exercisable, weighted average remaining contractual term (Year) 7 years 1 month 17 days
v3.24.3
Note 14 - Lease Commitments (Details Textual)
Sep. 29, 2024
Minimum [Member]  
Lessee, Operating Lease, Remaining Lease Term (Year) 1 year
Maximum [Member]  
Lessee, Operating Lease, Remaining Lease Term (Year) 10 years
v3.24.3
Note 14 - Lease Commitments - Schedule of Operating Lease Assets and Obligations (Details) - USD ($)
$ in Thousands
Sep. 29, 2024
Dec. 31, 2023
Right-of-use assets $ 30,911 $ 29,250
Current operating lease liabilities - Accrued liabilities 4,302 4,948
Long-term operating lease liabilities 27,759 25,177
Total lease liabilities $ 32,061 $ 30,125
Weighted average remaining lease term (in years) (Year) 6 years 8 months 12 days 7 years 2 months 12 days
Weighted average discount rate 6.29% 6.21%
v3.24.3
Note 14 - Lease Commitments - Schedule of Operating Lease Expense Supplemental Cash Flow Information (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 29, 2024
Oct. 01, 2023
Sep. 29, 2024
Oct. 01, 2023
Components of lease expense:        
Operating lease expense $ 1,840 $ 1,630 $ 5,346 $ 4,923
Short-term lease expense 510 521 1,214 1,499
Variable lease expense 68 88 254 257
Total lease expense 2,418 2,239 6,814 6,679
Cash paid for amounts included in measurement of operating lease liabilities 1,613 1,720 5,280 3,471
Right-of-use assets obtained in exchange for new operating lease liabilities 2,582 2,354 6,958 2,354
Decapitalization of right-of-use assets upon lease termination or modification $ 14 $ 154 $ 1,374 $ 154
v3.24.3
Note 14 - Lease Commitments - Schedule of Future Minimum Rental Payments for Operating Leases (Details) - USD ($)
$ in Thousands
Sep. 29, 2024
Dec. 31, 2023
2024 (excluding the thirty-nine weeks ended September 29, 2024) $ 1,601  
2025 6,363  
2026 5,972  
2027 5,992  
2028 5,562  
Thereafter 14,157  
Total lease payments 39,647  
Less imputed interest (7,586)  
Present value of lease liabilities $ 32,061 $ 30,125
v3.24.3
Note 15 - Commitments and Contingencies (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 29, 2024
Oct. 01, 2023
Sep. 29, 2024
Oct. 01, 2023
The 401K [Member]        
Defined Contribution Plan, Employer Discretionary Contribution Amount $ 39 $ 562 $ 1,168 $ 1,702
UNITED STATES        
Defined Contribution Plan, Employer Matching Contribution, Percent of Match     3.50%  
Defined Contribution Plan, Employer Discretionary Contribution, Percent of Match     1.50%  
Foreign Plan [Member]        
Defined Contribution Plan, Employer Matching Contribution, Percent of Match     3.00%  
Defined Contribution Plan, Employer Discretionary Contribution, Percent of Match     1.50%  
v3.24.3
Note 15 - Commitments and Contingencies - Schedule of Accrual For Product Warranties (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 29, 2024
Oct. 01, 2023
Sep. 29, 2024
Oct. 01, 2023
Beginning balance $ 6,046 $ 3,876 $ 3,325 $ 3,584
Accrued for current year warranty claims 2,542 3,005 9,289 9,472
Settlement of warranty claims (2,400) (2,857) (6,426) (9,032)
Ending balance $ 6,188 $ 4,024 $ 6,188 $ 4,024

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