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What changed in Holley Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Holley Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+205 added−194 removedSource: 10-K (2025-03-14) vs 10-K (2024-03-14)

Top changes in Holley Inc.'s 2024 10-K

205 paragraphs added · 194 removed · 144 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe have a recruitment strategy that encourages diversity across the company. We leverage our employee referral program to identify diverse talent during the recruitment process. We also engage with a local development board and a local refugee center in Bowling Green, KY to increase our diverse talent candidate pool. We believe our employees should reflect the customers we serve.
Biggest changeWe have a recruitment strategy that encourages diversity across the company. We leverage our employee referral program to identify diverse talent during the recruitment process. We believe our employees should reflect the customers we serve. Notably, approximatel y 30% of Holley consumers are female.
We believe the following factors distinguish Holley from its competitors: • Brand that resonates with enthusiasts: we actively engage enthusiasts at the platform level across multiple channels (e.g., events, digital media, online communities, etc.), creating reference networks for potential consumers. • Innovative, product development: we invest heavily in product research, innovation and development, and introduce products that meet latest platform and use case-specific needs of our enthusiast consumers. • Operational ability that enables efficient order execution : we make significant investments in sourcing, manufacturing and distribution excellence, enabling management of multiple product lines while maintaining scale and attractive relative pricing. • Differentiated go-to-market strategy : we offer a mix of single product and platform-oriented solutions across DTC and reseller channels, delivering a strong overall consumer experience. 6 Table of Contents Brands We have a strong portfolio of brands covering various product categories.
We believe the following factors distinguish Holley from its competitors: • Brand that resonates with enthusiasts: we actively engage enthusiasts at the platform level across multiple channels (e.g., events, digital media, online communities, etc.), creating reference networks for potential consumers. • Innovative product development: we invest heavily in product research, innovation and development, and introduce products that meet latest platform and use case-specific needs of our enthusiast consumers. • Operational ability that enables efficient order execution : we make significant investments in sourcing, manufacturing and distribution excellence, enabling management of multiple product lines while maintaining scale and attractive relative pricing. • Differentiated go-to-market strategy : we offer a mix of single product and platform-oriented solutions across DTC and distribution partner channels, delivering a strong overall consumer experience. 6 Table of Contents Brands We have a strong portfolio of brands covering various product categories.
We plan to unlock the full potential of Holley’s innovation-led research and development ("R&D") product portfolio and brand powerhouse in the performance automotive aftermarket across all nine verticals through our highly focused Steering Principles of Fueling our Teammates, Supercharging our Customers and Accelerating Profitable Growth. • Fueling our teammates : At the heart of our growth strategy lies not just innovation, but the people who drive it.
We plan to unlock the full potential of Holley’s innovation-led research and development ("R&D") product portfolio and brand powerhouse in the performance automotive aftermarket across all four verticals through our highly focused Steering Principles of Fueling our Teammates, Supercharging our Customers and Accelerating Profitable Growth. • Fueling our teammates : At the heart of our growth strategy lies not just innovation, but the people who drive it.
We aim to achieve those objectives more quickly than in the past by focusing on our nine go-to-market consumer verticals and launching innovative new products, entering new product categories, implementing sales and marketing strategies to boost revenue, and through strategic acquisitions.
We aim to achieve those objectives more quickly than in the past by focusing on our four go-to-market consumer verticals and launching innovative new products, entering new product categories, implementing sales and marketing strategies to boost revenue, and through strategic acquisitions.
Further, we are introducing an internship program designed to provide students in the community with an opportunity to gain practical experience. We are committed to fostering an equitable work environment that seeks to ensure fair treatment, equality of opportunity, and fairness in access to information and resources. Social Responsibility . We are committed to social responsibility.
Further, we introduced an internship program designed to provide students in the community with an opportunity to gain practical experience. We are committed to fostering an equitable work environment that seeks to ensure fair treatment, equality of opportunity, and fairness in access to information and resources. Social Responsibility . We are committed to social responsibility.
Holley offers a variety of products across multiple categories but traces its roots back to carburetors which originally made the brand famous with automotive enthusiasts. • MSD : Currently our third leading brand and represented 10% of our sales for 2023.
Holley offers a variety of products across multiple categories but traces its roots back to carburetors which originally made the brand famous with automotive enthusiasts. • MSD : Currently our third leading brand and represented 10% of our sales for 2024 .
Ongoing supply chain disruptions, resulting in supply shortages and higher shipping charges, have and could continue to impact our ability to maintain supplies of products and the costs associated with obtaining raw materials and key components, including automotive-grade microchips. 7 Table of Contents Marketing We reach and engage our consumers where they participate in the performance automotive aftermarket – online and in person.
Ongoing supply chain disruptions, resulting in supply shortages and higher shipping charges, have and could continue to impact our ability to maintain supplies of products and the costs associated with obtaining raw materials and key components. 7 Table of Contents Marketing We reach and engage our consumers where they participate in the performance automotive aftermarket – online and in person.
Approximately 49% of our full-time employees are based primarily in our Bowling Green, KY headquarters, distribution center and manufacturing plants. None of our employees are subject to collective bargaining agreements or represented by a labor union.
Approximately 46% of our full-time employees are based primarily in our Bowling Green, KY headquarters, distribution center and manufacturing plants. None of our employees are subject to collective bargaining agreements or represented by a labor union.
Our omni-channel model enables us to reach our consumers through DTC , E-tailer, warehouse distributor, traditional retailer, and jobber/ installer channels. We have mutually beneficial relationships with our resellers and are able to maintain strong pricing discipline across our channels with strict conformance to minimum advertised pricing.
Our omni-channel model enables us to reach our consumers through DTC , E-tailer, warehouse distributor, traditional retailer, and jobber/ installer channels. We have mutually beneficial relationships with our distribution partners and are able to maintain strong pricing discipline across our channels with strict conformance to minimum advertised pricing.
Our products are designed to enhance street, off-road, recreational and competitive vehicle performance through increased horsepower, torque and drivability. We have locations in the United States, Canada, Italy and China. 4 Table of Contents We attribute a major component of our success to our brands, including Holley EFI, Holley, MSD, Simpson, Powerteq, Accel and Flowmaster, among others.
Our products are designed to enhance street, off-road, recreational and competitive vehicle performance through increased horsepower, torque and drivability. We have locations in the United States, Canada, Italy and China. 4 Table of Contents We attribute a major component of our success to our brands, including Holley EFI, Holley, MSD, Simpson, EDGE, Superchips, Diablosport, Accel and Flowmaster, among others.
In addition, we have established dedicated consumer verticals that are focusing on our go-to-market strategy for the following nine vertical markets: Classic Truck, Classic Muscle, Modern Muscle, Modern Truck, Off-Road, Euro, Import, Safety and Racing. Our current mix of spending is towards activities believed to generate the highest return on investment.
In addition, we have established dedicated consumer verticals that are focusing on our go-to-market strategy for the following four vertical markets: Domestic Muscle, Modern Truck & Off-Road, Euro & Import, and Safety & Racing. Our current mix of spending is towards activities believed to generate the highest return on investment.
Single-product category providers generally offer either lower priced products or higher-quality products focused within one product category. • E-Tailer Private Labels : traditional online resellers sell other manufactured products and offer private label products, often at a lower price point.
Single-product category providers generally offer either lower priced products or higher-quality products focused within one product category. • E-Tailer Private Labels : traditional online distribution partners sell other manufactured products and offer private label products, often at a lower price point.
Through our portfolio of leading brands – ranging from icons of the American Road, to emerging technologies – we serve a large, diverse community of expert partners and enthusiast consumers across nine distinct consumer verticals, including Classic Truck, Classic Muscle, Modern Muscle, Modern Truck, Off-Road, Euro, Import, Safety and Racing.
Through our portfolio of leading brands – ranging from icons of the American Road, to emerging technologies – we serve a large, diverse community of expert partners and enthusiast consumers across four distinct consumer verticals, including Domestic Muscle, Modern Truck & Off-Road, Euro & Import, and Safety & Racing.
Health, Safety and Wellness . Holley is committed to the health and well-being of its employees and designs its compensation and benefit programs to demonstrate this commitment.
Holley is committed to the health and well-being of its employees and designs its compensation and benefit programs to demonstrate this commitment.
We are one of the largest multi-product category brands in the performance automotive aftermarket based on gross sales. • Single-product category providers : established companies focused on one product category in the market primarily selling via resellers.
We are one of the largest multi-product category brands in the performance automotive aftermarket based on gross sales. • Single-product category providers : established companies focused on one product category in the market primarily selling via distribution partners.
On December 31, 2023, our Engineering function included approximately 146 employees, including many enthusiast-focused engineers who are passionate about cars. We continue to seek out top level talent that will help accomplish our mission and vision moving forward.
On December 31, 2024, our Engineering function included approximately 103 employees, including many enthusiast-focused engineers who are passionate about cars. We continue to seek out top level talent that will help accomplish our mission and vision moving forward.
This is demonstrated by both the Company’s and its team members’ participation in philanthropic causes such as local food drives and programs that provide holiday gifts to those in need. 10 Table of Contents Available Information Our principal executive offices are located at 1801 Russellville Rd., Bowling Green, KY 42101, and our telephone number is (270) 782-2900.
This is demonstrated by both the Company’s and its team members’ participation in philanthropic causes such as local food drives and programs that provide holiday gifts to those in need. 10 Table of Contents Available Information Our principal executive offices are located at 2445 Nashville Rd., Suite B1, Bowling Green, KY 42101, and our telephone number is (270) 782-2900.
Our Holley EFI brand focuses on electronic fuel injection technology and showcases our new product development engine. • Holley : Currently our second largest brand and represented 14% of our sales for 2023. The Holley brand resonates with consumers as the majority of automotive enthusiast consumers recognize the Holley brand.
Our Holley EFI brand focuses on electronic fuel injection technology and showcases our new product development engine. • Holley : Currently our second largest brand and represented 15% of our sales for 2024 . The Holley brand resonates with consumers as the majority of automotive enthusiast consumers recognize the Holley brand.
Product Development We offer our enthusiast consumers a comprehensive suite of performance automotive aftermarket products to meet a wide range of needs. We are continuously innovating and evolving our product offerings to meet ever-changing consumer needs. We invest heavily in developing new products, spending an average of $25.1 million per year on research and development since 2019 .
Product Development We offer our enthusiast consumers a comprehensive suite of performance automotive aftermarket products to meet a wide range of needs. We are continuously innovating and evolving our product offerings to meet ever-changing consumer needs. We invest heavily in developing new products, spending an average of $24.7 million per year on research and development since 2020 .
We consider our team members to be our most valuable asset and seek to attract and maintain the highest quality talent by offering competitive benefits and wellness services, opportunities to grow professionally, and regular evaluations, among other initiatives. On December 31, 2023, we employed 1,594 full-time employees and 39 temporary employees.
We consider our team members to be our most valuable asset and seek to attract and maintain the highest quality talent by offering competitive benefits and wellness services, opportunities to grow professionally, and regular evaluations, among other initiatives. On December 31, 2024, we employed 1,467 full-time employees and 53 temporary employees.
MSD has historically been focused on production of ignition products and recently has been more focused on developing electronics for the powertrain category. • Simpson : Currently our fourth leading brand and represented 8% of our sales for 2023.
MSD has historically been focused on production of ignition products and recently has been more focused on developing electronics for the powertrain category. • Simpson : Currently our fourth leading brand and represented 10% of our sales for 2024 .
Niche custom manufacturers are typically local or regionally focused, and some also may resell customized products from other manufactured brands.
Niche custom manufacturers are typically local or regionally focused, and some also may distribution partners customized products from other manufactured brands.
These events focus on creating memorable experiences for enthusiasts, celebrate car culture, build community, and show enthusiasts how Holley products can help them get more performance and enjoyment from their vehicles. Our events have grown in total annual attendance from 14,000 in 2015 to 125,000 in 2023 .
These events focus on creating memorable experiences for enthusiasts, celebrate car culture, build community, and show enthusiasts how Holley products can help them get more performance and enjoyment from their vehicle s. Our events have grown in total annual attendance from 14,000 in 2015 to 114,000 in 2024 .
We believe our product development capabilities will enable us to create sustainable long-term growth and margin enhancements for our business. We have a history of developing innovative products, including new products in existing categories like Electronic Fuel Injection, product line expansions, and products that bring us into new markets including components for converting internal combustion engine vehicles to electric powertrains.
We believe our product development capabilities will enable us to create sustainable long-term growth and margin enhancements for our business. We have a history of developing innovative products, including new products in existing categories like Electronic Fuel Injection, product line expansions, and products that bring us into new markets.
Our marketing strategy is centered on strong brand equity, leading new product innovation capabilities and delivering consistently high-quality products. In 2023, we spent approximately $9.9 million (or approximately 1.4% of our 2023 annual gross sales) on marketing and advertising.
Our marketing strategy is centered on strong brand equity, leading new product innovation capabilities and delivering consistently high-quality products. In 2024, we spent approximately $13.5 million (or approximately 2.1% of our 2024 annual gross sales) on marketing and advertising.
Flowmaster's main focus is on developing exhaust products. We believe the popularity of our brands is the result of consistently delivering high quality, innovative products that resonate with our enthusiast consumers. Our brands have allowed us to build direct, trusted and long-lasting relationships with our consumers and resellers.
We believe the popularity of our brands is the result of consistently delivering high quality, innovative products that resonate with our enthusiast consumers. Our brands have allowed us to build direct, trusted and long-lasting relationships with our consumers and distribution partners.
Our portfolio consists of over 70 brands spanning across over 30 product categories. Our top seven brands generated 70% of our sales in 2023. • Holley EFI : Currently our largest brand and represented 16% of our sales for 2023.
Our portfolio consists of over 70 brands spanning across over 30 product categories. Our top five brands generated 55% of our sales in 2024 . • Holley EFI : Currently our largest brand and represented 14% of our sales for 2024 .
Resellers : We have historically sold the majority of our products through resellers who purchase our products and resell them through various channels.
Distribution Partners : We have historically sold the majority of our products through distribution partners who purchase our products and distribute them through various channels.
We hosted seven events in 2023: LS Fest East, LS Fest West, Ford Fest, MoParty, High Voltage, Brother's Truck Show, and LS Fest Texas. Sales and Distribution We have a diverse omni-channel distribution strategy focused on delivering the best customer experience to our enthusiast consumers and distribution partners.
We hosted seven events in 2024: LS Fest East, LS Fest West, Ford Fest, MoParty, Weekend On The Edge, Haus Party, and LS Fest Texas. Sales and Distribution We have a diverse omni-channel distribution strategy focused on delivering the best customer experience to our enthusiast consumers and distribution partners.
Notably, approximately 30% of Holley consumers are female. Accordingly, we recognize the benefits of female representation in our workforce, and in 2023 over 35% of our workforce were women. We are committed to closing the gender gap and our recruitment and retention strategies support improving women’s representation in leadership roles. Our Culture .
Accordingly, we recognize the benefits of female representation in our workforce, and in 2024 39% of our workforce were women. We are committed to closing the gender gap and our recruitment and retention strategies support improving women’s representation in leadership roles. Our Culture .
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 to targets. We are committed to providing an array of benefits that meet the needs of our workforce, as demonstrated by the addition of an HSA-eligible health plan in 2024.
During the 2024 fiscal year, Holley matched employee contributions to the 401(k) Plan up to 3.5% each pay period, and made an additional discretionary match of up to 1.5% based on company performance to target. We suspended the 401(k) match effective July 2024, but we are committed to providing an array of benefits that meet the needs of our workforce.
These resellers consist of E-tailers, warehouse distributors, traditional retailers, and jobber/installers with E-tailers and warehouse distributors accounting for 59% of our sales in 2023, and our top ten resellers accounting for 42% of our sales in 2023 with our largest reseller making up 21% of our sales in 2023. We have established mutually beneficial and long-term relationships with our resellers.
These partners consist of E-tailers, warehouse distributors, traditional retailers, and jobber/installers with E-tailers and warehouse distributors accounting for 55% of our sales in 2024, and our top ten distribution partners accounting for 42% of our sales in 2024 with our largest making up 21% of our sales in 2024.
Simpson is focused on motorsport safety products including helmets, head and neck restraints, seat belts and fire suits. • Powerteq : Currently our fifth leading brand and represented 8% of our sales for 2023.
Simpson is focused on motorsport safety products including helmets, head and neck restraints, seat belts and fire suits. • Flowmaster : Currently our seventh largest brand and represented 6% of our sales in 2024 . Flowmaster's main focus is on developing exhaust products.
We believe resellers benefit from our broad suite of product offerings that they can leverage to meet consumer demand across multiple product categories. Based on the value that we offer to our resellers, we are able to operate with pricing discipline that supports the value of our products in the marketplace and buttresses our profit margins.
Based on the value that we offer to our distribution partners, we are able to operate with pricing discipline that supports the value of our products in the marketplace and buttresses our profit margins.
Baer Brakes, Brothers Mail Order Industries, Inc., d.b.a. Brothers Trucks, Rocket Performance Machine, Inc., d.b.a. Rocket Racing Wheels, and Speartech Fuel Injections Systems, Inc. Through these strategic acquisitions, we have increased our market position in the otherwise highly fragmented performance automotive aftermarket industry. We operate in the performance automotive aftermarket parts industry.
Through these strategic acquisitions, we have increased our market position in the otherwise highly fragmented performance automotive aftermarket industry. We operate in the performance automotive aftermarket parts industry.
Removed
In addition, we have recently added to our brand lineup through a series of strategic acquisitions, including our 2022 acquisitions of John’s Ind., Inc., Southern Kentucky Classics, and Vesta Motorsports USA, Inc., d.b.a. RaceQuip, and our 2021 acquisitions of AEM Performance Electronics, Classic Instruments LLC, ADS Precision Machining, Inc., d.b.a. Arizona Desert Shocks, Baer, Inc, d.b.a.
Added
We have established mutually beneficial and long-term relationships with our distribution partners. We believe our partners benefit from our broad suite of product offerings that they can leverage to meet consumer demand across multiple product categories.
Removed
Powerteq is focused on exhaust, intakes, drivetrain and engine tuning products and accessories. • Accel : Currently our sixth largest brand and represented 8% of our sales in 2023. Accel is focused on performance fuel and ignition systems. • Flowmaster : Currently our seventh largest brand and represented 6% of our sales in 2023.
Added
For example, we added an HSA-eligible health plan in 2024. We are committed to providing an array of benefits that meet the needs of our workforce, as demonstrated by the addition of an HSA-eligible health plan in 2024. Health, Safety and Wellness .

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs an ongoing 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. 21 Table of Contents If such an event of default and acceleration of the Loan Parties’ obligations occurs, subject to intercreditor agreements agreed to by the lenders, the lenders under the Credit Agreement would have the right to proceed against the collateral the Loan Parties granted to them to secure such indebtedness.
Biggest changeIf such an event of default and acceleration of the Loan Parties’ obligations occurs, subject to intercreditor agreements agreed to by the lenders, the lenders under the Credit Agreement would have the right to proceed against the collateral the Loan Parties granted to them to secure such indebtedness.
We cannot guarantee that the market price of Common Stock and Warrants will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following: • the realization of any of the risk factors presented in this Annual Report; • actual or anticipated differences in our estimates, or in the estimates of analysts, for our revenues, results of operations, level of indebtedness, liquidity or financial condition; • additions and departures of key personnel; • failure to comply with the requirements of the NYSE; • failure to comply with the Sarbanes-Oxley Act or other laws or regulations; • future issuances, sales or resales, or anticipated issuances, sales or resales, of Common Stock; • perceptions of the investment opportunity associated with Common Stock relative to other investment alternatives; • the performance and market valuations of other similar companies; • future announcements concerning our business or our competitors’ businesses; • broad disruptions in the financial markets, including sudden disruptions in the credit markets; • speculation in the press or investment community; • actual, potential or perceived control, accounting or reporting problems; • changes in accounting principles, policies and guidelines; and • general economic and political conditions, such as inflation, labor shortages, disruption of the supply chain, interest rates, fuel prices and other transportation costs, international currency fluctuations, geopolitical instability, military conflicts (including the conflict in Ukraine, the conflict in Israel and surrounding areas, and the possible expansion of such conflicts) or terrorism.
We cannot guarantee that the market price of Common Stock and Warrants will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following: • the realization of any of the risk factors presented in this Annual Report; • actual or anticipated differences in our estimates, or in the estimates of analysts, for our revenues, results of operations, level of indebtedness, liquidity or financial condition; • additions and departures of key personnel; • failure to comply with the requirements of the NYSE; • failure to comply with the Sarbanes-Oxley Act or other laws or regulations; • future issuances, sales or resales, or anticipated issuances, sales or resales, of Common Stock; • perceptions of the investment opportunity associated with Common Stock relative to other investment alternatives; • the performance and market valuations of other similar companies; • future announcements concerning our business or our competitors’ businesses; • broad disruptions in the financial markets, including sudden disruptions in the credit markets; • speculation in the media, social media or investment community; • actual, potential or perceived control, accounting or reporting problems; • changes in accounting principles, policies and guidelines; and • general economic and political conditions, such as inflation, labor shortages, disruption of the supply chain, interest rates, fuel prices and other transportation costs, international currency fluctuations, geopolitical instability, military conflicts (including the conflict in Ukraine, the conflict in Israel and surrounding areas, and the possible expansion of such conflicts) or terrorism.
If this were to occur, we and our stockholders could face significant material adverse consequences including: • a limited availability of market quotations for our securities; • reduced liquidity for our securities; • a determination that our Common Stock is a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; • a limited amount of news and analyst coverage; and • a decreased ability to issue additional securities or obtain additional financing in the future. 29 Table of Contents The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Since our Common Stock and Warrants are listed on the NYSE, they are covered securities.
If this were to occur, we and our stockholders could face significant material adverse consequences including: • a limited availability of market quotations for our securities; • reduced liquidity for our securities; • a determination that our Common Stock is a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; • a limited amount of news and analyst coverage; and • a decreased ability to issue additional securities or obtain additional financing in the future. 30 Table of Contents The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Since our Common Stock and Warrants are listed on the NYSE, they are covered securities.
Increasing scrutiny and evolving expectations with respect to our environmental, social and governance ( “ ESG ” ) practices may impose additional costs on us or expose us to new or additional risks. In addition to the increased legislative and regulatory attention to climate change, customer, investor, and employee expectations in ESG have been rapidly evolving and increasing.
Increasing scrutiny and evolving expectations with respect to our environmental, social and governance ( “ ESG ” ) practices may impose additional costs on us or expose us to new or additional risks. In addition to the increased legislative and regulatory attention to climate change, customer, investor, and employee expectations in ESG have been rapidly evolving and changing.
There has also been an increase in consumer preferences for mobility on demand services, such as car and ride sharing, as opposed to automobile ownership, which may result in a long-term reduction in the number of vehicles per capita.
There has been an increase in consumer preferences for mobility on demand services, such as car and ride sharing, as opposed to automobile ownership, which may result in a long-term reduction in the number of vehicles per capita.
Personal privacy and data security have become significant issues in the United States, Europe, and in many other jurisdictions in which we operate. The regulatory framework for privacy and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future.
Personal privacy and data security have become significant issues in the United States, Europe, China, and in many other jurisdictions in which we operate. The regulatory framework for privacy and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future.
These risks may include, but are not limited to: • shortages of key component parts used in our products sourced from non-U.S. suppliers; • increased transportation costs; • significant delays in the delivery of cargo due to port security considerations; • imposition of duties, taxes, tariffs or other charges on imports; • potential recalls or cancellations of orders for any product that does not meet our quality standards; • disruption of imports by labor disputes or strikes and local business practices; • heightened terrorism security concerns, which could subject imported goods to additional, more frequent or more thorough inspections, leading to delays in deliveries or impoundment of goods for extended periods; • political tensions and military conflicts (including the conflict in Ukraine, the conflict in Israel and surrounding areas, and the possible expansion of such conflicts); • natural disasters, disease, epidemics and health related concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas; • inability of our non-U.S. suppliers to obtain adequate credit or access liquidity to finance their operations; and • our ability or inability to enforce any agreements with our foreign suppliers.
These risks may include, but are not limited to: • shortages of key component parts used in our products sourced from non-U.S. suppliers; • increased transportation costs; • significant delays in the delivery of cargo due to port security considerations; • imposition of duties, taxes, tariffs or other charges on imports; • potential recalls or cancellations of orders for any product that does not meet our quality standards; • disruption of imports by labor disputes or strikes and local business practices; • currency exchange rate fluctuations; • heightened terrorism security concerns, which could subject imported goods to additional, more frequent or more thorough inspections, leading to delays in deliveries or impoundment of goods for extended periods; • political tensions and military conflicts (including the conflict in Ukraine, the conflict in Israel and surrounding areas, and the possible expansion of such conflicts); • natural disasters, disease, epidemics and health related concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas; • inability of our non-U.S. suppliers to obtain adequate credit or access liquidity to finance their operations; and • our ability or inability to enforce any agreements with our foreign suppliers.
There can be no assurance that the outcomes from such examinations, or changes in tax law or regulation impacting our effective tax rates, will not have an adverse effect on our business, financial condition and results of operations. 26 Table of Contents Risks Related to Ownership of Our Securities Certain of our stockholders, including the Holley Stockholder and the Sponsor, may have conflicts of interest with other stockholders and may limit other stockholders' ability to influence corporate matters.
There can be no assurance that the outcomes from such examinations, or changes in tax law or regulation impacting our effective tax rates, will not have an adverse effect on our business, financial condition and results of operations. 27 Table of Contents Risks Related to Ownership of Our Securities Certain of our stockholders, including the Holley Stockholder and the Sponsor, may have conflicts of interest with other stockholders and may limit other stockholders' ability to influence corporate matters.
If some investors find our Common Stock and Warrants less attractive as a result, there may be a less active trading market for our Common Stock and Warrants and more stock price volatility. 30 Table of Contents Delaware law and our certificate of incorporation and bylaws contain certain provisions, including anti- takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
If some investors find our Common Stock and Warrants less attractive as a result, there may be a less active trading market for our Common Stock and Warrants and more stock price volatility. 31 Table of Contents Delaware law and our certificate of incorporation and bylaws contain certain provisions, including anti- takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
Although our ability to amend the terms of the Warrants with the consent of at least 50% of the then outstanding Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Warrants, shorten the exercise period or decrease the number of Common Stock purchasable upon exercise of a Warrant. 27 Table of Contents The market price and trading volume of Common Stock and Warrants may be volatile.
Although our ability to amend the terms of the Warrants with the consent of at least 50% of the then outstanding Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Warrants, shorten the exercise period or decrease the number of Common Stock purchasable upon exercise of a Warrant. 28 Table of Contents The market price and trading volume of Common Stock and Warrants may be volatile.
The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in the certificate of incorporation to be inapplicable or unenforceable in such action. 31 Table of Contents Item 1B.
The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in the certificate of incorporation to be inapplicable or unenforceable in such action. 32 Table of Contents Item 1B.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for Common Stock and Warrants could decrease, which might cause the market price and trading volume of our Common Stock and Warrants to decline significantly. 28 Table of Contents Future sales of our Common Stock and Warrants in the public market could cause our stock price to fall.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for Common Stock and Warrants could decrease, which might cause the market price and trading volume of our Common Stock and Warrants to decline significantly. 29 Table of Contents Future sales of our Common Stock and Warrants in the public market could cause our stock price to fall.
Warrants are exercisable for Common Stock, which could increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders. On December 31, 2023, we had an aggregate of 14,633,311 Warrants issued and outstanding, representing the right to purchase an equivalent number of shares of Common Stock.
Warrants are exercisable for Common Stock, which could increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders. On December 31, 2024, we had an aggregate of 14,633,311 Warrants issued and outstanding, representing the right to purchase an equivalent number of shares of Common Stock.
Securities class action litigation has often been instituted against companies following periods of volatility in the market price of their securities. The trading price of our common stock has experienced significant volatility. In addition, we and certain of our former executive officers have been named as defendants in a putative securities class action lawsuit.
Securities class action litigation has often been instituted against companies following periods of volatility in the market price of their securities. The trading price of our common stock has experienced significant volatility. In addition, we and certain of our former executive officers and current management and current management have been named as defendants in a putative securities class action lawsuit.
These factors may cause us to reduce our prices to retailers and customers or engage in more promotional activity than we anticipate, which could adversely impact our margins and cause our profitability to decline if we are unable to offset price reductions with comparable reductions in our operating costs.
Some of these factors may cause us to reduce our prices to retailers and customers or engage in more promotional activity than we anticipate, which could adversely impact our margins and cause our profitability to decline if we are unable to offset price reductions with comparable reductions in our operating costs.
This shift could force us to reduce prices for our products in order to compete. Conversely, rapid increases in demand due to improving economic conditions could lead to supply chain challenges. Global markets continued to face threats and uncertainty during fiscal year 2023.
This shift could force us to reduce prices for our products in order to compete. Conversely, rapid increases in demand due to improving economic conditions could lead to supply chain challenges. Global markets continued to face threats and uncertainty during fiscal year 2024.
In February 2023, the Company entered into an amendment to its Credit Agreement which, among other things, increased the consolidated net leverage ratio financial covenant level 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 March 31, 2024 (the "Covenant Relief Period").
In February 2023, the Company entered into an amendment to its Credit Agreement which, among other things, increased the consolidated net leverage ratio financial covenant level 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 (the "Covenant Relief Period").
These factors include, but are not limited to, recent supply chain disruptions, labor shortages, wage pressures, rising inflation and potential economic slowdown or growing recession risk, as well as input costs including fuel and energy costs (for example, the price of gasoline), foreign currency exchange rate fluctuations, and other matters that influence consumer spending and preferences.
These factors include, but are not limited to, recent supply chain disruptions, labor shortages, wage pressures, rising inflation, changes in trade policies, including tariffs, and potential economic slowdown or growing recession risk, as well as input costs including fuel and energy costs (for example, the price of gasoline or fuel shortage), foreign currency exchange rate fluctuations, and other matters that influence consumer spending and preferences.
Our industry is subject to significant pricing pressure caused by many factors, including unfavorable economic conditions, intense competition, consolidation in the retail industry, pressure from retailers to reduce the costs of products, and changes in consumer demand.
Our industry is subject to significant pricing pressure caused by many factors, including unfavorable economic conditions, intense competition, tariffs and other trade restrictions, consolidation in the retail industry, pressure from retailers to reduce the costs of products, and changes in consumer demand.
In addition, public health crises, geopolitical instability (including the conflicts in Ukraine and Israel and surrounding areas, and the possible expansion of such conflicts), as well as other global events have significantly increased global macroeconomic uncertainty and volatility.
In addition, public health crises, geopolitical instability (including the conflicts in Ukraine and Israel and surrounding areas, and the possible expansion of such conflicts and China-Taiwan relations), tariffs, as well as other global events have significantly increased global macroeconomic uncertainty and volatility.
On November 18, 2021, we 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 (as amended, the "Credit Agreement"). On December 31, 2023, $592.5 million in principal was outstanding under the credit facility.
On November 18, 2021, we 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 (as amended, the "Credit Agreement"). On December 31, 2024, $560.9 million in principal was outstanding under the credit facility.
See Litigation in Note 19 “Commitments and Contingencies.” We could face additional securities litigation class action lawsuits in the future. This type of litigation [has resulted and could continue to] result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect on us.
See Litigation in Note 18 “Commitments and Contingencies.” We could face additional securities litigation class action lawsuits in the future. This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect on us.
Environmental conditions at or related to our current or former properties or operations, and/or the costs of complying with current or future environmental, health and safety requirements (which have become more stringent and complex over time) could materially adversely affect our business, sales, financial condition and results of operations. 25 Table of Contents Compliance with new and proposed ESG disclosure requirements, including the climate change disclosure requirements of the SEC and the State of California, could require significant effort and divert management’s attention and resources, which could adversely affect our operating results.
Environmental conditions at or related to our current or former properties or operations, and/or the costs of complying with current or future environmental, health and safety requirements (which have become more stringent and complex over time) could materially adversely affect our business, sales, financial condition and results of operations. 26 Table of Contents Compliance with new and proposed climate disclosure requirements, including the climate change disclosure requirements in various jurisdictions could require significant effort and divert management’s attention and resources, which could adversely affect our operating results.
On December 31, 2023, the Holley Stockholder and the Sponsor (together with its affiliates) beneficially own, in the aggregate, approximately 50% of our shares of Common Stock, excluding any warrants exercisable for Common Stock held by Sponsor or its affiliates (or 52% inclusive of shares of Common Stock underlying Warrants held by Sponsor and its affiliates).
On December 31, 2024, the Holley Stockholder and the Sponsor (together with its affiliates) beneficially own, in the aggregate, approximately 43% of our shares of Common Stock, excluding any warrants exercisable for Common Stock held by Sponsor or its affiliates (or 46% inclusive of shares of Common Stock underlying Warrants held by Sponsor and its affiliates).
On December 31, 2023, the Holley Stockholder and the Sponsor (together with its affiliates) beneficially own, in the aggregate, approximately 50% of shares of Common Stock, excluding any Warrants exercisable for Common Stock held by Sponsor or its affiliates (or 52% inclusive of shares of Common Stock underlying Warrants held by Sponsor and its affiliates).
On December 31, 2024, the Holley Stockholder and the Sponsor (together with its affiliates) beneficially own, in the aggregate, approximately 43% of shares of Common Stock, excluding any Warrants exercisable for Common Stock held by Sponsor or its affiliates (or 46% inclusive of shares of Common Stock underlying Warrants held by Sponsor and its affiliates).
Our disclosure controls and procedures may not prevent or detect all acts of fraud.
GAAP for each period. Our disclosure controls and procedures may not prevent or detect all acts of fraud.
To date these incidents have not had a material adverse effect on our business and results of operations; however, there can be no assurance that such impacts will not be material in the future.
We have experienced in the past, and expect to continue to experience, cybersecurity threats and attacks. To date these incidents have not had a material adverse effect on our business and results of operations; however, there can be no assurance that such impacts will not be material in the future.
As an emerging growth company, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until the date we are no longer an emerging growth company.
As an emerging growth company, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404, but we anticipate this to be applicable for the 2025 10-K.
For 2023, we generated approximately $144 million in gross sales through our DTC channel. Part of our growth strategy involves increasing sales through our DTC channel.
For 2024, we generated approximately $149.5 m illion in gross sales through our DTC channel. Part of our growth strategy involves increasing sales through our DTC channel.
Failure to comply with these covenants and certain other provisions of the Credit Agreement, or the occurrence of a change of control, could result in an event of default and an acceleration of the Loan Parties’ obligations under the Credit Agreement or other indebtedness that we and our subsidiaries may incur in the future.
Commencing with the fiscal quarter ending June 30, 2024, the consolidated net leverage financial covenant reverted back to 5:00:1.00. 21 Table of Contents Failure to comply with these covenants and certain other provisions of the Credit Agreement, or the occurrence of a change of control, could result in an event of default and an acceleration of the Loan Parties’ obligations under the Credit Agreement or other indebtedness that we and our subsidiaries may incur in the future.
If we fail to comply with the evolving customer or investor or employee expectations and standards, or if we are perceived to have failed to adequately respond to such expectations and standards, we may suffer from reputational damage, which could have an adverse impact on our business or financial condition. 24 Table of Contents Legal, Regulatory and Compliance Risks Related to Our Business We may become involved in legal or regulatory proceedings and audits.
If we fail to comply with the evolving customer or investor or employee expectations and standards, or if we are perceived to have failed to adequately respond to such expectations and standards (including opposition to various ESG practices), we may suffer from reputational damage, which could have an adverse impact on our business or financial condition. 24 Table of Contents We are exposed to political or country risk inherent in doing business in some countries, including China.
As a result, our stockholders may not have access to certain information they deem important.
As a result, our stockholders may not have access to certain information they deem important. We will remain an emerging growth company until December 31, 2025.
Removed
Additionally, we have been adversely impacted by the global supply shortage of automotive-grade microchips. This shortage has resulted in increased microchip delivery lead times, delays in production and increased costs to source available automotive-grade microchips.
Added
This could materially harm our business, sales, financial condition and results of operations. If we fail to attract new customers, or fail to do so in a cost-effective manner, we may not be able to increase sales.
Removed
The automotive industry is increasingly focused on the development of hybrid and electric vehicles and of advanced driver assistance technologies, with the goal of developing and introducing a commercially viable, fully automated driving experience, and many manufacturers have announced plans to transition from internal- combustion engines into electric vehicle platforms over the coming years.
Added
We have identified a material weakness in our internal control over financial reporting that if not remediated could result in material misstatements in our financial statements and cause us to fail to meet our reporting and financial obligations.
Removed
This could materially harm our business, sales, financial condition and results of operations. In addition, ongoing and sustained promotional activities could harm the image of our brands.
Added
We are responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934.
Removed
We have experienced in the past, and expect to continue to experience, cybersecurity threats and attacks, including an external cyber-attack in 2021 that resulted in a temporary suspension of services to our customers.
Added
As more fully described under Item 9A, “Controls and Procedures,” our management conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures and internal control over financial reporting.
Removed
Commencing with the fiscal quarter ending June 30, 2024 (or such earlier date as the Company may choose to end the Covenant Relief Period in its sole discretion), the consolidated net leverage financial covenant reverts back to 5:00:1.00.
Added
Based on that evaluation, we have concluded that our disclosure controls and procedures were not effective as of December 31, 2024, due to a material weakness in internal control over financial reporting.
Removed
During the third quarter of 2022, we concluded it was necessary to reevaluate goodwill and indefinite-lived intangible assets for impairment after supply chain challenges led to a downward revision of earnings estimates for 2022, which resulted in a decline in our market capitalization.
Added
A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Removed
Based on a quantitative assessment in the third quarter of 2022, we identified impairment of $2.4 million on certain indefinite-lived tradenames but did not identify any indicators of goodwill impairment. During the fourth quarter of 2022, we performed our annual impairment test for goodwill, and a quantitative analysis did not identify any indicators of impairment.
Added
Recognizing this material weakness, management has concluded that our audited financial statements included in this Annual Report on Form 10-K are fairly stated in all material respects in accordance with U.S. GAAP for each of the periods. We have implemented and continue to implement remediation measures, and we are in the process of identifying any additional appropriate remediation measures.
Removed
Based on the annual impairment assessment, the estimated fair value exceeded the carrying value of the reporting unit by 15%. On December 31, 2022, we concluded it was necessary to reevaluate goodwill for impairment due to a further downward revision of earnings estimates for 2022 and a continued decline in our market capitalization.
Added
Until our remediation plan is fully implemented, our management will continue to devote significant time and attention to these efforts. Any failure to implement our remediation plan or any difficulties we encounter with our remediation plan could result in additional material weaknesses or deficiencies in our internal control or future material misstatements in our annual or interim financial statements.
Removed
Accordingly, we performed a qualitative assessment and did not identify any indicators of impairment. During the fourth quarter of 2023, we performed our annual impairment test for goodwill, and a qualitative analysis did not identify any indicators of impairment.
Added
Moreover, our failure to remediate the material weakness identified in this Form 10-K or the identification of additional material weaknesses, could adversely affect our stock price and investor confidence. As noted above, management has determined that the audited financial statements included in this Annual Report on Form 10-K are accurately presented in all material respects in accordance with U.S.
Removed
Goodwill was $419.1 million on December 31, 2023 , and is considered at higher risk of failing future quantitative impairment tests due to the narrow difference between fair value and carrying value. 23 Table of Contents Global climate change and related regulations could negatively affect our business.
Added
The Company completed its annual goodwill impairment analysis in the fourth quarter of fiscal 2024, in conjunction with its budgeting and forecasting process for fiscal year 2025 and concluded that impairment existed for its reporting unit.
Removed
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year (a) following the fifth anniversary of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of the Common Stock and Warrants that are held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
Added
Based on the quantitative assessment in the fourth quarter of 2024, we concluded that it is necessary to record a goodwill and trade name impairments of $40.9 million and $7.7 million, respectively. 23 Table of Contents Global climate change and related regulations could negatively affect our business.
Added
We conduct business in several countries, including Canada, Italy and China.
Added
As a result of our global operations, which can vary substantially by country, we are subject to certain risks that could disrupt our operations or force us to incur unanticipated costs or exit a specific country, including: • the burdens of complying with a wide variety of foreign laws and regulations, and the risks of non-compliance, including the increased burden of complying with anti-bribery regulations, such as the Foreign Corrupt Practices Act (“FCPA”) of the United States, and the risk associated with non-compliance with such laws; • fluctuations in currency exchange rates; • impact of inflation on local economies; • import and export license requirements, tariffs, economic sanctions, contractual limitations and other trade barriers; • difficulties in managing the geographically remote personnel and changes in labor conditions; • the complexities of foreign tax systems and changes in their tax rates and rules; • stringent consumer protection and product compliance regulations that are costly to comply with and may vary from country to country; • limited protection and enforcement regimes for intellectual property rights in some countries; and • increased financial accounting and reporting burdens and complexity.
Added
For example, the ongoing geopolitical and economic uncertainty between the U.S. and China, the unknown impact of current and future U.S. and Chinese trade regulations, and other geopolitical risks with respect to China and Taiwan may cause disruptions in the markets and industries we serve and our supply chain and limit our ability to offer our products and services.
Added
If we are unable to effectively adopt or react to the risks posed by and the opportunity presented by, new technology, such as artificial intelligence, machine learning, blockchain or other new approaches to data mining, we may be exposed to risks related to the adoption and application of such technology.
Added
The effective use of new technology is important for our business. We may face competitive risks related to the adoption and application of new technologies, such as artificial intelligence (AI) and machine learning by our competitors and other market participants. New technology may enhance efficiency or improve product offerings.
Added
To remain competitive, we may be required to implement new technology solutions and develop technical expertise to keep pace with technology advancement, industry standards and customer preferences. Developing and integrating new technologies in our operations may require significant investments, and there is no assurance that these efforts will achieve the intended results.
Added
For example, some technological initiatives may not be accepted in the marketplace or may not deliver the anticipated benefits, resulting in accelerated recognition of expenses or loss of competitive advantage.
Added
Additionally, if we fail to anticipate or respond to these technological developments in a timely and cost-effective manner, or if our competitors adopt more advanced or cost-effective technologies, our market position could be adversely affected.
Added
Furthermore, reliance on third-party technologies introduces risks outside of our control, including potential challenges related to data privacy, intellectual property rights, and compliance with evolving regulatory standards.
Added
If we are unable to develop or deploy new technologies as effectively or efficiently as our competitors, our business, financial condition, and results of operations could be materially and adversely impacted. 25 Table of Contents Legal, Regulatory and Compliance Risks Related to Our Business We may become involved in legal or regulatory proceedings and audits.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe information technology team is comprised of cybersecurity professionals with broad experience and expertise, including in cybersecurity threat assessments and detection, mitigation technologies, cybersecurity training, incident response, penetration testing processes and methodologies, and risk communication and reporting.
Biggest changeThe information technology team is comprised of cybersecurity professionals with broad experience and expertise, including in cybersecurity threat assessments and detection, mitigation technologies, cybersecurity training, incident response, penetration testing processes and methodologies, and risk communication and reporting. Our Chief Information Officer (“CIO”) is overseeing our cybersecurity program and is responsible for the management and oversight of Holley’s cybersecurity program.
Management ’ s Role Holley’s information technology team, which is responsible for developing and implementing our cybersecurity program, currently operates under the oversight of our Chief Financial Officer (“CFO”). The CFO is generally responsible for managing risks from cybersecurity threats, as well as overseeing the safeguarding and fortification of our networks and systems.
Management ’ s Role Holley’s information technology team, which is responsible for developing and implementing our cybersecurity program, currently operates under the oversight of our Chief Information Officer (“CIO”). The CIO is generally responsible for managing risks from cybersecurity threats, as well as overseeing the safeguarding and fortification of our networks and systems.
With a proven track record in developing and leading data science teams, the CFO's expertise in business, finance and technology enables him to guide the team in making strategic information technology investments that strike a balance between growth opportunities, risk mitigation and return on investment.
The CIO reports directly to the Chief Financial Officer ("CFO"). Combined the two have a proven track record in developing and leading data science teams. The CFO's expertise in business, finance and technology enables him to guide the team in making strategic information technology investments that strike a balance between growth opportunities, risk mitigation and return on investment.
Our employees with network access participate annually in required training, including privacy and security training designed to enhance employee awareness of how to detect and respond to cybersecurity threats. We have also developed a program for staging incident response drills to prepare support teams in the event of a significant incident.
Our employees with network access participate annually in required training, including privacy and security training designed to enhance employee awareness of how to detect and respond to cybersecurity threats. We have created an Incident Response Plan that provides our support team with a clear framework for effectively responding to significant incidents.
Removed
Currently, an Interim Chief Information Officer (“CIO”) is overseeing our cybersecurity program as we proceed with an executive search to appoint a permanent CIO. Going forward, the CIO will be responsible for the management and oversight of Holley’s cybersecurity program.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeItem 2. Properties Our corporate headquarters is located at 1801 Russellville Rd, Bowling Green, Kentucky 42101. We own the property and building where our headquarters is located. Our facility is approximately 200,000 square feet and includes approximately 69,000 square feet for corporate office space, 89,000 square feet for manufacturing and approximately 42,000 square feet for product shipment and delivery acceptance.
Biggest changeItem 2. Properties Our corporate headquarters is located at 2445 Nashville Rd, Suite B1, Bowling Green, Kentuck y 42101. We lease the property and building where our headquarters is located. Our facility is approximately 74,000 square feet. We own property at 1801 Russellville Rd, Bowling Green, Kentucky 42101, and is approximately 200,000 square feet.
We have a number of leased locations across the United States, Canada and Italy that serve multiple functions, including distribution, engineering, manufacturing, office space, R&D, and retail sales. We have 15 facilities that perform manufacturing of our products and 12 distribution locations. We also have 17 R&D/Engineering facilities designed to develop our new product innovations.
We have a number of leased locations across the United States, Canada and Italy that serve multiple functions, including distribution, engineering, manufacturing, office space, R&D, and retail sales. We have 15 facilities that perform manufacturing of our products and 11 distribution locations. We also have 14 R&D/Engineering facilities designed to develop our new product innovations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+1 added−1 removed3 unchanged
Biggest changeHolley may consider declaring and paying a cash dividend in the future; however, there can be no assurance that it will do so.
Biggest changeDividend Policy Holley has never declared or paid any cash dividends on its Common Stock and does not currently anticipate paying any cash dividends in the foreseeable future. Holley may consider declaring and paying a cash dividend in the future; however, there can be no assurance that it will do so.
Stock Performance Graph The following graph shows a comparison from July 16, 2021, (the date the Company’s common stock commenced trading on the NYSE) through December 31, 2023, of the cumulative total return for the Company's common stock, the Standard & Poor's 500 Stock Index (S&P 500 Index), and the Standard & Poor’s Consumer Discretionary (Sector) Index.
Stock Performance Graph The following graph shows a comparison from July 16, 2021, (the date the Company’s common stock commenced trading on the NYSE) through December 31, 2024, of the cumulative total return for the Company's common stock, the Standard & Poor's 500 Stock Index (S&P 500 Index), and the Standard & Poor’s Consumer Discretionary (Sector) Index.
Issuer Repurchase of Equity Securities None Unregistered Sales of Equity Securities Except as previously disclosed in a Current Report on Form 8-K, no unregistered sales of the Company’s equity securities were made during the year ended December 31, 2023.
Issuer Repurchase of Equity Securities None Unregistered Sales of Equity Securities Except as previously disclosed in a Current Report on Form 8-K, no unregistered sales of the Company’s equity securities were made during the year ended December 31, 2024.
Removed
Holders of Record As of March 11, 2024, there w ere approximately 14 stockholders o f record of Common Stock. Dividend Policy Holley has never declared or paid any cash dividends on its Common Stock and does not currently anticipate paying any cash dividends in the foreseeable future.
Added
Holders of Record A s of March 11, 2025, there w ere approximately 34 stockh olders o f record of Common Stock, although we believe that a larger number of beneficial owners hold our shares in street name by brokers and other nominees.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

64 edited+37 added−35 removed58 unchanged
Biggest changeYear Ended December 31, 2022 Compared With Year Ended December 31, 2021 The table below presents our results of operations for the years ended December 31, 2022 and 2021 (dollars in thousands): For the years ended December 31, 2022 2021 Change ($) Change (%) Net sales $ 688,415 $ 692,847 $ (4,432 ) (0.6 %) Cost of goods sold 434,757 406,040 28,717 7.1 % Gross profit 253,658 286,807 (33,149 ) (11.6 %) Selling, general, and administrative 150,728 116,793 33,935 29.1 % Research and development costs 29,083 28,280 803 2.8 % Amortization of intangible assets 14,683 13,999 684 4.9 % Impairment of indefinite-lived intangible assets 2,395 — 2,395 n/a Acquisition and restructuring costs 4,513 23,668 (19,155 ) (80.9 %) Related party acquisition and management fee costs — 25,789 (25,789 ) (100.0 %) Other operating expense 1,514 755 759 100.5 % Operating income 50,742 77,523 (26,781 ) (34.5 %) Change in fair value of warrant liability (57,021 ) 32,580 (89,601 ) n/a Change in fair value of earn-out liability (10,731 ) 8,875 (19,606 ) n/a Loss on early extinguishment of debt — 13,650 (13,650 ) (100.0 %) Interest expense 40,227 39,128 1,099 2.8 % Income (loss) before income taxes 78,267 (16,710 ) 94,977 n/a Income tax expense 4,493 10,429 (5,936 ) (56.9 %) Net income (loss) 73,774 (27,139 ) 100,913 n/a Foreign currency translation adjustment (990 ) 30 (1,020 ) n/a Pension liability gain 302 388 (86 ) (22.2 %) Total comprehensive income (loss) $ 73,086 $ (26,721 ) $ 99,807 n/a 40 Table of Contents Net Sales Net sales for the year ended December 31, 2022, decreased $4.4 million, or 0.6%, to $688.4 million as compared to $692.9 million for the year ended December 31, 2021.
Biggest changeInterest is based on the SOFR or prime rate, plus the applicable margin rate. 38 Table of Contents Results of Operations Year Ended December 31, 2024 Compared With Year Ended December 31, 2023 The table below presents our results of operations for the years ended December 31, 2024 and 2023 (dollars in thousands): For the years ended December 31, 2024 2023 Change ($) Change (%) Net sales $ 602,224 $ 659,704 $ (57,480 ) (8.7 )% Cost of goods sold 363,680 403,615 (39,935 ) (9.9 )% Gross profit 238,544 256,089 (17,545 ) (6.9 )% Selling, general, and administrative 132,149 120,244 11,905 9.9 % Research and development costs 18,710 23,844 (5,134 ) (21.5 )% Amortization of intangible assets 13,884 14,557 (673 ) (4.6 )% Impairment of indefinite-lived intangible assets 7,695 — 7,695 100.0 % Impairment of goodwill 40,906 — 40,906 100.0 % Loss on sale of assets 9,234 — 9,234 100.0 % Restructuring costs 1,566 2,641 (1,075 ) (40.7 )% Other expense (268 ) 765 (1,033 ) (135.0 )% Operating income 14,668 94,038 (79,370 ) (84.4 )% Change in fair value of warrant liability (7,570 ) 4,111 (11,681 ) nm Change in fair value of earn-out liability (2,333 ) 2,303 (4,636 ) (nm Loss (gain) on early extinguishment of debt 141 (701 ) 842 (120.1 )% Interest expense 50,690 60,746 (10,056 ) (16.6 )% Income (loss) before income taxes (26,260 ) 27,579 (53,839 ) (195.2 )% Income tax expense (benefit) (3,025 ) 8,399 (11,424 ) (136.0 )% Net income (loss) (23,235 ) 19,180 (42,415 ) (221.1 )% Foreign currency translation adjustment (452 ) 234 (686 ) (293.2 )% Total comprehensive income (loss) $ (23,687 ) $ 19,414 $ (43,101 ) (222.0 )% Net Sales Net sales for the year ended December 31, 2024 , decreased $57.5 million , or 8.7% , to $602.2 million as compared to $659.7 million for the year ended December 31, 2023 .
Should the ongoing macroeconomic conditions not improve, or worsen, or if our attempts to mitigate the impact on our supply chain, operations and costs is not successful, our business, results of operations and financial condition may be adversely affected. 36 Table of Contents Key Components of Results of Operations Net Sales The principal activity from which we generate our sales is the designing, marketing, manufacturing and distribution of performance aftermarket automotive parts for our end consumers.
Should the ongoing macroeconomic conditions not improve, or worsen, or if our attempts to mitigate the impact on our supply chain, operations and costs is not successful, our business, results of operations and financial condition may be adversely affected. 37 Table of Contents Key Components of Results of Operations Net Sales The principal activity from which we generate our sales is the designing, marketing, manufacturing and distribution of performance aftermarket automotive parts for our end consumers.
Comprehensive income (loss) includes the effect of foreign currency translation and pension liability adjustments. 42 Table of Contents Non-GAAP Financial Measures We present EBITDA and Adjusted EBITDA as supplemental measures of our operating performance and believe that such non-GAAP financial measures provide useful information to investors, because they exclude the impact of certain items that we do not consider indicative of our ongoing operating performance and we believe are useful in comparing our results of operations between periods.
Comprehensive income (loss) includes the effect of foreign currency translation and pension liability adjustments. 43 Table of Contents Non-GAAP Financial Measures We present EBITDA and Adjusted EBITDA as supplemental measures of our operating performance and believe that such non-GAAP financial measures provide useful information to investors, because they exclude the impact of certain items that we do not consider indicative of our ongoing operating performance and we believe are useful in comparing our results of operations between periods.
As discussed under “Business Environment” above, although the future impact of supply chain disruptions and inflationary pressures are highly uncertain, we believe that our current operating performance, operating plan, cash position, and borrowings available under our revolving credit facility will be sufficient to satisfy our liquidity needs and capital expenditure requirements for at least the next twelve months and thereafter for the foreseeable future.
As discussed under “Business Environment” above, although the future impact of supply chain disruptions, potential tariffs and inflationary pressures are highly uncertain, we believe that our current operating performance, operating plan, cash position, and borrowings available under our revolving credit facility will be sufficient to satisfy our liquidity needs and capital expenditure requirements for at least the next twelve months and thereafter for the foreseeable future.
We have incurred and expect to continue to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal, and administrative resources, including increased personnel costs, audit and other professional service fees. 35 Table of Contents Acquisitions We have historically pursued a growth strategy through both organic growth and acquisitions.
We have incurred and expect to continue to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal, and administrative resources, including increased personnel costs, audit and other professional service fees. 36 Table of Contents Acquisitions We have historically pursued a growth strategy through both organic growth and acquisitions.
These critical accounting policies are addressed below. 45 Table of Contents Inventory Reserve Our inventories are stated at the lower of cost or net realizable value using the first-in, first-out (FIFO) method. Adjustments to reduce the cost of inventory to its net realizable value are made, if required, for estimated excess, obsolescence or impaired balances.
These critical accounting policies are addressed below. 46 Table of Contents Inventory Reserve Our inventories are stated at the lower of cost or net realizable value using the first-in, first-out (FIFO) method. Adjustments to reduce the cost of inventory to its net realizable value are made, if required, for estimated excess, obsolescence or impaired balances.
Business Environment Our business and results of operations, financial condition, and liquidity are impacted by broad economic conditions including inflation, labor shortages, and disruption of the supply chain, as well as by geopolitical events, including military conflicts (including the conflict in Ukraine, the conflict in Israel and surrounding areas, and the possible expansion of such conflicts).
Business Environment Our business and results of operations, financial condition, and liquidity are impacted by broad economic conditions including inflation, labor shortages, disruption of the supply chain, and potential tariffs, as well as by geopolitical events, including military conflicts (including the conflict in Ukraine, the conflict in Israel and surrounding areas, and the possible expansion of such conflicts).
See Note 1, “ Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies ,” and Note 2, “ Business Combination and Acquisitions ,” in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information related to our acquisitions and investments.
See Note 1, “ Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies ” in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information related to our acquisitions and investments.
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.
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 infrast ructure and information technology.
Interest is based on the SOFR or prime rate, plus the applicable margin rate. 37 Table of Contents Results of Operations Year Ended December 31, 2023 Compared With Year Ended December 31, 2022 The table below presents our results of operations for the years ended December 31, 2023 and 2022 (dollars in thousands): For the years ended December 31, 2023 2022 Change ($) Change (%) Net sales $ 659,704 $ 688,415 $ (28,711 ) (4.2 )% Cost of goods sold 403,615 434,757 (31,142 ) (7.2 )% Gross profit 256,089 253,658 2,431 1.0 % Selling, general, and administrative 120,244 150,728 (30,484 ) (20.2 )% Research and development costs 23,844 29,083 (5,239 ) (18.0 )% Amortization of intangible assets 14,557 14,683 (126 ) (0.9 )% Impairment of indefinite-lived intangible assets — 2,395 (2,395 ) (100.0 )% Acquisition and restructuring costs 2,641 4,513 (1,872 ) (41.5 )% Other expense 765 1,514 (749 ) (49.5 )% Operating income 94,038 50,742 43,296 85.3 % Change in fair value of warrant liability 4,111 (57,021 ) 61,132 n/a Change in fair value of earn-out liability 2,303 (10,731 ) 13,034 n/a Gain on early extinguishment of debt (701 ) — (701 ) n/a Interest expense 60,746 40,227 20,519 51.0 % Income before income taxes 27,579 78,267 (50,688 ) (64.8 )% Income tax expense 8,399 4,493 3,906 86.9 % Net income 19,180 73,774 (54,594 ) (74.0 )% Foreign currency translation adjustment 234 (990 ) 1,224 n/a Pension liability gain — 302 (302 ) (100.0 )% Total comprehensive income $ 19,414 $ 73,086 $ (53,672 ) (73.4 )% Net Sales Net sales for the year ended December 31, 2023, decreased $28.7 million, or 4.2%, to $659.7 million as compared to $688.4 million for the year ended December 31, 2022.
Year Ended December 31, 2023 Compared With Year Ended December 31, 2022 The table below presents our results of operations for the years ended December 31, 2023 and 2022 (dollars in thousands): For the years ended December 31, 2023 2022 Change ($) Change (%) Net sales $ 659,704 $ 688,415 $ (28,711 ) (4.2 %) Cost of goods sold 403,615 434,757 (31,142 ) (7.2 %) Gross profit 256,089 253,658 2,431 1.0 % Selling, general, and administrative 120,244 150,728 (30,484 ) (20.2 %) Research and development costs 23,844 29,083 (5,239 ) (18.0 %) Amortization of intangible assets 14,557 14,683 (126 ) (0.9 %) Impairment of indefinite-lived intangible assets — 2,395 (2,395 ) (100.0 %) Acquisition and restructuring costs 2,641 4,513 (1,872 ) (41.5 %) Other operating expense 765 1,514 (749 ) (49.5 %) Operating income 94,038 50,742 43,296 85.3 % Change in fair value of warrant liability 4,111 (57,021 ) 61,132 nm Change in fair value of earn-out liability 2,303 (10,731 ) 13,034 nm Gain on early extinguishment of debt (701 ) — (701 ) (100.0 %) Interest expense 60,746 40,227 20,519 51.0 % Income before income taxes 27,579 78,267 (50,688 ) nm Income tax expense 8,399 4,493 3,906 86.9 % Net income 19,180 73,774 (54,594 ) nm Foreign currency translation adjustment 234 (990 ) 1,224 (123.6 %) Pension liability gain — 302 (302 ) (100.0 %) Total comprehensive income $ 19,414 $ 73,086 $ (53,672 ) nm 41 Table of Contents Net Sales Net sales for the year ended December 31, 2023, decreased $28.7 million, or 4.2%, to $659.7 million as compared to $688.4 million for the year ended December 31, 2022.
Offsetting these increases were decreases in cash provided by accrued interest, accounts receivable, and accounts payable of $8.2 million, $6.1 million, and $0.9 million, respectively. The changes in accounts receivable, accounts payable, and inventory are impacted by fluctuations in sales and accrued interest, accounts receivable and accounts payable are impacted by the timing of receipts and payments.
Offsetting these increases were decreases in cash used by accrued interest, accounts receivable, and accounts payable of $8.2 million, $6.1 million, and $0.9 million, respectively. The changes in accounts receivable, accounts payable, and inventory are impacted by fluctuations in sales and accrued interest, accounts receivable and accounts payable are impacted by the timing of receipts and payments. Investing Activities .
We are obligated under various operating leases for facilities, equipment, and automobiles with estimated lease payments of approximately $7.2 million , including short-term leases, due in fiscal year 2024. See Note 16, " Lease Commitments" in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information related to our lease obligations.
We are obligated under various operating leases for facilities, equipment, and automobiles with estimated lease payments of approximately $6.4 million, including short-term leases, due in fiscal year 2025. See Note 15, " Lease Commitments" in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information related to our lease obligations.
This compares to a gain of $10.7 million for the year ended December 31, 2022, a period during which Holley's stock price declined. The earn-out liability reflects the fair value of the unveste d Earn-Out Shares r esulting from the Business Combination.
This compares to a gain of $10.7 million for the year ended December 31, 2022, a period during which Holley's stock price declined. The earn-out liability reflects the fair value of the unvested Earn-Out Shares resulting from the Business Combination.
Acquisition and Restructuring Costs Acquisition and restructuring costs for the year ended December 31, 2023, decreased $1.9 million to $2.6 million, as compared to $4.5 million for the year ended December 31, 2022, reflecting a reduction in restructuring activities associated with acquisitions.
Restructuring Costs Restructuring costs for the year ended December 31, 2024 , decreased $1.1 million to $1.6 million , as compared to $2.6 million for the year ended December 31, 2023 , reflecting a reduction in restructuring and integration activities associated with acquisitions.
In February 2023, we entered into an amendment to our 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.
In March 2 023, 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.
Income (Loss) before Income Taxes As a result of factors described above, we recognized net income of $78.3 million before income taxes for the year ended December 31, 2022, as compared to a net loss before income taxes of $(16.7) million for the year ended December 31, 2021.
Income before Income Taxes As a result of factors described above, we recognized $27.6 million of income before income taxes for the year ended December 31, 2023, as compared to net income before income taxes of $78.3 million for the year ended December 31, 2022.
When expressed as a percentage of sales, selling, general and administrative costs increased to 21.9% of sales for the year ended December 31, 2022, compared to 16.9% of sales in 2021.
When expressed as a percentage of sales, selling, general and administrative costs increased to 21.9% of sales for the year ended December 31, 2024 , compared to 18.2% of sales in 2023.
Offsetting these increases were decreases in cash provided by inventory, accrued liabilities and accounts payable of $13.3 million, $13.0 million, and $9.5 million, respectively. The changes in accounts receivable, accounts payable, and inventory are impacted by fluctuations in sales and accrued interest, accounts receivable and accounts payable are impacted by the timing of receipts and payments. Investing Activities .
Offsetting this decrease were increases in cash provided by accrued interest, accounts receivable, and accounts payable of $5.1 million , $13.0 million , and $2.9 million , respectively. The changes in accounts receivable, accounts payable, and inventory are impacted by fluctuations in sales and accrued interest, accounts receivable and accounts payable are impacted by the timing of receipts and payments.
Cash Flows The following table provides a summary of cash flows from operating, investing, and financing activities for the periods presented (dollars in thousands): For the years ended December 31, 2023 2022 2021 Cash flows provided by operating activities $ 88,092 $ 12,312 $ 21,583 Cash flows used in investing activities (4,453 ) (25,037 ) (134,089 ) Cash flows (used in) provided by financing activities (69,008 ) 2,850 77,157 Effect of foreign currency rate fluctuations on cash 300 (300 ) — Net (decrease) increase in cash and cash equivalents $ 14,931 $ (10,175 ) $ (35,349 ) 44 Table of Contents Operating Activities .
Cash Flows The following table provides a summary of cash flows from operating, investing, and financing activities for the periods presented (dollars in thousands): For the years ended December 31, 2024 2023 2022 Cash flows provided by operating activities $ 46,899 $ 88,092 $ 12,312 Cash flows (used in) provided by investing activities 2,021 (4,453 ) (25,037 ) Cash flows (used in) provided by financing activities (34,605 ) (69,008 ) 2,850 Effect of foreign currency rate fluctuations on cash 691 300 (300 ) Net (decrease) increase in cash and cash equivalents $ 15,006 $ 14,931 $ (10,175 ) 45 Table of Contents Operating Activities .
Additionally, we recognized total comprehensive income of $73.1 million for the year ended December 31, 2022, as compared to total comprehensive loss of $(26.7) million for the year ended December 31, 2021.
Additionally, we recognized total comprehensive income of $19.4 million for the year ended December 31, 2023, as compared to total comprehensive income of $73.1 million for the year ended December 31, 2022.
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 Consolidated Financial Statements included in this Annual Report on Form 10-K. 47 Table of Contents
As a result of this evaluation, a pre-tax impairment of $7.7 million was recognized on certain indefinite-lived tradenames. 47 Table of Contents 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 Consolidated Financial Statements included in this Annual Report on Form 10-K. 48 Table of Contents
Cash provided by financing activities for the year ended December 31, 2022, was $2.9 million, which primarily reflected net borrowings on long-term debt.
Cash used in financing activities for the year ended December 31, 2023 , was $69.0 million , which primarily reflected principal payments on long-term debt. Cash provided by financing activities for the year ended December 31, 2022 , was $2.9 million, which primarily reflected net borrowings on long-term debt. Working Capital .
We expect capital expenditures in the range of $8 million to $12 million in fiscal year 2024 . See Note 7, " Debt " in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further detail of our credit facility and the timing of principal maturities.
See Note 7, " Debt " in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further detail of our credit facility and the timing of principal maturities.
Our capital expenditures for the year ended December 31, 2023 of $5.9 million 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.
Our capital expenditures for the year ended December 31, 2024 of $6.8 million 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 of up to $16 million in fiscal year 2025 .
We define Adjusted EBITDA as EBITDA adjusted to exclude, to the extent applicable, acquisition and restructuring costs, which includes transaction fees and expenses, 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; non-cash charges due to our product rationalization initiative aimed at eliminating unprofitable or slow-moving stock keeping units; impairment of indefinite-lived intangible assets; loss or (gain) on the early extinguishment of debt; related party acquisition and management fee costs; notable items that we do not believe are reflective of operating performance, which for the year ended December 31, 2023, includes certain costs incurred for advisory services related to identifying performance initiatives, and for the year ended December 31, 2022, includes a non-cash adjustment related to the adoption of ASC Topic 842, “ Leases ,” and legal fees and costs related to a settlement, and for the year ended December 31, 2021 includes amortization of the fair market value increase in inventory due to acquisitions; and other expenses or gains, which for the year ended December 31, 2022, includes a $1.0 million loss on the sale of a business (see Note 2, " Business Combination, Acquisitions, and Divestiture ," in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information related to the divestiture) and for all periods includes net gains or losses from disposal of fixed assets, franchise taxes, and gains or losses from foreign currency transactions.
We define Adjusted EBITDA as EBITDA adjusted to exclude, to the extent applicable, restructuring costs, which includes transaction fees and expenses, 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; impairment of goodwill and indefinite-lived intangible assets; loss on assets sold; loss or (gain) on the early extinguishment of debt; related party acquisition and management fee costs; notable items that we do not believe are reflective of operating performance, which for the year ended December 31, 2024, includes; $2.0 million legal settlement accrual, costs incurred for advisory services related to identifying performance initiatives, for the year ended December 31, 2023, includes certain costs incurred for advisory services related to identifying performance initiatives, and for the year ended December 31, 2022, included a non-cash adjustment related to the adoption of ASC Topic 842, “ Leases ,” and legal fees and costs related to a settlement; and other expenses or gains, which for the year ended December 31, 2022, includes a $1.0 million loss on the sale of a business and for all periods includes net gains or losses from disposal of fixed assets, franchise taxes, and gains or losses from foreign currency transactions.
Comparable year-over-year results by category include a decrease in electronic system sales of $28.1 million (9.1% category decline), a decrease in exhaust system sales of $11.4 million (14.6% category decline), a decrease in mechanical system sales of $4.6 million (3.0% category decline), a decrease in safety product sales of $3.2 million (4.9% category decline), and accessories sales growth of $11.6 million (13.6% category growth).
Comparable year-over-year results by category include a decrease in safety products sales of $9.4 million (14.3% category decline), a decrease in accessories sales of $9.3 million (8.6% category decline), a decrease in mechanical systems sales of $7.6 million (4.6% category decline), a decrease in exhaust system sales of $6.8 million (10.2% category decline), and electronic systems sales growth of $4.4 million (1.5% category growth).
Working Capital . On December 31, 2023, working capital was $203.6 million compared to $223.7 million on December 31, 2022. For the year ended December 31, 2023, inventories decreased by $41.3 million. Offsetting this decrease in working capital was an increase in cash of $14.9 million.
Holley’s working capital on December 31, 2023 , decreased $20.1 million from $223.7 million on December 31, 2022 . For t he year ended December 31, 2023, inventories decreased by $41.3 million. Offsetting this decrease in working capital was an increase in cash of $14.9 million.
Additionally, we recognized total comprehensive income of $19.4 million for the year ended December 31, 2023, as compared to total comprehensive income of $73.1 million for the year ended December 31, 2022. Comprehensive income (loss) includes the effect of foreign currency translation and pension liability adjustments.
Additionally, we recognized total comprehensive loss of $23.7 million for the year ended December 31, 2024, as compared to total comprehensive income of $19.4 million for the year ended December 31, 2023. Comprehensive income includes the effect of foreign currency translation.
On December 31, 2023, based on the then current weighted average interest rate of 9.2%, expected interest payments associated with outstanding debt totaled approximately $54.6 million for fiscal year 2024.
On December 31, 2024, based on the then current weighted average interest rate of 8.4%, expected interest payments associated with outstanding debt totaled approximately $47.3 million for fiscal year 2025.
On December 31, 2023, we had cash of $41.1 million and availability of $123.3 million under our revolving credit facility. We have a senior secured revolving credit facility with $125 million in borrowing capacity. On December 31, 2023, we had $1.7 million in letters of credit outstanding under the revolving credit facility.
On December 31, 2024 , we had cash of $56.1 million and availability of $97.8 million under our revolving credit facility. We have a senior secured revolving credit facility with $100 million in borrowing capacity. On December 31, 2024 , we had $2.2 million in letters of credit outstanding under the revolving credit facility.
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. We define EBITDA as earnings before depreciation, amortization of intangible assets, interest expense, and income tax expense.
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.
Cost of Goods Sold Cost of goods sold for year ended December 31, 2022, increased $28.7 million, or 7.1%, to $434.8 million as compared to $406.0 million for the year ended December 31, 2021.
Cost of Goods Sold Cost of goods sold for year ended December 31, 2023, decreased $31.1 million, or 7.2%, to $403.6 million as compared to $434.8 million for the year ended December 31, 2022.
Amortization and Impairment of Intangible Assets Amortization of intangible assets for the year ended December 31, 2022, increased $0.7 million, or 4.9%, to $14.7 million as compared to $14.0 million for the year ended December 31, 2021, due to recent acquisitions.
Amortization and Impairment of Intangible Assets Amortization of intangible assets for the year ended December 31, 2024 , decreased $0.7 million , or 4.6% , to $13.9 million as compared to $14.6 million for the year ended December 31, 2023 .
For the year ended December 31, 2021, cash used in investing activities was $134.1 million, primarily relating to acquisitions of $119.2 million and capital expenditures of $15.2 million. Financing Activities. Cash used in financing activities for the year ended December 31, 2023, was $69.0 million, which primarily reflected principal payments on long-term debt.
For the year ended December 31, 2022, cash used in investing activities was $25.0 million, primarily relating to acquisitions of $14.3 million and capital expenditures of $13.6 million. Financing Activities. Cash used in financing activities for the year ended December 31, 2024 , was $34.6 million , which primarily reflected principal payments on long-term debt.
Additionally, an impairment charge of $2.4 million was recognized on certain indefinite-lived tradenames during 2022 (see Note 5, “Goodwill and Other Intangible Assets” in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information related to our recognition of impairment charges).
Impairment of Indefinite-lived Assets Impairment of indefinite-lived assets for the year ended December 31, 2024 was $7.7 million, which related to our tradenames. Refer to Note 5, “Goodwill and Other Intangible Assets” in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information related to our recognition of impairment charges.
Interest expense for 2023 is net of a $1.2 million fair value adjustment on the interest rate collar and $0.6 million in cash payments received on the interest rate collar. 39 Table of Contents I ncome before Income Taxes As a result of factors described above, we recognized $27.6 million of income before income taxes for the year ended December 31, 2023, as compared to net income before income taxes of $78.3 million for the year ended December 31, 2022.
The Company recognized $1.1 million of interest income and $1.2 million of interest expense related to the interest rate collar for the year ended December 31, 2024 and 2023, respectively. 40 Table of Contents I ncome (Loss) before Income Taxes As a result of factors described above, we recognized $26.3 million of loss before income taxes for the year ended December 31, 2024, as compared to net income before income taxes of $27.6 million for the year ended December 31, 2023.
See Note 2, " Business Combination, Acquisitions, and Divestiture " and Note 10, " Fair Value Measurements " in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information related to our assets and liabilities measured at fair value.
These estimates and assumptions could vary significantly, which could result in material differences in the fair values assigned to the assets and liabilities. See Note 10, " Fair Value Measurements " in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information related to our assets and liabilities measured at fair value.
The amendment also increases the consolidated net leverage ratio financial covenant level 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 March 31, 2024 (the “Covenant Relief Period”).
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. Du ring the year ended December 31, 2024 , the Company successfully exited the Covenant Relief Period.
Our profitability has been, and may continue to be, adversely affected by constrained consumer demand, a shift in sales mix to lower-margin products, and demands on our performance that increased our costs.
Our profitability has been, and may continue to be, adversely affected by constrained consumer demand, a shift in sales mix to lower-margin products, which is offset by our cost cutting and operating efficiency gains.
The difference between the effective tax rate and the federal statutory rate in 2022 was primarily due to permanent differences resulting from the change in fair value of the warrant and earn-out liabilities.
The difference between the effective tax rate and the federal statutory rate in 2024 was primarily due to permanent differences resulting from state income taxes, foreign rate differentials, compensation limits with respect to covered employees, goodwill asset impairment, valuation allowance and the change in fair value of warrant and earn-out liabilities.
Our operations have been adversely impacted, and may continue to be adversely impacted, by inflationary pressures primarily related to transportation, labor and component costs. Sales growth in certain products has been constrained by continuing supply chain challenges and automotive electronic component shortages.
Our operations have been adversely impacted, and may continue to be adversely impacted, by inflationary pressures primarily related to transportation, labor and component costs.
Income Tax Expense We recognized income tax expense of $4.5 million for the year ended December 31, 2022, as compared to $10.4 million for the year ended December 31, 2021. The effective tax rate for the year ended December 31, 2022, was 5.7%.
Income Tax Expense (Benefit) We recognized income tax benefit of $3.0 million for the year ended December 31, 2024 , as compared to income tax expense of $8.4 million for the year ended December 31, 2023 . The effective tax rate was 11.5% and 30.5% for the years ended December 31, 2024 and 2023 , respectively.
Operating Income As a result of factors described above, operating income for the year ended December 31, 2023, increased $43.3 million, or 85.3%, to $94.0 million as compared to $50.7 million for the year ended December 31, 2022.
Acquisition and Restructuring Costs Acquisition and restructuring costs for the year ended December 31, 2023, decreased $1.9 million to $2.6 million, as compared to $4.5 million for the year ended December 31, 2022, reflecting a reduction in restructuring activities associated with acquisitions. 42 Table of Contents Operating Income As a result of factors described above, operating income for the year ended December 31, 2023, increased $43.3 million, or 85.3%, to $94.0 million as compared to $50.7 million for the year ended December 31, 2022.
Cash used in investing activities for the year ended December 31, 2023, was $4.5 million, primarily relating to capital expenditures of $5.9 million. For the year ended December 31, 2022, cash used in investing activities was $25.0 million, primarily relating to acquisitions of $14.3 million and capital expenditures of $13.6 million.
Cash provided by investing activities for the year ended December 31, 2024 , was $2.0 million, primarily relating to the sales of Detroit Speed Engineering, which was partially offset by capital expenditures of $6.8 million . Cash used in investing activities for the year ended December 31, 2023, was $4.5 million, primarily relating to capital expenditures of $5.9 million.
Selling, General and Administrative Selling, general and administrative costs for the year ended December 31, 2022, increased $33.9 million, or 29.1%, to $150.7 million as compared to $116.8 million for the year ended December 31, 2021.
Selling, General and Administrative Selling, general and administrative costs for the year ended December 31, 2023, decreased $30.5 million, or 20.2%, to $120.2 million as compared to $150.7 million for the year ended December 31, 2022.
The following unaudited table presents the reconciliation of net income (loss), the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA for the years ended December 31, 2023, 2022 and 2021 (dollars in thousands): For the years ended December 31, 2023 2022 2021 Net income (loss) $ 19,180 $ 73,774 $ (27,139 ) Adjustments: Depreciation 10,308 10,107 11,527 Amortization of intangible assets 14,557 14,683 13,999 Interest expense, net 60,746 40,227 39,128 Income tax expense (benefit) 8,399 4,493 10,429 EBITDA 113,190 143,284 47,944 Acquisition and restructuring costs 2,641 4,513 23,668 Change in fair value of warrant liability 4,111 (57,021 ) 32,580 Change in fair value of earn-out liability 2,303 (10,731 ) 8,875 Equity-based compensation expense 7,291 24,395 4,963 Product rationalization (800 ) 4,519 — Impairment of indefinite-lived intangible assets — 2,395 — (Gain) loss on early extinguishment of debt (701 ) — 13,650 Related party acquisition and management fee costs — — 25,789 Notable items 1,285 1,838 11,270 Other expense 765 1,514 755 Adjusted EBITDA $ 130,085 $ 114,706 $ 169,494 43 Table of Contents Liquidity and Capital Resources Our primary cash needs are to support working capital, capital expenditures, acquisitions, and debt repayments.
The following unaudited table presents the reconciliation of net income (loss), the most directly comparable GAAP measure, to EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin for the years ended December 31, 2024, 2023 and 2022 (dollars in thousands): For the years ended December 31, 2024 2023 2022 Net income (loss) $ (23,235 ) $ 19,180 $ 73,774 Adjustments: Depreciation 10,551 10,308 10,107 Amortization of intangible assets 13,884 14,557 14,683 Interest expense, net 50,690 60,746 40,227 Income tax expense (benefit) (3,025 ) 8,399 4,493 EBITDA 48,865 113,190 143,284 Restructuring costs 1,372 2,641 4,513 Change in fair value of warrant liability (7,570 ) 4,111 (57,021 ) Change in fair value of earn-out liability (2,333 ) 2,303 (10,731 ) Equity-based compensation expense 5,170 7,291 24,395 Impairment of indefinite-lived intangible assets 7,695 — 2,395 Impairment of goodwill 40,906 — — Loss on assets sold 9,234 — — (Gain) loss on early extinguishment of debt 141 (701 ) — Notable items 7,100 1,285 1,838 Other expense (86 ) 765 477 Adjusted EBITDA $ 110,494 $ 130,885 $ 109,150 Adjusted EBITDA for 2024 and 2023 includes the impact of an $8.2 million and $(0.8) million, respectively, non-cash charge related to a previously announced strategic product rationalization.
Interest Expense Interest expense consists of interest due on the indebtedness under our credit facilities. On December 31, 2023, $592.5 million was outstanding under the Credit Agreement.
Loss on Sale of Assets Loss on sale of assets relates to the loss incurred related to the sale of Detroit Speed Engineering. Interest Expense Interest expense consists of interest due on the indebtedness under our credit facilities. On December 31, 2024, $560.9 million was outstanding under the Credit Agreement.
Goodwill and Intangible Assets Goodwill represents the excess of purchase price over the fair value of the net tangible and identifiable intangible assets of businesses acquired. Goodwill amounts are not amortized, but rather tested for impairment at least annually or more often if circumstances indicate that the carrying value may not be recoverable.
Goodwill and Intangible Assets Goodwill and intangible assets deemed to have indefinite lives are not amortized but rather are tested at least annually for impairment, or more often if events or changes in circumstances indicate that more likely than not the carrying amount of the asset may not be recoverable. Goodwill is tested for impairment at the reporting unit level.
Acquired finite-lived intangible assets are initially recorded at fair value and are amortized on a straight-line basis over their estimated useful lives. Indefinite life intangible assets are not amortized but are tested for impairment at least annually or more often if circumstances indicate that the carrying amounts may not be recoverable.
Indefinite life intangible assets are not amortized but are tested for impairment at least annually or more often if circumstances indicate that the carrying amounts may not be recoverable. During the fourth quarter of 2024, a quantitative assessment of indefinite life intangible assets identified certain tradenames for which the carrying amounts might not be recoverable.
The increase in gross profit and gross profit margin, during a period in which sales volume was down, was driven primarily by meaningful improvements in freight, lower warranty costs, and product mix. 38 Table of Contents Selling, General and Administrative Selling, general and administrative costs for the year ended December 31, 2023, decreased $30.5 million, or 20.2%, to $120.2 million as compared to $150.7 million for the year ended December 31, 2022.
The increase in gross profit and gross profit margin, during a period in which sales volume was down, was driven primarily by meaningful improvements in freight, lower warranty costs, and product mix.
Change in Fair Value of Warrant Liability For the year ended December 31, 2022, we recognized a gain of $57.0 million from the change in fair value of the warrant liability as compared to a loss of $32.6 million for the year ended December 31, 2021.
Change in Fair Value of Warrant Liability For the year ended December 31, 2024 , we recognized a gain of $7.6 million due to the change in fair value of the warrant liability. This compares to a loss of $4.1 million for the year ended December 31, 2023 , a period during which Holley's stock price increased.
Comparable year-over-year results by category include a decrease in safety products sales of $9.4 million ( 14.3% category decline), a decrease in accessories sales of $9.3 million ( 8.6% category decline), a decrease in mechanical systems sales of $7.6 million ( 4.6% category decline), a decrease in exhaust system sales of $6.8 million ( 10.2% category decline), and electronic systems sales growth of $4.4 million ( 1.5% category growth) Cost of Goods Sold Cost of goods sold for year ended December 31, 2023, decreased $31.1 million, or 7.2%, to $403.6 million as compared to $434.8 million for the year ended December 31, 2022.
Major categories driving the comparable year-over- year results include a decreas e in electronic systems sales of $33.4 million ( 11.6% category decline), a decrease in mechanical systems sales of $11.5 million ( 7.3% category decline), a decrease in accessories sales of $10.6 million ( 10.7% category decline) and a decrease in exhaust system sales of $6.3 million ( 10.5% category decline.) This was partially offset by an increase in safety products sales of $4.2 million ( 7.5% category incline).
Operating Income As a result of factors described above, operating income for the year ended December 31, 2022, decreased $26.8 million, or 34.5%, to $50.7 million as compared to $77.5 million for the year ended December 31, 2021.
Operating Income As a result of factors described above, operating income for the year ended December 31, 2024, decreased $79.3 million, or 84.4%, to $14.7 million as compared to $94.0 million for the year ended December 31, 2023, which is primarily attributable to the $48.6 million impairment charges.
Acquisition and Restructuring Costs Acquisition and restructuring costs consist of professional fees for legal, accounting, consulting, administrative, and other professional services directly attributable to potential acquisitions. In addition, operational restructuring costs are included within this classification.
Restructuring Costs Restructuring costs consist of professional fees for legal, accounting, consulting, administrative, and other professional services directly attributable to restructuring. Impairment of Indefinite-lived Assets Impairment of indefinite-lived assets relates to indefinite-live trade name impairment charges. Impairment of Goodwill Impairment of goodwill relates to goodwill impairment charges.
Change in Fair Value of Earn-Out Liability For the year ended December 31, 2022, we recognized a gain of $10.7 million from the change in fair value of the earn-out liability as compared to a loss of $8.9 million for the year ended December 31, 2021.
Loss (Gain) on Early Extinguishment of Debt For the year ended December 31, 2024 , we recognized a loss of $0.1 million on the early extinguishment of debt as compared to a gain of $0.7 million for the year ended December 31, 2023 .
Gross Profit and Gross Margin Gross profit for the year ended December 31, 2022, decreased $33.2 million, or 11.6%, to $253.7 million as compared to $286.8 million for the year ended December 31, 2021. Gross margin for the year ended December 31, 2022, of 36.8% decreased from gross margin of 41.4% for the year ended December 31, 2021.
Gross Profit and Gross Margin Gross profit for the year ended December 31, 2024 , decreased $17.5 million , or 6.9% , to $238.5 million as compared to $256.1 million for the year ended December 31, 2023 .
We recognized income tax expense on a net loss for the year ended December 31, 2021, due to permanent differences resulting from the Business Combination, the adjustment to the Simpson earn-out liability during the period, and the change in fair value of the warrant and earn-out liabilities.
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 year ended December 31, 2024 , we recognized a gain of $2.3 million due to the change in fair value of the earn-out liability, which reflects a decrease in Holley's stock price during 2024.
The earn-out liability reflects the fair value of the unvested Earn-Out Shares resulting from the Business Combination. Loss on Early Extinguishment of Debt For the year ended December 31, 2021, we recognized a $13.6 million loss on the early extinguishment of debt.
This compares to a loss of $2.3 million for the year ended December 31, 2023 , a period during which Holley's stock price increased. The earn-out liability reflects the fair value of the unveste d Earn-Out Shares r esulting from the Business Combination.
Cash provided by operating activities for the year ended December 31, 2022, was $12.3 million compared to cash provided by operating activities of $21.6 million for the year ended December 31, 2021. Cash provided by prepaids and other current assets, accrued interest and accounts receivable increased by $14.6 million, $5.9 million, and $3.3 million, respectively.
Cash provided by operating activities for the year ended December 31, 2024 , was $46.9 million compared to cash provided by operating activities of $88.1 million for the year ended December 31, 2023 .
Holley’s working capital on December 31, 2022, increased $23.8 million from $199.9 million on December 31, 2021. For the year ended December 31, 2022, inventories increased by $48.5 million. Offsetting this increase in working capital were a decrease in cash of $10.2 million, an increase in accrued liabilities of $8.5 million, and a decrease in accounts receivable of $4.3 million.
On December 31, 2024 , working capital was $202.2 million compared to $203.6 million on December 31, 2023 . For the year ended December 31, 2024 , prepaids and other current assets decreased by $3.1 million and accrued liabilities decreased by $1.1 million . Offsetting this decrease in working capital was an increase in cash of $15.0 million .
Interest Expense Interest expense for the year ended December 31, 2022, increased $1.1 million, or 2.8%, to $40.2 million as compared to $39.1 million for the year ended December 31, 2021, due to a higher effective interest rate.
Interest Expense (Benefit) Interest expense for the year ended December 31, 2024 , decreased $10.1 million , or 16.6% , to $50.7 million as compared to $60.8 million for the year ended December 31, 2023 , reflecting a lower outstanding debt balances, offset in part by a higher effective interest rate on outstanding debt.
As a result, lower unit volume drove a decrease of approximately $88.5 million that was partially offset by improved price realization of approximately $52.8 million compared to 2021.
Lower sales volume resulted in a decrease of approximately $67.7 million offset partially by improved price realization of approximately $10.2 million compared to the prior year period.
The extinguishment loss includes a write off of $12.2 million in unamortized debt issuance costs associated with our previous first lien and second lien notes due to the refinancing of our previous credit facility (refer to Note 7, “Debt” for further discussion).
The gain in the year ended December 31, 2023 was recognized on the repurchase of $38.8 million of our first lien term loan at a discount to par, net of the write-off of unamortized debt issuance costs (refer to Note 7, “Debt” for further discussion).
Net Income (Loss) and Total Comprehensive Income (Loss) As a result of factors described above, we recognized net income of $73.8 million for the year ended December 31, 2022, as compared to a net loss of $(27.1) million for the year ended December 31, 2021.
The difference between the effective tax rate and the federal statutory rate in 2023 was primarily due to permanent differences resulting from state income taxes, foreign rate differentials, compensation limits with respect to covered employees, and the change in fair value of 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 $23.2 million for the year ended December 31, 2024, as compared to net income of $19.2 million for the year ended December 31, 2023.
Removed
In 2022 and 2021, Holley completed 11 acquisitions. The most significant of these acquisitions impacting the comparability of our operating results were: • Baer, Inc. : On December 23, 2021, we acquired Baer, Inc. doing business as Baer Brakes, a developer and supplier of brakes and brake systems.
Added
The table below presents our net sales for the year ended December 31, 2024 and 2023, as well as sales related to divestitures and sales part of our strategic product rationalization project. The divestitures sales relate to divested businesses prior to the divestiture date. The divestitures include Detroit Speed Engineering, Gear FX and Proforged.
Removed
This acquisition moves us closer to our goal of providing complete vehicle solutions by adding a new product category and brake system expertise. • Brothers Mail Order Industries, Inc. : On December 16, 2021, we acquired Brothers Mail Order Industries, Inc., doing business as Brothers Trucks, a distributor of Classic and Custom vehicle restoration parts serving the Chevrolet and GMC truck aftermarket.
Added
The strategic product rationalization sales relate to discontinued SKUs.
Removed
This acquisition increases our offering in truck and SUV appearance items. • Advance Engine Management Inc. : On April 14, 2021, we acquired Advance Engine Management Inc., doing business as AEM Performance Electronics, a developer and supplier of electronic control and monitoring systems for performance automotive applications.
Added
For the year ended December 31, 2024 2023 Net Sales $ 602,224 $ 659,704 Divestitures 12,821 13,437 Strategic Product Rationalization 13,953 7,298 Cost of Goods Sold Cost of goods sold for year ended December 31, 2024 , decreased $39.9 million , or 9.9% , to $363.7 million as compared to $403.6 million for the year ended December 31, 2023 .
Removed
This acquisition increases our penetration into the import and other sport compact cars submarket.
Added
The decrease in cost of goods sold during the year ended December 31, 2024 , resulted from a 8.7% decrease in product sales and lower freight costs, partially offset by $8.2 million of strategic product rationalization charge that is part of a portfolio transformation aimed at eliminating unprofitable or slow-moving stock keeping units ("SKUs"), which was completed in the first quarter of 2024.
Removed
Related Party Acquisition and Management Fee Costs Related party acquisition and management fee costs consist of fees paid to our historical private equity sponsor pursuant to a management services agreement for management services and consulting services directly attributable to potential acquisitions. Upon the Closing of the Business Combination, the management services agreement with our private equity sponsor was terminated.
Added
Gross margin for the year ended December 31, 2024 , was 39.6% as compared to a gross margin of 38.8% for the year ended December 31, 2023 . The decrease in gross profit was primarily due to lower sales volume and a $8.2 million related to the strategic product rationalization charge.
Removed
Non-comparable sales associated with acquisitions contributed $31.3 million to net sales in 2022, or year-over-year growth of 4.5%. The remaining comparable sales decreased by $35.7 million, or 5.2%.
Added
The improvement in gross margin was largely driven by cost to serve efforts related to lower freight costs and improved warranty performance, as well as reduced write-downs for excess and obsolete inventory, partially offset by the million related to the strategic product rationalization charge. 39 Table of Contents Selling, General and Administrative Selling, general and administrative costs for the year ended December 31, 2024 , increased $11.9 million , or 9.9% , to $132.2 million as compared to $120.2 million for the year ended December 31, 2023 .
Removed
The decline in comparable sales was primarily driven by supply chain constraints that prevented us from building and shipping to orders received from customers and stabilizing demand due to a reduction in disposable income of our consumers.
Added
The net increase in selling, general and administrative costs was predominately driven by a $2.0 million reserve related to litigation settlements, an increase in marketing and advertising to support growth, and incremental spend related to advisory services supporting transformation initiatives.
Removed
The increase in cost of goods sold during the year ended December 31, 2022, in which sales declined reflects compression in gross profit margin due to manufacturing inefficiencies driven by supply chain constraints, higher product rationalization charges, higher warranty costs, and inflationary pressures on certain other costs.
Added
These increases were partially offset by furloughs and temporary headcount reductions from earlier in the year, reflecting resource allocation efforts for portfolio development optimization Research and Development Costs Research and development costs for the year ended December 31, 2024 , decreased $5.1 million , or 21.5% , to $18.7 million as compared to $23.8 million for the year ended December 31, 2023 .

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOn December 31, 2023 the Company had $592.5 million of floating-rate debt outstanding under the Credit Agreement with a weighted average borrowing rate of 9.2%.
Biggest changeOn December 31, 2024 the Company had $560.9 million of floating-rate debt outstanding under the Credit Agreement with a weighted average borrowing rate of 8.4%.
Holley is exposed to credit risk associated with cash and cash equivalents and trade receivables. On December 31, 2023, the majority of the Company’s cash and cash equivalents consisted of cash balances in non-interest-bearing checking accounts which exceed the insurance coverage provided on such deposits. Substantially all trade receivable balances of the business are unsecured.
Holley is exposed to credit risk associated with cash and cash equivalents and trade receivables. On December 31, 2024, the majority of the Company’s cash and cash equivalents consisted of cash balances in non-interest-bearing checking accounts which exceed the insurance coverage provided on such deposits. Substantially all trade receivable balances of the business are unsecured.
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 . On December 31, 2023, the Company was exposed to changes in foreign currency exchange rates.
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 . On December 31, 2024, the Company was exposed to changes in foreign currency exchange rates.
A hypothetical 100 basis point increase in interest rates would result in an approximately $0.9 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 .
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 $5.6 million decrease to Holley’s annual interest expense. Credit and other Risks .

Other HLLY 10-K year-over-year comparisons