10-K: Holley Inc. Swings to Profit, Boosts Margins in 2025

Holley Inc. reported a significant turnaround in 2025, achieving net income and substantial gross margin improvement, driven by operational efficiencies and higher pricing.

Summary

• Holley Inc. reported net sales of $613.5 million for the year ended December 31, 2025, an increase of 1.9% from $602.2 million in 2024.
• Gross profit increased by 11.6% to $266.2 million in 2025, up from $238.5 million in 2024.
• Gross margin improved significantly to 43.4% in 2025, compared to 39.6% in 2024.
• The company achieved a net income of $19.2 million in 2025, a substantial improvement from a net loss of $23.2 million in 2024.
• Operating income surged by 462.3% to $82.5 million in 2025, primarily due to the absence of $48.6 million in impairment charges recognized in the prior year.
• Adjusted EBITDA increased to $124.0 million in 2025 from $110.5 million in 2024.
• Cash and cash equivalents decreased to $37.2 million as of December 31, 2025, from $56.1 million at the end of 2024.
• Total long-term debt, net of current portion, was $516.1 million as of December 31, 2025, down from $545.4 million in 2024.
• The material weakness in internal control over financial reporting identified in fiscal year 2024 was fully remediated as of December 31, 2025.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, reflecting a strong financial turnaround from a net loss to a net profit, significant gross margin expansion, and effective remediation of internal control weaknesses. While cash flow declined and SG&A increased, the overall operational improvements and strategic growth initiatives position the company favorably.

Positives

• Net income of $19.2 million in 2025 marks a significant turnaround from a $23.2 million net loss in 2024.
• Gross margin improved by 3.8 percentage points to 43.4% in 2025, reflecting higher manufacturing efficiency, stronger inventory discipline, improved product quality, and reduced freight expense.
• Operating income increased by 462.3% to $82.5 million, largely due to the absence of substantial impairment charges from the previous year.
• Adjusted EBITDA grew to $124.0 million in 2025, up from $110.5 million in 2024, indicating improved underlying operational performance.
• The company successfully remediated a material weakness in its internal control over financial reporting as of December 31, 2025, enhancing financial reporting reliability.
• Acquired a perpetual exclusive license agreement with Cataclean in North America for $23.8 million, expanding product offerings and market reach.
• Maintained compliance with all financial covenants under its credit agreement as of December 31, 2025.

Negatives

• Selling, general, and administrative (SG&A) costs increased by 10.6% to $146.1 million in 2025, rising to 23.8% of sales from 21.9% in 2024, driven by higher personnel expenses and increased marketing.
• Restructuring costs increased by 85.4% to $2.9 million in 2025, reflecting ongoing resource allocation and integration activities.
• Cash and cash equivalents decreased by $18.9 million to $37.2 million at year-end 2025.
• Free Cash Flow decreased to $34.2 million in 2025 from $41.8 million in 2024.
• Interest expense increased by 2.3% to $51.8 million in 2025, primarily due to the unfavorable impact of interest rate collars.
• The company recognized a loss of $1.2 million from the change in fair value of warrant liability and a loss of $0.9 million from the change in fair value of earn-out liability in 2025, compared to gains in 2024.

Risks

• A downturn in consumer spending, including from severe or prolonged economic downturns, could adversely impact financial condition and results of operations.
• Inflation and tariffs could result in higher costs and decreased profitability, materially affecting revenue and results of operations.
• Disruptions of supply or shortages of raw materials or components could harm business and profitability.
• Significant disruptions in manufacturing facilities or distribution centers could have a material adverse effect.
• Pandemics, epidemics, or other public health crises could adversely affect business, sales, financial condition, and ability to access lending facilities.
• Failure to compete effectively or to develop and market new products, or a reduction in demand for products, could reduce business and financial results.
• Fuel shortages or high fuel prices could negatively affect the use of powered vehicles that use Holley's products.
• Increased electric vehicle ownership or a shift away from vehicle ownership could impact business.
• Inaccurate forecasting of product demand could harm financial performance.
• Inability to effectively manage growth could strain resources and operations.
• Failure to attract new customers or expand into additional consumer markets cost-effectively could harm business.
• Failure to protect Holley's brand could harm financial condition and results of operations.
• Profitability may decline due to increasing pressure on pricing.
• Failure to maintain relationships with distribution partners or increase sales through the direct-to-consumer (DTC) channel could harm business.
• Adverse effects on results of operations from labor shortages, turnover, and labor cost increases.
• Operations and reputation may be negatively impacted if information technology systems fail or due to security threats/disruptions.
• Adverse developments affecting the financial services industry, such as bank failures, could impact financial condition.
• Indebtedness may limit ability to invest in business needs, and non-compliance with credit agreement covenants could harm business.
• Failure to assess and maintain effective internal control over financial reporting could harm the company.
• Acquisitions or investments in other companies may not be successful and could divert resources.
• Goodwill, other intangible assets, or fixed assets becoming impaired could require a charge to earnings.
• Incorrect estimates relating to accounting policies could harm results of operations.
• Disclosure controls and procedures may not prevent or detect all acts of fraud.
• Negative impacts from global climate change or evolving environmental, social, and governance (ESG) expectations.
• Exposure to political and country risks inherent in conducting business globally, including in China.
• Failure to adopt new technologies like artificial intelligence could expose the company to risks.
• Unauthorized sales of products could harm reputation.
• Involvement in legal or regulatory proceedings, including intellectual property claims, could incur significant costs or prohibit product sales.
• Subject to environmental, health, safety, and privacy laws and regulations, which could subject the company to liabilities, increase costs, or restrict operations.
• Insurance policies may not provide adequate coverage against all claims.
• Certain stockholders (Holley Stockholder and Sponsor) may have conflicts of interest and limit other stockholders' influence.
• Warrants are exercisable for Common Stock, which could increase shares eligible for future resale and result in dilution.
• Warrants may expire worthless or be amended adversely to holders.
• Market price and trading volume of Common Stock and Warrants may be volatile.
• Reports published by analysts could adversely affect market price and trading volume.
• Future sales of Common Stock and Warrants in the public market could cause stock price to fall.
• The company may redeem unexpired Warrants at a disadvantageous time for holders, making them worthless.
• NYSE may delist securities, limiting transaction ability and subjecting the company to additional trading restrictions.
• Future issuances of debt and equity securities may adversely affect the company and dilute existing stockholders.
• No intention to pay cash dividends for the foreseeable future.
• As a smaller reporting company, reliance on reduced reporting and disclosure requirements could make common stock less attractive to investors.
• Delaware law and corporate governance provisions contain anti-takeover measures that could limit stockholder actions.

Future Outlook

Holley Inc. anticipates continued organic growth and will evaluate opportunities for strategic acquisitions. The company expects capital expenditures of up to $20.0 million in fiscal year 2026. Management believes current operating performance, operating plan, cash position, and available borrowings will be sufficient to satisfy liquidity needs and capital expenditure requirements for at least the next twelve months and the foreseeable future. The company does not intend to pay cash dividends in the foreseeable future, preferring to retain earnings for business development and expansion.

Management Comments

• We have pursued our mission of bringing innovation, discovery and fun to motor life for over 120 years.
• Our first principle is to create a premier place to work that attracts, retains, and empowers talented individuals who share our passion for automotive performance.
• Our objective is to deliver exceptional value, innovation, and support to our customers, ultimately creating a loyal and satisfied base of consumer and distribution partners.
• Our third strategic principle is to significantly increase revenue by expanding our market share while maintaining and improving profitability.
• We believe our product development capabilities will enable us to create sustainable long-term growth and margin enhancements for our business.
• We believe there is ample opportunity to continue our expansion into new products and markets, such as exterior accessories and mobile electronics.
• We believe our facilities are in labor markets with ready access to adequate numbers of skilled and unskilled workers, and we believe our relations with our employees are good.
• We pride ourselves on having a platform built for enthusiasts by enthusiasts.
• 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.
• 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.

Industry Context

StockSavvy.ai notes that Holley Inc. operates in a highly competitive and fragmented performance automotive aftermarket industry. The company's strategy of focusing on enthusiast-driven products, expanding into new categories like exterior accessories and mobile electronics, and leveraging a strong brand portfolio aligns with broader trends of niche market specialization and direct consumer engagement. The reported gross margin improvement and shift to profitability, despite increased SG&A, suggest effective cost management and pricing power in a challenging macroeconomic environment marked by inflation and supply chain disruptions, which are common industry headwinds.

Comparison to Industry Standards

• Holley's gross margin of 43.4% in 2025 is a strong indicator of operational efficiency and pricing power within the performance automotive aftermarket, potentially outperforming smaller, less diversified competitors who may struggle with scale and sourcing costs.
• The significant increase in operating income (462.3%) is largely due to the absence of prior-year impairment charges, making direct comparison to industry peers' organic growth rates challenging without further context on their impairment activities.
• The growth in experiential events, with attendance rising from 14,000 in 2015 to 110,000 in 2025, demonstrates a successful community-building strategy that could differentiate Holley from competitors relying solely on traditional distribution channels, fostering stronger brand loyalty similar to enthusiast-focused brands in other recreational markets.
• The company's investment in R&D, averaging $23.7 million per year since 2020, is crucial for maintaining competitiveness in an industry that demands continuous product innovation to meet evolving consumer preferences and vehicle technologies, comparable to R&D efforts seen in specialized automotive component manufacturers.

Management Changes

Corporate Governance

Legal Proceedings

• A putative securities class action lawsuit was filed on November 6, 2023, against Holley Inc., its former Director, President, and CEO (Tom Tomlinson), and former CFO (Dominic Bardos), alleging misleading statements regarding business, operations, and prospects.
• An amended complaint was filed on April 26, 2024, adding Vinod Nimmagadda (Executive Vice President of Corporate Development and New Ventures) as a defendant.
• The company's motion to dismiss the supplemented amended complaint was denied on August 29, 2025.
• The parties are currently conducting discovery, and the potential range of loss, if any, cannot be reasonably estimated at this early stage.

Related Party Transactions

• Holley Parent Holdings, LLC and Empower Sponsor Holdings LLC (together with its affiliates) beneficially own approximately 29% of Common Stock (32% inclusive of Warrants), giving them significant voting power and potential conflicts of interest.
• The Stockholders Agreement grants Holley Stockholder and Sponsor the right to designate nominees for election to the board of directors.
• The certificate of incorporation allows Holley Stockholder, Sponsor, and their affiliates to engage in business activities that compete with Holley Inc.

Stakeholder Impact

• Shareholders: Potential for dilution from warrant exercises, volatility in stock price due to market factors and analyst reports, and impact from ongoing legal proceedings. The shift to net income and improved gross margin are positive for shareholder value.
• Employees: Continued investment in attracting, retaining, and developing talent, competitive benefits, and a focus on an inclusive and safe work environment. Increased SG&A includes higher salary and personnel-related expenses.
• Customers: Focus on delivering exceptional value, innovation, and support through a comprehensive marketing strategy and omni-channel distribution. Improved product quality and lower warranty costs benefit customers.
• Distribution Partners: Continued focus on mutually beneficial relationships and disciplined pricing to preserve product value. However, increased sales through the DTC channel could shift dynamics.
• Creditors: Reduced long-term debt and compliance with financial covenants indicate a stable financial position, though increased interest expense from interest rate collars is noted.

Next Steps

• Continue to identify appropriate opportunities to acquire or invest in businesses or assets that complement or expand the business.
• Continue investments in direct consumer marketing and advertising.
• Refocus some marketing efforts to support the distribution network.
• Continued expansion of and investment in digital and social media to support the DTC channel and complete distribution network.
• Expect capital expenditures of up to $20.0 million in fiscal year 2026.
• Ongoing monitoring of cybersecurity measures and continuous improvement as technologies change.

Key Dates

Recommendation

Holley Inc. demonstrated a strong financial turnaround in 2025, moving from a significant net loss to a net profit, driven by impressive gross margin expansion and the absence of prior-year impairment charges. The remediation of internal control weaknesses is a positive governance development. However, the decline in Free Cash Flow, increased SG&A, and ongoing securities class action lawsuit introduce elements of uncertainty. While the operational improvements are encouraging, these factors suggest a 'hold' recommendation, as investors should monitor the company's ability to sustain profitability, manage rising operating costs, and navigate legal challenges before considering a stronger position.

Keywords

Automotive Aftermarket, Performance Parts, SEC Filing, 10-K, Holley Inc., HLLY, Financial Results, Gross Margin, Net Income, Adjusted EBITDA, Supply Chain, Inflation, Direct-to-Consumer, DTC, Corporate Governance, Internal Controls, Risk Factors, Carburetors, Fuel Injection, Exhaust Systems, Motorsport Safety