Good morning, ladies and gentlemen, and welcome to the conference call to discuss Holley's third quarter 2025 earnings results. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Holley. And as a reminder, this call is being recorded and will be made available for future playback. I would now like to introduce your host for today's call, Anthony Rozmus with Investor Relations. Please go ahead.

Good morning, and welcome to Holley's Third Quarter 2025 Earnings Conference Call. On the call with me today are President and Chief Executive Officer, Matthew Stevenson; and Chief Financial Officer, Jesse Weaver. This webcast and presentation materials, including non-GAAP reconciliations, are available on our Investor Relations website. Our discussion today includes forward-looking statements that are based on our best view of the world and our businesses as we see them today and are subject to risks and uncertainties, including the ones described in our SEC filings. This morning, we will review our financial results for the third quarter and discuss guidance for the full year 2025. At the conclusion of the prepared remarks, we will open the call for questions. With that, I'll turn the call over to our CEO, Matthew Stevenson.

Thank you, Anthony, and good morning to everyone joining us live on the call today. As we look back on the third quarter of 2025, I'm pleased to share that the positive momentum we have been building for more than 2 years continues to gain strength. This quarter marks another clear step forward in our transformation journey, a reflection of disciplined execution, sharp focus, and a resilient team that keeps delivering results in a constantly changing consumer and macroeconomic environment. For the third consecutive quarter, our core business delivered strong growth. Just as a quick reminder, when I say core business, I'm referring to our results, excluding the operations we divested and the product lines we phased out as part of last year's strategic rationalization. This quarter, we made meaningful progress across the company with core growth in every division. It's especially encouraging to see continued momentum in both our direct-to-consumer and business-to-business channels, reinforcing the strength and balance of our omnichannel strategy. As we've said before, our omnichannel approach remains central to our core strategy as the leading consumer enthusiast platform in the automotive performance aftermarket. We're committed to serving customers wherever they choose to engage, whether that's through e-tailers, distributors, wholesalers, third-party marketplaces, installers, national retailers, or our own e-commerce platform. The foundation we've built through our strategic framework continues to deliver from product innovation and digital capability to operational excellence and commercial capabilities. With these fundamentals in place, our focus remains on sustaining momentum and executing against our 3-year plan. We're also staying proactive in managing external factors like tariffs and supply chain costs. While these remain dynamic, our diversified sourcing strategies and pricing discipline have positioned us well to manage impacts and protect margins. Overall, it was an excellent quarter, one that reflects the hard work, focus, and determination driving our organization forward. I couldn't be prouder of our team and the meaningful progress we continue to make together. Now let's turn to Slide 5. I'll walk you through a few of this quarter's standout highlights. We delivered strong results this quarter, achieving 6.4% growth in our core business. This performance reflects genuine volume-driven expansion, which continues to build momentum quarter-over-quarter. Year-to-date, our 5% core growth is composed of a 4% increase in volume and a modest 1% pricing tailwind. This performance showcases the strength of our business model designed to drive consistent growth and the deep commitment of our enthusiast consumer base for whom this is more than a hobby. It's a passion and it's a way of life. Importantly, our growth was broad-based across all channels, divisions, and within 70 brands. That breadth speaks to the success of our transformation initiatives across the company and the strong execution behind our go-to-market strategy. In our B2B channel, we saw a 7.3% growth as we deepen engagement with key partners. Through strong joint planning, continued data integration, and expanded sales enablement tools, we've enhanced collaboration and delivered more value to our channel partners. It's a great example of how our customer-first approach is driving strong relationships and measurable performance gains across the business. Our strategic initiatives also contributed meaningfully this quarter, generating about $26 million of revenue. Roughly $11.3 million came from new product innovation and portfolio management, including strategic pricing and channel margin optimization. These results underscore how well our commercial and operational teams are working together to drive sustainable, profitable growth. Even in what's typically our slowest quarter of the year, we generated $5.5 million of free cash flow, a $7.6 million improvement from last year. That improvement came from higher margin and disciplined capital management across the organization. We ended the quarter with net debt-to-EBITDA leverage at 3.9x, ahead of our year-end target of 4x. Now this is the first time we've been below 4x leverage since 2022, a clear marker in our transformation and a reflection of our stronger financial position. And after the quarter ended, we prepaid another $10 million in debt, bringing total prepayments to $100 million since September 2023. That's an important milestone for us and reinforces our commitment to strengthening the balance sheet, positioning us for continued long-term value creation. Let's move over to Slide 6 and take a look at some of the key quantitative highlights from the quarter. Net sales for Q3 was $138.4 million, which translated to core business growth of 6.4%. That marks our third consecutive quarter of year-over-year growth in the core business, and it underscores our outperformance in the market and the share gains we are seeing in key categories across the company. Gross margins came in at 43.2%, up more than 400 basis points from last year. That improvement reflects strong pricing discipline and operational improvements across the company while keeping our focus on quality and serving the customer. Adjusted EBITDA margin rose to 19.6%, an increase of over 300 basis points year-over-year. This strong performance highlights the operating leverage within the business and the benefits of maintaining cost discipline and execution focus, resulting in a significant $7.6 million improvement in free cash flow compared to the same quarter last year. On the right-hand side of the slide, you can see a few additional business highlights. Product innovation continues to be central to our philosophy, and this past quarter delivered a range of successful launches across our divisions, including digital dashes from our Holley EFI product suite, Big Claw heavy-duty brake kits from Baer, at-home BMW performance tuning solutions from Dinan, and Club Sport racing seats from Simpson. We'll see the impact of these and many other recent product introductions when we review our strategic initiatives tracker in the upcoming slides. Operationally, we also continue to move the needle. In-stock rates for our top 2,500 products improved 2.2% year-over-year, giving customers better access to what they need. Efficiency was up more than $3 million and past due orders were down 20.7%. Those are strong signs of progress and a testament to the impactful additions we made to our operational leadership team across supply chain, manufacturing, and quality. On the consumer side, we continue to see strong engagement from our enthusiast base. Direct-to-consumer sales were up 4.2% year-over-year, supported by a sharper promotional execution and stronger digital performance. The third quarter also represents the peak of our event season. And this year, engagement across our enthusiast community was strong. Attendance at our events was on track to break records, but a rainy weekend during our flagship LS Fest East did impact that momentum, leaving overall attendance roughly flat for our event season this year. Even so, the impact of these events extends well beyond in-person attendance. A key part of our event strategy is leveraging these experiences to grow and engage our digital audience. With more than 8 million followers growing steadily this quarter at 2% year-over-year, our brands continue to reach and inspire enthusiasts across platforms, keeping our community energized during marquee weekends like LS Fest. On Slide 7, we can see some standout examples of the core business growth driving our performance across divisions in Q3. Our Domestic Muscle division roared ahead with 6.2% year-over-year growth, powered by an unwavering enthusiast passion for our legendary brands. Multiple brands delivered standout high-single and double-digit gains across categories, reinforcing the vitality of this portfolio. The Modern Truck and Off-Road division accelerated with 5.2% growth, led by exceptional performance from Baer, Flowmaster, and Range, each posting double-digit gains. DiabloSport also delivered robust high single-digit growth, further strengthening the division's overall performance. Meanwhile, our Euro & Import division continued its impressive trajectory, climbing 16.6%. Dinan and APR sustained remarkable growth throughout the year, driving strong segment performance. We've also shifted AEM to our Domestic Muscle portfolio, better aligning its fuel delivery and monitoring focus with that vertical. Going forward, the Euro & Import division will include only Dinan and APR, sharpening focus and alignment. In our safety division, distributors began ramping up ahead of the Snell 2025 certification changeover, which officially began on October 1. Simpson Motorsport, Motorcycle, and Stilo all posted solid gains, signaling renewed momentum across the category. This acceleration follows the typical pre-certification cycle slowdown earlier in the year, and it positions the division for continued strength through the balance of 2025 and beyond. Together, these results highlight broad-based growth across our divisions, setting the stage for continued progress. Let's move next to our strategic initiative tracker to see how these efforts are fueling our long-term growth. But before that, just a quick reminder on Slide 8, where we revisit the 8 areas forming the foundation of our strategic framework centered around 3 core principles. First, fueling our teammates, making Holley a great place to work, where team members are empowered, see clear paths for growth, and thrive in an engaging and inclusive culture. Second, supercharging our customer relationships, delivering the premier consumer journey in our industry, strengthening B2B partnerships through shared growth, and leading with innovation that defines performance excellence. And finally, accelerating profitable growth, expanding into new markets, pursuing transformational M&A, and driving continuous operational improvement to enable reinvestment and long-term value creation. Together, these principles continue to guide our strategic initiatives and keep our teams aligned around Holley's long-term vision. Now on Slide 9, I'm pleased to share our third quarter highlights as captured in the updated strategic initiative tracker. Under our Trailblazer and trusted partner pillar focused on B2B growth, we delivered another strong quarter. Enhanced product data adoption at key retailers drove $1.7 million in new sales, bringing year-to-date gains to $83 million. Our smaller account segment also remained strong, growing $2.4 million year-over-year in Q3. The largest driver of growth in the quarter was continued share gains with our largest e-tailer and wholesale partners. Altogether, B2B initiatives generated $13.5 million in revenue this quarter. Turning to our premier consumer journey pillar. E-commerce and direct-to-consumer channels continue to perform well. Third-party marketplaces grew 28% year-to-date to $12.9 million, with our new Amazon program driving over 50% growth in chemical product sales. Enthusiast events also fueled record merchandise sales and overall e-commerce sales were up 5% year-to-date. In total, this pillar contributed nearly $2 million year-over-year. New product launches across divisions, paired with continuous sales strength in tuning and exhaust for their new innovations delivered $2.5 million in year-over-year growth and set the stage for strong momentum heading into Q4. Within portfolio management, strategic pricing actions and distributor margin enhancements contributed an additional $7.7 million in sales during the quarter. Combined, this pillar contributed approximately $11.3 million in revenue during Q3. Our global expansion in new markets pillar also continues to gain traction. Mexico shipments reached 240,000 in September, our second straight month above 200,000, tracking toward a $2.5 million annual run rate. Powersports delivered record revenue of nearly $300,000 in September and $1.1 million year-to-date, keeping pace with a $1.8 million target. Together, these efforts generated $1.1 million in revenue for Q3. Under our Fund the Growth pillar, cost and efficiency initiatives yielded $6.2 million in total savings this quarter. In-stock rates for our top 2,500 products are near our 93% goal with significant reductions in past dues with decreased overall inventory levels. Finally, our Great Place to Work initiatives continue to build engagement and productivity. Employee engagement rose 4%, and we remain on track to achieve our revenue per employee goals by year-end. Altogether, execution of our strategic framework delivered about $27.8 million in revenue from key initiatives and $6.2 million in cost savings this quarter, clear proof of focus, discipline, and consistent execution. Holley's third quarter showcased strong broad-based growth, margin expansion, and disciplined execution across our business. We've strengthened our financial position, bringing net debt-to-EBITDA leverage below 4x for the first time since 2022, a major milestone in our transformation journey. These results reflect the hard work and focus of our team and position us well for continued momentum. With that, I'll turn it over to Jesse to walk through the financial highlights and refined guidance for the remainder of the year.

Thank you, Matt, and good morning, everyone. I'd like to start by providing an update on our progress against our financial priorities, then discuss our third quarter '25 financial results before discussing our guidance updates. Moving to Slide 11. Turning to our financial priorities. Our focus remains on strengthening the fundamentals of the business by restoring historical profitability and optimizing working capital. We built on our progress with operating efficiency by generating $3.2 million in incremental savings during the quarter, achieved through ongoing improvements in logistics and the recovery process. These efforts have already pushed total '25 savings to $5 million with additional initiatives still underway. As of the end of the quarter, we remain within our target range and expect further savings through year-end as the team continues to execute on previously outlined initiatives moving steadily toward the midpoint of our annual goal. Turning to working capital. I'd like to take some time to discuss our inventory performance in the third quarter. Year-to-date, inventory reduction moderated from $9 million in Q2 to $5 million in Q3. This shift reflects operating decisions made during the quarter aimed at enhancing long-term visibility, control, and operational efficiency, specifically around the consignment inventory and bonded warehouse. While these actions temporarily increased inventory on hand, they are foundational to our improvements in operations and delivering on our commitments to our customers. While these operational changes mean we are not currently on pace to reach the low end of the $10 million reduction target for the full year of '25, they are setting the stage for sustainable improvements in working capital management. We remain focused on refining our SIOP process to improve planning and forecasting, optimizing safety stock levels, all of which are expected to drive further gains in '26 as these initiatives mature. And on Slide 12, we'll walk through our key financial metrics for the third quarter. Net sales for the third quarter grew 3.2% to $138.4 million versus $134 million in the same period a year ago. It's important to note that this is the first time we achieved net sales growth on a GAAP reported basis in 2 years. On a core business basis, we achieved net sales growth of 6.4%, which is the third quarter in a row of core business growth. The increase was primarily related to a combination of improved pricing realization of $4.6 million and volume mix increase of 3.7. Core business growth once again came across all divisions as well as both channels and continues to be the result of our commercial transformation efforts with B2B and D2C. Gross profit was $59.8 million in the quarter, a growth of 14.4% compared to $52.3 million in the same period last year. Gross margin for the quarter was 43.2%, an increase of 422 basis points versus 39% in the prior year. This improvement was through a combination of pricing flow-through as well as operational initiatives highlighted earlier in the presentation across facilities efficiencies, reduced excess inventory write-downs, and improvements in quality through reduced warranty claims. SG&A, including R&D expense for the third quarter was $38.2 million versus $34.7 million in the same period for the prior year. Primary drivers in SG&A are related to lapping reduced payroll expense in '24 from the furlough activity, reduced '24 incentive comp accrual, and increased investments in '25 related stocks and tariff mitigation support. Net loss for the third quarter was negative $800,000, a $5.5 million improvement versus a net loss of $6.3 million in the third quarter of '24. Adjusted net income in the third quarter was $3.3 million, a $3.8 million improvement versus an adjusted net loss of $500,000 in the same period last year. Adjusted EBITDA for the third quarter was $27.1 million versus $22.1 million in the prior year and driven by a combination of higher sales and improved gross margin. Adjusted EBITDA margin was 19.6%, a 309 basis point improvement versus 16.5% in the third quarter of 2024. On Slide 13, the third quarter was another strong quarter of free cash flow generation of $5.5 million compared to negative $2.1 million in free cash flow for the same quarter a year ago. This performance was driven by improved EBITDA, slightly offset by working capital investments, as previously noted in the presentation. And year-to-date, we have generated $30.3 million in free cash flow. On Slide 14, we reduced our covenant net leverage at the end of the third quarter to 3.9x versus 4.2x a quarter ago. In the third quarter, we prepaid an additional $15 million of debt, which helped drive our leverage down under 4x target we set for the end of '25. This marks the first time we are under 4x leverage in 12 quarters. In addition, at the end of October, we prepaid another $10 million of debt. And since September of '23, we have prepaid $100 million of debt, exercising our commitment to strengthening our balance sheet and enhancing our financial flexibility. And just as a reminder, our leverage remains well under the 5x covenant that is only in place when the revolver is drawn at the end of the quarter. There is no outstanding balance on our revolver and we concluded the quarter with $51 million in cash with no expectation of drawing on the revolver in the near-term. As we look ahead to guidance on Slide 15, we've been closely monitoring the broader economic environment throughout the year. Conditions remain fluid as tariff developments continue to evolve and consumer trends adjust. While factors such as higher unemployment, persistent inflation, and tariff uncertainty have influenced sentiment as reflected in the University of Michigan Consumer Index, U.S. households continue to navigate these challenges with measured caution. But even within this complex backdrop, Holley continues to deliver strong results. Our disciplined execution, focus on operational excellence, and commitment to strategic priorities have driven growth that exceeded expectations through the first 9 months of '25. This performance highlights the resilience of our business model and our ability to perform in a dynamic environment. Given our results year-to-date and the momentum we've built across our core operations, we are raising our full-year guidance for revenue at the bottom end of our range on adjusted EBITDA. This update reflects both our confidence in the team's ability to execute and our disciplined approach to navigating an evolving macro environment. For '25 revenue, we now expect a range of $590 million to $605 million, which implies 3.8% growth at the midpoint over the core business base of roughly $575 million in '24. Additionally, for adjusted EBITDA, we now expect a range of $120 million to $127 million as we raised the bottom end of our guidance from $116 million. We look forward to closing the year on a strong note and roll this momentum into 2026. We remain focused on strengthening our balance sheet, enhancing free cash flow generation, and maintaining disciplined capital allocation to position ourselves for long-term growth for years to come. This concludes our prepared remarks. We would now like to open the line for questions.

Our first question comes from Christian Carlino with JPMorgan.

You had talked about taking high single-digit pricing, but price realization was only around 3% in the quarter. So could you talk about why that delta exists? What was same SKU inflation? And then is it simply a function of channel mix and more B2B sales versus D2C or is there some trade down or favoring smaller projects over larger ones?

Yes, good question, Christian. From what we can tell, it's a combination of factors. We are seeing continued strong growth in B2B related to the average selling price, but there is a slightly lower price realization on a comparable basis. Additionally, several of our customers have pricing structures that don't take effect immediately and will be reflected in later periods. There are also some contractual prices for various items that we provide to existing distribution partners that aren't influencing this. Overall, it’s really a mix of these elements. Regarding the trade down aspect, we're not observing much of that; it’s more about the other factors.

Got it. That's helpful. And you're not tracking to above your gross margin and EBITDA margin targets for the year. So how should we think about the structural margin profile of the business? I guess, 2 parts there. One, is there anything unsustainable in the base right now? And then the flip side is that you've achieved this despite a subdued sales environment. So as sales growth returns to more normalized levels, is there room to expand margins further or will you generally look to reinvest upside back into the business?

Regarding the first question, there hasn't been any structural change. The pricing is definitely benefiting us, especially at lower volumes. As for your second question, Matt and I believe that while we are two years into our transformation, there are still opportunities to focus on for driving growth, particularly in operations. We do not want to overcommit regarding the growth we expect to see. However, we are focused on continuing to accelerate margins, and we are committed to achieving above 20%, although I don't anticipate that will materialize until our operations are on a smoother trajectory.

Our next question comes from the line of Phillip Blee with William Blair.

The question. The midpoint of your guidance implies a fairly big step down in organic sales growth in the fourth quarter it seems. So is that more just a function of conservatism in the current environment or is that driven by something more specific that you've seen quarter-to-date that warrants a bit more caution here?

Good question, Phillip. And it's a combination of the conservatism, like the current environment is a bit murky, and I think we're all reading the news every day. And so, Matt and I are really big on making sure that we don't overpromise on this. Plus, this time last year, we're lapping a marketing calendar event that we decided not to reengage in this year just from a margin profile perspective. So that's impacting the top line a bit. So those 2 things combined really account for the majority of it.

Okay, great. And then given what you know about who your average customer is, how do you think about the potential benefits from the One Big Beautiful Bill between no tax on tips and overtime and the potential for a bigger tax refund season next year? Do you think that, that could have maybe a more meaningful impact on your business and underlying demand?

Phillip, it's Matt. What I think the current environment shows our consumers are resilient, right? This is not just a hobby for them, it's a lifestyle. And as we've seen in the past, when there's times they get more discretionary income or tax refunds, that does generate increases in demand. So we'll see how that plays out over the next 6 months or so.

Our next question comes from the line of Joe Altobello with Raymond James.

I guess, Matt, first question for you. You've talked about a lot of the changes at Holley over the last 2-plus years here, certainly making a lot of progress. As we start to think about 2026, where are your priorities for next year?

Joe, I think if you reflect back on our strategic initiatives that we showcase each quarter on the progress there, that is part of our 3-year plan, and that's what we had the teams focused on. So there's a number of key growth areas there. Also, we still think it's pretty early relative to the operational roadmap we have for continued improvements there. So between those strategic initiatives around growth and operational improvements, that's where the team is focused. And again, still early innings in a number of areas that we continue to see opportunity.

Okay. Maybe a follow-up for Jesse. You mentioned inventories were a little heavier at least than I was looking for. Can you sort of explain a little bit better what drove that?

Yes, Joe. So in the quarter, there are a couple of things. One, operationally, we felt like there was a much stronger case for us to actually service our customers better by taking some product that we've been selling on consignment and bringing it into our system. It brings a lot more visibility into where the product is, how much of it we have on hand so we can make products and deliver on time to our customers. So that was about a $2 million to $3 million headwind in and of itself. And then in addition, we also decided to get out of the bonded warehouse, which was a strategy that was used to help mitigate tariffs in the beginning. It worked for that purpose. But as tariffs came down, it also was causing operational challenges. So as we started to bring in those products out of the bonded warehouse or directly from port and the port in particular, became less congested, you see a lot of inventory that came in, in Q3 that more than likely would have shown up in Q2. So it felt like a big change in Q3, but it's just more of some of the things that should have come in Q2 as well.

Our next question comes from the line of Brian McNamara with Canaccord Genuity.

Congrats on the strong results, I might add. So I'm curious, you guys did a 3.3% in Q1, 3.9% in Q2, a 6.4% in Q3, markedly getting better each quarter. Matt, I think like about a year ago, you kind of called your shot and you said we're going to return to growth in Q1. So kudos on that. I'm just curious how this year has played out relative to your expectations internally?

Thank you for the question, Brian. When we set our plan for 2025 at the end of last year, I believe the team is executing exceptionally well. As we discussed earlier with Joe, our strategic initiative tracker is what the team focuses on daily, and they continue to make progress on the key initiatives aimed at driving growth or improving operations. Overall, I would say things are going as planned.

And then with all the work you guys have done behind the scenes, do you think you have all the building blocks in place for this growth to be what I would, dare I call, sustainable from here on out, obviously, acknowledging that from quarter-to-quarter, there'll be unique challenges.

Yes. We have focused extensively on foundational elements, including our direct-to-consumer business and strengthening relationships with our distributors. These are essential building blocks for long-term success. Currently, SEMA is taking place, and I've had the chance to meet with several of our esteemed distribution partners. We've made significant progress over the past two years in collaboration and finding new ways to grow together. All of these efforts are foundational for our long-term objectives.

And just last quick one, on SEMA, actually. It feels like you guys have refined your strategy with that event each year since you've been there, Matt. I'm curious how does SEMA today compare to maybe your first go at it in 2023 and obviously, acknowledging there was a high energy there last year given the election results.

Yes, the energy this year felt even greater. Our booth was absolutely packed, and the customer meetings were tremendous. This is my third SEMA with the company, and we continue to execute our plan at the event. We are really focusing on our key four verticals, and it's eye-opening to see the fantastic brands and products we have in our portfolio. We are showcasing them within these verticals and expanding that execution strategy. We are engaging with major customers, scheduling meetings to connect, winning product awards, and highlighting the great innovations we have. The team does a great job refining our strategy and taking the time to engage with customers to drive business.

Our next question comes from Bret Jordan with Jefferies.

Could you talk about the B2B and sort of what the white space you see there? I mean I think you talked about sort of doing more with some of the big parts retailers, traditional mechanical guys, but sort of good growth there, how do you see the run rate?

Yes, Bret, on a strategic initiative tracker, we call out a number of things there. We think there's still a lot of runway in our existing relationships, of course, with whether it's e-tailers, wholesale distributors, but some of the areas you referenced, national retailers is something we're continuing to engage in strongly. We feel that, that channel is accretive in our omnichannel strategy that in-store impulse purchase being able to provide enthusiast products that they want, being able to just go in and pick up something from one of our brands. We also see continued opportunity in export markets, and you see some of the expansion that we're doing in Mexico and other areas. And we continue to work with OEMs on programs for their aftermarket, not OE production, but their aftermarket performance teams and providing them solutions for enthusiasts. So there are a number of ways we're continuing to drive the B2B growth for the long term.

I believe you've mentioned before that the events are usually self-funding, but you noted that LS Fest East might have experienced lower traffic. Were the events in the third quarter generally neutral in terms of earnings, or did they face a headwind during that period?

No, no, Bret. They're positive. We receive many inquiries about attendance and its trends. As I noted in the prepared remarks, engagement this year was strong, but weather at our largest event can have an impact. When you have over 40,000 attendees and experience rainy conditions on a Friday afternoon or Saturday morning, it affects things. However, the profitability was in line with expectations.

Our next question comes from the line of Joe Feldman with Telsey Advisory Group.

I wanted to ask, go back to the guidance, I think somebody had asked this as well, but something similar. What would happen for you guys or have to happen to get to the high-end of the guide versus the low-end? Like is there a subtle difference or is it you would really need a couple of things to really go right to get to the high-end versus the low-end?

Yes. I mean, I think, Joe, to get to the high end, we're coming up on our holidays event and just having a really strong merchandising calendar and participation by our B2B partners with great sellout would really allow us to get to the high-end. I think on the other end, it's obviously that not hitting in conjunction with distribution partners potentially getting even more conservative on what their forecast is for the coming year because that does impact their in stocks that they hold. So there could be some destocking there in that low-end scenario.

Got it. That's helpful. I wanted to follow up on your mention of working with B2B partners and improving data sharing, which you referred to as data product adoption in your prepared remarks. Can you provide more insights on how this has been received and how B2B partners are utilizing that data? It seems to be beneficial, but I would like to understand it better.

Yes, Joe, it's Matt. I'm glad to provide an answer. This has been a company-wide initiative for over a year now. When we talk about data, we're specifically referring to product data. In today's e-commerce environment, whether it's selling directly to consumers or through wholesale partners to installers, the key is the product information they can display through their online merchandising efforts. This requires a comprehensive set of information, including photos, videos, dimensions in and out of the box, features, advantages, benefits, comparisons, and compatibility details. Previously, there wasn't a proactive approach to offer best-in-class product data, but our teams have significantly improved the quality of our data. We evaluate the data across every category and brand, continuously enhancing it on a weekly basis as our product teams work to improve the information. Ultimately, this simplifies the task for our B2B customers in merchandising the products to their clients.

Our next question comes from the line of Mike Baker with D.A. Davidson.

Can I ask about just the overall spending environment in the consumer? It sounds like there's great energy at SEMA. So you took share clearly. Any idea or any metrics on the overall market? Is your growth just share gains or have you started to see any kind of recovery in spending in the consumer and all that kind of stuff?

It's a great question, Michael. The industry is challenging when it comes to obtaining real-time information. However, based on our conversations with distribution partners, I've noticed that out-the-door sales have been strong throughout the year for our products, and they've reported better overall results for their entire portfolio than they anticipated at the start of the year. We've also been gaining market share. Currently, our guidance is based on the expectation that these trends will continue.

So to that point, and that's my follow-up. When you say the trends continue, are you referring to your share gains or industry trends? And I guess what I'm getting at is for a lot of consumer type of names, we saw really strong sales results through July and August and then something seems to have changed in terms of spending September, October and even into November, for a lot of different macro government reasons. So I'm wondering if you can comment on that and any trend that you're seeing throughout the quarter and early into this year or this quarter?

Yes, Mike, it's Matt. Generally speaking, how our industry has played out this year, the first quarter was pretty soft. And then the overall industry started to pick up through the balance of the year. And I think to Jesse's point, through that whole period, we've been taking share. Now I just sat down with no less than a dozen of our key partners over 2 days. And generally speaking, they're seeing the out-the-door trends be very consistent in demand. And so there are no indications coming from our key partners or, of course, from ourselves that anything has really changed at this point and to which it does in the future, who knows.

Our final question this morning comes from the line of Mike Albanese with The Benchmark Company.

It was a good quarter. When I consider your pricing, volume, and margin expansion, it appears that you've effectively dealt with tariffs and managed your supply chain. I'm curious if you could share your perspective on the competitive environment. I understand it’s challenging to obtain detailed data, especially with many brands and SKUs involved. I'm interested in knowing how much of your market share increase is influenced by current macroeconomic factors from a cost perspective, and whether your competitive position has improved as a result.

Yes, Mike, I think you're meaning competitive position relative to pricing?

Correct.

Yes. It's really specific to each category. There isn’t a general statement that applies to all. Our focus is on staying competitive, not only in the value we offer to consumers but also in ensuring that our distributors maintain healthy margins to effectively market our products. Generally, we have gained market share by outperforming and enhancing our capabilities throughout the year in both direct-to-consumer and business-to-business segments. Additionally, improvements in our product data and relationships with key partners have significantly contributed to our market share growth.

Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Mr. Stevenson for any final comments.

Okay. Thank you, Melissa. Slide 17 underscores the compelling investment story behind Holley Performance brands. This market, fueled by automotive enthusiasts goes far beyond a past time. It's a passion and it's a lifestyle for our customers. With an addressable market in the U.S. approaching $40 billion, Holley stands at the forefront, backed by a portfolio of iconic brands with a rich legacy of innovation. As we wrap up on today's discussion, I'd like to reflect on what this quarter signifies for Holley. The third quarter showcased broad-based strength across our operations with solid growth in every division and sustained momentum in both B2B and direct-to-consumer channels. Our disciplined execution, operational enhancements, and commitment to innovation continue to deliver tangible results from margin expansion and efficiency gains to deeper engagement with our enthusiast community. We also achieved a key financial milestone this quarter, reducing net leverage below 4x for the first time since 2022 and generating positive free cash flow during what is typically a slower seasonal period. These achievements highlight the impact of our transformation and the dedication of our teams to building a stronger and more resilient Holley. Through our strategic framework, we remain focused on initiatives that matter most, advancing digital capabilities, driving product innovation, strengthening partnerships, and laying the foundation for sustainable, profitable growth. Looking ahead, our outlook remains consistent. We are committed to delivering steady organic top line growth, maintaining gross margins above 40%, and achieving adjusted EBITDA margins of 20%. Our goal is to generate sustainable free cash flow and continue creating value through strategic acquisitions that complement our portfolio. The combination of a vibrant automotive enthusiast marketplace and Holley's legendary brand family positions us as a unique investment opportunity in a passionate segment. In closing, I want to express my gratitude to our team members for their dedication and execution, to our consumers for their unwavering passion for performance, and to our distribution partners, many of whom have stood with us for decades. Together, we're building a stronger, more innovative Holley for the future. I want to thank you for your attendance on our call today and wish you all a great morning. Thank you.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.