Holley Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(in thousands, except share data) (unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)

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

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

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

Risks and Uncertainties

The Company's business and results of operations, financial condition, and liquidity are impacted by broad economic conditions, as well as by geopolitical events, including the conflict in Ukraine, the conflict in the Middle East and surrounding areas, and the possible expansion of such conflicts and potential geopolitical consequences. The Company's business is impacted by various economic factors that affect both consumers and the automotive aftermarket industry, including but not limited to inflation, fuel costs, wage rates, trade restrictions, including tariffs, supply chain disruptions, hiring, and other economic conditions. The global and regional economic and political conditions, as well as changes in trade policies, may cause volatility in demand for the Company's products, materials and logistics, and transportation delays, and as a result may impact the pricing of the Company's products and product availability.

Trade policy developments, including tariff actions implemented during 2025 and 2026, continue to create uncertainty and complexity in the global trade environment. In response, the Company has implemented a range of initiatives to mitigate the impact of tariffs, including conducting harmonized tariff code audits to ensure accurate classification and compliance, diversifying supplier locations outside of China, reshoring products to North America, and exploring direct shipping from suppliers to international customers to reduce tariff exposure on goods entering the U.S.

In February 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") were not authorized by the statute. During the 39-week period ended September 27, 2026, we received approximately $11,057 as a refund on such tariffs, of which $1,719 was recorded as a reduction of inventory, $8,863 was recorded as other income, and $475 was recorded as interest income.

Following the Supreme Court's ruling, the U.S. government imposed additional, non-IEEPA global Section 122 tariffs and Section 338 tariffs on certain Canadian goods. Any trade disputes or further changes in tax or trade policy, including the imposition of additional tariffs or duties on imported products or changes in tariff levels, between the U.S. and countries from which we source goods directly or indirectly through vendors could require us to take certain actions, including raising prices on products we sell and seeking alternative sources of supply from vendors in other countries. The Company continues to monitor international trade developments, including potential changes in tariff rates and the possibility of new exemptions or retaliatory actions, in order to analyze their impact on the business. The Company additionally continues to evaluate and implement additional strategies to further minimize the impact of tariffs on its operations. If current tariff levels are sustained or increased, there remains a risk that our profitability, cash flows, and financial estimates could be negatively affected.

Additionally, in response to inflationary impacts and supply chain disruptions, the Company has attempted to minimize potential adverse impacts on its business with cost savings initiatives, price increases to customers, and increased attention to maintaining appropriate inventory levels in the distribution channel. The Company's profitability has been, and may continue to be, adversely affected by constrained consumer demand, a shift in sales to lower-margin products, and demands on our performance that increase our costs. Should the ongoing macroeconomic conditions not improve, or worsen, or if the Company's attempt to mitigate the impact on its supply chain, operations and costs is not successful, the Company’s business, results of operations and financial condition may be adversely affected.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP" or “GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 2025, as filed with the SEC on March 16, 2026, in the Company’s annual report on Form 10-K. In management’s opinion, the unaudited interim condensed consolidated financial statements reflect all adjustments, which are of a normal and recurring nature, that are necessary for a fair presentation of financial results for the interim periods presented. Operating results for any quarter are not necessarily indicative of the results for the full fiscal year.

The Company operates on a fiscal year that ends on December 31. The three- and nine-month periods ended September 27, 2026 and September 28, 2025 each included 13 weeks and 39 weeks, respectively.

Principles of Consolidation

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

Recent Accounting Pronouncements

Accounting Standards Recently Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires additional disclosures of various income tax components that affect the rate reconciliation based on the applicable taxing jurisdictions, as well as the qualitative and quantitative aspects of those components. The standard also requires information pertaining to taxes paid to be disaggregated for federal, state and foreign taxes, and contains other disclosure requirements. The Company adopted ASU 2023-09 during the year ended December 31, 2025 and applied the guidance on a retrospective basis. The interim disclosure requirements became effective for the Company beginning January 1, 2026. See Note 12 "Income Taxes" in the accompanying notes to the consolidated financial statements for further detail.

Accounting Standards Not Yet Adopted

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

In November 2024, the FASB issued ASU 2024‑03, Income Statement—Reporting Comprehensive Income (Topic 220): Disaggregation of Income Statement Expenses, which requires expanded disaggregation of certain operating expense captions. ASU 2025‑01 later clarified the effective dates for this ASU. This guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company will continue to evaluate the impact of this guidance on its consolidated financial statements.

In September 2025, the FASB issued ASU 2025‑07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share‑Based Noncash Consideration from a Customer in a Revenue Contract, which refines scope exceptions and clarifies treatment of certain noncash consideration. This guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within those fiscal years. The Company will continue to evaluate the impact of this guidance on its consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles — Goodwill and Other — Internal-Use Software (Topic 350): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the guidance for capitalizing internal-use software costs to better reflect current software development practices. The amendments eliminate the prior stage-based framework and introduce a principles-based approach under which capitalization begins when management has authorized and committed to funding a software project and it is probable that the project will be completed and used for its intended function. This guidance is effective for annual reporting periods beginning after December 15, 2027, and interim periods within those annual reporting periods, with early adoption permitted. The Company will continue to evaluate the impact of this guidance on its consolidated financial statements.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements, which makes targeted improvements to the Codification by clarifying, correcting, and simplifying existing guidance across multiple Topics, including earnings per share, leases, equity, and receivables. The amendments are generally effective for fiscal years beginning after December 15, 2026, including the Company's fiscal year beginning January 1, 2027, with early adoption permitted for certain amendments. Although the amendments are primarily technical in nature, they may affect the Company's application of specific guidance depending on facts and circumstances. The Company will continue to evaluate the impact of this guidance on its consolidated financial statements.

2. ACQUISITION AND DIVESTITURES

HRX ACQUISITION

On March 18, 2026, the Company acquired HRX S.r.l. (“HRX”), an Italian motorsports racewear brand serving drivers and teams across karting and competitive racing categories. The acquisition adds complementary racewear capabilities to Holley’s Safety & Racing portfolio and expands the Company’s presence in European motorsports. The transaction was accounted for as a business combination. Accordingly, the purchase price has been allocated based upon the fair value of the assets acquired and liabilities assumed. Goodwill arising from the acquisition is primarily due to HRX's strong market position. The goodwill and intangibles generated as a result of this acquisition are deductible for income tax purposes. The purchase price was funded from cash on hand.

The initial accounting for this business combination is incomplete for certain assets, liabilities and equity. Accordingly, the purchase price allocation is preliminary and subject to change as the Company completes its valuation analyses and working capital adjustments, including deferred cash payments, contingent consideration, and the valuation of acquired inventory, intangible assets, property, plant and equipment, and certain leases. Any adjustments to the preliminary purchase price allocation will be made as soon as practicable but no later than one year from the acquisition date.

The following table summarizes the preliminary allocation of the purchase price to the fair values of the identifiable assets acquired and liabilities assumed at the acquisition date.

DIVESTITURES

On April 17, 2026, the Company entered into an agreement with a buyer, pursuant to which the Company divested the Arizona Desert Shocks brand ("ADS"), including the intellectual property, inventory on hand related to the brand and other certain assets. The Company received total consideration of $3,646, consisting of $1,000 in the 39-week period ended September 27, 2026, and a promissory note of $2,646. The Company recognized a net loss of $3,342, which was reported as a loss on sale of assets in the condensed consolidated statements of comprehensive (loss) income.

On May 7, 2026, the Company entered into an agreement with a buyer, pursuant to which the Company divested the Speartech brand, including the intellectual property, inventory on hand related to the brand and other certain assets. The Company received total consideration of $1,250 in the 39-week period ended September 27, 2026. The Company recognized a net loss of $1,486, which was reported as a loss on sale of assets in the condensed consolidated statements of comprehensive (loss) income.

On June 22, 2026, the Company entered into an agreement with a buyer, pursuant to which the Company divested the Drake Classic, Scott Drake, Drake Muscle Cars, Drake Automotive Group, Drake Auto Group, and Brothers Trucks brands (the "Drake Brands"), including the intellectual property, inventory on hand related to the Drake Brands and other certain assets. The Company received total consideration of $7,500 received in the 39-week period ended September 27, 2026. The Company recognized a net loss of $23,821, which was reported as a loss on sale of assets in the condensed consolidated statements of comprehensive (loss) income.

The divestitures are intended to allow the Company to better focus and utilize its resources on its core brands and other opportunities which the Company believes better align with its long-term strategies. The divested brands did not represent a strategic shift that has a major effect on the Company's operations and financial results, and, as such, they were not presented as discontinued operations.

3. INVENTORY

Inventories of the Company consisted of the following:

4. PROPERTY, PLANT AND EQUIPMENT, NET

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

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

5. GOODWILL AND OTHER INTANGIBLE ASSETS

The following presents changes to goodwill for the periods indicated:

Goodwill represents the premium paid over the fair value of the net tangible and identifiable intangible assets acquired in the Company's business combinations. The Company acquired $2,685 of goodwill related to the HRX acquisition during the 13-week period ended March 29, 2026. Refer to Note 2, "Acquisition and Divestitures," for additional information.

The Company disposed of $4,067 of goodwill during the 39-week period ended September 27, 2026 related to the three divestitures that occurred during the period, compared tono disposals of goodwill during the 39-week period ended September 28, 2025. Refer to Note 2 "Acquisition and Divestitures," for additional information. Potential changes in the Company's costs and operating structure, the implementation of synergies, and overall performance in the automotive aftermarket industry, could negatively impact near-term cash-flow projections and could trigger a potential impairment of the Company's goodwill and / or indefinite-lived intangible assets. In addition, failure to execute the Company's strategic plans as well as increases in weighted average costs of capital could negatively impact the fair value of the reporting unit and increase the risk of future impairment charges.

On January 1, 2025, the Company entered into an agreement with Cataclean Global Limited ("Cataclean") to purchase a perpetual exclusive license in North America for developing, manufacturing, marketing, distributing, using and selling existing Cataclean products as well as future product formulations in all sales channels in North America for a total purchase price of $23,800. The Cataclean perpetual license agreement of $23,800 is included in other intangible assets, net in the condensed consolidated balance sheets. As of September 27, 2026, the Company has fully paid the Cataclean purchase price, and no amounts related to the agreement remain included in accrued liabilities in the condensed consolidated balance sheets.

Intangible assets consisted of the following:

The following outlines the estimated amortization expense related to finite-lived intangible assets held as of September 27, 2026:

6. ACCRUED LIABILITIES

Accrued liabilities of the Company consisted of the following:

7. DEBT

Debt of the Company consisted of the following:

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

The revolving credit facility includes a letter of credit facility in the amount of $10,000, pursuant to which letters of credit may be issued as long as revolving loans may be advanced and subject to availability under the revolving credit facility. The Company had $2,509 in outstanding letters of credit on September 27, 2026.

The first lien term loan is to be repaid in quarterly payments of $1,643 through September 30, 2028 with the balance due upon maturity on November 17, 2028. The Company is required to make annual payments on the term loan in an amount equal to 50% of annual excess cash flow greater than $5,000, as defined in the Credit Agreement. This percentage requirement may decrease or be eliminated if certain leverage ratios are achieved. No excess cash flow payment is expected to be required for the remainder of 2026. Any such payments offset future mandatory quarterly payments. The Credit Agreement permits voluntary prepayments at any time, in whole or in part.

As of September 27, 2026, amounts outstanding under the credit facility accrue interest at a rate equal to either the Secured Overnight Financing Rate ("SOFR") or base rate, at the Company's election, plus a specified margin. In the case of revolving credit loans and letter of credit fees, the specified margin is based on the Company's Total Leverage Ratio, as defined in the Credit Agreement. Commitment fees payable under the revolving credit facility are based on the Company's Total Leverage Ratio. On September 27, 2026, the weighted average interest rate on the Company's borrowings under the credit facility was 7.8%. As of September 27, 2026, the Company had no borrowings outstanding on its revolving credit facility.

The Company has entered into interest rate collars in the notional amounts of $500,000 and $400,000 to hedge the Company's exposure to fluctuations in interest rates on its variable-rate debt. During the 39-week period ended September 27, 2026, the $500,000 notional collar expired. As of September 27, 2026, the Company hadone interest rate collar remaining with a notional amount of $400,000. Refer to Note 9, "Derivative Instruments," for additional information.

Obligations under the Credit Agreement are secured by substantially all of the Company’s assets. The Credit Agreement includes representations and warranties and affirmative and negative covenants customary for financings of this type, including, but not limited to, limitations on restricted payments, additional borrowings, additional investments, and asset sales. The Credit Agreement also requires that Holley maintain, on the last day of each quarter, a Total Leverage Ratio not to exceed a maximum amount.

In February 2023, the Company entered into an amendment to the Credit Agreement which, among other things, increased the Total Leverage Ratio applicable under the Credit Agreement to initially 7.25:1.00, and provided for modified step-down levels for such covenant thereafter through the fiscal quarter ended June 30, 2024 (the “Covenant Relief Period”). As a condition to the Covenant Relief Period, the Company also agreed to (i) a minimum liquidity test, (ii) an interest coverage test, (iii) an anti-cash hoarding test at any time revolving loans are outstanding, and (iv) additional reporting obligations. Under the amended Credit Agreement, the revolving credit facility contains a minimum liquidity financial covenant of $45,000, which includes unrestricted cash and any available borrowing capacity under the revolving credit facility. In April 2023, the Company entered into a second amendment to the Credit Agreement in which the interest rate on any outstanding borrowings under the Credit Agreement was changed from LIBOR to SOFR. In May 2023, the Company entered into a third amendment to the Credit Agreement in which certain defined terms were clarified. The Company incurred $2,106 of deferred financing fees related to these amendments. As of September 27, 2026, the required Total Leverage Ratio was 5.00:1.00.

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

On December 4, 2024, the Company entered into an amendment to its Credit Agreement that extends the revolver maturity date to November 18, 2029, which date may occur earlier if the maturity date of the existing term loan is not extended, and reduces the revolving credit facility from $125,000 to $100,000. The amendment permits our Total Leverage Ratio for the benefit of the revolving credit lenders to be tested only for fiscal quarters in which there are outstanding revolving credit loans on the last day of such fiscal quarter. On September 27, 2026, the Company was in compliance with all financial covenants.

On March 18, 2026, the Company assumed approximately $2,200 of existing third-party debt obligations related to the HRX acquisition. Additionally, pursuant to the terms of the sale and purchase agreement, the Company is obligated to make deferred purchase price payments totaling approximately $2,100. Both the assumed debt and deferred payment obligations are classified as long-term on the condensed consolidated balance sheet as of September 27, 2026. Refer to Note 2, "Acquisition and Divestitures," for additional information.

Future maturities of long-term debt, excluding finance lease obligations, and amortization of debt issuance costs of the first lien term loan as of September 27, 2026 are as follows:

8. COMMON STOCK WARRANTS AND EARN-OUT LIABILITY

The Company consummated a business combination (the “Business Combination”) pursuant to that certain Agreement and Plan of Merger dated March 11, 2021 (the “Merger Agreement”), by and among Empower Ltd., (“Empower”), Empower Merger Sub I Inc., Empower Merger Sub II LLC, and Holley Intermediate

Holdings, Inc. (“Holley Intermediate”) on July 16, 2021, (the “Closing” and such date, the “Closing Date”). Upon the Closing, there were 14,666,644 Warrants, consisting of 9,999,977 public warrants ("Public Warrants") and 4,666,667 private warrants ("Private Warrants" and together with the Public Warrants, the “Warrants”), outstanding to purchase shares of Common Stock that were issued by Empower prior to the Business Combination. Each Warrant entitled the registered holder to purchaseone share of Common Stock at a price of $11.50 per share, subject to adjustments, provided that the Company had an effective registration statement under the Securities Act covering the shares of Common Stock issuable upon exercise of the Warrants and a current prospectus relating to them was available and such shares were registered, qualified or exempt from registration under the securities laws of the state of residence of the holder. The Warrants were exercisable only for a whole number of shares of Common Stock. The Warrants expired on July 16, 2026, in accordance with their terms. None of the Warrants were exercised.

The Company’s Warrants, prior to expiration, were accounted for as a liability in accordance with ASC 815-40 and are presented as a warrant liability on the condensed consolidated balance sheets. The warrant liability was measured at fair value at inception and on a recurring basis, with changes in fair value recognized as non-operating expense. The Warrants expired on July 16, 2026, in accordance with their terms and as of September 27, 2026 the related liability was reduced to $0. As of December 31, 2025, a warrant liability with a fair value of $2,024 was reflected in the condensed consolidated balance sheets. A decrease of $444 and an increase of $3,019 in the fair value of the warrant liability was reflected as change in fair value of warrant liability in the condensed consolidated statements of comprehensive income for the 13-week periods ended September 27, 2026 and September 28, 2025, respectively. A decrease of $2,024 and an increase of $2,939 in the fair value of the warrant liability was reflected as change in fair value of warrant liability in the condensed consolidated statements of comprehensive income for the 39-week periods ended September 27, 2026 and September 28, 2025, respectively.

Additionally, Empower Holdings, LLC received 2,187,500 shares of Common Stock upon the Closing, which vest intwo equal tranches upon achievement of certain market share price milestones during the earn-out period, as outlined in the Merger Agreement (the “Earn-Out Shares”). The first tranche of Earn-Out Shares vested during the first quarter of 2022. Upon vesting, the first tranche of 1,093,750 Earn-Out Shares were issued and a liability of $14,689, representing the fair value of the shares on the date of vesting, was reclassified from liabilities to equity. The remaining tranche of Earn-Out Shares will be forfeited if the applicable conditions are not satisfied before July 16, 2028 (seven years after the Closing Date). The unvested Earn-Out Shares are presented as an earn-out liability on the condensed consolidated balance sheet and are remeasured at fair value with changes in fair value recognized as non-operating expense. As of September 27, 2026 and December 31, 2025, an earn-out liability with a fair value of $229 and $2,045, respectively, was reflected as a long-term liability in the condensed consolidated balance sheets. A decrease of $44 and an increase of $1,126 in the fair value of the earn-out liability was reflected as change in fair value of earn-out liability in the condensed consolidated statements of comprehensive income for the 13-week periods ended September 27, 2026 and September 28, 2025, respectively. A decrease of $1,816 and an increase of $722 in the fair value of the earn-out liability was reflected as change in fair value of earn-out liability in the condensed consolidated statements of comprehensive income for the 39-week period ended September 27, 2026 and September 28, 2025, respectively.

9. DERIVATIVE INSTRUMENTS

The Company from time to time enters into derivative financial instruments, such as interest rate collar agreements (each, a “Collar”), to manage its exposure to fluctuations in interest rates on the Company’s variable rate debt. On January 4, 2023, the Company entered into a Collar with Wells Fargo Bank, N.A. ("Wells Fargo") with a notional amount of $500,000 that expired on February 18, 2026. The Collar had a floor of 2.81% and a cap of 5.00% (based on three-month SOFR). On January 30, 2025, the Company entered into another Collar with Wells Fargo with a notional amount of $400,000 that expires on November 18, 2028. The Collar has a floor of 3.35% and a cap of 4.99% (based on three-month SOFR). The structure of these Collars is such that the Company receives an incremental amount if the Collar index exceeds the cap rate. Conversely, the Company pays an incremental amount to Wells Fargo if the Collar index falls below the floor rate. No payments are required if the Collar index falls between the cap and floor rates.

As of September 27, 2026, the Company recognized a derivative asset of $1,924 for the Collar in other noncurrent assets on the condensed consolidated balance sheets. The Company recorded a net change in the fair value of the Collar as a decrease of $2,524 and $972 to interest expense for the 13-week periods ended September 27, 2026 and September 28, 2025, respectively. The Company recorded a net change in the fair value of the Collar as a decrease of $5,422 and an increase of $4,271 to interest expense for 39-week period ended September 27, 2026 and September 28, 2025, respectively.

The fair value of the Collar is determined using observable market-based inputs and the impact of credit risk on the derivative’s fair value (the creditworthiness of the Company’s counterparty for assets and the creditworthiness of the Company for liabilities) (a Level 2 measurement, as described in Note 10,"Fair Value Measurements").

10. FAIR VALUE MEASUREMENTS

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

The Company's liabilities for its Private and Public Warrants, earn-out liability, and derivative asset/liability for its Collar are measured at fair value on a recurring basis (see Note 8, “Common Stock Warrants and Earn-Out Liability,” and Note 9, "Derivative Instruments," for more details). The fair values of the Private Warrants and earn-out liability were determined based on significant inputs not observable in the market (Level 3). The valuation of the Level 3 liabilities uses assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained. The Company uses a Monte Carlo simulation model to estimate the fair value of its Private Warrants and earn-out liability. The fair value of the Collar, which is included in other noncurrent assets and liabilities depending on the fair value on the condensed consolidated balance sheets, is determined based on models that reflect the contractual terms of the derivative, yield curves, and the credit quality of the counterparties. Inputs are generally observable and do not contain a high level of subjectivity

(Level 2). The fair value of the Public Warrants was determined using publicly traded prices (Level 1). Changes in the fair value of the liabilities related to Warrants and the earn-out liability are recognized as non-operating expense in the condensed consolidated statements of comprehensive income. Changes in the fair value of the Collar are recognized as an adjustment to interest expense in the condensed consolidated statements of comprehensive income. Changes in the fair value of the liabilities related to Warrants, the earn-out liability, and the Collar are recognized in net cash provided by operating activities on the condensed consolidated statements of cash flows.

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

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

As of September 27, 2026 and December 31, 2025, the Company has accounts receivable, accounts payable, and accrued expenses for which the carrying value approximates fair value due to the short-term nature of these instruments. The carrying value of the Company’s long-term debt approximates fair value as the rates used approximate the market rates currently available to the Company.

The reconciliation of changes in Level 3 liabilities during the 39-week periods ended September 27, 2026 and September 28, 2025 is as follows:

11. REVENUE

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

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

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

The Company’s payment terms with customers are customary and vary by customer and geography but typically range from 30 to 365 days. The Company elected the practical expedient to disregard the possible existence of a significant financing component related to payment on contracts, as the Company expects that customers will pay for the products within one year. The Company has evaluated the terms of our arrangements and determined that they do not contain significant financing components. Additionally, as all contracts with customers have an expected duration of one year or less, the Company has elected the practical expedient to exclude disclosure of information regarding the aggregate amount and future timing of performance obligations that are unsatisfied or partially satisfied as of the end of the reporting period. The Company provides limited warranties on most of its products against certain manufacturing and other defects. Provisions for estimated expenses related to product warranty are made at the time products are sold. Refer to Note 17, “Commitments and Contingencies,” for more information.

The following table summarizes total revenue by division category during the 13-week periods and 39-week periods ended September 27, 2026 and September 28, 2025.

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

12. INCOME TAXES

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

For the 13-week period ended September 27, 2026, the Company's effective tax rate of 25.1% differed from the 21.0% federal statutory tax rate primarily due to permanent differences related to changes in fair value of warrant and earn-out liabilities recognized during the period, the benefit from the foreign derived intangible income (FDII) deduction, federal research and development tax credits, state taxes, and the impact of foreign taxes in higher tax rate jurisdictions. For the 13-week period ended September 28, 2025, the Company’s effective tax rate of 274.1% differed from the 21.0% federal statutory rate primarily due to permanent differences related to changes in fair value of the warrant and earn-out liabilities recognized during the period, state taxes, and the impact of foreign taxes in higher tax rate jurisdictions. These items had a greater impact on the effective tax rate for the 13-week period ended September 28, 2025 due to the low pre-tax net income result.

For the 39-week period ended September 27, 2026, the Company's effective tax rate of 20.7% differed from the 21.0% federal statutory tax rate primarily due to permanent differences related to changes in fair value of warrant and earn-out liabilities recognized during the period, the benefit from the foreign derived intangible income (FDII) deduction, federal research and development tax credits, state taxes, and the impact of foreign taxes in higher tax rate jurisdictions. For the 39-week period ended September 28, 2025, the Company’s effective tax rate of 31.2% differed from the 21.0% federal statutory rate primarily due to permanent differences related to changes in fair value of warrant and earn-out liabilities recognized during the period, state taxes, the impact of foreign taxes in higher tax rate jurisdictions, and excess tax deficiencies from share based compensation recognized during the period.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. Where relevant, the Company has reflected any material items that were enacted in the consolidated financial statements for the 13-week and 39-week periods ended September 27, 2026. Key provisions that impact the Company include the restoration of 100% bonus depreciation, restoration of immediate expensing for domestic research and development costs, and reversion to an EBITDA-based limitation for business interest expense deductions under Section 163(j) of the Internal Revenue Code.

13. EARNINGS PER SHARE

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

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

14. EQUITY-BASED COMPENSATION PLANS

In 2021, the Company adopted the 2021 Omnibus Incentive Plan (the “2021 Plan”), under which awards, including stock options, restricted stock units ("RSUs") and performance stock units ("PSUs") may be granted to employees and non-employee directors. The 2021 Plan authorized 8,850,000 shares of Common Stock to be available for award grants. On May 1, 2026, the stockholders of the Company approved an amendment to the 2021 Plan to increase the number of authorized shares of Common Stock reserved for delivery under the Plan by 5,000,000 shares of Common Stock, thereby increasing the shares of Common Stock reserved under the amended plan to 13,850,000. On May 6, 2026, the Company filed a registration statement on Form S-8 to register an additional 5,000,000 shares of Common Stock issuable under the 2021 Plan. As of September 27, 2026,6,069,692 shares of Common Stock remained available for future issuance under the 2021 Plan.

Equity-based compensation expense included the following components:

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

Restricted Stock Awards

RSUs and PSUs are collectively referred to as "Restricted Stock Awards". The Compensation Committee has awarded RSUs to select employees and non-employee directors and has awarded PSUs to select employees. The RSUs vest ratably overone tofour years of continued employment or board services, as applicable. The grant date fair value of a time-based award or a performance-based award without a market condition is equal to the market price of Common Stock on the grant date and is recognized over the requisite service period. The grant date fair value of a performance-based award with a market condition is determined using a Monte Carlo simulation and is recognized over the requisite service period. On September 27, 2026, there was$7,763 of unrecognized compensation cost related to unvested Restricted Stock Awards that is expected to be recognized over a remaining weighted average period of 1.7 years.

The weighted-average grant-date fair value of Restricted Stock Awards granted during the 39-week periods ended September 27, 2026 and September 28, 2025, was $3.04 and $2.89, respectively. The fair value of Restricted Stock Awards vested and converted to shares of Common Stock during the 39-week periods ended September 27, 2026 and September 28, 2025, was $6,002 and $2,444, respectively.

The following table summarizes Restricted Stock Awards for the 39-week period ended September 27, 2026:

Performance-based Restricted Stock Units

The PSUs granted under the 2021 Plan represent shares of Common Stock that are potentially issuable in the future based on a combination of performance and service requirements. On March 13, 2026 and May 1, 2026, the Company granted 379,211 and 273,532 PSUs, respectively, under the 2021 Plan to employees with grant date fair values of $3.01 and $3.10, respectively. On June 29, 2026, the Company granted 18,867 PSUs, under the 2021 Plan to employees with a grant date fair value of $2.60. The PSUs granted to employees were based on salary and include annual net sales and adjusted EBITDA growth targets with threshold and stretch goals. The awards vest ratably over three years, subject to the employee’s continuous employment through the vesting date and the level of performance achieved. The number of PSUs granted reflects the target number able to be earned under a given award. Non-vested PSU compensation expense is based on the most recent performance assumption available and is adjusted as assumptions change. The fair value of a PSU at the grant date is equal to the market price of Common Stock on the grant date. The cost estimates for PSU grants represent initial target awards until the Company can reasonably forecast the financial performance of each PSU award grant. The actual number of shares of Common Stock to be issued at the end of each performance period will range from 0% to 150% of the initial target awards.

Stock Options

Stock option grants have an exercise price at least equal to the market value of the underlying Common Stock on the date of grant, haveten-year terms, and vest ratably over three years of continued employment. In general, vested options expire if not exercised within 90 days of termination of service. Compensation expense for stock options is recorded based on straight-line amortization of the grant date fair value over the requisite service period. As of September 27, 2026, all stock options were vested and there was no additional compensation cost to recognize.

The following table summarizes stock option activity for the 39-week period ended September 27, 2026:

15. SHARE REPURCHASE PROGRAM

On May 26, 2026, the Company announced that its Board of Directors authorized a share repurchase program providing for the purchase by the Company in the aggregate of up to $25.0 million of the Company's outstanding Common Stock. Repurchases of shares are made in accordance with applicable securities laws and may be made from time to time in the open market or by privately negotiated transactions. The amount and timing of repurchases are based on a variety of factors, including stock prices, regulatory limitations and other market and economic factors. The share repurchase plan does not require the Company to repurchase any specific number of shares, and the Company may modify, suspend or terminate the repurchase plan at any time without notice. As of September 27, 2026, the Company has approximately $23.0 million remaining under the share repurchase plan.

The following table summarizes selected share repurchase program information for the periods indicated:

16. LEASE COMMITMENTS

The Company leases retail stores, manufacturing, distribution, engineering, and research and development facilities, office space, equipment, and automobiles under operating lease agreements. Leases have remaining lease terms ofone to 14 years, inclusive of renewal options that the Company is reasonably certain to exercise.

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

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

The following table summarizes the maturities of the Company's operating lease liabilities as of September 27, 2026:

17. COMMITMENTS AND CONTINGENCIES

Litigation

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

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

On February 26, 2024, the court appointed City of Fort Lauderdale General Employees’ Retirement System to serve as lead plaintiff to prosecute claims on behalf of a proposed class of stockholders who purchased or otherwise acquired Holley securities between July 21, 2021 and February 6, 2023. On April 26, 2024, the lead plaintiff filed an amended complaint, adding Vinod Nimmagadda (the Company’s Executive Vice President of Corporate Development and New Ventures) as a defendant. The lead plaintiff alleges that statements made regarding the Company’s business, operations, and prospects violated Sections 10(b) and Section 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 and seeks class certification, damages, interest, attorneys’ fees, and other relief. The Company filed a motion to dismiss on June 28, 2024. On January 7, 2025, the lead plaintiff filed a motion for leave to file a supplemented amended Complaint, which the court granted on March 20, 2025. The Company filed a motion to dismiss the supplemented amended Complaint on April 3, 2025, and on August 29, 2025, the court denied the motion to dismiss.

On April 21, 2026, the parties reached an agreement in principle to resolve the matter, and on April 22, 2026, the parties filed a joint motion to stay all case deadlines forsixty days to negotiate and prepare a settlement agreement and settlement-related papers. The Court granted the motion on April 24, 2026. To allow additional time to negotiate definitive settlement documentation, the Court subsequently granted motions to further extend all case deadlines until July 10, 2026 and July 17, 2026. The lead plaintiff filed for preliminary approval of the settlement on July 17, 2026. The settlement received preliminary Court approval on August 3, 2026. The approved notice was then sent to potential class members (the Company's stockholders). On October 5, 2026, the plaintiff filed a motion for final approval of the settlement. The final settlement hearing is scheduled for November 9, 2026.

Based on information currently available, the Company believes that its existing accruals appropriately reflect its estimated exposure related to this matter, including amounts associated with applicable insurance deductibles. The Company expects that a substantial portion of any settlement amount in excess of the applicable deductible will be covered by insurance. Accordingly, the Company does not expect the resolution of this matter to have a material incremental impact on its consolidated financial position or results of operations.

Product Warranties

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

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

Employee Savings Plans

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

During the 13-week periods ended September 27, 2026 and September 28, 2025, the Company made matching contributions under the savings plans totaling $665 and $607, respectively. During the 39-week periods ended September 27, 2026 and September 28, 2025, the Company made matching contributions under the savings plan totaling $2,212 and $1,698, respectively.

18. SEGMENTS

The Company operates asone operating segment. The Company's chief operating decision maker ("CODM") is its Chief Executive Officer, who reviews financial information presented on a consolidated basis. The CODM uses consolidated gross margin and net income to assess financial performance and allocate resources. These financial metrics are used by the CODM to make key operating decisions, such as the determination of the rate at which the Company seeks to grow gross margin and the allocation of budget between cost of revenues, sales and marketing, research and development, and general and administrative expenses.

The following table presents selected financial information with respect to the Company’s single operating segment for the 13-week and 39-week periods ended September 27, 2026 and September 28, 2025:

19. SUBSEQUENT EVENTS

On October 29, 2026, the Company acquired SXTH Element, LLC ("SXTH"), a designer and supplier of performance automotive products and related accessories. The acquisition adds complementary products to Holley's Modern Truck and Off-Road portfolio.