What is a “non-cash decrease in liabilities for warrants and earn-out shares”?

I've tried searching for an explanation on this and am only coming across articles with heavy legal language that's hard to follow.

I was going over the most recent 10Q and earnings call transcript for Holley (HLLY) and came across the below statement.

We recorded net income of $40.6 million in the second quarter of 2022. Net income for the second quarter of 2022 was favorably impacted by a $27.4 million non-cash decrease in liabilities for warrants and earn-out shares. On an adjusted basis, net income was $13.2 million

I understand the liability decrease is not included in the adjusted EPS, which is why TD Ameritrade and others only reported an EPS of $0.11, instead of $0.34, this last quarter.

Is it not included because it's non-cash, so it's only a paper gain?

Thank you for any help you guys can give.