FOX FACTORY HOLDING CORP

Previous wording

•changes in general economic conditions, including market and macro-economic disruptions resulting from escalating tensions between China and Taiwan, the on-going Russian war in Ukraine, the Israel-Palestine conflict, or due to growing inflation or higher interest rates;

Current wording

•changes in general economic conditions, including market and macro-economic disruptions resulting from escalating tensions between China and Taiwan, the on-going Russian war in Ukraine, the Israel-Palestine conflict, or due to growing inflation or higher interest rates, or tariffs;

Previous wording

•the growth of the markets in which we compete, our expectations regarding consumer preferences and our ability to respond to changes in consumer preferences;

Current wording

•the growth of the markets in which we compete, our expectations regarding consumer preferences and our ability to respond to changes in consumer preferences and effectively compete against competitors;

Previous wording

•our ability to adapt our business model to mitigate the impact of certain changes in tax laws;

Current wording

•our ability to adapt our business model to mitigate the impact of certain changes in tax laws, tariffs, and international trade policies;

Previous wording

There have been no changes to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 29, 2023, as filed with the SEC on February 23, 2024, that had a material impact on our condensed consolidated financial statements and related notes.

Current wording

There have been no changes to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended January 3, 2025, as filed with the SEC on February 27, 2025, that had a material impact on our unaudited condensed consolidated financial statements and related notes, except as described below.

Previous wording

Total net sales for the three months ended September 27, 2024 increased $28.0 million, or 8.5%, compared to the three months ended September 29, 2023. The increase in net sales is primarily due to the inclusion of $49.6 million in net sales from Marucci that was acquired in November 2023, and a $27.9 million increase in bike sales, partially offset by a shift in product mix, higher interest rates impacting industry and consumer demands, and higher inventory levels at dealerships. Although bike sales improved compared to prior year, the ongoing channel inventory recalibration and, to a lesser extent, lower end consumer demand remain headwinds.

Current wording

Total net sales for the three months ended April 4, 2025 increased $21.5 million, or 6.5%, compared to the three months ended March 29, 2024. The increase in net sales is driven by higher upfitting sales due to a shift in product mix, increased demand for aftermarket products, growth in bike sales, and the expansion of motorcycle business, which offset lower industry demand in the traditional powersports product lines. Although, net sales increased, high interest rates impacting industry and consumer demands, high inventory levels at dealerships, the bike channel inventory recalibration, and to a lower extent, lower bike consumer demand, and impacts related to tariff policies remain headwinds.

Previous wording

Cost of sales for the nine months ended September 27, 2024 decreased $39.6 million, or 5.2%, compared to the nine months ended September 29, 2023. The decrease in cost of sales is primarily due to our decreased sales. Our gross margin decreased by 200 basis points to 30.9% for the nine months ended September 27, 2024 as compared to the same prior fiscal year period is primarily due to a shift in our product line mix and operating leverage on lower volume.

Current wording

Cost of sales for the three months ended April 4, 2025 increased $15.1 million, or 6.6%, compared to the three months ended March 29, 2024. The increase in cost of sales is mainly due to our increased sales. Our gross margin increased 0 basis points to 30.9% for the three months ended April 4, 2025 as compared to the same prior fiscal year period primarily due to our product mix.

Previous wording

As a result of the factors discussed above, income from operations for the three months ended September 27, 2024 decreased $22.6 million, or 54.6%, compared to income from operations for the three months ended September 29, 2023.

Current wording

As a result of the factors discussed above, income from operations for the three months ended April 4, 2025 decreased $259.5 million, or 2,915.7%, compared to income from operations for the three months ended March 29, 2024.

Previous wording

Interest and other expense, net for the three months ended September 27, 2024 increased by $11.1 million to $13.7 million, compared to $2.6 million for the three months ended September 29, 2023. Interest expense increased by $10.7 million due to additional debt and higher interest rates.

Current wording

Interest and other expense, net for the three months ended April 4, 2025 decreased by $0.9 million to $12.7 million, compared to $13.6 million for the three months ended March 29, 2024.

Previous wording

The effective tax rates were 5.0% and 9.0% for the three months ended September 27, 2024 and September 29, 2023, respectively.

Current wording

The effective tax rates were 1.4% and 26.6% for the three months ended April 4, 2025 and March 29, 2024, respectively.

Previous wording

For the three months ended September 27, 2024, the difference between the Company’s effective tax rate of 5.0% and the 21% federal statutory rate was due to a benefit from the U.S. research and development tax credit, offset by the impact of discrete items on lower levels of pre-tax income, including a modification of the tax treatment of certain research and development expenditures recognized in prior years.

Current wording

For the three months ended March 29, 2024, the difference between our effective tax rate of 26.6% and the 21% federal statutory rate was due to the impact of discrete items and pre-tax loss.

Previous wording

As a result of the factors described above, our net income decreased $30.5 million, or 86.4%, to $4.8 million in the three months ended September 27, 2024 from $35.3 million for the three months ended September 29, 2023.

Current wording

As a result of the factors described above, our net loss increased $256.2 million, or 7,320.0%, to a net loss $259.7 million in the three months ended April 4, 2025 from a net loss of $3.5 million for the three months ended March 29, 2024.

Previous wording

Due in part to how we operate our business and to best serve our customers, we manage our activities based on three operating segments: Powered Vehicles Group, Aftermarket Applications Group, and Specialty Sports Group.

Current wording

We manage our activities based on three operating segments: PVG, AAG, and SSG.

Previous wording

Powered Vehicles Group net sales decreased by $13.7 million, or 11.2%, due to lower industry demand in Power Sports and automotive because of higher interest rates.

Current wording

Powered Vehicles Group net sales increased by $4.0 million, or 3.4%, due to the inclusion of $12.0 million in net sales from Marzocchi acquired in December 2024, partially offset by lower industry demand in power sports because of higher interest rates and higher inventory levels.

Previous wording

Aftermarket Applications Group net sales decreased by $35.8 million, or 26.3%, driven by lower upfitting sales due to product mix, higher interest rates impacting industry dealers and consumers, and higher inventory levels at dealerships.

Current wording

Aftermarket Applications Group net sales increased by $10.1 million, or 9.9%, driven by higher upfitting sales due to our product mix and increased demand for aftermarket products; however, high interest rates impacting dealers and consumers, and high inventory levels at dealerships continue to pose challenges.

Previous wording

Specialty Sports Group net sales increased by $77.5 million, or 107.6%, primarily due to the inclusion of $49.6 million in net sales from Marucci, which we acquired in November 2023, and a $27.9 million increase in bike sales. Although bike sales improved compared to prior year, the ongoing channel inventory recalibration and, to a lesser extent, lower end consumer demand remain headwinds.

Current wording

Specialty Sports Group net sales increased by $7.5 million, or 6.6%, primarily due to the growth in bike sales. Although bike sales improved compared to prior year, the channel inventory recalibration, and to a lower extent, lower end consumer demand remain headwinds.

Previous wording

Our primary cash needs are to support working capital, interest on debt, employee compensation, capital expenditures, acquisitions, debt repayments, and other general corporate purposes. Historically, we generally financed our liquidity needs with operating cash flows, borrowings under our Prior Credit Facility and our 2022 Credit Facility, and the issuance of common stock. These sources of liquidity may be impacted by events described in Cautionary Note Regarding Forward-Looking Statements and Part II, Item 1A. Risk Factors.

Current wording

Our primary cash needs are to support working capital, interest on debt, employee compensation, capital expenditures, acquisitions, debt repayments, and other general corporate purposes. Historically, we generally financed our liquidity needs with operating cash flows, borrowings under our 2022 Credit Facility, and the issuance of common stock. These sources of liquidity may be impacted by events described in Cautionary Note Regarding Forward-Looking Statements and Part II, Item 1A. Risk Factors.

Previous wording

As of September 27, 2024, we held $31.0 million of our $89.2 million of cash and cash equivalents in accounts of our subsidiaries outside of the U.S., which we may repatriate.

Current wording

As of April 4, 2025, we held $17.8 million of our $68.6 million of cash and cash equivalents in accounts of our subsidiaries outside of the U.S., which we may repatriate.

Previous wording

In the nine months ended September 27, 2024, net cash provided by operating activities was $50.1 million. Our investment in operating assets and liabilities is a result of an increase in inventory of $29.0 million, a decrease in income taxes payable of $25.3 million, and an increase in accounts receivable of $21.8 million, partially offset by an increase in accounts payable of $24.2 million, an increase in accrued expenses and other liabilities of $11.3 million, and a decrease in prepaids and other assets of $9.9 million. The decrease in income taxes payable is mainly due to lower income tax expense and our income tax payments. The increase in inventory is mainly due to timing and some seasonal inventory. The change in our accounts receivable reflects an increase in our sales and the timing of customer collections. The decrease in prepaids and other assets is primarily due to lower chassis deposits as we worked to sell through model year 2024. The increase in accrued expenses and other liabilities is mainly due to additional leases. The change in our accounts payable is driven by timing of inventory purchases and vendor payments.

Current wording

In the three months ended April 4, 2025, net cash used in operating activities was $0.7 million. Our investment in operating assets and liabilities is a result of a decrease in accounts payable of $25.2 million, an increase in accounts receivable of $11.3 million, a decrease in accrued expenses and other liabilities of $9.0 million, an increase in inventory of $1.8 million, and a decrease in income taxes payable of $1.9 million, partially offset by a decrease in prepaids and other assets of $25.7 million. The change in our accounts payable is driven by timing of inventory purchases and vendor payments. The change in our accounts receivable reflects an increase in our sales and the timing of customer collections. The decrease in accrued expenses and other liabilities is mainly due to a decrease in warranty reserve, a decrease in lease liabilities due to lease terminations, and payments for various accruals. The decrease in income taxes payable is mainly due to our income tax payments. The decrease in prepaids and other assets is primarily due to lower chassis deposits driven by working capital optimization efforts.

Previous wording

In the nine months ended September 29, 2023, net cash provided by operating activities was $126.7 million. Our investment in operating assets and liabilities is a result of increases in prepaids and other assets of $53.5 million primarily due to carrying more chassis to meet current year production needs for the upfitting product lines, and decreases in accounts payable of $51.4 million, income taxes payable of $20.4 million and accrued expenses and other liabilities of$7.3 million, partially offset by decreases in accounts receivable of $53.3 million and inventory of $20.4 million. The change in our accounts receivable reflects a shift in our product line mix and the timing of customer collections. The change in our accounts payable is driven by timing of inventory purchases and vendor payments. The change in accrued expenses and other liabilities is primarily due to payments made for compensation and tax related accruals. The decrease in inventory reflects our continued efforts to optimize inventory levels.

Current wording

In the three months ended March 29, 2024, net cash provided by operating activities was $9.4 million. Our investment in operating assets and liabilities is a result of increases in prepaids and other assets of $37.3 million and decreases in accounts payable of $2.4 million, accrued expenses and other liabilities of $1.3 million, and income taxes payable of $0.8 million, partially offset by decreases in inventory of $20.0 million and accounts receivable of $5.3 million. The increase in prepaids and other assets is primarily due to carrying new model year chassis to meet current year production needs for the upfitting product lines and, to a lesser degree, slowing sales of older model years. The change in our accounts receivable reflects the timing of customer collections. The change in our accounts payable is driven by timing of inventory purchases and vendor payments. The change in accrued expenses and other liabilities is primarily due to settlements of sales rebate accruals. The decrease in inventory reflects our continued efforts to optimize inventory levels.

Previous wording

In the nine months ended September 27, 2024 and September 29, 2023, net cash used in investing activities consisted of $42.5 million and $165.4 million, respectively. Investing activities for the nine months ended September 27, 2024 consisted of $32.1 million of property and equipment additions, $5.3 million of cash consideration for our acquisition of other assets, and $5.0 million of cash consideration for our acquisitions. Investing activities for the nine months ended September 29, 2023 consisted of $130.9 million of cash consideration for our purchase of Custom Wheel House, $32.0 million of property and equipment additions and $2.4 million in cash consideration for our purchase of other assets.

Current wording

In the three months ended April 4, 2025 and March 29, 2024, net cash used in investing activities consisted of $7.2 million and $15.3 million, respectively. Investing activities for the three months ended April 4, 2025 consisted of $7.2 million of property and equipment additions. Investing activities for the three months ended March 29, 2024 consisted of $9.9 million of property and equipment additions, $5.0 million of cash consideration for our acquisitions, and $0.4 million of cash consideration for our purchase of other assets.

Previous wording

In the nine months ended September 29, 2023, net cash provided by financing activities was $16.2 million, and consisted of the proceeds from our 2022 Credit Facility of $210.0 million that were used to support our working capital and the purchase of Custom Wheel House, offset by payments of $220.0 million to reduce the revolver borrowings and payments of $6.2 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program.

Current wording

In the three months ended April 4, 2025, net cash used in financing activities was $3.3 million, and consisted of the proceeds from our 2022 Credit Facility revolver of $37.0 million that were used to support our working capital, offset by payments of $27.0 million to reduce the revolver borrowings, $6.1 million repayments on our term loans, and payments of $0.6 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program.

Previous wording

In the nine months ended September 27, 2024, net cash used in financing activities was $1.7 million, and consisted of the proceeds from our 2022 Credit Facility revolver of $169.0 million and draw from the Delayed Draw Term Loan of $200.0 million that were used to support our working capital, offset by payments of $329.0 million to reduce the revolver borrowings, $13.2 million repayments on our term loans, $25.0 million to repurchase shares of our common stock for retirement, and payments of $2.6 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program.

Current wording

In the three months ended March 29, 2024, net cash used in financing activities was $7.9 million, and consisted of the proceeds from our 2022 Credit Facility of $70.0 million that were used to support our working capital, offset by payments of $48.0 million to reduce the revolver borrowings, $3.6 million quarterly repayment on our Term A Loan, $25.0 million to repurchase shares of our common stock for retirement, and payments of $1.3 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program.

Previous wording

The Company may borrow, prepay and re-borrow principal under the 2022 Credit Facility during its term. Advances under the 2022 Credit Facility can be either Adjusted Term SOFR loans or base rate loans. SOFR rate revolving loans bear interest on the outstanding principal amount thereof for each interest period at a rate per annum equal to Term SOFR for such calculation plus 0.10% plus a margin ranging from 1.00% to 2.00%. Base rate revolving loans bear interest on the outstanding principal amount thereof at a rate per annum equal to the highest of (i) Federal Funds Rate plus 0.50%, (ii) the rate of interest in effect for such day as publicly announced from time to time by the lender as its “prime rate”, and (iii) Adjusted Term SOFR rate for a one-month tenor plus 1.00%, subject to the interest rate floors set forth therein, plus a margin ranging from 0.00% to 1.00%. At September 27, 2024, the one-month SOFR and three-month SOFR rates were 5.21% and 5.33%, respectively. At September 27, 2024, our weighted-average interest rate on outstanding borrowing was 6.30%.

Current wording

The Company may borrow, prepay and re-borrow principal under the 2022 Credit Facility during its term. Advances under the 2022 Credit Facility can be either Adjusted Term SOFR loans or base rate loans. SOFR rate revolving loans bear interest on the outstanding principal amount thereof for each interest period at a rate per annum equal to Term SOFR for such calculation plus 0.10% plus a margin ranging from 1.00% to 2.25%. Base rate revolving loans bear interest on the outstanding principal amount thereof at a rate per annum equal to the highest of (i) Federal Funds Rate plus 0.50%, (ii) the rate of interest in effect for such day as publicly announced from time to time by the lender as its “prime rate”, and (iii) Adjusted Term SOFR rate for a one-month tenor plus 1.00%, subject to the interest rate floors set forth therein, plus a margin ranging from 0.00% to 1.00%. At April 4, 2025, the one-month SOFR and three-month SOFR rates were 4.34% and 4.35%, respectively. At April 4, 2025, our weighted-average interest rate on outstanding borrowing was 6.36%.

Previous wording

On July 31, 2024, the Company entered into the Third Amendment to the Credit Facility to secure an improved covenant profile on its capital structure to provide more flexibility given the uncertain macro environment. The Company continues to work on gaining further flexibility.

Current wording

On July 31, 2024 and December 20, 2024, the Company entered into the Third and Fourth Amendment to the Credit Facility, respectively to secure an improved covenant profile on its capital structure to provide more flexibility given the uncertain macro environment.

Previous wording

Historically, inflation has not had a material effect on our results of operations. However, significant increases in inflation, particularly those related to wages and increases in the cost of raw materials have and could continue to have an adverse impact on our business, financial condition and results of operations.

Current wording

Significant increases in inflation, particularly those related to wages and increases in the cost of raw materials have and could continue to have an adverse impact on our business, financial condition and results of operations.