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, or tariffs;

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 rising tension in the Middle East, or due to growing inflation or higher interest rates, or tariffs;

Previous wording

•changes in commodity, freight, and tariff costs (including tariff relief or our ability to mitigate tariffs, particularly in light of the policies of the new presidential administration and retaliatory actions in response thereto);

Current wording

•changes in commodity, freight, and tariff costs (including tariff relief or our ability to mitigate tariffs, particularly in light of the policies of the current presidential administration and retaliatory actions in response thereto);

Previous wording

•legal and regulatory developments, including the resolution of legal proceedings or regulatory or other governmental inquiries, and the impact of changing emissions and other related climate change regulations in the various jurisdictions in which our products are produced, used, and/or sold;

Current wording

•legal and regulatory developments, including the resolution of legal proceedings or regulatory or other governmental inquiries, and the impact of changing emissions and other related regulations in the various jurisdictions in which our products are produced, used, and/or sold;

Previous wording

During the three month period ended April 4, 2025, we recognized a non-cash goodwill impairment charge of $262.1 million within operating expenses, which impacted all reporting units. The impairment resulted from a triggering event related to adverse changes in U.S. tariff policies, new and expanded tariffs enacted by the current presidential administration and resulting sustained decline in its stock price. The impairment charge reflects the amount by which the carrying values of the reporting units exceeded their estimated fair values.

Current wording

In the first quarter of fiscal year 2025, we recognized a non-cash goodwill impairment charge of $262.1 million within operating expenses, which impacted all reporting units. The impairment resulted from a triggering event related to adverse changes in U.S. tariff policies, new and expanded tariffs enacted by the current presidential administration, and resulting sustained decline in our stock price. The impairment charge reflects the amount by which the carrying values of the reporting units exceeded their estimated fair values.

Previous wording

The Company determines the fair value of the reporting unit based on a weighting of income and market approaches. The income approach employs a discounted cash flow model, projecting revenue and cash flows over a multi-year period. These projections are based on management’s estimates, historical performance trends, and industry outlooks. These cash flows, along with a terminal value, are discounted to their present value using a WACC that reflects a market rate appropriate for each reporting unit. The company performs sensitivity analyses to determine how fluctuations in forecasts could affect the fair value relative to the carrying amount. The market approach employs multiples for public companies that reasonably compare to the reporting units. Sensitivity analyses were performed to assess the impact of changes in key assumptions. While the Company believes that the estimates and assumptions used in the impairment test were reasonable, changes in key assumptions, including lower revenue growth, terminal growth rate, or increase in WACC could result in a future impairment of the reporting units. Such charge could have a material effect on the condensed consolidated statements of income (loss) and the condensed consolidated balance sheets.

Current wording

The Company determines the fair value of the reporting unit based on a weighting of income and market approaches. The income approach employs a discounted cash flow model, projecting revenue and cash flows over a multi-year period. These projections are based on management’s estimates, historical performance trends, and industry outlooks. These cash flows, along with a terminal value, are discounted to their present value using a WACC that reflects a market rate appropriate for each reporting unit. The company performs sensitivity analyses to determine how fluctuations in forecasts could affect the fair value relative to the carrying amount. The market approach employs multiples for public companies that reasonably compare to the reporting units. Sensitivity analyses were performed to assess the impact of changes in key assumptions. While the Company believes that the estimates and assumptions used in the impairment test were reasonable, changes in key assumptions, including lower revenue growth, terminal growth rate, or increase in WACC could result in a future impairment of the reporting units. Such charge could have a material effect on the condensed consolidated statements of operations and the condensed consolidated balance sheets.

Previous 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.

Current wording

Total net sales for the three months ended July 4, 2025 increased $26.4 million, or 7.6%, compared to the three months ended June 28, 2024. The increase in net sales is driven by the stabilization in bike sales, increased demand for aftermarket products, and the expansion of motorcycle business, which offset lower industry demand in the automotive OE product lines. Although, net sales increased, high interest rates impacting industry and consumer demands, high vehicle costs, and macro-economic conditions impacting dealers and consumers remain headwinds.

Previous 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.

Current wording

Cost of sales for the three months ended July 4, 2025 increased $20.4 million, or 8.6%, compared to the three months ended June 28, 2024. The increase in cost of sales is mainly due to our increased sales. Our gross margin decreased 60 basis points to 31.2% for the three months ended July 4, 2025, as compared to the same prior fiscal year period, primarily due to our product mix and impact of tariffs.

Previous wording

Total operating expenses for the three months ended April 4, 2025 were $360.3 million, compared to $94.3 million for the three months ended March 29, 2024. During the three months ended April 4, 2025, we recognized an impairment charge of $262.1 million as a result of our quantitative assessment on goodwill. Research and development expenses and sales and marketing expenses increased $2.6 million and $1.7 million, respectively, mainly due to investments to support future growth and product innovation.

Current wording

Total operating expenses for the three months ended July 4, 2025 were $98.5 million, compared to $92.4 million for the three months ended June 28, 2024. Research and development expenses and sales and marketing expenses increased $3.1 million and $1.7 million, respectively, mainly due to investments to support future growth and product innovation. General and administrative expenses increased $2.0 million driven by our organizational restructuring initiatives.

Previous 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.

Current wording

As a result of the factors discussed above, income from operations for the three months ended July 4, 2025 decreased $0.1 million, or 0.5%, compared to income from operations for the three months ended June 28, 2024.

Previous 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.

Current wording

Interest and other expense, net for the three months ended July 4, 2025 decreased by $0.6 million to $13.0 million, compared to $13.6 million for the three months ended June 28, 2024.

Previous wording

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

Current wording

The effective tax rates were 50.9% and (7.4)% for the three months ended July 4, 2025 and June 28, 2024, respectively.

Previous 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.

Current wording

For the three months ended June 28, 2024, the difference between our effective tax rate of (7.4)% and the 21% federal statutory rate was primarily due to the favorable impact of discrete items in proportion to lower levels of pre-tax income.

Previous 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.

Current wording

As a result of the factors described above, our net income decreased $2.7 million, or 50.0%, to $2.7 million in the three months ended July 4, 2025 from net income of $5.4 million for the three months ended June 28, 2024.

Previous 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.

Current wording

Aftermarket Applications Group net sales increased by $7.1 million, or 6.6%, driven by increased demand for aftermarket products; however, high interest rates, high vehicle costs, and macro-economic conditions impacting dealers and consumers continue to pose challenges.

Previous wording

For the three months ended April 4, 2025, the difference between the Company’s effective tax rate of 1.4% and the 21% federal statutory rate was due to the impairment impact of the non-deductible goodwill recognized during the same period.

Current wording

For the six months ended July 4, 2025, the difference between the Company’s effective tax rate of 0.3% and the 21% federal statutory rate was due to the impairment impact of non-deductible goodwill.

Previous 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.

Current wording

Powered Vehicles Group net sales increased by $9.7 million, or 4.1%, due to the inclusion of $23.7 million in net sales from Marzocchi acquired in December 2024, partially offset by lower industry demand in automotive OE and power sports.

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 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, research and development, 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 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.

Current wording

As of July 4, 2025, we held $19.5 million of our $81.5 million of cash and cash equivalents in accounts of our subsidiaries outside of the U.S., which we may repatriate.

Previous wording

We expect that cash on hand, cash flow from operations and availability under our 2022 Credit Facility will be sufficient to fund our operations during the next 12 months from the date of this Form 10-Q and beyond.

Current wording

We expect that cash on hand, cash flows from operations and availability under our 2022 Credit Facility will be sufficient to fund our operations during the next 12 months from the date of this Form 10-Q and beyond.

Previous 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.

Current wording

In the six months ended July 4, 2025, net cash provided by operating activities was $37.5 million. Our investment in operating assets and liabilities is a result of a decrease in accounts payable of $19.4 million, an increase in accounts receivable of $15.4 million, a decrease in income taxes payable of $4.0 million, and a decrease in accrued expenses and other liabilities of $0.4 million, partially offset by a decrease in prepaids and other assets of $17.6 million and a decrease in inventory of $1.8 million, excluding the impact of foreign currency translation. On a reported currency basis, the change in our accounts payable is driven by timing of inventory purchases and vendor payments and foreign currency translation. The change in our accounts receivable reflects an increase in our sales and the timing of customer collections. 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. On a reported currency basis, inventory increased primarily due to foreign currency translation, planned inventory builds to support anticipated demand, and the impact from higher tariffs, partially offset by our efforts to optimize inventory levels.

Previous 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.

Current wording

In the six months ended June 28, 2024, net cash provided by operating activities was $36.0 million. Our investment in operating assets and liabilities is a result of an increase in prepaids and other assets of $37.1 million, a decrease in income taxes payable of $23.2 million, and an increase in inventory of $7.8 million, partially offset by an increase in accounts payable of $34.6 million, a decrease in accounts receivable of $12.0 million, and an increase in accrued expenses and other liabilities of $2.9 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 decrease in income taxes payable is mainly due to our income tax payments. The change in our accounts payable is driven by timing of inventory purchases and vendor payments. The change in our accounts receivable reflects a decrease in our sales and the timing of customer collections.

Previous 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.

Current wording

In the six months ended July 4, 2025 and June 28, 2024, net cash used in investing activities was $19.4 million and $26.6 million, respectively. Investing activities for the six months ended July 4, 2025 consisted of $19.4 million of property and equipment additions. Investing activities for the six months ended June 28, 2024 consisted of $21.2 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 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.

Current wording

In the six months ended July 4, 2025, net cash used in financing activities was $9.4 million, and consisted of the proceeds from our 2022 Credit Facility revolver of $57.0 million that were used to support our working capital, offset by payments of $53.0 million to reduce the revolver borrowings, $12.1 million repayments on our term loans, 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

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.

Current wording

In the six months ended June 28, 2024, net cash used in financing activities was $10.7 million, and consisted of the proceeds from our 2022 Credit Facility revolver of $119.0 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 $295.0 million to reduce the revolver borrowings, $7.1 million quarterly repayment on our Term A Loan, $25.0 million to repurchase shares of our common stock for retirement, and payments of $2.5 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 2.25%. 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%.

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 July 4, 2025, the one-month SOFR and three-month SOFR rates were 4.33% and 4.34%, respectively. At July 4, 2025, our weighted-average interest rate on outstanding borrowing was 6.41%.

Previous wording

On May 13, 2024, the Company borrowed the full amount of $200,000 of the Delayed Draw Term Loan. The fees were reclassified to a contra-liability account and amortized over the term of the drawn debt using the interest method.

Current wording

On May 13, 2024, the Company borrowed the full amount of $200.0 million of the Delayed Draw Term Loan. The fees were reclassified to a contra-liability account and amortized over the term of the drawn debt using the interest method.

Previous wording

New and expanded tariffs recently announced under the Trump administration and triggered retaliatory actions by certain affected countries, and other foreign governments have introduced additional costs and uncertainty into our supply chain, which may impact our cost structure and working capital needs in the near term. We are evaluating the potential effect on our supply chain and sourcing strategies, and while we expect some volatility in cash flows as we adjust, we believe our existing liquidity and access to the 2022 Credit Facility provide sufficient flexibility to manage these developments. Please read “U.S. policies related to global trade and tariffs could have a material adverse effect on our results of operations” within Item 1A. Risk Factors of this Quarterly Report on Form 10-Q.

Current wording

Global Trade Actions and Tariffs -New and expanded tariffs recently announced under the Trump administration and triggered retaliatory actions by certain affected countries, and other foreign governments have introduced additional costs and uncertainty into our supply chain, which may impact our cost structure and working capital needs in the near term. We are evaluating the potential effect on our supply chain and sourcing strategies, and while we expect some volatility in cash flows as we adjust, we believe our existing liquidity and access to the 2022 Credit Facility provide sufficient flexibility to manage these developments. Please read “U.S. policies related to global trade and tariffs could have a material adverse effect on our results of operations” within Item 1A. Risk Factors of this Quarterly Report on Form 10-Q.