Financial Data and Key Metrics Changes - The company reported net sales of $375 million for Q2 2025, reflecting a 7.6% increase year-over-year [27] - Adjusted EBITDA margin improved to 13.1%, marking the highest level in nearly two years [6][30] - Gross margin decreased to 31.2% from 31.8% year-over-year, while adjusted gross margin was 31.3% compared to 31.9% in the prior year [27][28] Business Line Data and Key Metrics Changes - In the Powered Vehicles Group (PVG), net sales increased by $4.9 million to $123.5 million, driven by growth in the motorized two-wheel business [11] - The Aftermarket Applications Group (AAG) saw net sales rise 6.5% to $114.1 million, attributed to increased demand for aftermarket products [14] - The Specialty Sports Group (SSG) reported an 11% increase in net sales to $137.2 million, supported by strong bike business performance [18] Market Data and Key Metrics Changes - The company noted that the consumer discretionary environment is stabilizing, which is expected to support enhanced profitability [10] - Tariff impacts were highlighted, with an increase in expected tariff costs from $38 million to $50 million for the year, affecting various segments [33][49] Company Strategy and Development Direction - The company is focused on four key initiatives: footprint consolidation, portfolio optimization, working capital management, and a $25 million cost reduction program [7][9] - Emphasis on product innovation and R&D is seen as crucial for maintaining market share and driving long-term growth [6][10] - The company is strategically expanding into new OEMs and industries, particularly in the motorcycle and electric vehicle sectors [11][44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macro challenges and achieve growth through operational excellence and innovation [10][35] - The outlook for the second half of 2025 remains positive, with expectations for improved order books and product launches [25][32] - Management acknowledged ongoing tariff pressures but emphasized efforts to mitigate these impacts through various strategies [33][87] Other Important Information - The company is on track to reduce net leverage to below three times by year-end, with a focus on debt reduction [31] - Free cash flow generation is anticipated to be approximately $80 million for the full year [32] Q&A Session Summary Question: What is driving the raised sales guidance? - Management indicated that the entire enterprise is performing well, leading to increased confidence in the second half of the year [41][42] Question: How is the company addressing the higher tariff impact? - The increase in tariff impact is attributed to both the Marucci mix and products from Taiwan, with specific allocations provided for each segment [49] Question: Is there directional improvement in the powersports market? - Management noted that while stability is returning to the powersports market, interest rate improvements are necessary for significant growth [50] Question: What is the outlook for the bike business? - The bike business is expected to grow, with a focus on stabilizing inventory levels and preparing for new product launches [63][67] Question: What are the growth vectors for Marucci? - Management highlighted global growth, diversification in product lines, and expansion into softball as key growth areas for Marucci [78][81]

[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) Fox Factory reported Q2 2025 net sales of **$375M**, with sequential and year-over-year growth across all segments, while adjusted EBITDA and its margin improved despite a decline in net income [Second Quarter Fiscal 2025 Highlights](index=1&type=section&id=Second%20Quarter%20Fiscal%202025%20Highlights) Key financial metrics for Q2 2025 show sales growth and improved adjusted EBITDA, alongside a decrease in net income Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | Change | Sequential Change (vs Q1 2025) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $374.9M | $348.5M | +7.6% | +5.6% | | Net Income | $2.7M | $5.4M | -50.0% | N/A | | EPS (diluted) | $0.07 | $0.13 | -46.2% | N/A | | Adjusted EBITDA | $49.3M | $44.1M | +11.8% | +$9.7M | | Adjusted EBITDA Margin | 13.1% | 12.7% | +40 bps | +190 bps | | Adjusted EPS (diluted) | $0.40 | $0.38 | +5.3% | N/A | | Net Leverage | 3.8x | N/A | N/A | Improved from **4.1x** | - Cost reduction initiatives are progressing as expected, mitigating the financial impacts of tariffs[5](index=5&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management attributes growth to product innovation and operational improvements, actively managing tariff impacts to restore profitability - CEO Mike Dennison highlighted that growth was driven by product innovation, while operational improvements and cost management initiatives are improving profitability[3](index=3&type=chunk) - The company is proactively managing an evolving tariff landscape through several initiatives[4](index=4&type=chunk) - Footprint optimization across three continents - Shifting production from higher-cost regions - Strategic sourcing - Customer pricing discussions - Management expects the combination of operational excellence and innovation to restore industry-leading profitability as the consumer discretionary environment stabilizes[4](index=4&type=chunk) [Detailed Financial Results](index=2&type=section&id=Detailed%20Financial%20Results) Q2 net sales increased by **7.6%** year-over-year across all segments, but gross margin contracted due to product mix and tariffs, while the first six months saw a significant net loss primarily from a goodwill impairment charge [Second Quarter 2025 Results](index=2&type=section&id=Second%20Quarter%202025%20Results) Q2 2025 net sales grew across all segments, but gross margin declined due to product mix and tariffs, while operating expenses increased from restructuring and R&D Q2 2025 Net Sales by Segment (in millions) | Segment | Q2 2025 Sales | Q2 2024 Sales | YoY Growth | Growth Driver | | :--- | :--- | :--- | :--- | :--- | | Specialty Sports Group (SSG) | $137.2 | $123.6 | +11.0% | Stabilization in bike sales | | Aftermarket Applications Group (AAG) | $114.1 | $107.1 | +6.5% | Increased demand for aftermarket products | | Powered Vehicles Group (PVG) | $123.5 | $117.8 | +4.9% | Expansion of the motorcycle business | | **Total Net Sales** | **$374.9** | **$348.5** | **+7.6%** | | - Gross margin decreased to **31.2%** from **31.8%** in the prior year period, primarily driven by shifts in product line mix and the impact of tariffs[7](index=7&type=chunk) - Total operating expenses increased by **$6.1M** to **$98.5M**, driven by organizational restructuring, R&D, and sales & marketing initiatives[8](index=8&type=chunk) - The effective tax rate was **50.9%**, significantly higher than the **21%** federal statutory rate, due to the unfavorable impact of discrete items in proportion to pre-tax income[9](index=9&type=chunk) [First Six Months Fiscal 2025 Results](index=3&type=section&id=First%20Six%20Months%20Fiscal%202025%20Results) For the first six months of fiscal 2025, net sales increased by **7.0%**, but the company reported a significant net loss of **$257.0M** primarily due to a goodwill impairment charge First Six Months 2025 Key Financials | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $729.9M | $682.0M | +7.0% | | Gross Margin | 31.1% | 31.4% | -30 bps | | Net (Loss) Income | ($257.0M) | $1.9M | N/A | | Net (Loss) per Share | ($6.15) | $0.05 | N/A | | Adjusted Net Income | $26.4M | $27.8M | -5.0% | | Adjusted EPS | $0.63 | $0.67 | -6.0% | | Adjusted EBITDA | $88.9M | $84.6M | +5.1% | - Operating expenses for the first six months increased significantly to **$458.7M** from **$186.7M** year-over-year, primarily due to a goodwill impairment charge of **$262.1M** recorded in Q1 2025[14](index=14&type=chunk)[32](index=32&type=chunk) [Financial Position and Outlook](index=4&type=section&id=Financial%20Position%20and%20Outlook) The company's balance sheet shows increased cash and reduced debt, with a significant goodwill impairment in Q1 2025, leading to updated fiscal 2025 guidance reflecting higher tariff expenses [Balance Sheet Summary](index=4&type=section&id=Balance%20Sheet%20Summary) As of July 4, 2025, the balance sheet reflects increased cash and decreased total debt compared to the beginning of the year, with a notable reduction in goodwill due to an impairment charge Balance Sheet Highlights (as of July 4, 2025 vs Jan 3, 2025) | Account | July 4, 2025 | January 3, 2025 | | :--- | :--- | :--- | | Cash and cash equivalents | $81.5M | $71.7M | | Inventory | $412.8M | $404.7M | | Goodwill | $377.4M | $639.5M | | Total debt | $698.8M | $705.1M | - Goodwill decreased significantly due to a non-cash impairment charge taken in Q1 2025, triggered by adverse changes in U.S. tariff policies and a sustained decline in the company's stock price[18](index=18&type=chunk) [Third Quarter and Fiscal 2025 Guidance](index=4&type=section&id=Third%20Quarter%20and%20Fiscal%202025%20Guidance) The company updated its fiscal 2025 guidance, expecting net sales between **$1.45B** and **$1.51B** and adjusted EPS between **$1.60** and **$2.00**, factoring in increased tariff expenses Fiscal 2025 Guidance | Metric | Q3 2025 Guidance | Full Year 2025 Guidance | | :--- | :--- | :--- | | Net Sales | $370M - $390M | $1.45B - $1.51B | | Adjusted EPS | $0.45 - $0.65 | $1.60 - $2.00 | | Full Year Adj. Tax Rate | N/A | 15% - 18% | - The company's expected pre-mitigated tariff expense for 2025 has increased from approximately **$38M** to upwards of **$50M**, which management believes it can absorb within its updated guidance through countermeasures[21](index=21&type=chunk) [Financial Statements and Reconciliations](index=7&type=section&id=Financial%20Statements%20and%20Reconciliations) This section presents unaudited consolidated financial statements, including balance sheets, income statements, and cash flow statements, along with detailed reconciliations of GAAP to non-GAAP measures for adjusted net income, EBITDA, gross profit, and operating expenses [Condensed Consolidated Financial Statements](index=7&type=section&id=Condensed%20Consolidated%20Financial%20Statements) The condensed consolidated financial statements show total assets of **$1.965B** and total liabilities of **$1.006B** as of July 4, 2025, with a net loss of **$257.0M** for the six months ended July 4, 2025, primarily due to a goodwill impairment charge - The Condensed Consolidated Balance Sheet as of July 4, 2025, shows total assets of **$1.965B** and total liabilities of **$1.006B**[30](index=30&type=chunk) - The Condensed Consolidated Statement of Income (Loss) for the six months ended July 4, 2025, reports a net loss of **$257.0M**, heavily impacted by a **$262.1M** goodwill impairment charge[32](index=32&type=chunk) - The Condensed Consolidated Statement of Cash Flows for the first six months of 2025 shows net cash provided by operating activities was **$37.5M**[35](index=35&type=chunk) [Reconciliation of GAAP to Non-GAAP Measures](index=10&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) This section reconciles GAAP net income to adjusted net income and adjusted EBITDA for Q2 2025, detailing adjustments for amortization, restructuring, and other expenses, and provides segment-level adjusted EBITDA - For Q2 2025, GAAP Net Income of **$2.7M** was reconciled to Adjusted Net Income of **$16.6M**, with key adjustments including **$10.4M** for amortization of purchased intangibles and **$3.6M** for organizational restructuring expenses[37](index=37&type=chunk) - For Q2 2025, GAAP Net Income of **$2.7M** was reconciled to Adjusted EBITDA of **$49.3M**, with major reconciling items including depreciation and amortization (**$21.4M**) and interest/other expense (**$12.6M**)[40](index=40&type=chunk) Q2 2025 Segment Adjusted EBITDA (in millions) | Segment | Q2 2025 Adj. EBITDA | | :--- | :--- | | Powered Vehicles Group | $16.4 | | Aftermarket Applications Group | $16.0 | | Specialty Sports Group | $30.4 | | Unallocated corporate expenses | ($13.5) | | **Total Adjusted EBITDA** | **$49.3** | - Q2 2025 Gross Margin of **31.2%** was reconciled to an Adjusted Gross Margin of **31.3%** after accounting for amortization of acquired inventory valuation markup[44](index=44&type=chunk)

Company Overview - Fox Factory Holding Corp. is a global leader in the design, engineering, and manufacturing of premium products for specialty sports and on and off-road vehicles [3] - The company's portfolio includes brands such as FOX, Marucci, and Method Race Wheels, known for their championship-level performance [3] - Fox Factory is a direct supplier of shocks, suspension, and components to leading powered vehicle and bicycle original equipment manufacturers [3] Upcoming Financial Results - The company will announce its second-quarter results for the period ended July 4, 2025, on August 7, 2025, after market close [1] - A conference call with the executive management team will be held on the same day at 4:30 p.m. ET to discuss the results [2] - The conference call will be available for live streaming on the company's website and archived for one year [2] Business Strategy - Fox Factory aims to diversify its product offerings and increase market potential by acquiring complementary businesses [3] - The company provides products in the aftermarket through a global network of retailers and distributors, as well as direct-to-consumer channels [3] Communication and Disclosure - The company utilizes various means to announce material information, including SEC filings, press releases, public conference calls, and its investor relations website [5]

Group 1 - Fox Factory Holding (FOXF) has seen a 20% increase in stock price over the past four weeks, with a mean price target of $32.25 indicating a potential upside of 35.6% from the current price of $23.78 [1] - The average of eight short-term price targets ranges from a low of $24 to a high of $50, with a standard deviation of $8.60, suggesting variability in analyst estimates [2] - Analysts show strong agreement on FOXF's ability to report better earnings than previously predicted, which supports the view of potential upside [4][11] Group 2 - The Zacks Consensus Estimate for FOXF's current year earnings has increased by 0.4% over the past month, indicating positive sentiment among analysts [12] - FOXF holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates, which suggests a solid potential upside [13] - While price targets can be misleading, the direction implied by the consensus price target for FOXF appears to be a good guide for potential price movement [10][13]

Core Viewpoint - Zacks emphasizes a ranking system focused on earnings estimates and revisions to identify winning stocks, while also considering trends in value, growth, and momentum to find strong companies for investors [1] Value Investing - Value investing is a popular strategy for identifying undervalued stocks using fundamental analysis and established metrics [2] Fox Factory Holdings (FOXF) - FOXF is currently rated with a Zacks Rank of 2 (Buy) and has a Value grade of A, making it a stock of interest for value investors [3] - FOXF has a PEG ratio of 1.38, significantly lower than the industry average of 4.10, indicating potential undervaluation [4] - The P/S ratio for FOXF is 0.7, compared to the industry average of 0.75, suggesting it is reasonably priced based on sales [5] - FOXF's P/CF ratio stands at 9.05, well below the industry average of 27.71, highlighting its attractive cash flow outlook [6] - Overall, FOXF appears undervalued based on these metrics and has a strong earnings outlook, positioning it as one of the market's strongest value stocks [7]

Core Viewpoint - Fox Factory Holding Corp. is conducting its Q1 2025 earnings conference call, indicating a focus on business updates and financial performance for the quarter [1][3]. Group 1: Company Overview - The conference call is led by key executives including the Chief Executive Officer, Chief Financial Officer, and Chief Legal Officer, highlighting the importance of leadership in communicating the company's performance [3][4]. - The earnings release for Q1 2025 is available on the company's Investor Relations website, ensuring transparency and accessibility of financial information to stakeholders [4]. Group 2: Financial Performance - The call will include a review of quarterly results and future outlook, suggesting a structured approach to discussing financial performance and strategic direction [3].

Core Insights - Fox Factory Holding (FOXF) reported revenue of $355.03 million for the quarter ended March 2025, reflecting a 6.5% increase year-over-year and an 8.06% surprise over the Zacks Consensus Estimate of $328.55 million [1] - The company's EPS for the quarter was $0.23, down from $0.29 in the same quarter last year, with a 4.55% surprise over the consensus estimate of $0.22 [1] Revenue Performance - Net Sales for the Aftermarket Applications Group reached $111.91 million, exceeding the estimated $98.50 million, representing a 9.9% increase year-over-year [4] - Net Sales for the Powered Vehicles Group were $122.10 million, surpassing the estimated $106.05 million, marking a 3.4% increase compared to the previous year [4] - Net Sales for the Specialty Sports Group totaled $121.02 million, slightly below the estimated $122.45 million, but still showing a 6.6% increase year-over-year [4] Stock Performance - Over the past month, Fox Factory Holding's shares have returned -7.5%, contrasting with the Zacks S&P 500 composite's +11.3% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Part I: Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Net sales increased to $355.0 million, but a **$262.1 million goodwill impairment** led to a **$259.7 million net loss** and reduced total assets [Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Summary (in thousands) | Account | April 4, 2025 | January 3, 2025 | | :--- | :--- | :--- | | **Total Current Assets** | **$714,102** | **$727,680** | | Cash and cash equivalents | $68,601 | $71,674 | | Inventory | $408,786 | $404,736 | | **Goodwill** | **$377,226** | **$639,505** | | **Total Assets** | **$1,938,489** | **$2,232,310** | | **Total Current Liabilities** | **$224,475** | **$259,780** | | Revolver | $163,000 | $153,000 | | Term Loans, less current portion | $522,631 | $527,775 | | **Total Liabilities** | **$998,673** | **$1,031,166** | | **Total Stockholders' Equity** | **$939,894** | **$1,201,182** | - Goodwill decreased significantly from **$639.5 million** to **$377.2 million** due to an impairment charge. Total assets fell by approximately **$294 million** during the quarter[8](index=8&type=chunk) [Condensed Consolidated Statements of Loss](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Loss) Statement of Loss Summary (in thousands, except per share data) | Metric | Q1 2025 (ended Apr 4) | Q1 2024 (ended Mar 29) | | :--- | :--- | :--- | | **Net Sales** | **$355,030** | **$333,472** | | Gross Profit | $109,679 | $103,158 | | **Goodwill Impairment** | **$262,129** | **$0** | | Total Operating Expenses | $360,266 | $94,283 | | (Loss) Income from Operations | ($250,587) | $8,875 | | **Net Loss** | **($259,734)** | **($3,496)** | | **Diluted EPS** | **($6.23)** | **($0.08)** | - The company recorded a non-cash goodwill impairment charge of **$262.1 million** in the first quarter of 2025, which was the primary driver of the significant net loss and negative EPS[10](index=10&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary (in thousands) | Activity | Q1 2025 (ended Apr 4) | Q1 2024 (ended Mar 29) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $680 | $9,352 | | Net Cash used in Investing Activities | ($7,180) | ($15,298) | | Net Cash from (used in) Financing Activities | $3,349 | ($7,886) | | **Change in Cash and Cash Equivalents** | **($3,073)** | **($14,059)** | - Despite a net loss of **$259.7 million**, net cash from operating activities was positive at **$0.7 million**, primarily because the **$262.1 million** goodwill impairment was a non-cash charge[19](index=19&type=chunk) [Notes to Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) - A triggering event related to adverse changes in U.S. tariff policies and a sustained decline in stock price led to a quantitative impairment assessment in Q1 2025[36](index=36&type=chunk) Goodwill Impairment by Reporting Unit (in thousands) | Reporting Unit | Balance as of Jan 3, 2025 | Impairment Loss | Balance as of Apr 4, 2025 | | :--- | :--- | :--- | :--- | | PVG | $94,063 | ($51,206) | $42,669 | | AAG | $258,243 | ($191,823) | $66,420 | | SSG | $287,199 | ($19,100) | $268,137 | | **Total** | **$639,505** | **($262,129)** | **$377,226** | - The company is involved in a securities class action lawsuit filed on Feb 20, 2024, and two related stockholder derivative complaints, alleging material misstatements regarding product demand and inventory levels. The company denies all allegations and intends to defend itself vigorously[79](index=79&type=chunk)[80](index=80&type=chunk) - As of April 4, 2025, the company had **$163.0 million** outstanding on its revolver and **$546.9 million** in term loans, with **$486.8 million** available borrowing capacity under its 2022 Credit Facility[73](index=73&type=chunk)[75](index=75&type=chunk) [Management's Discussion and Analysis (MD&A)](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net sales increased to **$355.0 million**, but a **$262.1 million goodwill impairment** led to a **$259.7 million net loss**, with Adjusted EBITDA at **$39.6 million** [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Q1 2025 vs. Q1 2024 Performance (in millions) | Metric | Q1 2025 | Q1 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | **$355.0** | **$333.5** | **$21.5** | **6.5%** | | Gross Profit | $109.7 | $103.2 | $6.5 | 6.3% | | Gross Margin | 30.9% | 30.9% | - | 0 bps | | **Goodwill Impairment** | **$262.1** | **$0.0** | **$262.1** | **N/A** | | (Loss) Income from Operations | ($250.6) | $8.9 | ($259.5) | (2,915.7)% | | **Net Loss** | **($259.7)** | **($3.5)** | **($256.2)** | **7,320.0%** | - The increase in net sales was driven by higher upfitting sales, increased demand for aftermarket products, growth in bike sales, and the expansion of the motorcycle business. This offset lower demand in traditional powersports lines[145](index=145&type=chunk) - Total operating expenses surged to **$360.3 million** from **$94.3 million**, almost entirely due to the **$262.1 million** goodwill impairment charge[147](index=147&type=chunk) [Segment Review](index=34&type=section&id=Segment%20Review) Segment Performance - Q1 2025 vs Q1 2024 (in millions) | Segment | Net Sales Q1 2025 | Net Sales Q1 2024 | % Change | Adj. EBITDA Q1 2025 | Adj. EBITDA Q1 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Powered Vehicles Group (PVG) | $122.1 | $118.1 | 3.4% | $14.4 | $15.9 | (9.4)% | | Aftermarket Applications Group (AAG) | $111.9 | $101.9 | 9.9% | $17.0 | $14.9 | 14.1% | | Specialty Sports Group (SSG) | $121.0 | $113.5 | 6.6% | $23.4 | $24.1 | (2.9)% | | **Total** | **$355.0** | **$333.5** | **6.4%** | **$39.6** | **$40.5** | **(2.2)%** | - **PVG:** Sales increased due to the Marzocchi acquisition (**$12.0M**), offset by lower industry demand in powersports. Adjusted EBITDA decreased due to product mix[155](index=155&type=chunk) - **AAG:** Sales and Adjusted EBITDA grew, driven by higher upfitting sales and demand for aftermarket products[157](index=157&type=chunk) - **SSG:** Sales increased due to growth in bike sales, though channel inventory recalibration remains a headwind. Adjusted EBITDA decreased slightly due to product mix[158](index=158&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Cash Flow Summary - Q1 2025 (in millions) | Activity | Q1 2025 | | :--- | :--- | | Net cash from operating activities | $0.7 | | Net cash used in investing activities | ($7.2) | | Net cash provided by financing activities | $3.3 | | **Change in cash and cash equivalents** | **($3.1)** | - The company believes cash on hand, cash flow from operations, and availability under its 2022 Credit Facility will be sufficient to fund operations for the next 12 months and beyond[164](index=164&type=chunk) - The company borrowed the full **$200 million** available under its Delayed Draw Term Loan on May 13, 2024. As of April 4, 2025, the company was in compliance with all debt covenants[174](index=174&type=chunk)[175](index=175&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk disclosures were reported, with key risks including interest rate volatility and inflation - There have been no material changes to the disclosures regarding market risk since the last annual report[180](index=180&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of April 4, 2025, the company's disclosure controls and procedures were effective at the reasonable assurance level[182](index=182&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[183](index=183&type=chunk) Part II: Other Information [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company is defending against a securities class action and two derivative lawsuits alleging material misstatements regarding product demand and inventory - A securities class action lawsuit was filed against the company and certain officers, alleging material misstatements and omissions regarding demand and inventory levels for the period of May 6, 2021, to November 2, 2023[185](index=185&type=chunk) - Two related stockholder derivative complaints were also filed, alleging breaches of fiduciary duties by officers and directors. The company denies all allegations of wrongdoing in these cases[186](index=186&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from U.S. global trade and tariff policies, including potential supply chain disruptions from new tariffs and forced labor laws - The company identifies significant risk from existing and potential changes to U.S. policies on global trade and tariffs, which have created uncertainty and could adversely affect results[187](index=187&type=chunk) - Specific tariff actions highlighted include increased tariffs on aluminum and steel, a **20%** tariff on imports from China and Hong Kong, and a universal **10%** "reciprocal" tariff, which has been increased to **125%** for Chinese goods in retaliation[187](index=187&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) - The company faces potential supply chain disruptions due to the Uyghur Forced Labor Prevention Act (UFLPA), which could lead to delays, rejections of imported products, and increased operating costs[193](index=193&type=chunk)[194](index=194&type=chunk) [Issuer Purchases of Equity Securities](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company acquired **22,980 shares** for tax obligations, not under its public plan, with **$250 million** remaining for future repurchases Share Repurchase Activity (Quarter ended April 4, 2025) | Period | Total Shares Purchased | Avg. Price Paid per Share | Purchased as Part of Public Plan | Approx. Dollar Value Remaining in Plan | | :--- | :--- | :--- | :--- | :--- | | **Total** | **22,980** | **$25.48** | **0** | **$250,000,000** | - The shares purchased during the quarter were acquired from holders of restricted stock unit awards to satisfy tax-withholding obligations and were not part of the public share repurchase program[197](index=197&type=chunk) - The company's Board of Directors authorized a **$300 million** share repurchase plan on November 1, 2023. As of April 4, 2025, **$250 million** remains available under this authorization[198](index=198&type=chunk)[96](index=96&type=chunk)

Group 1: Earnings Performance - Fox Factory Holding reported quarterly earnings of $0.23 per share, exceeding the Zacks Consensus Estimate of $0.22 per share, but down from $0.29 per share a year ago, representing an earnings surprise of 4.55% [1] - The company posted revenues of $355.03 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 8.06%, compared to year-ago revenues of $333.47 million [2] - Over the last four quarters, Fox Factory has surpassed consensus EPS estimates three times and topped consensus revenue estimates three times [2] Group 2: Stock Performance and Outlook - Fox Factory Holding shares have declined approximately 32.9% since the beginning of the year, contrasting with the S&P 500's decline of 4.3% [3] - The company's earnings outlook is mixed, with a current Zacks Rank of 3 (Hold), indicating expected performance in line with the market in the near future [6] - The current consensus EPS estimate for the upcoming quarter is $0.40 on revenues of $347.5 million, and for the current fiscal year, it is $1.88 on revenues of $1.42 billion [7] Group 3: Industry Context - The Automotive - Domestic industry, to which Fox Factory belongs, is currently in the bottom 22% of over 250 Zacks industries, suggesting potential challenges ahead [8] - The performance of Fox Factory's stock may be influenced by the overall outlook for the industry, as research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [8]

Financial Data and Key Metrics Changes - First quarter sales reached $355 million, reflecting a 6.5% increase year-over-year, with adjusted earnings per share at $0.23, aligning with expectations [7][24] - Gross margin improved by 200 basis points sequentially to 30.9%, while adjusted gross margin decreased to 30.9% from 32.3% year-over-year due to a shift in product mix [7][25] - Net loss for the quarter was $259.7 million, or negative $6.23 per diluted share, primarily due to a goodwill impairment charge [26] Business Line Data and Key Metrics Changes - In the Powered Vehicles Group (PVG), net sales increased by 3.4% to $122.1 million, driven by motorcycle business growth [12] - The Aftermarket Applications Group (AAG) saw net sales rise by 9.9% to $111.9 million, with adjusted EBITDA margin improving to 15.2% [15] - Specialty Sports Group (SSG) reported a 6.6% increase in net sales to $121 million, although adjusted EBITDA margins decreased to 19.3% due to seasonality and investments in product engineering [17] Market Data and Key Metrics Changes - The automotive sector is showing signs of stabilization, particularly in the premium truck category, despite broader market caution [13] - The motorcycle business is experiencing growth, offsetting declines in traditional powersports product lines [12][15] - The company is leveraging international growth opportunities, particularly in Asia, to mitigate domestic market challenges [53] Company Strategy and Development Direction - The company is focused on operational efficiency, innovation, and strategic growth initiatives to drive long-term shareholder value [22][32] - Key initiatives include simplifying and consolidating manufacturing footprint, optimizing product portfolio, and enhancing working capital management [9][10] - The company aims to achieve $25 million in cost savings through various strategic actions throughout 2025 [11][30] Management's Comments on Operating Environment and Future Outlook - Management remains cautious about the broader market environment but is optimistic about sequential margin improvements and top-line growth across segments [21][32] - The company is continuously analyzing tariff impacts and implementing mitigation strategies, including cost reductions and price adjustments [22][31] - Despite uncertainties, management reaffirms full-year guidance for 2025, anticipating continued growth and margin improvement [29][30] Other Important Information - The company completed the closure of one of its Taiwan facilities, which is expected to yield cost benefits starting in Q2 [9][18] - The company is actively managing inventory levels to support demand and prepare for potential tariff impacts [27][44] Q&A Session Summary Question: Update on demand from bicycle OEM partners regarding tariffs - Management noted a spectrum of responses from OEM customers, with no significant demand reduction observed due to tariffs [38][39] Question: Key drivers of growth in the upfitting business - Growth is attributed to better product execution, improved dealer relationships, and a favorable product mix [41][42] Question: Quality of inventory and potential for cash generation - Management emphasized a strategic approach to inventory builds, focusing on high-demand aftermarket products [43][44] Question: Updates on international opportunities - The company is expanding its international relationships, particularly in Asia, to diversify its market presence [53] Question: Impact of tariffs on supply chain and consumer demand - Management discussed various strategies to mitigate tariff impacts, including commodity price adjustments and insourcing [64][66] Question: Did the company see any pull-forward in demand due to tariffs? - Management indicated minimal pull-forward in demand, with some product launches influencing sales [70][71] Question: Insights on the performance of the lower-priced fork in the market - The lower-priced fork has expanded market share and is performing well [105]