Fox(FOXF) - 2025 Q1 - Quarterly Report

Part I: Financial Information Financial Statements 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 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] Condensed Consolidated Statements of Loss 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] Condensed Consolidated Statements of Cash Flows 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] Notes to Financial Statements - 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] 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][80] - 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][75] Management's Discussion and Analysis (MD&A) 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 $39.6 million Results of Operations Q1 2025 vs. Q1 2024 Performance (in millions) | Metric | Q1 2025 | Q1 2024 | Change ($) | 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] - Total operating expenses surged to $360.3 million from $94.3 million, almost entirely due to the $262.1 million goodwill impairment charge[147] Segment Review 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] - AAG: Sales and Adjusted EBITDA grew, driven by higher upfitting sales and demand for aftermarket products[157] - 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] Liquidity and Capital Resources 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] - 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][175] Quantitative and Qualitative Disclosures About Market Risk 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] Controls and Procedures 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] - 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] Part II: Other Information Legal Proceedings 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] - 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] Risk Factors 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] - 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][189][190] - 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][194] Issuer Purchases of Equity Securities 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] - 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][96]