Fox Factory : Quarterly Report for Quarter Ending October 3, 2025 (Form 10-Q)

About this update from Fox Factory Holding Corp.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended January 3, 2025, as filed with the SEC on February 28, 2025, and our other reports and registration statements that we file with the SEC from time to time. In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in the "Risk Factors" section included in Part II, Item 1A. Unless the context otherwise requires, the terms "FOX," the "Company," "we," "us," and "our" in this Quarterly Report on Form 10-Q refer to Fox Factory Holding Corp. and its operating subsidiaries on a consolidated basis. Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements, which are subject to the "safe harbor" created by Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We may make forward-looking statements in our SEC filings, press releases, news articles, earnings presentations and when we are speaking on behalf of the Company. Forward-looking statements generally relate to future events or our future financial or operating performance that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements because they contain words such as "may," "might," "will," "would," "should," "expect," "plan," "anticipate," "could," "can," "intend," "target," "project," "contemplate," "believe," "estimate," "predict," "likely," "potential", "remain", or "continue" or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q are subject to numerous risks and uncertainties, including but not limited to risks related to: • 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; • our dependency on a limited number of suppliers for materials, product parts, and vehicle chassis could lead to an increase in material costs, disruptions in our supply chain, or reputational costs; • our ability to develop new and innovative products in our current end-markets; • our ability to leverage our technologies and brand to expand into new categories and end-markets; • the spread of highly infectious or contagious disease, such as COVID-19, could cause severe disruptions in the U.S. and global economy, which could in turn disrupt the business activities and operations of our customers, as well as our businesses and operations; • our ability to increase our aftermarket penetration; • our ability to accelerate international growth; • our exposure to exchange rate fluctuations; • the loss of key customers; • our ability to accurately forecast demand for our products; • our ability to improve operating and supply chain efficiencies; • 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); • our ability to mitigate increasing input costs through pricing or other measures; • economic conditions that impact consumer spending or consumer credit, including changes in inflation or interest rates; • our ability to enforce our intellectual property rights; • our future financial performance, including our sales, cost of sales, gross profit or gross margins, operating expenses, ability to generate positive cash flow, and ability to maintain our profitability; • our ability to maintain our premium brand image and high-performance products; • our ability to maintain relationships with the professional athletes and race teams we sponsor; • our ability to selectively add additional dealers and distributors in certain geographic markets; • 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; • changes in demand for performance-defining products; • the loss of key personnel, management, and skilled engineers; • our ability to successfully identify, evaluate and manage potential or completed acquisitions and to benefit from such acquisitions; • 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; • the cost of compliance with, or liabilities related to, environmental or other governmental regulations or changes in governmental or industry regulatory standards; • future disruptions in the operations of our manufacturing facilities; • our ability to adapt our business model to mitigate the impact of certain changes in tax laws, tariffs, and international trade policies, including regulations or orders related to the import and export of industry products; • changes in the relative proportion of profit earned in the numerous jurisdictions in which we do business and in tax legislation, case law and other authoritative guidance in those jurisdictions; • product recalls and product liability claims; and • future economic or market conditions. You should not rely upon forward-looking statements as predictions of future events. We based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects and the outcomes of any of the events described in any forward-looking statements are subject to risks, uncertainties, and other factors. In addition to the risks, uncertainties, and other factors discussed above and elsewhere in this Quarterly Report on Form 10-Q, the risks, uncertainties, and other factors expressed or implied in Part I, Item 1A. "Risk Factors" of our 2024 Annual Report on Form 10-K, as filed with the SEC on February 28, 2025, could cause or contribute to actual results differing materially from those set forth in any forward-looking statement. Moreover, we operate in a very competitive and challenging environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur and you should not place undue reliance on our forward-looking statements. Actual results, events, or circumstances could differ materially from those contemplated by, set forth in, or underlying any forward-looking statements. For all of these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements in Section 27A of the Securities Act and Section 21E of the Exchange Act. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make or choose not to make. Critical Accounting Policies and Estimates 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 28, 2025, that had a material impact on our unaudited condensed consolidated financial statements and related notes, except as described below. Goodwill Impairment 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. 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. As a reasonableness check, the impairment assessment also included a comparison of the aggregate estimated fair value of the reporting units to the Company's total market capitalization. The Company will continue to monitor its goodwill balances for further potential impairments. See "Goodwill, Intangible Assets, and Long-Lived Assets" within Note 1. Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies for goodwill activity by reporting unit. Recent Accounting Pronouncements See Note 1 - Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies to the accompanying notes to unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further details regarding this topic. Results of Operations The table below summarizes our results of operations: For the three months ended For the nine months ended (in millions) October 3, 2025 September 27, 2024 October 3, 2025 September 27, 2024 Net sales $ 376.4 $ 359.1 $ 1,106.2 $ 1,041.1 Cost of sales 261.9 251.6 765.1 719.5 Gross profit 114.5 107.5 341.1 321.6 Operating expenses: Goodwill impairment - - 262.1 - General and administrative 37.7 32.4 114.0 106.8 Sales and marketing 32.7 29.1 96.7 89.8 Research and development 18.6 16.1 53.5 45.3 Amortization of purchased intangibles 10.4 11.0 31.7 33.4 Total operating expenses 99.4 88.7 558.1 275.3 Income (loss) from operations 15.1 18.8 (217.0) 46.3 Interest expense 13.9 14.2 41.2 41.4 Other income, net (0.4) (0.5) (2.0) (0.5) Income (loss) before income taxes 1.6 5.0 (256.2) 5.3 Provision (benefit) from income taxes 2.3 0.3 1.4 (1.4) Net (loss) income $ (0.7) $ 4.8 $ (257.7) $ 6.7 Less: net loss attributable to non-controlling interest - - (0.1) - Net (loss) income attributable to FOX stockholders $ (0.6) $ 4.8 $ (257.6) $ 6.7 *Amounts may not foot due to rounding. The following table sets forth selected statement of income data as a percentage of net sales for the periods indicated: For the three months ended For the nine months ended October 3, 2025 September 27, 2024 October 3, 2025 September 27, 2024 Net sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of sales 69.6 70.1 69.2 69.1 Gross profit 30.4 29.9 30.8 30.9 Operating expenses: Goodwill impairment - - 23.7 - General and administrative 10.0 9.0 10.3 10.3 Sales and marketing 8.7 8.1 8.7 8.6 Research and development 4.9 4.5 4.8 4.4 Amortization of purchased intangibles 2.8 3.1 2.9 3.2 Total operating expenses 26.4 24.7 50.4 26.4 Income (loss) from operations 4.0 5.2 (19.6) 4.4 Interest expense 3.7 4.0 3.7 4.0 Other income, net (0.1) (0.1) (0.2) - Income (loss) before income taxes 0.4 1.4 (23.2) 0.5 Provision (benefit) from income taxes 0.6 0.1 0.1 (0.1) Net (loss) income (0.2) % 1.3 % (23.3) % 0.6 % Less: net loss attributable to non-controlling interest - - - - Net (loss) income attributable to FOX stockholders (0.2) % 1.3 % (23.3) % 0.6 % *Percentages may not foot due to rounding. Three months ended October 3, 2025 compared to three months ended September 27, 2024 Consolidated net sales For the three months ended (in millions) October 3, 2025 September 27, 2024 Change ($) Change (%) Net sales $ 376.4 $ 359.1 $ 17.3 4.8 % Total net sales for the three months ended October 3, 2025 increased $17.3 million, or 4.8%, compared to the three months ended September 27, 2024. The increase in net sales is driven by increased demand for aftermarket products, strategic customer program launches, and market share gains in motorcycle business, which more than offset lower industry demand in the automotive OE product lines and reduced inventory levels by OEMs, distributors, and dealers in response to market-wide economic conditions. Although net sales increased, high interest rates impacting industry and consumer demand, high vehicle costs, and macro-economic conditions remain headwinds. Cost of sales For the three months ended (in millions) October 3, 2025 September 27, 2024 Change ($) Change (%) Cost of sales $ 261.9 $ 251.6 $ 10.3 4.1 % Cost of sales for the three months ended October 3, 2025 increased $10.3 million, or 4.1%, compared to the three months ended September 27, 2024. The increase in cost of sales is mainly due to our increased sales and impact of tariffs. Our gross margin increased 50 basis points to 30.4% for the three months ended October 3, 2025, as compared to the same prior fiscal year period, primarily due to our product mix. Operating expenses For the three months ended (in millions) October 3, 2025 September 27, 2024 Change ($) Change (%) Operating expenses: General and administrative $ 37.7 $ 32.5 $ 5.2 16.0 % Sales and marketing 32.7 29.1 3.6 12.4 Research and development 18.6 16.1 2.5 15.5 Amortization of purchased intangibles 10.4 11.0 (0.6) (5.5) Total operating expenses $ 99.4 $ 88.7 $ 10.7 12.1 % Total operating expenses for the three months ended October 3, 2025 were $99.4 million, compared to $88.7 million for the three months ended September 27, 2024. General and administrative expenses increased $5.2 million driven by our organizational restructuring initiatives. Sales and marketing expenses and research and development expenses increased $3.6 million and $2.5 million, respectively, mainly due to investments to support strategic customer launches and product innovation. Income from operations For the three months ended (in millions) October 3, 2025 September 27, 2024 Change ($) Change (%) Income from operations $ 15.1 $ 18.8 $ (3.7) (19.7) % As a result of the factors discussed above, income from operations for the three months ended October 3, 2025 decreased $3.7 million, or 19.7%, compared to income from operations for the three months ended September 27, 2024. Interest and other expense, net For the three months ended (in millions) October 3, 2025 September 27, 2024 Change ($) Change (%) Interest expense $ 13.9 $ 14.2 $ (0.3) (2.1) % Other income, net (0.4) (0.5) (0.1) (20.0) Interest and other expense, net $ 13.5 $ 13.7 $ (0.2) (1.5) % Interest and other expense, net for the three months ended October 3, 2025 decreased by $0.2 million to $13.5 million, compared to $13.7 million for the three months ended September 27, 2024. Income taxes For the three months ended (in millions) October 3, 2025 September 27, 2024 Change ($) Change (%) Provision for income taxes $ 2.3 $ 0.3 $ 2.0 666.7 % The effective tax rates were 140.8% and 5.0% for the three months ended October 3, 2025 and September 27, 2024, respectively. For the three months ended October 3, 2025, the difference between the Company's effective tax rate of 140.8% and the 21% federal statutory rate was primarily due to unfavorable impact of discrete items in proportion to lower levels of pre-tax income. For the three months ended September 27, 2024, the difference between our effective tax rate of 5.0% and the 21% federal statutory rate was primarily due to the favorable impact of discrete items on lower levels of pre-tax income. Net (loss) income For the three months ended (in millions) October 3, 2025 September 27, 2024 Change ($) Change (%) Net (loss) income $ (0.7) $ 4.8 $ (5.5) (114.6) % As a result of the factors described above, our net income decreased $5.5 million, or 114.6%, to a net loss of $0.7 million in the three months ended October 3, 2025 from net income of $4.8 million for the three months ended September 27, 2024. Segment Review We manage our activities based on three operating segments: PVG, AAG, and SSG. For additional financial information related to our operating segments including the reconciliation of consolidated net (loss) income to adjusted EBITDA, see Note 15 - Segment Information . The following table summarizes consolidated net sales and adjusted EBITDA by segment: For the three months ended (in millions) October 3, 2025 September 27, 2024 Change ($) Change (%) Net sales Powered Vehicles Group $ 125.9 $ 109.3 $ 16.5 15.1 % Aftermarket Applications Group 117.8 100.3 17.5 17.4 Specialty Sports Group 132.7 149.5 (16.8) (11.2) Net sales $ 376.4 $ 359.1 $ 17.3 4.8 % Adjusted EBITDA Powered Vehicles Group $ 18.9 $ 8.9 $ 10.0 112.4 % Aftermarket Applications Group 12.4 9.4 3.0 31.9 Specialty Sports Group 27.5 36.5 (9.0) (24.7) Unallocated corporate expenses (14.4) (12.8) (1.6) (12.5) Adjusted EBITDA $ 44.4 $ 42.0 $ 2.4 5.7 % *Numbers may not foot due to rounding. Powered Vehicles Group Powered Vehicles Group net sales increased by $16.5 million, or 15.1%, mainly due to strategic customer program launches and the inclusion of $9.1 million in net sales from Marzocchi acquired in December 2024, partially offset by lower industry demand in automotive OE product lines. Powered Vehicles Group adjusted EBITDA increased by $10.0 million, or 112.4%, primarily due to higher gross profit, partially offset by an increase in research and development expenses. Aftermarket Applications Group Aftermarket Applications Group net sales increased by $17.5 million, or 17.4%, 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. Aftermarket Applications Group adjusted EBITDA increased by $3.0 million, or 31.9%, mainly due to higher gross profit, partially offset by an increase in sales and marketing expenses. Specialty Sports Group Specialty Sports Group net sales decreased by $16.8 million, or 11.2%, primarily due to OEMs, distributors, and dealers reducing inventory levels in response to market-wide economic conditions. Specialty Sports Group adjusted EBITDA decreased by $9.0 million, or 24.7%, primarily due to a decrease in gross profit. Unallocated Corporate Expenses Unallocated corporate expenses consist of corporate overhead expenses that are not directly attributable to one of our business segments and include unallocated occupancy costs for our corporate headquarters, acquisition costs, other benefit and compensation programs, including performance-based compensation, and administrative expenses such as accounting, finance, legal, human resources, and information technology expenses. Unallocated corporate expenses increased by $1.6 million, or 12.5%, to $14.4 million, compared to $12.8 million in the same period of the prior fiscal year. Nine months ended October 3, 2025 compared to nine months ended September 27, 2024 Consolidated net sales For the nine months ended (in millions) October 3, 2025 September 27, 2024 Change ($) Change (%) Net sales $ 1,106.2 $ 1,041.1 $ 65.1 6.3 % Total net sales for the nine months ended October 3, 2025 increased $65.1 million, or 6.3%, compared to the nine months ended September 27, 2024. The increase in net sales is primarily due to increased demand for aftermarket products, and the expansion of motorcycle business, which offset lower industry demand in the automotive OE product lines. Although net sales increased, high interest rates impacting industry and consumer demands, high vehicle costs, and macro-economic conditions remain headwinds. Cost of sales For the nine months ended (in millions) October 3, 2025 September 27, 2024 Change ($) Change (%) Cost of sales $ 765.1 $ 719.5 $ 45.6 6.3 % Cost of sales for the nine months ended October 3, 2025 increased $45.6 million, or 6.3%, compared to the nine months ended September 27, 2024. The increase in cost of sales is primarily due to our increased sales. Our gross margin decreased by 10 basis points to 30.8% for the nine months ended October 3, 2025, as compared to the same prior fiscal year period, primarily due to shifts in our product line mix and impact of tariffs. Operating expenses For the nine months ended (in millions) October 3, 2025 September 27, 2024 Change ($) Change (%) Operating expenses: Goodwill impairment $ 262.1 $ - $ 262.1 N/A General and administrative 114.0 106.8 7.2 6.7 % Sales and marketing 96.7 89.8 6.9 7.7 Research and development 53.5 45.3 8.2 18.1 Amortization of purchased intangibles 31.7 33.4 (1.7) (5.1) Total operating expenses $ 558.1 $ 275.3 $ 282.8 102.7 % *Numbers may not foot due to rounding. Total operating expenses for the nine months ended October 3, 2025 were $558.1 million, compared to $275.3 million for the nine months ended September 27, 2024. During the nine months ended October 3, 2025, we recognized an impairment charge of $262.1 million as a result of our quantitative assessment on goodwill triggered by 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. Research and development and sales and marketing expenses increased $8.2 million and $6.9 million, respectively, due to our investments to support future growth and product innovation. General and administrative expenses increased $7.2 million primarily on organizational restructuring initiatives. (Loss) income from operations For the nine months ended (in millions) October 3, 2025 September 27, 2024 Change ($) Change (%) (Loss) income from operations $ (217.0) $ 46.3 $ (263.3) (568.7) % As a result of the factors discussed above, income from operations for the nine months ended October 3, 2025 decreased $263.3 million, or 568.7%, compared to income from operations for the nine months ended September 27, 2024. Interest and other expense, net For the nine months ended (in millions) October 3, 2025 September 27, 2024 Change ($) Change (%) Interest expense $ 41.2 $ 41.4 $ (0.2) (0.5) % Other income, net (2.0) (0.5) (1.5) (300.0) Interest and other expense, net $ 39.2 $ 40.9 $ (1.7) (4.2) % Interest and other expense, net for the nine months ended October 3, 2025 decreased by $1.7 million to $39.2 million, compared to $40.9 million for the nine months ended September 27, 2024 due to the effect of foreign currency exchange rates. Income taxes For the nine months ended (in millions) October 3, 2025 September 27, 2024 Change ($) Change (%) Provision (Benefit) for income taxes $ 1.4 $ (1.4) $ 2.8 (200.0) % The effective tax rates were (0.6)% and (26.2)% for the nine months ended October 3, 2025 and September 27, 2024, respectively. For the nine months ended October 3, 2025, the difference between the Company's effective tax rate of (0.6)% and the 21% federal statutory rate was due to the impairment impact of non-deductible goodwill. For the nine months ended September 27, 2024, the difference between our effective tax rate of (26.2)% and the 21% federal statutory rate was due to the favorable impact of discrete items on lower levels of pre-tax income. Net (loss) income For the nine months ended (in millions) October 3, 2025 September 27, 2024 Change ($) Change (%) Net (loss) income $ (257.7) $ 6.7 $ (264.4) (3,946.3) % As a result of the factors described above, our net income decreased $264.4 million to a net loss of $257.7 million for the nine months ended October 3, 2025 from a net income of $6.7 million for the nine months ended September 27, 2024. Segment Review For additional financial information related to our operating segments including the reconciliation of consolidated net (loss) income to adjusted EBITDA, see Note 15 - Segment Information . The following table summarizes consolidated net sales and adjusted EBITDA by segment: For the nine months ended (in millions) October 3, 2025 September 27, 2024 Change ($) Change (%) Net sales Powered Vehicles Group $ 371.5 $ 345.2 $ 26.3 7.6 % Aftermarket Applications Group 343.8 309.3 34.5 11.2 Specialty Sports Group 390.9 386.6 4.3 1.1 Net sales $ 1,106.2 $ 1,041.1 $ 65.1 6.3 % Adjusted EBITDA Powered Vehicles Group $ 49.7 $ 40.7 $ 9.0 22.1 % Aftermarket Applications Group 45.5 38.4 7.1 18.5 Specialty Sports Group 81.3 89.8 (8.5) (9.5) Unallocated corporate expenses (43.1) (42.3) (0.8) (1.9) Adjusted EBITDA $ 133.3 $ 126.6 $ 6.7 5.3 % *Numbers may not foot due to rounding. Powered Vehicles Group Powered Vehicles Group net sales increased by $26.3 million, or 7.6%, due to the inclusion of $32.7 million in net sales from Marzocchi acquired in December 2024, partially offset by lower industry demand in automotive OE. Powered Vehicles Group adjusted EBITDA increased by $9.0 million, or 22.1%, mainly due to an increase in gross profit, partially offset by higher research and development expenses. Aftermarket Applications Group Aftermarket Applications Group net sales increased by $34.5 million, or 11.2%, 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. Aftermarket Applications Group adjusted EBITDA increased by $7.1 million, or 18.5%, mainly due to higher gross profit. Specialty Sports Group Specialty Sports Group net sales increased by $4.3 million, or 1.1%. Specialty Sports Group adjusted EBITDA decreased by $8.5 million, or 9.5%, primarily due to a decrease in gross profit and increases in sales and marketing and research and development expenses. Unallocated corporate expenses Unallocated corporate expenses increased by $0.8 million, or 1.9% to $43.1 million, compared to $42.3 million in the same period of the prior fiscal year. Liquidity and Capital Resources 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 Credit Agreement, 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 . As of October 3, 2025, we held $12.7 million of our $65.4 million of cash and cash equivalents in accounts of our subsidiaries outside of the U.S., which we may repatriate. A summary of our operating, investing, and financing activities is shown in the following table: For the nine months ended (in millions) October 3, 2025 September 27, 2024 Net cash provided by operating activities $ 42.8 $ 50.1 Net cash used in investing activities (27.2) (42.5) Net cash used in financing activities (21.5) (1.7) Effect of exchange rate changes on cash and cash equivalents (0.4) (0.4) Change in cash and cash equivalents $ (6.3) $ 5.6 *Amounts may not foot due to rounding. We expect that cash on hand, cash flows from operations and availability under our Credit Agreement will be sufficient to fund our operations during the next 12 months from the date of this Form 10-Q and beyond. Operating activities In the nine months ended October 3, 2025, net cash provided by operating activities was $42.8 million. Our investment in operating assets and liabilities is mainly a result of an increase in accounts receivable of $30.7 million, a decrease in accrued expenses and other liabilities of $8.5 million, an increase in inventory of $4.9 million, and a decrease in income taxes payable of $4.8 million, partially offset by a decrease in prepaids and other assets of $0.6 million, excluding the impact of 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 accrued expenses and other liabilities is driven by a reduction in warranty reserve. On a reported currency basis, inventory increased primarily due to planned inventory builds to support anticipated demand, the impact from higher tariffs, and foreign currency translation, partially offset by our efforts to optimize inventory levels. 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 $7.8 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. Investing activities In the nine months ended October 3, 2025 and September 27, 2024, net cash used in investing activities was $27.2 million and $42.5 million, respectively. Investing activities for the nine months ended October 3, 2025 consisted of $27.2 million of property and equipment additions. 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 purchase of other assets, and $5.0 million of cash consideration for our acquisitions. Financing activities In the nine months ended October 3, 2025, net cash used in financing activities was $21.5 million, and consisted of the proceeds from our Credit Agreement revolver of $77.0 million that were used to support our working capital, offset by payments of $79.0 million to reduce the revolver borrowings, $18.2 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. 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 Credit Agreement 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 quarterly repayment on our Term A Loan, $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. Credit Agreement On April 5, 2022, the Company entered into a new credit agreement with Wells Fargo Bank, National Association, and other named lenders. The Credit Agreement, which matures on April 5, 2027, provides for revolving loans, swingline loans and letters of credit up to an aggregate amount of $650.0 million. The Company may borrow, prepay, and re-borrow principal under the Credit Agreement during its term. Advances under the Credit Agreement 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 October 3, 2025, the one-month SOFR and three-month SOFR rates were 4.29% and 4.34%, respectively. At October 3, 2025, our weighted-average interest rate on outstanding borrowing was 6.28%. On November 14, 2023, in connection and concurrently with the closing of the Marucci acquisition, the Company entered into the First Incremental Facility Amendment (the "First Amendment") amending the Credit Agreement. The Fist Amendment provided the Company with the Incremental Term A Loan in an amount of $400.0 million and the Delayed Draw Term Loan in an amount of $200.0 million, each of which are permitted under the Credit Agreement, subject to satisfaction of certain conditions. The Incremental Term A Loan was fully funded on November 14, 2023 and used to fund a portion of the consideration owed under the Marucci acquisition. The Delayed Draw Term Loan was available to the Company for up to six months commencing on December 6, 2023, until the earlier of (a) May 14, 2024 and (b) the date on which the Delayed Draw Term commitments have been terminated. Each Incremental Term Loan is subject to quarterly amortization payments of principal at a rate of 5.00% per annum. The Incremental Term Loans are in the form of term SOFR loans and base rate loans, at the option of the Company, and have an applicable margin ranging from 0.50% to 1.50% for base rate loans and 1.50% to 2.50% for term SOFR loans, subject to adjustment provisions. Each Incremental Term Loan has a maturity date of April 5, 2027, consistent with the Credit Agreement. The Company paid $10.1 million in debt issuance costs, of which $6.7 million were allocated to the Term A Loan and $3.4 million were allocated to the Delayed Draw Term Loan. Loan fees allocated to the Term A Loan are amortized using the interest method over the term of the Credit Facility. Loan fees allocated to the Delayed Draw Term Loan were deferred as an asset until the debt is drawn. 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. 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. The Credit Agreement is secured by substantially all of the Company's assets, restricts the Company's ability to make certain payments and engage in certain transactions, and requires that the Company satisfy customary financial ratios. The Company was in compliance with the covenants as of October 3, 2025. On October 24, 2025, the Company entered into the Fifth Amendment to the Credit Agreement and Second Amendment to Guaranty and Security Agreement among the Company, certain subsidiaries of the Company, Wells Fargo Bank, National Association, as administrative agent, swingline lender and L/C issuer (the "Agent"), and a group of lenders party thereto. Refer to Note 16. Subsequent Events for further information. Recent Developments Global Trade Actions and Tariffs - New and expanded tariffs 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 Credit Agreement 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. One Big Beautiful Bill Act - On July 4, 2025, the OBBBA was enacted in the U.S. This legislation introduces several significant tax provisions, including the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, changes to the international tax framework, and the reinstatement of favorable tax treatment for select business provisions. The OBBBA includes multiple effective dates, with certain provisions taking effect in 2025 and others phased in through 2027. We have reviewed the enacted legislation and have determined that these provisions do not affect the measurement of our deferred tax assets and liabilities as of October 3, 2025. We will continue to assess the impact on the effective tax rate for future periods. Material Cash Requirements There have been no material changes to the information in our material cash requirements related to commitments or contractual obligations from those reported in our Annual Report on Form 10-K for the fiscal year ended January 3, 2025, as filed with the SEC on February 28, 2025. Inflation 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. Interest Rates Interest rate volatility can impact our borrowing costs and overall financial condition. Significant increases could lead to higher interest expense on our variable-rate debt. To mitigate this risk and enhance predictability, we utilize interest rate swaps to manage our exposure to interest rate fluctuations.

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