FOX FACTORY HOLDING CORP

Fox Factory Holding Corp. (FOXF) is a global leader in the design, engineering, manufacturing, and marketing of premium performance-defining products and systems. The company's offerings are primarily utilized in bicycles, side-by-side vehicles, on-road and off-road vehicles and trucks, ATVs, snowmobiles, motorcycles, and specialty applications. Additionally, FOXF provides premium baseball and softball gear and equipment. The company's business model involves selling products to leading Original Equipment Manufacturers (OEMs) and directly to consumers through a global network of dealers, distributors, and direct-to-consumer channels. FOXF emphasizes innovative design, performance, durability, and reliability, associating its brand with high-performance and technologically advanced products, often demonstrated by professional athletes in elite competitive events ¹.

FOXF operates in highly competitive markets for performance-defining products, competing with both specialized manufacturers and vertically-integrated OEMs that produce their own product lines. Key competitive factors include technical features, performance, product design, innovation, reliability, durability, brand recognition, time to market, customer service, and reliable order execution. While pricing is a factor, the company believes its product performance justifies premium pricing. Within the Powered Vehicles Group (PVG), FOXF competes with companies like ThyssenKrupp Bilstein Suspension GmbH, King Shock Technology, Inc., and Icon Vehicle Dynamics. In the Aftermarket Applications Group (AAG), competitors include TransAmerican Wholesale/Pro Comp USA and Rough Country Suspension Systems. For the Specialty Sports Group (SSG), bike suspension competitors include RockShox (SRAM Corp.) and SR Suntour, while in baseball and softball, it competes with Easton and Wilson Sporting Goods Company ².

The core business model of FOXF revolves around the design, engineering, manufacturing, and marketing of performance-defining products and systems. Revenue is primarily generated from product sales, with miscellaneous sources like service-related repair work and associated parts sales representing less than 2% of total sales ³. The company serves two primary customer segments: OEM customers who incorporate FOXF products into their vehicles and bikes, and aftermarket consumers reached through a global network of dealers, distributors, and direct-to-consumer platforms. In fiscal year 2025, approximately 44% of net sales were from OEM customers, 49% from aftermarket channels (dealers and distributors), and 7% from direct-to-consumer channels ⁴.

The company operates in three reportable segments: Powered Vehicles Group (PVG), Aftermarket Applications Group (AAG), and Specialty Sports Group (SSG). The PVG segment focuses on sales to off-road and powersports OEM and aftermarket businesses, offering premium products under the FOX brand for various vehicles including off-road vehicles, trucks, side-by-sides, ATVs, snowmobiles, motorcycles, and commercial trucks. In fiscal year 2025, PVG contributed approximately 33% of total net sales ⁵. The segment's net sales increased by $26.7 million, or 5.8%, to $488.1 million in fiscal year 2025 compared to fiscal year 2024, driven by higher sales in powersports and aftermarket applications, offsetting lower demand in automotive OE product lines ⁶. PVG adjusted EBITDA increased by $8.5 million, or 15.8%, to $62.3 million, mainly due to an increase in gross profit ⁷.

The AAG segment comprises aftermarket businesses offering custom vehicle shock, tuning, suspension, lift kit, upfitting, and wheel and tire solutions for automotive and powersports enthusiasts. This segment includes brands such as BDS Suspension, Method Race Wheels, and Rocky Ridge. In fiscal year 2025, AAG accounted for approximately 32% of total net sales ⁸. AAG net sales increased by $48.6 million, or 11.5%, to $470.0 million in fiscal year 2025 compared to fiscal year 2024, driven by increased demand for aftermarket products and higher upfitting sales ⁹. AAG adjusted EBITDA increased by $4.1 million, or 7.9%, to $55.8 million, primarily due to higher gross profit ¹⁰.

The SSG segment includes sales to OEM and aftermarket businesses providing components for performance mountain bikes, e-bikes, and gravel bikes under brands like FOX, Race Face, Easton Cycling, and Marzocchi. It also encompasses premium baseball and softball equipment under brands such as Marucci, Victus, Lizard Skins, and Baum Bat. In fiscal year 2025, SSG generated approximately 35% of total net sales ¹¹. SSG net sales decreased by $1.9 million, or 0.4%, to $509.2 million in fiscal year 2025 compared to fiscal year 2024, primarily due to lower diamond sports product sales partially offset by higher bike sales ¹². SSG adjusted EBITDA decreased by $10.2 million, or 8.7%, to $107.6 million, primarily due to a decrease in gross profit ¹³.

For the fiscal year ended January 2, 2026, FOXF reported total net sales of $1,467.3 million ¹⁴, an increase of 5.3% from $1,393.9 million in the prior fiscal year ¹⁵. Cost of sales increased by 5.5% to $1,024.1 million ¹⁶, resulting in a gross profit of $443.2 million ¹⁷ and a gross margin of 30.2% ¹⁸, a slight decrease from 30.4% in the previous year ¹⁹. Operating expenses significantly increased by 164.0% to $966.2 million ²⁰, primarily due to goodwill impairment charges of $557.3 million ²¹ and intangible and long-lived asset impairment charges of $13.5 million ²². This led to a net loss from operations of $(522.9) million ²³, compared to income from operations of $57.7 million in the prior year ²⁴. Interest expense was $53.7 million ²⁵, and the company reported a net loss of $(544.7) million ²⁶, or diluted EPS of $(13.03) ²⁷, compared to net income of $6.5 million and diluted EPS of $0.16 in the prior year ²⁸. Net cash provided by operating activities was $60.9 million ²⁹. As of January 2, 2026, cash and cash equivalents totaled $58.0 million ³⁰, and total long-term borrowings (including current portion) were $680.9 million ³¹.

Comparing fiscal year 2025 to fiscal year 2024, total net sales increased by $73.4 million, or 5.3% ³². Gross margin slightly decreased from 30.4% to 30.2% ³³, primarily due to shifts in product line mix and the impact of tariffs ³⁴. Operating expenses saw a substantial increase of $600.2 million, or 164.0% ³⁵, driven by the aforementioned goodwill and intangible asset impairment charges. Research and development expenses increased by $9.1 million, or 15.1%, to $69.4 million ³⁶, reflecting higher investments in product innovation. Amortization of purchased intangibles decreased by $2.5 million, or 5.6%, to $42.0 million ³⁷, as certain intangible assets became fully amortized. Net cash provided by operating activities decreased from $131.8 million in fiscal year 2024 to $60.9 million in fiscal year 2025 ³⁸.

During fiscal year 2025, FOXF recognized significant non-cash goodwill impairment charges totaling $557.3 million ³⁹ and intangible and long-lived asset impairment charges of $13.5 million ⁴⁰. These impairments were triggered by adverse changes in U.S. tariff policies, new and expanded tariffs enacted by the current presidential administration, and a resulting sustained decline in the company's stock price ⁴¹. The company also undertook various restructuring initiatives to improve operational efficiency and realign resources, resulting in $13.9 million in charges for employee severance, relocation expenses, consulting fees, and losses related to lease terminations and fixed asset disposals ⁴². In December 2024, FOXF acquired Marzocchi Suspension S.r.l., a leader in motorbike suspension manufacturing, for $20.5 million, net of cash acquired, expanding its product portfolio and market position in the powered vehicle segment ⁴³.

Management intends to focus on generating sales of its performance-defining products through OEM, aftermarket, retail, and direct-to-consumer channels. This strategy includes continuing to develop and introduce new and innovative products in current end-markets and selectively developing products for new applications and end-markets ⁴⁴. The company believes that performance and control are crucial to its consumer base, and frequent introduction of products with innovative and improved technologies increases both OEM and aftermarket demand ⁴⁵. Evolving market trends, such as changing bike wheel and tire sizes and increasing adoption rates of off-road capable, on-road trucks, are expected to increase demand for vehicles in FOXF's end-markets, thereby increasing demand for its suspension products ⁴⁶.

FOXF plans to leverage its technology and brand to expand into new categories and end-markets. The Powered Vehicle Group facility is expected to enable scaling to newer levels efficiently ⁴⁷. The company has successfully expanded into recreational vehicles, street car applications, international truck and SUV applications, and entry premium bike applications, and sees opportunities for further penetration and growth with pioneering product applications ⁴⁸. Additionally, FOXF is exploring international opportunities with some of its applications to grow its end-user base ⁴⁹.

The company aims to increase its aftermarket penetration by selectively adding dealers and distributors in certain geographic markets, expanding its internal sales force, and strategically increasing aftermarket-specific products and services for existing vehicle platforms ⁵⁰. International growth is considered a significant opportunity, and FOXF plans to selectively increase infrastructure investments and focus on identified geographic regions ⁵¹. Rising consumer discretionary income in developing markets and increasing consumer preferences for premium performance bikes and powered vehicles are expected to contribute to increasing demand for FOXF products ⁵². The company intends to leverage its brand recognition to capitalize on these trends by globally increasing sales to both OEMs and dealers and distributors, particularly in markets with significant opportunities ⁵³.

FOXF is implementing aggressive cost management and strategic operational improvements to strengthen its business, protect margins, and drive significant, consistent free cash flow to de-lever its balance sheet ⁵⁴. The company has developed a plan to adjust its business structure to operate efficiently across various demand environments ⁵⁵.

The company's operations and supply chain are directly impacted by evolving U.S. trade policies and global tariffs. The current presidential administration has expanded tariffs on steel, aluminum, and derivative products, imposed new tariffs on imports from China, Hong Kong, Mexico, and Canada, and proposed a shift toward reciprocal tariffs ⁵⁶. These changes are expected to introduce additional costs and uncertainty into the supply chain, impacting FOXF's cost structure and working capital needs in the near term ⁵⁷. The company is evaluating the potential effect on its supply chain and sourcing strategies and expects some volatility in cash flows as it adjusts ⁵⁸.

FOXF expects that cash on hand, cash flow from operations, and availability under its Amended Credit Agreement will be sufficient to fund operations for the next 12 months and beyond ⁵⁹. The company's primary cash needs include supporting working capital, interest on debt, employee compensation, capital expenditures, acquisitions, debt repayments, and other general corporate purposes ⁶⁰. As of January 2, 2026, the company had $349.8 million in revolving credit available to borrow under the Amended Credit Agreement ⁶¹.

FOXF faces material risks including the uncertain impact of international geopolitical conflicts, particularly escalating tensions between China and Taiwan, which could negatively affect its manufacturing in Taiwan, global supply chains, and overall business operations ⁶². The company's dependency on a limited number of single-source suppliers for certain materials and components poses a risk of increased material costs, supply chain disruptions, or reputational damage if these suppliers cannot fulfill orders or if a transition to new suppliers is required ⁶³. Failure to continuously enhance existing products or develop new, innovative products that meet evolving consumer needs and preferences could lead to decreased demand and negatively impact financial results, especially given intense competition from companies with greater financial and marketing resources ⁶⁴. The discretionary nature of FOXF's products makes its business sensitive to adverse economic conditions, including inflation and changes in interest rates, which could reduce consumer spending and product sales ⁶⁵. Furthermore, the company is exposed to risks from new technological applications like artificial intelligence, where a failure to anticipate or respond effectively could lead to competitive disadvantages ⁶⁶. The Amended Credit Agreement imposes operating restrictions and default risks, and the variable interest rate on outstanding debt, which was $180.8 million as of January 2, 2026, makes the company vulnerable to increases in interest rates, with a hypothetical 100 basis point increase resulting in an approximately $1.8 million increase in interest expense ⁶⁷. U.S. policies related to global trade and tariffs, including increased tariffs on steel and aluminum to 50% for most countries and a 20% tariff on imports from China and Hong Kong, could materially increase supply chain costs and negatively impact operating performance ⁶⁸. Additionally, the U.S. CBP's recent Withhold Release Order against bicycles and parts manufactured in Taiwan by Giant Manufacturing Co. Ltd. could subject FOXF's Taiwan-based operations to increased scrutiny, hindering or delaying product importation and delivery ⁶⁹.

Management's message to shareholders emphasizes a strategic focus on navigating current market challenges while investing in future growth. CEO Michael C. Dennison leads an experienced senior management team, many of whom are avid users of the company's products, contributing to their expertise ⁷⁰. The company is committed to continuous product innovation, with research and development expenses totaling $69.4 million in fiscal year 2025 ⁷¹, reflecting a 15.1% increase over the prior year ⁷². Key strategic priorities include developing new and innovative products in current end-markets, leveraging technology and brand to expand into new categories and end-markets, opportunistically expanding the business platform through acquisitions, increasing aftermarket penetration, and accelerating international growth ⁷³. Management is actively implementing cost optimization efforts and strategic operational improvements to strengthen the business, protect margins, and drive significant free cash flow to de-lever the balance sheet ⁷⁴. The company acknowledges the impact of high interest rates, high vehicle costs, and macroeconomic conditions as headwinds, particularly affecting automotive OE product lines and discretionary consumer spending ⁷⁵.