FOX FACTORY HOLDING CORP 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management, under the direction and with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of January 3, 2025. Based on the evaluation of our disclosure controls and procedures as of January 3, 2025, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. Management’s Report on Internal Control Over Financial Reporting The Management’s Report on Internal Control Over Financial Reporting is contained in Part IV. Management’s Report on Internal Control Over Financial Reporting of this Annual Report on Form 10-K and is incorporated herein by reference. Attestation Report of Independent Registered Public Accounting Firm Grant Thornton, LLP, the independent registered public accounting firm that audited the Company’s consolidated financial statements, has issued an attestation report on the Company’s internal control over financial reporting. A report of independent registered public accounting firm is contained in Part IV. Report of Independent Registered Public Accounting Firm of this Annual Report on Form 10-K. Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended January 3, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Inherent Limitations on Effectiveness of Controls Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. 61 Table of Contents ITEM 9B. OTHER INFORMATION The following information is being included in this Item 9B in lieu of filing such information on a Current Report on Form 8-K under Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. On February 25, 2025, the Compensation Committee of the Board of Directors of the Company adopted a form of performance share unit award agreement (the “Form of PSU Agreement”) for use in connection with the Fox Factory Holding Corp. 2022 Omnibus Plan. The foregoing description of the Form of PSU Agreement is qualified in its entirety by the full text of the Form of PSU Agreement, a copy of which is filed as Exhibit 10.37 to this Annual Report on Form 10-K. Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements During the three months ended January 3, 2025, none of our officers or directors (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act) . ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information required by this Item regarding our directors and executive officers is incorporated by reference to the sections of our proxy statement to be filed with the SEC in connection with our 2025 Annual Meeting of Stockholders (the “Proxy Statement”) entitled “Election of Class III Directors” and “Corporate Governance.” Information required by this Item regarding our corporate governance, including our audit committee and code of ethics, is incorporated by reference to the sections of the Proxy Statement entitled “Corporate Governance” and “The Board of Directors.” Information required by this Item regarding compliance with Section 16(a) of the Exchange Act required by this Item is incorporated by reference to the section of the Proxy Statement entitled “Delinquent Section 16(a) Reports.” ITEM 11. EXECUTIVE COMPENSATION Information required by this item regarding executive compensation is incorporated by reference to the information set forth under the captions “Executive Compensation,” “Director Compensation” and “Corporate Governance” in our Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information regarding security ownership of certain beneficial owners and management is incorporated by reference to the section of the Proxy Statement entitled “Security Ownership of Certain Beneficial Owners and Management.” Information required by this item regarding securities authorized for issuance under our equity compensation plans is incorporated by reference to the information set forth under the caption “Executive Compensation” in our Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information required by this Item is incorporated by reference to the section of the Proxy Statement entitled “Certain Relationships and Related Transactions and Director Independence.” ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Information required by this Item is incorporated by reference to the section of the Proxy Statement entitled “Ratification of Appointment of Independent Registered Public Accounting Firm.” 62 Table of Contents PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) Financial Statements Management’s Report on Internal Control Over Financial Reporting 69 Reports of Independent Registered Public Accounting Firm (PCAOB ID Number: 248 ) 70 Consolidated Balance Sheets as of January 3, 2025 and December 29, 2023 74 Consolidated Statements of Income for the years ended January 3, 2025, December 29, 2023 and December 30, 2022 75 Consolidated Statements of Comprehensive Income for the years ended January 3, 2025, December 29, 2023 and December 30, 2022 76 Consolidated Statements of Stockholders’ Equity for the years ended January 3, 2025, December 29, 2023 and December 30, 2022 77 Consolidated Statements of Cash Flows for the years ended January 3, 2025, December 29, 2023 and December 30, 2022 78 Notes to Consolidated Financial Statements 80 (b) Exhibits See Index to Exhibits 64 ITEM 16. FORM 10-K SUMMARY None. 63 Table of Contents Index to Exhibits Incorporated by Reference Exhibit Number Exhibit Description Form File No. Filing Date Filed or Furnished Herewith 2.1 Agreement and Plan of Merger, dated November 1, 2023, by and among (i) Fox Factory, Inc; (ii) Marucci Merger Sub, Inc.; (iii) Wheelhouse Holdings Inc.; and (iv) Compass Group Diversified Holdings LLC, as the Equityholders’ Representative 8-K 001-36040 November 3, 2023 3.1 Second Amended and Restated Certificate of Incorporation 10-Q 001-36040 August 4, 2023 3.2 Second Amended and Restated Bylaws 8-K 001-36040 August 1, 2024 4.1 Form of Common Stock Certificate S-1 333-189841 July 8, 2013 4.2 Form of Indenture S-3 333-203146 March 31, 2015 4.3 Description of Securities 10-K 001-36040 February 23, 2023 10.1† Employment Agreement, dated May 1, 2018, by and between Fox Factory Holding Corp. and Chris Tutton 10-K 001-36040 February 26, 2019 10.2† Employment Agreement, dated August 29, 2018, by and between Fox Factory Holding Corp. and Michael C. Dennison 10-K 001-36040 February 26, 2019 10.3† Amended and Restated Employment Agreement, dated June 26, 2019, by and between Fox Factory Holding Corp. and Michael C. Dennison 8-K 001-36040 July 1, 2019 10.4† Amendment to the Amended and Restated Employment Agreement, by and between Fox Factory Holding Corp. and Michael C. Dennison, dated August 5, 2020. 8-K 001-36040 August 10, 2020 10.5† Amendment to the Amended and Restated Employment Agreement, by and between Fox Factory, Inc. and Christopher J. Tutton, dated August 5, 2020. 8-K 001-36040 August 10, 2020 10.6† 2023 Policy Regarding Terms Applicable to Restricted Stock Unit and Performance Share Unit Award Agreements in the Event of Qualified Retirement 10-K 001-36040 February 23, 2024 10.7† Sixth Amended and Restated Non-Employee Director Compensation Policy, effective January 1, 2022. 10-K 001-36040 February 23, 2024 10. 8 † Form of Indemnification Agreement, by and between Fox Factory Holding Corp. and certain of its officers, directors and/or advisors 10-Q 001-36040 October 31, 2018 10. 9 † 2008 Stock Option Plan, as amended S-1 333-189841 July 8, 2013 10. 10 † 2008 Non-Statutory Stock Option Plan, as amended S-1/A 333-189841 August 2, 2013 10.1 1 † Fox Factory Holding Corp. 2022 Omnibus Plan 8-K 001-36040 May 6, 2022 10.1 2 † Form of Employee Restricted Stock Unit Award Agreement for Non-Employee Directors under 2022 Omnibus Plan (U.S.) 8-K 001-36040 May 6, 2022 10.1 3 † Form of Restricted Stock Unit Award Agreement under 2022 Omnibus Plan (U.S.) 10-K 001-36040 February 23, 2024 10.1 4 † Form of Performance Share Unit Award Agreement under the 2022 Omnibus Plan 10-K 001-36040 February 23, 2024 10.15 † Form of Performance Share Unit Award Agreement under the 2022 Omnibus Plan 8-K 001-36040 March 21, 2024 10.16† Form of Revenue Growth Performance Share Unit Award Agreement under the 2022 Omnibus Plan 8-K 001-36040 March 21, 2024 10.1 5 First Incremental Facility Amendment, dated November 14, 2023, by and among Fox Factory Holding Corp., Bank of America, N.A., Wells Fargo Bank, National Association and PNC Bank, National Association 8-K 001-36040 November 15, 2023 10.17 Pilot Agreement, between the Gainesville and Hall County Development Authority and Fox Factory, Inc., effective June 12, 2020. 8-K 001-36040 June 16, 2020 64 Table of Contents 10.18 Bond Purchase Agreement, between the Gainesville and Hall County Development Authority and Fox Factory, Inc., effective June 12, 2020. 8-K 001-36040 June 16, 2020 10.19 Financing Agreement, between the Gainesville and Hall County Development Authority and Fox Factory, Inc., effective June 12, 2020. 8-K 001-36040 June 16, 2020 10.20 Lease Agreement, between the Gainesville and Hall County Development Authority and Fox Factory, Inc., effective June 12, 2020. 8-K 001-36040 June 16, 2020 10.21 Amendment No. 1 to Lease Agreement between the Gainesville and Hall County Development Authority and Fox Factory, Inc., dated December 31, 2020. 10-K 001-36040 February 24, 2022 10.22 Amendment No. 2 to Lease Agreement between the Gainesville and Hall County Development Authority and Fox Factory, Inc., dated December 31, 2021. 10-K 001-36040 February 24, 2022 10.23 Deed to Secure Debt and Security Agreement, between the Gainesville and Hall County Development Authority and Fox Factory, Inc., effective June 12, 2020. 8-K 001-36040 June 16, 2020 10.24 Assignment of Lease Agreement, between the Gainesville and Hall County Development Authority and Fox Factory, Inc., effective June 12, 2020. 8-K 001-36040 June 16, 2020 10.25 Direct Payment Agreement, between the Gainesville and Hall County Development Authority and Fox Factory, Inc., effective June 12, 2020. 8-K 001-36040 June 16, 2020 10.26 Credit Agreement, among Fox Factory Holding Corp., Wells Fargo Bank, N.A., as Administrative Agent, Swingline Lender and L/C Issuer, and a group of lenders party thereto, dated April 5, 2022. 8-K 001-36040 April 5, 2022 10.27† Deferred Compensation Plan, effective June 30, 2021. S-8 333-264858 June 29, 2021 10.28 Securities Purchase Agreement, between Fox Factory, Inc., CWH Holdco, LLC, CWH Blocker Corp., and Thompson Street Capital Partners V, L.P., effective February 17, 2023. 10-K 001-36040 February 23, 2023 10.29 Amendment No. 3 to Lease Agreement between the Gainesville and Hall County Development Authority and Fox Factory, Inc., dated December 31, 2022. 10-Q 001-36040 May 4, 2023 10.30† Employment Agreement, by and between Fox Factory Holding Corp. and Dennis C. Schemm, dated June 12, 2023 10-Q 001-36040 August 4, 2023 10.3 1 † Employment Agreement, by and between Fox Factory Holding Corp. and Toby D. Merchant, dated April 13, 2021 10-Q 001-36040 August 4, 2023 10.3 2 † Employment Agreement, by and between Fox Factory Holding Corp. and Thomas L. Fletcher, dated May 24, 2021 10-Q 001-36040 August 4, 2023 10.3 3 Second Amendment to Credit Agreement and First Amendment to Guaranty and Security Agreement, dated June 5, 2024 10-Q 001-36040 August 2, 2024 10.3 4 Third Amendment to Credit Agreement, dated July 31, 2024 10-Q 001-36040 November 1, 2024 10.3 5 Amendment to Pilot Agreement, dated September 25, 2024 10-Q 001-36040 November 1, 2024 10.36 Fourth Amendment to the Credit Agreement, dated December 20, 2024. 8-K 001-36040 December 20, 2024 10.37† Form of EBITDA Performance Share Unit Award Agreement under 2022 Omnibus Plan X 19.1 Insider Trading Policy X 21.1 List of Subsidiaries X 23.1 Consent of Independent Registered Public Accounting Firm X 24.1 Power of Attorney (contained in signature page to this Annual Report on Form 10-K) X 65 Table of Contents 31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended X 31.2 Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended X 32.1* Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended X 32.2* Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended X 97.1 Clawback Policy 10-K 001-36040 February 23, 2024 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document X 101.SCH Inline XBRL Taxonomy Extension Schema Document X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X 104 Cover page formatted as Inline XBRL and contained in Exhibit 101 X † Management contract or compensatory plan. X Filed herewith * In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference. 66 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FOX FACTORY HOLDING CORP. February 27, 2025 By: /s/ Dennis C. Schemm Dennis C. Schemm, Chief Financial Officer (Principal Financial Officer & Duly Authorized Signatory) February 27, 2025 By: /s/ Brendan R. Enick Brendan R. Enick, Chief Accounting Officer (Principal Accounting Officer) 67 Table of Contents POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dennis C. Schemm and Michael C. Dennison, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution for him or her, and in his or her name in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and either of them, his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Michael C. Dennison Chief Executive Officer and Director February 27, 2025 Michael C. Dennison ( Principal Executive Officer ) /s/ Dennis C. Schemm Chief Financial Officer February 27, 2025 Dennis C. Schemm (Principal Financial Officer) /s/ Dudley W. Mendenhall Chairman February 27, 2025 Dudley W. Mendenhall /s/ Thomas E. Duncan Director February 27, 2025 Thomas E. Duncan /s/ Elizabeth A. Fetter Director February 27, 2025 Elizabeth A. Fetter /s/ Jean H. Hlay Director February 27, 2025 Jean H. Hlay /s/ Ted D. Waitman Director February 27, 2025 Ted D. Waitman /s/ Sidney Johnson Director February 27, 2025 Sidney Johnson 68 Table of Contents Management’s Report on Internal Control Over Financial Reporting The management of Fox is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Fox’s internal control over financial reporting is a process designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation and fair presentation of financial statements issued for external purposes in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Under the supervision of our management, including our Chief Executive Officer and Chief Financial Officer, Fox conducted an evaluation of the effectiveness of our internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In making its assessment of internal control over financial reporting, management used criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on the evaluation, our management concluded that its internal control over financial reporting was effective as of January 3, 2025. Grant Thornton LLP, the independent registered public accounting firm that audited the Company’s consolidated financial statements, issued an attestation report on the Company’s internal control over financial reporting, which is included elsewhere in this Annual Report on Form 10-K. February 27, 2025 /s/ Michael C. Dennison Michael C. Dennison Chief Executive Officer /s/ Dennis C. Schemm Dennis C. Schemm Chief Financial Officer 69 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Fox Factory Holding Corp. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Fox Factory Holding Corp. (a Delaware corporation) and subsidiaries (the “Company”) as of January 3, 2025 and December 29, 2023, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended January 3, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 3, 2025 and December 29, 2023, and the results of its operations and its cash flows for each of the three years in the period ended January 3, 2025, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of January 3, 2025, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 27, 2025 expressed an unqualified opinion. Basis for opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Net realizable value of inventory As discussed in Note 1 to the consolidated financial statements, adjustments are made to reduce the cost of inventory to its net realizable value, if required, for estimated excess, obsolete or impaired balances. Management monitors inventory quantities on hand and on order and records write-downs for estimated excess or obsolescence based on estimated demand for products, obsolescence of technology, product life cycles, and when pricing trends or forecasts indicate that the carrying value of inventory exceeds estimated selling price. We identified the net realizable value of inventory for certain product categories as a critical audit matter. 70 Table of Contents The principal consideration for our determination that the net realizable value of inventory represents a critical audit matter is that the assessment of the net realizable value of inventory is complex and includes an estimate of forecasted demand. The demand estimate is subjective and requires the Company to consider significant assumptions such as economic conditions, technology changes, and new product introductions, which are subject to significant uncertainty and therefore require significant auditor judgement. Our audit procedures related to the net realizable value of inventory included the following, among others: • We obtained management’s analysis for estimated excess or obsolete inventory. We evaluated the appropriateness of management’s approach and tested the completeness and accuracy of the underlying data. • We tested selected inventory items by making inquiries of management and evaluating the appropriateness of judgments and assumptions. We also reviewed industry reports and inquired with management and various staff members outside of the finance function to understand macroeconomic, technology, and product trends. • We performed a retrospective review by comparing previous demand forecasts to actual usage during the year for a sample of items. • We compared estimated demand for selected inventory items to actual customer sales orders and forecasted demand information as provided by the sales and operations team in order to test the accuracy of demand information included in the calculation. • We tested the design and operating effectiveness of controls related to the forecasted demand for the Company’s products as well as management’s review of the net realizable value of inventory. Realizability of foreign tax credits As discussed in Note 1 to the consolidated financial statements, deferred tax assets and liabilities are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are provided when necessary to reduce net deferred tax assets to an amount that is more likely than not to be realized. We identified the realizability of deferred tax assets relating to the Company’s foreign tax credits as a critical audit matter. The principal considerations for our determination that the realizability of deferred tax assets relating to the Company’s foreign tax credits represents a critical audit matter are the significance of the Company’s foreign tax credits and the use of forecasted profitability by jurisdiction and source. The forecasts, including future sales and expenses by jurisdiction, are subject to a high level of estimation uncertainty and subjectivity. Additionally, realizability depends on continued implementation of a tax planning strategy. As a result, significant auditor judgment is necessary to evaluate management’s judgments and assumptions. Our audit procedures related to the realizability of deferred tax assets relating to the Company’s foreign tax credtis included the following, among others: • We considered the applicability of the Company’s international transfer pricing arrangements as it relates to the Company’s ability to utilize foreign tax credits. • We tested the accuracy of the underlying data used in the forecasts by agreeing the baseline 2024 results for selected jurisdictions to general ledger balances. • We evaluated the appropriateness of the assumptions supporting the future revenue growth rate by jurisdiction. • We evaluated management’s assumptions with respect to anticipated relief from withholding on intercompany charges paid by selected jurisdictions for consistency and credibility. • We tested the design and operating effectiveness of controls related to the generation and review of the forecasts and assumptions that underpin the assessment of the realizability of deferred tax assets relating to the Company’s foreign tax credits. 71 Table of Contents /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2008. San Jose, California February 27, 2025 72 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Fox Factory Holding Corp. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of Fox Factory Holding Corp. (a Delaware corporation) and subsidiaries (the “Company”) as of January 3, 2025, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 3, 2025, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended January 3, 2025, and our report dated February 27, 2025 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP San Jose, California February 27, 2025 73 Table of Contents FOX FACTORY HOLDING CORP. Consolidated Balance Sheets (in thousands, except par value) As of As of January 03, 2025 December 29, 2023 Assets Current assets: Cash and cash equivalents $ 71,674 $ 83,642 Accounts receivable (net of allowances of $ 1,848 and $ 1,158 at January 3, 2025 and December 29, 2023, respectively) 165,827 171,060 Inventory 404,736 371,841 Prepaids and other current assets 85,443 141,512 Total current assets 727,680 768,055 Property, plant and equipment, net 246,393 237,192 Lease right-of-use assets 104,019 84,317 Deferred tax assets, net 44,364 21,297 Goodwill 639,505 636,565 Trademarks and brands, net 264,126 273,293 Customer and distributor relationships, net 161,585 184,269 Core technologies, net 23,154 25,785 Other assets 21,484 11,525 Total assets $ 2,232,310 $ 2,242,298 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 144,067 $ 104,150 Accrued expenses 91,427 103,400 Current portion of long-term debt 24,286 14,286 Total current liabilities 259,780 221,836 Revolver 153,000 370,000 Term Loans, less current portion 527,775 359,242 Other liabilities 90,611 69,459 Total liabilities 1,031,166 1,020,537 Commitments and contingent liabilities (Refer to Note 12. Commitments and Contingent Liabilities ) Non-controlling interest ( 38 ) — Stockholders’ equity Preferred stock, $ 0.001 par value — 10,000 authorized and no shares issued or outstanding as of January 3, 2025 and December 29, 2023 — — Common stock, $ 0.001 par value — 90,000 authorized; 42,574 shares issued and 41,684 outstanding as of January 3, 2025; 42,844 shares issued and 41,954 outstanding as of December 29, 2023 42 42 Additional paid-in capital 339,266 348,346 Treasury stock, at cost; 890 common shares as of January 3, 2025 and December 29, 2023 ( 13,754 ) ( 13,754 ) Accumulated other comprehensive (loss) income (“AOCI”) 224 9,041 Retained earnings 875,404 878,086 Total stockholders’ equity 1,201,182 1,221,761 Total liabilities and stockholders’ equity $ 2,232,310 $ 2,242,298 The accompanying notes are an integral part of these consolidated financial statements. 74 Table of Contents FOX FACTORY HOLDING CORP. Consolidated Statements of Income (in thousands, except per share data) For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 Net sales $ 1,393,921 $ 1,464,178 $ 1,602,491 Cost of sales 970,345 999,366 1,071,148 Gross profit 423,576 464,812 531,343 Operating expenses: General and administrative 139,857 124,582 116,103 Sales and marketing 121,207 100,451 90,801 Research and development 60,314 53,179 56,205 Amortization of purchased intangibles 44,528 26,509 21,537 Total operating expenses 365,906 304,721 284,646 Income from operations 57,670 160,091 246,697 Interest expense 54,942 19,320 8,939 Other expense, net 1,716 2,108 3,994 Income before income taxes 1,012 138,663 233,764 (Benefit) provision for income taxes ( 5,500 ) 17,817 28,486 Net income $ 6,512 $ 120,846 $ 205,278 Less: net loss attributable to non-controlling interest ( 38 ) — — Net income attributable to Fox stockholders $ 6,550 $ 120,846 $ 205,278 Earnings per share: Basic $ 0.16 $ 2.86 $ 4.86 Diluted $ 0.16 $ 2.85 $ 4.84 Weighted-average shares used to compute earnings per share: Basic 41,681 42,305 42,232 Diluted 41,717 42,432 42,384 The accompanying notes are an integral part of these consolidated financial statements. 75 Table of Contents FOX FACTORY HOLDING CORP. Consolidated Statements of Comprehensive Income (in thousands) For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 Net income $ 6,512 $ 120,846 $ 205,278 Other comprehensive income (loss) Interest rate swap Change in net unrealized gain 6,418 830 13,775 Reclassification of net gain on interest rate swaps to net earnings ( 8,460 ) ( 6,775 ) ( 3,177 ) Tax effects ( 466 ) ( 1,303 ) 4,226 Net change, net of tax effects ( 2,508 ) ( 7,248 ) 14,824 Foreign currency translation adjustments ( 6,309 ) 1,507 ( 4,918 ) Other comprehensive (loss) income ( 8,817 ) ( 5,741 ) 9,906 Comprehensive (loss) income $ ( 2,305 ) $ 115,105 $ 215,184 Less: comprehensive loss attributable to non-controlling interest ( 38 ) — — Comprehensive (loss) income attributable to Fox stockholders $ ( 2,267 ) $ 115,105 $ 215,184 The accompanying notes are an integral part of these consolidated financial statements. 76 Table of Contents FOX FACTORY HOLDING CORP. Consolidated Statements of Stockholders’ Equity (in thousands) Common Stock Treasury Additional paid-in capital Accumulated other comprehensive income Retained earnings Total stockholders’ equity Non-controlling interest Shares Amount Shares Amount Balance - December 31, 2021 43,010 $ 42 890 $ ( 13,754 ) $ 344,119 $ 4,876 $ 558,799 $ 894,082 $ — Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding 150 — — — ( 4,231 ) — — ( 4,231 ) — Stock-based compensation expense — — — — 16,351 — — 16,351 — Other comprehensive income — — — — — 9,906 — 9,906 — Net income — — — — — — 205,278 205,278 — Balance - December 30, 2022 43,160 $ 42 890 $ ( 13,754 ) $ 356,239 $ 14,782 $ 764,077 $ 1,121,386 $ — Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding 112 — — — ( 6,195 ) — — ( 6,195 ) — Stock-based compensation expense — — — — 16,465 — — 16,465 — Purchase and retirement of common stock ( 428 ) — — — ( 18,163 ) — ( 6,837 ) ( 25,000 ) Other comprehensive income (loss) — — — — — ( 5,741 ) — ( 5,741 ) — Net income — — — — — — 120,846 120,846 Balance - December 29, 2023 42,844 $ 42 890 $ ( 13,754 ) $ 348,346 $ 9,041 $ 878,086 $ 1,221,761 $ — Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding 108 — — — ( 2,609 ) — — ( 2,609 ) — Stock-based compensation expense — — — — 9,606 — — 9,606 — Purchase and retirement of common stock ( 378 ) — — — ( 16,077 ) — ( 9,232 ) ( 25,309 ) — Other comprehensive income (loss) — — — — — ( 8,817 ) — ( 8,817 ) — Net income — — — — — — 6,550 6,550 ( 38 ) Balance - January 3, 2025 42,574 $ 42 890 $ ( 13,754 ) $ 339,266 $ 224 $ 875,404 $ 1,201,182 $ ( 38 ) The accompanying notes are an integral part of these consolidated statements. 77 FOX FACTORY HOLDING CORP. Consolidated Statements of Cash Flows (in thousands) For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 OPERATING ACTIVITIES: Net income $ 6,512 $ 120,846 $ 205,278 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 83,566 58,603 49,242 Provision for inventory reserve 5,631 6,184 8,923 Stock-based compensation 9,606 16,465 16,351 Amortization of acquired inventory step-up 4,485 13,008 — Amortization of loan fees 3,748 905 1,086 Write off of unamortized loan origination fees — — 1,927 Amortization of deferred gains on prior swap settlements ( 4,334 ) ( 4,252 ) ( 3,177 ) Proceeds from (cash paid for) interest rate swap settlements 4,026 2,522 ( 471 ) Loss (gain) on disposal of property and equipment 341 1,492 ( 1,740 ) Deferred taxes ( 23,310 ) ( 7,867 ) ( 18,445 ) Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable 10,372 64,527 ( 63,957 ) Inventory ( 26,503 ) 31,613 ( 87,460 ) Income taxes ( 11,168 ) ( 19,094 ) 8,717 Prepaids and other assets 48,463 ( 40,702 ) 18,603 Accounts payable 23,234 ( 44,029 ) 40,493 Accrued expenses and other liabilities ( 2,837 ) ( 21,478 ) 11,724 Net cash provided by operating activities 131,832 178,743 187,094 INVESTING ACTIVITIES: Acquisition of businesses, net of cash acquired ( 25,785 ) ( 701,112 ) ( 714 ) Acquisition foreign exchange hedge settlement ( 1,118 ) — — Acquisition of other assets ( 5,344 ) ( 2,432 ) ( 3,500 ) Purchases of property and equipment ( 44,040 ) ( 46,852 ) ( 43,701 ) Proceeds from sale of property and equipment — — 3,180 Net cash used in investing activities ( 76,287 ) ( 750,396 ) ( 44,735 ) FINANCING ACTIVITIES: Proceeds from line of credit, net of origination fees 189,000 400,000 602,356 Payments on revolver ( 406,000 ) ( 230,000 ) ( 404,336 ) Proceeds from issuance of debt 200,000 393,528 — Repayment of term debt ( 19,286 ) ( 20,000 ) ( 382,500 ) Purchase and retirement of common stock ( 25,000 ) ( 25,000 ) — Installment on purchase of non-controlling interest — — ( 2,700 ) Repurchases from stock compensation program, net ( 2,608 ) ( 6,195 ) ( 4,231 ) Deferred debt issuance/modification costs ( 3,434 ) ( 3,354 ) — Proceeds from termination of swap agreement — — 12,270 Net cash (used in) provided by financing activities ( 67,328 ) 508,979 ( 179,141 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ( 185 ) 1,066 2,346 CHANGE IN CASH AND CASH EQUIVALENTS ( 11,968 ) ( 61,608 ) ( 34,436 ) CASH AND CASH EQUIVALENTS—Beginning of year 83,642 145,250 179,686 CASH AND CASH EQUIVALENTS—End of year $ 71,674 $ 83,642 $ 145,250 The accompanying notes are an integral part of these consolidated statements. 78 FOX FACTORY HOLDING CORP. Consolidated Statements of Cash Flows (in thousands) For the fiscal years ended SUPPLEMENTAL CASH FLOW INFORMATION: January 3, 2025 December 29, 2023 December 30, 2022 Cash paid during the period for: Income tax payment $ 29,159 $ 44,655 $ 37,493 Interest $ 57,004 $ 21,147 $ 9,922 Amounts included in the measurement of lease liabilities $ 18,844 $ 14,009 $ 10,499 Non-cash operating activities: Right-of-use assets obtained in exchange for lease obligations $ 39,541 $ 54,949 $ 21,167 Non-cash investing and financing activities: Capital expenditures included in accounts payable $ 747 $ 977 $ 2,049 The accompanying notes are an integral part of these consolidated financial statements. 79 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) 1. Description of the Business, Basis of Presentation and Summary of Significant Accounting Policies Fox Factory Holding Corp. (the “Company”) designs, engineers, manufactures and markets performance-defining products and systems for customers worldwide. Our premium brand, performance-defining products and systems are used primarily on bicycles (“bikes”), side-by-side vehicles (“side-by-sides”), on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, all-terrain vehicles (“ATVs”), snowmobiles, and specialty vehicles and applications. In addition, we also offer premium baseball and softball gear and equipment. Some of our products are specifically designed and marketed to some of the leading cycling and powered vehicle original equipment manufacturers (“OEMs”), while others are distributed to consumers through a global network of dealers and distributors and retailers. Throughout this Annual Report on Form 10-K, unless stated otherwise or as the context otherwise requires, the “Company,” “FOX,” “Fox Factory,” “we,” “us,” “our,” and “ours” refer to Fox Factory Holding Corp. and its operating subsidiaries on a consolidated basis. Basis of Presentation - The accompanying consolidated financial statements have been prepared in accordance with United States of America (“U.S.”) generally accepted accounting principles (“GAAP”). Fiscal Year Calendar - The Company operates using a 52-53-week fiscal year calendar ending on the Friday nearest to December 31. Therefore, the financial results of certain fiscal years and quarters, which will contain 53 and 14 weeks, respectively, will not be exactly comparable to the prior and subsequent fiscal years and quarters, which contain 52 and 13 weeks, respectively. For the fiscal years 2024, 2023 and 2022, the Company’s fiscal year ended on January 3, 2025, December 29, 2023 and December 30, 2022 and had 53, 52, and 52 weeks, respectively. Principles of Consolidation - The consolidated financial statements include the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Use of Estimates - The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from management’s estimates. Foreign Currency Translation and Transaction - The functional currency of the Company’s non-U.S. entities is the local currency of the respective operations. The Company translates the financial statements of its non-U.S. entities into U.S. Dollars each reporting period for purposes of consolidation. Assets and liabilities of the Company’s foreign subsidiaries are translated at the period-end currency exchange rates while sales and expenses are translated at the average currency exchange rates in effect for the period. The effects of these translation adjustments are a component of other comprehensive income. Foreign currency transaction losses of $ 1,811 , $ 1,465 , and $ 3,377 for the years ended January 3, 2025, December 29, 2023 and December 30, 2022, respectively, are included as a component of other income or expense. Cash and Cash Equivalents - Cash consists of cash maintained in checking or money market accounts. All highly liquid investments purchased with an original maturity date of 90 days or less at the date of purchase are considered to be cash equivalents. 80 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) Accounts Receivable - Accounts receivable are unsecured customer obligations which generally require payment within various terms from the invoice date. The receivables are stated at the invoice amount. Financing terms vary by customer. Invoices are considered past due when payment is not received within the terms stated within the contract. Payments of accounts receivable are applied to the specific invoices identified on the customer’s remittance advice or if unspecified, generally to the earliest unpaid invoices. The carrying amount of accounts receivable is reduced by an allowance for credit losses that reflects management’s best estimate of amounts that may not be collected. All accounts or portions thereof deemed to be uncollectible or that may require an excessive collection cost are written off to the allowance for credit losses. The Company records the allowance for credit losses using the aging method, considering the length of time a receivable has been outstanding. This assessment incorporates historical credit loss rates, current conditions, and reasonable and supportable forecasts of future economic conditions that may impact collectability. Our methodology follows the expected credit loss model, which not only accounts for past events and incurred losses but also integrates forward-looking information to estimate potential credit deterioration. If circumstances change, such as higher-than-expected defaults or an unexpected material adverse change in a major customer’s financial condition, we reassess our estimates to determine whether the recoverability of amounts due could be materially impacted. The following table presents the activity in the allowance for credit losses: For the fiscal years ended Allowance for credit losses: January 3, 2025 December 29, 2023 December 30, 2022 Balance, beginning of year $ 1,158 $ 443 $ 410 Add: bad debt expense (benefit) 913 907 446 Less: write-offs, net of recoveries ( 223 ) ( 192 ) ( 413 ) Balance, end of year $ 1,848 $ 1,158 $ 443 Concentration of Credit Risk - Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist primarily of cash and accounts receivable. As of January 3, 2025 the Company held $ 63,743 in cash at U.S. subsidiaries and $ 7,931 at subsidiaries outside the U.S. The account balances may significantly exceed the insurance coverage provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. The Company has not experienced any losses in its uninsured accounts. The Company mitigates its credit risk with respect to accounts receivable by performing ongoing credit evaluations and monitoring of its customers’ accounts receivable balances. The following customers accounted for 10% or more of the Company’s accounts receivable balance: January 3, 2025 December 29, 2023 Customer A 14 % 18 % In 2024 and 2023, our sales to customer A accounted for approximately 15% and 13% of total net sales, respectively. No other customers were individually significant in any of these periods presented. The Company depends on a limited number of vendors to supply component parts for its products. The Company purchased 26 %, 29 %, and 34 % of its product components for the years ended January 3, 2025, December 29, 2023 and December 30, 2022, respectively, from ten vendors. As of January 3, 2025 and December 29, 2023, amounts due to these vendors represented 21 % and 20 % of accounts payable, respectively. Inventories - Inventories are stated at the lower of actual cost (or standard cost which generally approximates actual costs on a first-in first-out basis) or net realizable value. Cost includes raw materials and inbound freight, as well as direct labor and manufacturing overhead for products we manufacture. Net realizable value is based on current replacement cost for raw materials and on a net realizable value for finished goods. Adjustments to reduce the cost of inventory to its net realizable value are made, if required, for estimated excess, obsolescence or impaired balances. 81 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) Property and Equipment - Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the balance sheet and any resulting gain or loss is reflected in operations in the period realized. Leasehold improvements are amortized on a straight-line basis over the terms of the lease, or the useful lives of the assets, whichever is shorter. The value assigned to land associated with buildings we own is not amortized. Depreciation and amortization periods for the Company’s property and equipment are as follows: Asset Classification Estimated useful life Building and building improvements 15 - 39 years Information systems, office equipment and furniture 3 - 7 years Internal-use computer software 10 years Land improvements 15 years Machinery and manufacturing equipment 5 - 15 years Transportation equipment 3 - 5 years Internal-use Computer Software Costs - Costs incurred to purchase and develop computer software for internal use are capitalized during the application development and implementation stages. These software costs have been for enterprise-level business and finance software that is customized to meet the Company’s operational needs. Capitalized costs are included in property and equipment and are amortized on a straight-line basis over the estimated useful life of the software beginning when the software project is substantially complete and placed in service. Costs incurred during the preliminary project stage and costs for training, data conversion, and maintenance are expensed as incurred. Impairment of Long-lived Assets - The Company periodically reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset is impaired or the estimated useful lives are no longer appropriate. If indicators of impairment exist and the undiscounted projected cash flows associated with such assets are less than the carrying amount of the assets, an impairment loss is recorded to write the assets down to their estimated fair values. Fair value is estimated based on discounted future cash flows. No impairment charges were recorded during the years ended January 3, 2025, December 29, 2023 and December 30, 2022. Business Combinations - The Company accounts for acquisitions of entities that include inputs and processes and have the ability to create outputs as business combinations. The Company allocates the purchase price of the acquisition to the tangible assets acquired, liabilities assumed, and identifiable intangible assets acquired based on their estimated fair values. The excess of the purchase price over those fair values is recorded as goodwill. Acquisition-related expenses and restructuring costs are expensed as incurred. During the measurement period, the Company records adjustments to provisional amounts recorded for assets acquired and liabilities assumed with the corresponding offset to goodwill. After the measurement period, which could be up to one year after the transaction date, subsequent adjustments are recorded to the Company’s consolidated statements of income. 82 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) Goodwill and Intangible Assets - Goodwill represents the excess of purchase price over the fair value of the net assets of businesses acquired. On an annual basis, the Company makes a qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill. If the Company determines that the fair value of the reporting unit is less than its carrying amount, it will perform a quantitative analysis; otherwise, no further evaluation is necessary. For the quantitative impairment assessment, the Company compares the fair value of the reporting unit to its carrying value, including goodwill. The Company determines the fair value of the reporting unit based on a weighting of income and market approaches. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired and no further testing is performed. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company will recognize a loss equal to the excess, limited to the total amount of goodwill allocated to that reporting unit. Impairments, if any, are charged directly to earnings. We completed our most recent annual impairment test in the third quarter of 2024 at which time we had three reporting units: PVG, AAG, and SSG for purposes of assessing goodwill impairment. The quantitative impairment test indicated that the fair values of our three reporting units - PVG, AAG, and SSG - exceeded their respective carrying values by 44 %, 18 %, and 38 %, respectively. Additionally, we performed a qualitative analysis at year end and concluded that it was not more likely than not that the fair values of the reporting units were less than the carrying values. No impairment charges have been incurred to date. Intangible assets including customer relationships, certain trademarks, and the Company’s core technology, are subject to amortization over their respective useful lives, and are classified in intangibles, net in the accompanying consolidated balance sheet. These intangibles are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be fully recoverable. If facts and circumstances indicate that the carrying value might not be recoverable, projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining useful lives is compared against their respective carrying amounts. If an asset is found to be impaired, the impairment charge will be measured as the amount by which the carrying amount of an entity exceeds its fair value. Certain trademarks and brands are considered to be indefinite life intangibles and are not amortized but are subject to testing for impairment annually. No impairments of intangible assets were identified in the years ended January 3, 2025, December 29, 2023 and December 30, 2022. Self-Insurance - The Company is self-insured for its U.S. employee health and welfare benefits. The Company’s liability for self-insurance is based on claims filed and an estimate of claims incurred but not yet reported. The Company considers a number of factors, including historical claims information, when determining the amount of the accrual. Costs related to the administration of the plan and related claims are expensed as incurred. The Company has third-party insurance coverage to limit exposure for individually significant claims. The estimates for unpaid claims incurred as of January 3, 2025 and December 29, 2023 are $ 2,031 and $ 2,203 respectively, and are recorded within accrued expenses on the consolidated balance sheets. Revenue Recognition - Revenues are generated from the sale of performance-defining products and systems to customers worldwide. The Company’s performance-defining products and systems are solutions that improve performance of powered vehicles, bikes, and baseball and softball gear and equipment. Powered vehicles include side-by-sides, on-road vehicles with off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, motorcycles. Revenue is measured based on the consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a product to a customer, generally at the time of shipment. Contracts are generally in the form of purchase orders and are governed by standard terms and conditions. For larger OEMs, the Company may also enter into master agreements. Sales tax and other similar taxes are excluded from revenues. Revenues generated from upfit packages generally do not include the vehicle chassis, as the Company is not the principal in this arrangement and the automotive dealer purchases the chassis directly from the OEM. The Company is required to place a deposit on Stellantis vehicle chassis, however that deposit is refunded when the chassis is sold through to the end customer. For other chassis, the Company entered into floor plan financing agreements, in which the Company pays interest expense based on the duration of time the chassis stay on the Company's premises. Revenues generated from custom upfit packages from our Outside Van subsidiary generally include the vehicle chassis, of which the Company has the risks and rewards of ownership and are recognized over-time as work is performed based on actual costs incurred. We elected as a practical expedient to not capitalize the incremental costs to obtain contracts with customers since the amortization period would have been one year or less. Provisions for discounts, rebates, sales incentives, returns, and other adjustments are generally provided for in the period the related sales are recorded, based on management’s assessment of historical trends and projection of future results. 83 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) Cost of Sales - Cost of sales primarily consists of materials and labor expense in the manufacturing of the Company’s products sold to customers. Cost of sales also includes provisions for excess and obsolete inventory, warranty costs, certain allocated costs for facilities, depreciation and other manufacturing overhead. Additionally, it includes stock-based compensation for personnel directly involved with manufacturing the Company’s product offerings. Shipping and Handling Fees and Costs - The Company includes shipping and handling fees billed to customers in sales. Shipping costs associated with freight are capitalized as part of inventory and included in cost of sales as products are sold. Sales and Marketing - Our sales and marketing expenses include costs related to our sales, customer service and marketing personnel, including their wages, employee benefits and related stock-based compensation, and occupancy related expenses. Other significant sales and marketing expenses include commissions paid to outside sales representatives, promotional materials and products, our sales office costs, race support and sponsorships of events and athletes, advertising and promotions related to trade shows, and travel and entertainment. Research and Development - Research and development expenses consist primarily of salaries and personnel costs, including wages, employee benefits and related stock-based compensation for the Company’s engineering, research and development teams, occupancy related expenses, fees for third party consultants, service fees, and expenses for prototype tooling and materials, travel, and supplies. The Company expenses research and development costs as incurred. General and Administrative - General and administrative expenses include costs related to executive, finance, information technology, human resources and administrative personnel, including wages, employee benefits and related stock-based compensation expenses. The Company records professional and contract service expenses, occupancy related expenses associated with corporate locations and equipment, and legal expenses in general and administrative expenses. Stock-Based Compensation - The Company measures stock-based compensation for all stock-based awards, including stock options and RSUs, based on their estimated fair values on the date of the grant and recognizes the stock-based compensation cost for time-vested awards on a straight-line basis over the requisite service period. For performance-based RSUs, the number of shares ultimately expected to vest is estimated at each reporting date based on management’s expectations regarding the relevant performance criteria. To the extent shares are expected to vest, the stock-based compensation cost is recognized on a straight-line basis over the requisite service period. The fair value of each stock option granted is estimated using the Black-Scholes option-pricing model. The Company does not estimate forfeitures in recognizing stock-based compensation expense. The fair value of the RSUs is equal to the fair value of the Company’s common stock, that is a derivative of RSUs, on the grant date of the award. Income Taxes - Income taxes are computed using the asset and liability method, under which deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Operating loss and tax credit carryforwards are measured by applying currently enacted tax laws. Valuation allowances are provided when necessary to reduce net deferred tax assets to an amount that is more likely than not to be realized. The Company accounts for global intangible low-taxed income (“GILTI”) in the year the tax is incurred, rather than recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years. The net GILTI inclusion for the year ended January 3, 2025 was partially offset by foreign tax credits associated with the income. The Company recognizes the tax effects of an uncertain tax position only if it is more likely than not to be sustained based solely on its technical merits as of the reporting date and then only in an amount more likely than not to be sustained upon review by the tax authorities. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and which may not accurately anticipate actual outcomes. Advertising - Advertising costs are expensed as incurred and recorded as sales and marketing expenses on our Consolidated Statements of Income. Costs incurred for advertising totaled $ 10,695 , $ 6,717 , and $ 4,813 for the years ended January 3, 2025, December 29, 2023 and December 30, 2022, respectively. 84 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) Warranties - The Company offers limited warranties on its products generally for one to three years . The Company recognizes estimated costs related to warranty activities as a component of cost of sales upon product shipment. The estimates are based upon historical product failure rates and historical costs incurred in correcting product failures. The recorded amount is adjusted from time to time for specifically identified warranty exposures. Actual warranty expenses are charged against the Company’s estimated warranty liability when incurred. Factors that affect the Company’s liability include the number of units, historical and anticipated rates of warranty claims, and the cost per claim. Segments - The Company determined that, as of the end of the first quarter of fiscal year 2024, due to the manner in which we began to operate the business to further drive long term value to our stockholders and customers, we have three operating and reportable segments: PVG, AAG, and SSG. The Company considers operating segments to be components of the Company in which separate financial information is available that is evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM for the Company is the Chief Executive Officer. Starting in March 2024, the Chief Executive Officer reviews additional financial information by operating and reportable segment for purposes of allocating resources and evaluating financial performance. Adjusted EBITDA is utilized by the CODM to evaluate segment profitability and inform strategic decisions regarding investments, cost management, and resource allocation. On a regular basis, the CODM reviews budget-to-actual variances for adjusted EBITDA to guide capital and personnel distribution. During the annual budgeting and forecasting process, segment adjusted EBITDA is used by the CODM to measure segment performance and to allocate resources such as employees, financial assets, or capital. Additionally, adjusted EBITDA is reviewed by the CODM in evaluating the efficiency of cost management strategies within each segment, ensuring that financial and operational resources are optimized and in alignment with the Company's overall strategic objectives. Reclassifications - We reclassified certain prior period amounts within our consolidated balance sheets, consolidated statements of other comprehensive income, consolidated statements of cash flows, Note 2 - Revenues, and Note 7 - Goodwill and Intangible Assets for the year ended December 30, 2022 to conform to our current year presentation. The reclassifications did not have any impact on net income or other major financial statement line items. As of December 29, 2023, the Company classified all of its outstanding balance of the Incremental Term A Loan as non-current based on prepaying our required quarterly amortizing principal amounts for all of fiscal 2024. The prepayment was applied pro-rata to all future quarterly amounts instead. The Company analyzed the materiality of this accidental misclassification of current and non-current debt using Staff Accounting Bulletin No. 99 and concluded that in light of surrounding circumstances, this item would not have altered the judgement of a reasonable person relying on the Annual Report on Form 10-K. The current and non-current debt balances as of December 29, 2023 within our consolidated balance sheets in this Annual Report on Form 10-K are recast to reflect the correct classification. The recast did not have any impact on net income or earnings per share. Fair Value Measurements and Financial Instruments - The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification 820, Fair Value Measurements and Disclosures , that requires the valuation of assets and liabilities required or permitted to be either recorded or disclosed at fair value based on hierarchy of available inputs as follows: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). The carrying amounts of the Company’s financial instruments, including cash, receivables, accounts payable, accrued liabilities, and current portion of long-term debt approximate their fair values due to their short-term nature. The carrying amounts of the Company’s revolver and long-term debt, excluding current portion, approximate their fair values because the interest rates vary with the market. 85 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) Certain Significant Risks and Uncertainties - The Company is subject to those risks common in manufacturing-driven markets, including, but not limited to, competitive forces, dependence on key personnel, customer demand for its products, disruptions in the operations of its or its customers’ facilities, or along its global supply chain, the successful protection of its proprietary technologies, compliance with government regulations, and the possibility of not being able to obtain additional financing when needed. International geopolitical conflicts, including continuing tensions between Taiwan and China, the Russian war in Ukraine, and the Israel-Palestine conflict on the global economy, energy supplies and raw materials may prove to negatively impact the Company’s business and operations. Additionally, the imposition of U.S. tariffs on China and retaliatory tariffs by China on the U.S. may increase costs, disrupt supply chains, and impact demand for the Company’s products. Furthermore, domestic and foreign political instability and uncertainty may create economic volatility, regulatory changes, and trade disruptions that pose additional risks to the Company’s business environment. Non-GAAP Financial Measures - Total adjusted EBITDA presents the sum of the results of our three operating segments and unallocated corporate expenses on a consolidated basis. We believe that total adjusted EBITDA is an operating performance measure that measures operating results unaffected by differences in capital structures, capital investment cycles, and ages of related assets among otherwise comparable companies. In reviewing our corporate operating results, we also believe it is important to review the aggregate consolidated performance of all of our segments on the same basis we review the performance of each of our segments and draw comparisons between periods based on the same measure of consolidated performance. Management provides this non-GAAP financial measure as a supplemental tool to assist investors in understanding our performance and evaluating our ongoing results of operations. Many investors are interested in understanding the performance of our business by comparing our results from ongoing operations from one period to the next and would ordinarily add back items that are not part of normal day-to-day operations of our business. This measure is intended to facilitate period-to-period comparisons by excluding items that management does not view as indicative of the Company’s day-to-day operations. By presenting adjusted EBITDA, along with reconciliations to the most directly comparable GAAP measure, we aim to support investors’ ability to analyze our results of operations and assess our progress in executing strategic initiatives. However, total adjusted EBITDA is not a measurement of financial performance under U.S. GAAP, and our total adjusted EBITDA may not be comparable to similarly titled measures of other companies. Total adjusted EBITDA has important limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. For example, total adjusted EBITDA: • does not reflect the Company’s cash expenditures or requirements for capital expenditures or capital commitments; • does not reflect changes in, or cash requirements for, the Company's working capital needs; and • does not reflect any costs related to the current or future replacement of assets being depreciated or amortized. We also use total adjusted EBITDA: • as a measure of operating performance to assist us in comparing our operating performance on a consistent basis because it removes the impact of items not directly resulting from our core operations; • for planning purposes, including the preparation of our internal annual operating budgets and financial projections; • to evaluate the performance and effectiveness of our operational strategies; and • as a basis to calculate incentive compensation payments for our key employees. Please see Note 20 – Segment Information for our definition of adjusted EBITDA. Under ASC 280, adjusted EBITDA is the measure of segment profitability and financial performance of our operating segments, and when used in this context, the term adjusted EBITDA is a financial measure prepared in accordance with U.S. GAAP. Adjusted EBITDA reported for the Company on a consolidated basis is a non-U.S. GAAP financial measure. 86 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) Recent Accounting Pronouncements - In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. Under ASU 2021-08, an acquirer must recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The guidance is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. The Company adopted this guidance in the first quarter of 2022. This adoption did not have a material impact on our financial statements. In September 2022, the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405): Disclosure of Supplier Finance Program Obligations. Under ASU 2022-04, the buyer in a supplier finance program is required to disclose sufficient information to allow a user of the financial statements to understand the program's nature, activity during the period, changes from period to period, and potential magnitude. The guidance is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. These amendments will be applied retrospectively to each period in which a balance sheet is presented, except for the disclosure of rollforward information, which will be applied prospectively. The Company adopted the interim disclosure requirements, as applicable, during the first quarter of 2023 and adopted the annual disclosure requirements, except for the annual rollforward, in the Company’s 2023 Annual Report on Form 10-K. The Company adopted the annual rollforward requirement in our 2024 Annual Report on Form 10-K. Refer to the “Bailment Pool Arrangements” section within Note 12 - Commitments and Contingencies for further details of this adoption. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in ASU 2023-07 require disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM. The amendments in this update also expand the interim segment disclosure requirements. These amendments do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments in this update are required to be applied on a retrospective basis. The Company adopted ASU 2023-07 in this Annual Report on Form 10-K for fiscal year 2024 ending January 3, 2025. Refer to Significant Accounting Policies - Segments above and Note 20. Segment Information for further details. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures through changes to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the accounting standard update, but does not expect material impact on its consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). ASU 2024-03 introduces enhanced income statement expense disclosure requirements. The amendments in ASU 2023-03 require new tabular disclosures in the notes to financial statements, disaggregating specific expense categories within relevant income statement captions. These categories include inventory purchases, employee compensation, depreciation, and intangible asset amortization. The guidance is effective for fiscal years beginning after December 15, 2026, and must be applied prospectively. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures. 87 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) 2. Revenues In the second quarter of fiscal year 2023, the Company realigned its Powered Vehicles Group into the Powered Vehicles Group and the Aftermarket Applications Group to be more aligned with the Company’s end customers and drive additional focus on product development. The new Powered Vehicles Group is comprised of sales to original equipment off-road and power sports manufacturers and aftermarket businesses that sell shocks directly to dealers and distributors. The Aftermarket Applications Group is comprised of aftermarket businesses that offer custom vehicle shock, tuning, suspension, lift kit, upfitting, and wheel and tire solutions for automotive and power sports enthusiasts. All prior-period amounts have been recast to conform with the current period presentation. The following table summarizes total net sales by segment: For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 Powered Vehicles Group $ 461,403 $ 523,862 $ 432,388 Aftermarket Applications Group 421,453 551,143 489,132 Specialty Sports Group 511,065 389,173 680,971 Total net sales $ 1,393,921 $ 1,464,178 $ 1,602,491 The following table summarizes total net sales by sales channel: For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 OEM $ 612,679 $ 725,232 $ 909,550 Aftermarket/Non-OEM (1) 781,242 738,946 692,941 Total net sales $ 1,393,921 $ 1,464,178 $ 1,602,491 (1) Aftermarket/non-OEM sales include sales to dealers and dealerships, distributors, sales through our websites, retail sales and various others, including Marucci’s sales within each of these. The following table summarizes total net sales generated by geographic location of the customer: For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 North America $ 1,097,329 $ 1,127,587 $ 1,009,203 Europe 165,043 187,762 320,545 Asia 109,074 125,488 252,275 Rest of the World 22,475 23,341 20,468 Total net sales $ 1,393,921 $ 1,464,178 $ 1,602,491 88 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) 3. Inventory Inventory consisted of the following: January 3, 2025 December 29, 2023 Raw materials $ 245,368 $ 217,888 Work-in-process 16,519 8,813 Finished goods 142,849 145,140 Total inventory $ 404,736 $ 371,841 4. Prepaids and Other Current Assets Prepaids and other current assets consisted of the following: January 3, 2025 December 29, 2023 Prepaid chassis deposits $ 47,094 $ 108,866 Advanced payments and prepaid contracts 26,496 14,025 Other current assets 11,853 18,621 Total prepaids and other assets $ 85,443 $ 141,512 89 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) 5. Property, Plant and Equipment, net Property, plant and equipment consisted of the following: January 3, 2025 December 29, 2023 Machinery and manufacturing equipment $ 177,261 $ 149,502 Building and building improvements 82,224 77,998 Internal-use computer software 38,572 35,518 Information systems, office equipment and furniture 28,725 26,972 Leasehold improvements 40,663 38,115 Transportation equipment 23,299 15,505 Land and land improvements 15,521 14,692 Total property, plant and equipment 406,265 358,302 Less: accumulated depreciation and amortization ( 159,872 ) ( 121,110 ) Total property, plant and equipment, net $ 246,393 $ 237,192 Depreciation expense was $ 39,038 , $ 32,094 , and $ 27,705 for the years ended January 3, 2025, December 29, 2023 and December 30, 2022, respectively, including $ 3,949 , $ 2,916 , and $ 3,787 of internal-use software amortization for the years ended January 3, 2025, December 29, 2023 and December 30, 2022, respectively. The Company capitalized $ 3,054 , $ 5,254 , and $ 4,683 in internal use computer software costs during the years ended January 3, 2025, December 29, 2023, and December 30, 2022, respectively. The following table summarizes the allocation of depreciation expense in the accompanying consolidated statements of income: For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 Cost of sales $ 19,153 $ 15,040 $ 13,741 General and administrative 15,092 13,098 11,003 Research and development 3,158 2,916 2,441 Sales and marketing 1,635 1,040 520 Total depreciation expense $ 39,038 $ 32,094 $ 27,705 The Company’s long-lived assets by geographic location are as follows: January 3, 2025 December 29, 2023 United States $ 203,937 $ 198,033 International 42,456 39,159 Total long-lived assets $ 246,393 $ 237,192 90 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) 6. Leases An agreement is considered a lease when it gives the Company the right to substantially all of the economic benefits from an identified asset and the ability to direct its use throughout the term of the agreement. The Company has operating lease agreements for administrative, research and development, manufacturing, and sales and marketing facilities. These leases have remaining lease terms ranging from under one year to twenty years , some of which include options to extend or terminate the leases. The Company considered these options to the extent that they were reasonably certain to be exercised in determining the lease term used to establish its right-of-use assets and lease liabilities. Certain leases are subject to annual escalations as specified in the lease agreements. These lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company elected the practical expedient related to treating lease and non-lease components as a single lease component for all of its leases and elected a policy exclusion permitting leases with an original lease term of less than one year to be excluded from the right-of-use assets and lease liabilities. As most of the Company’s leases do not provide an interest rate, the Company used the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The weighted-average remaining lease term for the Company’s operating leases was 8.84 years and the weighted-average incremental borrowing rate was 3.96 % as of January 3, 2025. Operating lease costs consisted of the following: For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 Operating lease cost $ 21,467 $ 15,656 $ 11,209 Other lease costs (1) 4,443 3,846 3,638 Total lease costs $ 25,910 $ 19,502 $ 14,847 (1) Includes short-term leases and variable lease costs. The Company elected a policy exclusion permitting leases with an original lease term of less than one year to be excluded from the right-of-use assets and lease liabilities. Supplemental balance sheet information related to the Company’s operating leases is as follows: Balance Sheet Classification January 3, 2025 Operating lease right-of-use assets Lease right-of-use assets $ 104,019 Current lease liabilities Accrued expenses $ 16,683 Non-current lease liabilities Other liabilities $ 88,168 91 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) Maturities of lease liabilities by fiscal year for the Company’s operating leases are as follows: For fiscal year Total future payments 2025 $ 20,544 2026 18,856 2027 14,250 2028 13,398 2029 11,716 Thereafter 48,789 Total lease payments 127,553 Less: imputed interest ( 22,702 ) Present value of lease liabilities 104,851 Less: current portion ( 16,683 ) Lease liabilities less current portion $ 88,168 7. Goodwill and Intangible Assets Intangible assets, excluding goodwill, are comprised of the following: Gross carrying amount Accumulated amortization Net carrying amount Weighted average life (years) January 03, 2025 Trademarks and brands, subject to amortization $ 233,728 $ ( 25,172 ) $ 208,556 14 Customer and distributor relationships 292,934 ( 131,349 ) 161,585 12 Core technologies 62,169 ( 39,015 ) 23,154 10 Total $ 588,831 $ ( 195,536 ) 393,295 Trademarks and brands, not subject to amortization 55,570 Total $ 448,865 December 29, 2023 Trademarks and brands, subject to amortization $ 226,563 $ ( 8,840 ) $ 217,723 14 Customer and distributor relationships 290,518 ( 106,249 ) 184,269 12 Core technologies 61,439 ( 35,654 ) 25,785 10 Total $ 578,520 $ ( 150,743 ) 427,777 Trademarks and brands, not subject to amortization 55,570 Total $ 483,347 The following table summarizes the amortization of intangible assets in the accompanying consolidated statements of income: For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 Amortization of intangibles $ 44,528 $ 26,509 $ 21,537 92 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) Future amortization expense for finite-lived intangibles as of January 3, 2025 is as follows: For fiscal year: Amortization Expense 2025 $ 42,067 2026 41,433 2027 40,007 2028 37,468 2029 36,244 Thereafter 196,076 Total expected future amortization $ 393,295 Goodwill activity attributable to each reporting unit consisted of the following: PVG AAG SSG Total Balance as of December 29, 2023 $ 90,683 $ 257,972 $ 287,910 $ 636,565 Acquisitions (Refer to Note 18. Acquisitions ) 3,504 1,879 — 5,383 Purchase price adjustments (Refer to Note 18. Acquisitions ) — ( 1,608 ) ( 670 ) ( 2,278 ) Currency translation and other adjustments ( 124 ) — ( 41 ) ( 165 ) Balance as of January 3, 2025 $ 94,063 $ 258,243 $ 287,199 $ 639,505 8. Accrued Expenses Accrued expenses consisted of the following: January 3, 2025 December 29, 2023 Payroll and related expenses $ 22,504 $ 17,988 Income tax payable 9,343 21,743 Warranty 21,593 20,001 Current portion of lease liabilities 16,683 14,115 Accrued sales rebate 7,852 11,885 Other accrued expenses 13,452 17,668 Total accrued expenses $ 91,427 $ 103,400 Activity related to warranties is as follows: For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 Beginning warranty liability $ 20,001 $ 17,071 $ 15,510 Charge to cost of sales 18,276 16,114 11,387 Fair value of warranty assumed in acquisition 514 391 — Costs incurred ( 17,198 ) ( 13,575 ) ( 9,826 ) Ending warranty liability $ 21,593 $ 20,001 $ 17,071 93 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) 9. Related Party Transactions On July 22, 2020, the Company, pursuant to a stock purchase agreement with Flagship, Inc., purchased the remaining 20 % interest of FF US Holding Corp. for $ 24,975 payable in a combination of stock and cash. The cash and stock portions were settled in quarterly installments through July 2022. Refer to Note 12. Commitments and Contingent Liabilities for additional details of this agreement. On March 3, 2023, the Company acquired all of the outstanding equity interest of Custom Wheel House. Custom Wheel House has building leases for its office facilities in California. The buildings are owned by the former owner of Custom Wheel House, who was an employee of the Company until May 2024. Rent expense under these leases was $ 371 and $ 600 for the years ended January 3, 2025 and December 29, 2023, respectively. 10. Debt 2022 Credit Facility On April 5, 2022, the Company entered into a new credit agreement with Wells Fargo Bank, National Association, and other named lenders (the “2022 Credit Facility”), and concurrently repaid in full and terminated the Prior Credit Facility. The 2022 Credit Facility, which matures on April 5, 2027, provides for revolving loans, swingline loans and letters of credit up to an aggregate amount of $ 650,000 . On April 5, 2022, the Company borrowed $ 475,000 under the 2022 Credit Facility, which was used to repay all outstanding amounts owed under a prior credit facility and for general corporate purposes. Future advances under the 2022 Credit Facility will be used to finance working capital, capital expenditures and other general corporate purposes of the Company. To the extent not previously paid, all then-outstanding amounts under the 2022 Credit Facility are due and payable on the maturity date. The Company paid $ 1,980 in debt issuance costs in connection with the 2022 Credit Facility, which were allocated to revolver and amortized on a straight-line basis over the term of the facility. Additionally, the Company had $ 4,473 of remaining unamortized debt issuance costs related to the Prior Credit Facility, of which $ 2,546 were carried forward to the 2022 Credit Facility. The Company may borrow, prepay and re-borrow principal under the 2022 Credit Facility during its term. Advances under the 2022 Credit Facility can be either Adjusted Term Secured Overnight Financing Rate (“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 administrative agent 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 %. On November 14, 2023, in connection and concurrently with the closing of the Marucci acquisition, the Company entered into the Amendment amending the 2022 Credit Facility. The Amendment provided the Company with the Incremental Term A Loan in an amount of $ 400,000 and the Delayed Draw Term Loan in an amount of $ 200,000 , each of which are permitted under the 2022 Credit Facility, 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 is 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 of the Incremental Term Loans 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 of the Incremental Term Loans has a maturity date of April 5, 2027, consistent with the 2022 Credit Facility. The Company paid $ 10,063 in debt issuance costs, of which $ 6,709 were allocated to the Incremental Term A Loan and $ 3,354 were allocated to the Delayed Draw Term Loan. Loan fees allocated to the Incremental Term A Loan are amortized using the interest method over the term of the 2022 Credit Facility. Loan fees allocated to the Delayed Draw Term Loan were deferred as an asset until the debt was drawn. 94 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) On May 13, 2024, the Company borrowed the full amount of $ 200,000 of the Delayed Draw Term Loan. The fees were reclassified to a contra-liability account and amortized over the term of the drawn debt using the interest method. On July 31, 2024 and December 20, 2024, the Company entered into the Third and Fourth Amendments to the 2022 Credit Facility, respectively, to secure an improved covenant profile on its capital structure to provide more flexibility given the uncertain macro environment. The Company paid $ 3,490 in loan fees for the Third and Fourth Amendments, of which $ 3,433 were allocated among the revolver and the Incremental Term Loans to be amortized over the remaining term of the 2022 Credit Facility. At January 3, 2025, the one-month SOFR and three-month SOFR rates were 4.51 % and 4.68 %, respectively. At January 3, 2025, our weighted-average interest rate on outstanding borrowing was 6.43 %. The 2022 Credit Facility 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 January 3, 2025. The following table summarizes the revolver under the 2022 Credit Facility: January 3, 2025 December 29, 2023 Amount outstanding $ 153,000 $ 370,000 Standby letters of credit $ 155 $ — Available borrowing capacity $ 496,845 $ 280,000 Total borrowing capacity $ 650,000 $ 650,000 Maturity date April 5, 2027 April 5, 2027 As of January 3, 2025, future principal payments for term loan debt, including the current portion, as summarized as follows: For fiscal year January 3, 2025 2025 $ 24,286 2026 24,286 2027 512,142 Total $ 560,714 Debt issuance cost ( 8,653 ) Long-term debt, net of issuance cost 552,061 Less: current portion ( 24,286 ) Long-term debt less current portion $ 527,775 95 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) 11. Derivatives and Hedging The Company is exposed to certain risks relating to its ongoing business operations. The primary risk managed by using derivative instruments is interest rate risk. The Company utilizes interest rate swaps to limit its exposure to interest rate risk by converting a portion of its floating-rate debt to a fixed-rate basis, thus reducing the impact of interest rate changes on future interest expense. Interest rate swaps involve the receipt of floating-rate amounts in exchange for fixed-rate interest payments based on the three-month Term SOFR over the lives of the agreements without an exchange of the underlying principal amounts. The Company hedges the variability of cash flows in interest payments associated with the first $ 500,000 of its variable rate debt through the interest rate swaps. As of January 3, 2025 and December 29, 2023, the Company had the following interest rate swap contracts: January 3, 2025 December 29, 2023 Effective Date Termination Date Notional Amount Unrealized Gain (Loss) in AOCI Unrealized Gain in AOCI September 2, 2020 June 11, 2021 $ 200,000 $ 16 $ 104 July 2, 2021 April 5, 2022 $ 200,000 767 5,013 April 5, 2022 April 5, 2027 $ 100,000 2,650 3,394 September 20, 2024 December 26, 2025 $ 100,000 ( 87 ) — September 20, 2024 December 25, 2026 $ 200,000 903 — September 20, 2024 September 21, 2029 $ 100,000 2,219 — Total $ 6,468 $ 8,511 On June 11, 2021, the Company terminated its existing swap agreement (the “2020 Swap Agreement”) with an effective date of September 2, 2020 and entered into an interest rate swap agreement (the “2021 Swap Agreement”) with an effective date of July 2, 2021 and a notional amount of $ 200,000 . On April 5, 2022, the Company terminated its 2021 Swap Agreement and entered into a new interest rate swap agreement with a notional amount of $ 100,000 with an effective date of April 5, 2022. The terminated 2020 and 2021 Swap Agreements resulted in unrealized gains of $ 324 and $ 12,270 , respectively, at the termination dates that will continue to be accounted for in accumulated other comprehensive income and amortized into earnings over the term of the associated debt instrument. The remaining unrealized gains from the terminated agreements as of January 3, 2025 will be fully amortized during the first quarter of fiscal year 2025. On August 26, 2024, the Company entered into new interest rate swap agreements with an aggregate notional amount of $ 400,000 . The interest rate swaps are indexed to a three-month Term SOFR as defined in the agreements. The interest rate swaps met the criteria as cash flow hedges under ASC 815, Derivatives and Hedging (“ASC 815”), and are recorded to other assets or other liabilities on the condensed consolidated balance sheets. Refer to Note 16. Fair Value Measurements and Financial Instruments for additional information on determining the fair value. The unrealized gains or losses, after tax, will be recorded in accumulated other comprehensive income, a component of equity, and are expected to be reclassified into interest expense on the condensed consolidated statements of income when the forecasted transactions affect earnings. As required under ASC 815, the interest rate swap contracts’ effectiveness will be assessed on a quarterly basis using a quantitative regression analysis. The unrealized gains and losses deferred to accumulated other comprehensive income resulting from the derivative instruments designated as cash flow hedges for the years ended January 3, 2025, December 29, 2023, and December 30, 2022 were gains of $ 6,418 , and $ 830 , and a gain of $ 13,775 , respectively. The reclassifications of gains from accumulated other comprehensive income into earnings related to the derivative instruments designated as cash flow hedges during the years ended January 3, 2025, December 29, 2023 and December 30, 2022 were $ 8,460 , $ 6,775 and $ 3,177 , respectively. The aggregate tax effects on activity in accumulated other comprehensive income associated with the derivative instruments designated as cash flow hedges during the years ended January 3, 2025, December 29, 2023 and December 30, 2022 were losses of $ 466 , $ 1,303 , and a gain of $ 4,226 , respectively. Over the next 12 months, the Company estimates that $ 5,285 will be reclassified as a decrease to interest expense related to the interest rate swap contracts. 96 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) 12. Commitments and Contingent Liabilities Indemnification Agreements - In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by the Company or intellectual property infringement claims made by third parties. In addition, the Company entered into indemnification agreements with directors and certain officers and employees that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. While the outcome of these matters cannot be predicted with certainty, the Company does not believe that the outcome of any claims under indemnification arrangements will have a material effect on the Company’s results of operations, financial position or liquidity. Legal Proceedings - From time to time, the Company is involved in legal proceedings that arise in the ordinary course of business. Although the Company cannot assure the outcome of any such legal proceedings, based on information currently available, management does not believe that the ultimate resolution of any pending matters, either individually or in the aggregate, will have a material adverse effect on the Company’s financial condition, results of operations or cash flows. On February 20, 2024, a complaint alleging violations of federal securities laws and seeking certification as a class action was filed against the Company and certain of its current and former officers in the United States District Court for the Northern District of Georgia in Atlanta. On August 16, 2024, the plaintiff filed an amended complaint that purports to seek damages on behalf of a putative class of persons who purchased the Company’s common stock between May 6, 2021 and November 2, 2023. The amended complaint asserts claims under Sections 10(b) and 20 of the Securities Exchange Act and alleges that the Company and certain current and former officers made material misstatements and omissions to investors regarding demand for the Company’s products and its inventory levels. The amended complaint generally seeks monetary damages, interest, attorneys’ fees, and other costs. The defendants deny all allegations of wrongdoing, believe the plaintiff’s positions are without merit, and intend to vigorously defend themselves. On October 15, 2024, the defendants filed a motion to dismiss the amended complaint. Plaintiff filed his opposition on December 13, 2024, and defendants filed their reply on January 13, 2025. The motion is fully briefed and the parties await the court’s ruling. On October 9, 2024, and October 29, 2024, two stockholder derivative complaints were filed in the United States District Court for the Northern District of Georgia against certain of the Company’s officers and its directors, with the Company named as a nominal defendant. The cases are assigned to the same judge presiding over the securities fraud class action. The complaints are premised on substantially the same factual allegations as the securities fraud class action, but in these complaints, the plaintiff claims that the Company’s officers and directors breached their fiduciary duties or otherwise engaged in wrongdoing by allowing the underlying securities fraud to occur. The defendants deny all allegations of wrongdoing, believe the plaintiffs’ claims are without merit, and intend to vigorously defend themselves. Bailment Pool Arrangements - The Company has relationships with several OEM partners, including General Motors (“GM”), Ford Motor Company (“Ford”), and Stellantis to obtain truck chassis. For Stellantis chassis, the Company pays a cash deposit upon transfer of the chassis to the Company’s premises, and records the chassis within prepaids and other current assets on the condensed consolidated balance sheets until the chassis are transferred to the dealer customer’s floor plan, at which time the cash deposit is returned to the Company. For GM and Ford, the Company has entered into floor plan financing agreements with the OEM. The Company receives an allocation of chassis and pays interest expense on the allocated value of chassis based on the duration of time they are on the Company’s premises. Bailment, which is the non-ownership transfer of the chassis from GM and Ford to the Company, ends when the vehicle is sold to an authorized dealer, or upon authorized return of the vehicle to the manufacturer. The Company does not pay a cash deposit to obtain GM and Ford chassis, and accordingly it does not recognize an asset or a liability related to these chassis. Interest payments made to manufacturer-affiliated finance companies are classified as operating activities in the condensed consolidated statements of cash flows. At January 3, 2025 and December 29, 2023, the Company utilized $ 36,008 and $ 9,036 out of a maximum of $ 36,100 and $ 49,400 of Ford allocation of chassis, respectively, and $ 10,857 and $ 11,362 , respectively, out of a maximum of $ 49,500 and $ 100,000 GM allocation of chassis. The Company incurred $ 1,271 and $ 4,760 of interest expense related to chassis on hand during the years ended January 3, 2025 and December 29, 2023, respectively. 97 Table of Contents FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) The following table sets forth a rollforward of GM and Ford chassis utilization for the year ended January 3, 2025: January 3, 2025 Beginning balance: Supplier financed chassis $ 20,398 Add: New supplier financed chassis 298,156 Less: Supplier financed chassis sold ( 271,689 ) Ending balance: Supplier financed chassis $ 46,865 Other Commitments - On November 30, 2017, the Company through FF US Holding Corp., acquired the assets of Flagship, Inc. d/b/a Tuscany (“Tuscany”) and issued a 20 % interest in FF US Holding Corp. to Flagship, Inc. A stockholders' agreement with Flagship, Inc. provided the Company with a call option (the “Call Option”) to acquire the remaining 20 % of FF US Holding Corp. at any time from November 30, 2019 through November 30, 2024 at a value that approximates fair market value. On July 22, 2020, the Company exercised the Call Option and, pursuant to a stock purchase agreement with Flagship, Inc., the Company purchased the remaining 20 % interest for $ 24,975 payable in a combination of stock and cash. The cash portion was settled in quarterly installment payments beginning in July 2020 through July 2022, which amounted to $ 6,556 , $ 4,550 and $ 2,700 in 2020, 2021 and 2022, respectively. The Company had no remaining liability as of December 30, 2022. The stock portion of 136 shares were released from escrow on a quarterly basis starting January 2021 through July 2022. The Company released 58 shares during the years ended December 30, 2022. The Company had no remaining shares to be released as of December 30, 2022. The exercise of the Call Option effectively canceled the put option held by Flagship, Inc. 98 FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands, except per share data) 13. Stockholders’ Equity Share Repurchase Plan During the fiscal years ended January 3, 2025 and December 29, 2023, the Company repurchased approximately 378 and 428 shares for $ 25,000 and $ 25,000 , at an average price of $ 66.03 and $ 58.44 , respectively. All repurchased shares were immediately retired. The aggregate cost of share repurchases and average price paid per share exclude 1% excise tax on share repurchases imposed as part of the Inflation Reduction Act of 2022. Common stock was reduced by the number of shares retired at $ 0.001 par value per shares. The excess purchase price over par value was allocated between additional paid-in capital and retained earnings. Equity Incentive Plans The Company has outstanding awards under the following equity incentive plans: the 2008 Stock Option Plan (the “2008 Plan”), the 2008 Non-Statutory Stock Option Plan (the “2008 Non-Statutory Plan”) and the 2013 Omnibus Plan (the “2013 Plan”). On February 23, 2022, the Board of Directors, upon recommendation of the Compensation Committee approved the 2022 Omnibus Plan (the “2022 Plan”), which replaced the 2013 Plan. All remaining available shares under the 2013 Plan were rolled into the 2022 Plan and made available for issuance. No further awards will be granted pursuant to the 2008 Plan or the 2008 Non-Statutory Plan. Under the 2022 Plan, the Company has the ability to issue incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, RSUs, performance units and/or performance shares. The equity incentive plans are administered by the Compensation Committee of the Board of Directors of the Company, which has the authority to determine the type of incentive award, as well as the terms and conditions of the awards. Options granted under the plans have vesting periods ranging from one to ten years and expire no later than ten years from the date of grant. As of January 3, 2025, there were no outstanding options remaining. RSUs generally vest over a three to four-year period with equal annual installments beginning at the end of one year and the remaining vesting annually thereafter. In addition to time-based vesting criteria, certain of our RSUs include performance-based vesting criteria. As of January 3, 2025, there were 2,872 shares available for issuance under the 2022 Plan. The Company generally issues new shares in connection with awards under its equity incentive plans. Stock-Based Compensation Compensation expense related to the Company’s share-based awards for the fiscal years ended January 3, 2025, December 29, 2023, and December 30, 2022 was $ 9,606 , $ 16,465 , and $ 16,351 , respectively, all of which related to RSUs and performance share units (“PSUs”). No compensation expense related to stock options was incurred during the fiscal years ended January 3, 2025, December 29, 2023, and December 30, 2022. The following table summarizes the allocation of stock-based compensation in the accompanying consolidated statements of income: For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 Cost of sales $ 1,124 $ 1,179 $ 957 Sales and marketing 1,303 1,501 924 Research and development 1,198 1,175 946 General and administrative 5,981 12,610 13,524 Total $ 9,606 $ 16,465 $ 16,351 Stock-based compensation expense capitalized to inventory was not material for the years ended January 3, 2025, December 29, 2023 and December 30, 2022. 99 FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands, except per share data) Restricted Stock Units The Company grants both time-based and performance-based stock awards, which also include a time-based vesting feature. Compensation expense for time-based stock awards is measured at the grant date based on the closing market price of the Company’s common stock and recognized ratably over the vesting period. For performance-based stock awards, compensation expense is measured based on estimates of the number of shares ultimately expected to vest at each reporting date based on management’s expectations regarding the relevant performance criteria. The recognition of compensation expense associated with performance-based stock awards requires defined criteria for assessing achievement and judgment in assessing the probability of meeting the performance goals. The following table summarizes RSU activity: Unvested RSUs Number of shares outstanding Weighted-average grant date fair value Unvested at December 30, 2021 338 $ 76.30 Granted 142 $ 95.34 Canceled ( 17 ) $ 97.00 Vested ( 166 ) $ 73.14 Unvested at December 30, 2022 297 $ 87.05 Granted 135 $ 109.23 Canceled ( 44 ) $ 90.91 Vested ( 141 ) $ 83.97 Unvested at December 29, 2023 247 $ 100.21 Granted 333 $ 45.82 Canceled ( 43 ) $ 71.30 Vested ( 137 ) $ 94.76 Unvested at January 3, 2025 400 $ 59.88 The fair value of vested RSUs was $ 5,837 , $ 15,516 and $ 15,140 for the years ended January 3, 2025, December 29, 2023 and December 30, 2022, respectively. As of January 3, 2025, the Company had approximately $ 15,377 of unrecognized stock-based compensation expense related to RSUs, which will be recognized over the remaining weighted-average vesting period of approximately 1.86 years. Performance Stock Units During the year ended January 3, 2025, the Company issued PSUs to certain executives that represent shares potentially issuable in the future. Issuance is based upon the Company’s performance, over a three-year performance period, on certain measures including EBITDA margin. The PSUs vest only upon the achievement of the applicable performance goals for the performance period, and, depending on the actual achievement on the performance goals, the grantee may earn between 0 % and 200 % of the target PSUs. The fair value of PSUs is calculated based on the stock price on the date of grant. 100 FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands, except per share data) The following table summarizes the activity for the Company’s unvested PSUs for the year ended January 3, 2025: Unvested PSUs Number of shares outstanding Weighted-average grant date fair value Unvested at December 31, 2021 29 $ 141.46 Granted 37 $ 120.90 Canceled ( 4 ) $ 126.73 Vested ( 14 ) $ 141.46 Unvested at December 30, 2022 48 $ 126.69 Granted 45 $ 114.04 Canceled ( 10 ) $ 120.08 Vested ( 13 ) $ 141.57 Unvested at December 29, 2023 70 $ 116.54 Granted 232 $ 46.38 Canceled ( 26 ) $ 52.30 Vested ( 30 ) $ 118.09 Unvested at January 3, 2025 246 $ 57.00 The stock-based compensation expense recognized each period is dependent upon our estimate of the number of shares that will ultimately vest based on the achievement of certain performance conditions. Future stock-based compensation expense for unvested performance-based awards could reach a maximum of $ 19,024 assuming achievement at the maximum level. The unrecognized stock-based compensation expense is expected to be recognized over a weighted average period of 2.24 years. Stock Options The following table summarizes stock option activity: Number of shares outstanding Weighted-average exercise price Weighted-average remaining contractual life (years) Aggregate intrinsic value Balance at December 31, 2021 33 $ 5.16 2 $ 5,389 Options exercised ( 33 ) $ 5.16 $ 2,470 Balance at December 30, 2022 — $ — 0 $ — Options exercised — $ — $ — Balance at December 29, 2023 — $ — 0 $ — Options exercised — $ — $ — Balance at January 3, 2025 — $ — 0 $ — Options vested and expected to vest - January 3, 2025 — $ — 0 $ — Options exercisable - January 3, 2025 — $ — 0 $ — Aggregate intrinsic value represents the difference between the closing price of the Company’s common stock on NASDAQ and the exercise price of outstanding, in-the-money options. As of December 30, 2022, stock-based compensation expense related to stock options has been fully recognized. During the year ended December 30, 2022, 33 shares of common stock, were issued due to the exercise of stock options, resulting in proceeds to the Company of approximately $ 169 . 101 FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands, except per share data) 14. Earnings Per Share Basic earnings per share (“EPS”) amounts are computed by dividing net income attributable to Fox stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted EPS amounts are computed by dividing net income for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period. Potentially dilutive common shares include shares issuable upon the exercise of outstanding stock options and vesting of restricted stock units, which are reflected in diluted earnings per share by application of the treasury stock method. The following table presents the calculation of basic and diluted earnings per share: For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 Net income attributable to FOX stockholders $ 6,550 $ 120,846 $ 205,278 Weighted average shares used to compute basic earnings per share 41,681 42,305 42,232 Dilutive effect of employee stock plans 36 127 152 Weighted average shares used to compute diluted earnings per share 41,717 42,432 42,384 Earnings per share: Basic $ 0.16 $ 2.86 $ 4.86 Diluted $ 0.16 $ 2.85 $ 4.84 The Company excluded 127 , 12 , and 20 shares from the calculation of diluted earnings per share for the years ended January 3, 2025, December 29, 2023, and December 30, 2022, respectively, as these shares would have been antidilutive. 102 FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) 15. Income Taxes Provision for Income Taxes The components of income tax expense are as follows: For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 Current: Federal $ 9,464 $ 14,427 $ 33,622 State 3,568 5,404 4,372 Foreign 4,646 5,850 11,964 Total current 17,678 25,681 49,958 Deferred: Federal ( 21,107 ) ( 4,782 ) ( 17,447 ) State ( 2,041 ) ( 2,693 ) ( 2,837 ) Foreign ( 30 ) ( 389 ) ( 1,188 ) Total deferred ( 23,178 ) ( 7,864 ) ( 21,472 ) (Benefit) provision for income taxes $ ( 5,500 ) $ 17,817 $ 28,486 The Company’s income (loss) before provision for income taxes was subject to taxes in the following jurisdictions for the following periods: For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 United States $ ( 13,351 ) $ 114,128 $ 197,640 Foreign 14,363 24,535 36,124 Total income before provision for income taxes $ 1,012 $ 138,663 $ 233,764 103 FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) The following table presents a reconciliation of the statutory federal rate and the Company’s effective tax rate for the periods presented: For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 Tax at federal statutory rate 21.0 % 21.0 % 21.0 % Research and development tax credit ( 645.2 ) ( 3.8 ) ( 2.9 ) Foreign derived income benefit ( 263.8 ) ( 4.4 ) ( 6.6 ) Adjustments with respect to prior periods ( 243.5 ) — — Stock-based compensation 182.1 ( 0.2 ) ( 0.5 ) GILTI 126.2 0.7 0.4 State taxes, net of federal benefit 120.6 0.8 0.6 Valuation allowance on DTAs 111.5 0.3 ( 3.8 ) Executive compensation deduction limitation 20.2 0.6 0.8 Federal return to provision 15.8 ( 2.2 ) 1.0 Change in liability for unrecognized tax benefits ( 1.4 ) 0.7 — Foreign withholding taxes, net of foreign tax credits — — 1.1 Other 13.0 ( 0.7 ) 1.1 Effective tax rate ( 543.5 ) % 12.8 % 12.2 % 104 FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) Deferred Income Taxes January 3, 2025 December 29, 2023 Deferred tax assets: Foreign tax credits, including amounts associated with accrued charges $ 47,394 $ 51,232 Capitalized research & development 44,967 23,778 Lease liability 21,368 16,597 Inventory 9,555 9,673 Accrued liabilities 7,519 7,299 Interest Carryforward 5,868 — Net operating losses 2,071 3,226 Research and development tax credits 4,946 2,402 Interest rate swap 1,544 2,010 Other 2,441 3,014 Total deferred tax asset 147,673 119,231 Valuation allowance ( 1,785 ) ( 693 ) Net deferred tax asset 145,888 118,538 Deferred tax liabilities: Intangible assets ( 63,016 ) ( 65,090 ) Lease right-of-use-asset ( 21,389 ) ( 17,117 ) Depreciation ( 12,554 ) ( 12,192 ) Other ( 4,565 ) ( 2,842 ) Total deferred tax liability ( 101,524 ) ( 97,241 ) Net deferred tax asset $ 44,364 $ 21,297 As of January 3, 2025, the Company had foreign tax credits of $ 47,394 that begin to expire in 2027, unless previously utilized. As of January 3, 2025, the Company assessed the realizability of deferred tax assets and evaluated the need for a valuation allowance for deferred tax assets for each jurisdiction based on the framework of ASC 740. For the year ended January 3, 2025, the valuation allowance increased by $ 1,092 due to a taxable loss at the Company’s UK Thailand and Sweden subsidiaries. It is reasonably possible that the company could record a material adjustment to the valuation allowance in the next twelve months related to the carrying value of foreign tax credits. Unrecognized Tax Benefits For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 Balance - beginning of period $ 1,274 $ 119 $ 228 Increase related to current year tax positions 686 1,274 — Decrease related to prior year tax positions ( 1,931 ) ( 119 ) ( 109 ) Balance - end of period $ 29 $ 1,274 $ 119 As of January 3, 2025, the Company had $ 29 of unrecognized tax benefits related to certain state tax positions. The Company regularly engages in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. It is reasonably possible that significant changes in the unrecognized tax benefit may occur within the next twelve months, including settlement of the full amount with the taxing authority. The Company’s 2020 and forward federal tax returns, state tax returns from 2018 and forward, and foreign tax returns from 2020 and forward are subject to examination by tax authorities. In 2024, the IRS commenced an examination of our 2021 income tax return, which is ongoing. 105 FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) 16. Fair Value Measurements and Financial Instruments The FASB’s Accounting Standards Codification 820, “Fair Value Measurements and Disclosures” requires the valuation of assets and liabilities required or permitted to be either recorded or disclosed at fair value based on hierarchy of available inputs as follows: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). The following table presents the Company’s hierarchy for its assets, liabilities and redeemable non-controlling interest measured at fair value on a recurring basis as of the following periods: January 3, 2025 December 29, 2023 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Interest Rate Swaps $ — $ 5,685 $ — $ 5,685 $ — $ 3,394 $ — $ 3,394 Deferred Compensation Plan Investments 4,394 — — 4,394 3,794 — — 3,794 Total assets measured at fair value $ 4,394 $ 5,685 $ — $ 10,079 $ 3,794 $ 3,394 $ — $ 7,188 Liabilities: Incremental Term Loans — 552,061 — 552,061 — 373,528 — 373,528 Revolver — 153,000 — 153,000 — 370,000 — 370,000 Total liabilities measured at fair value $ — $ 705,061 $ — $ 705,061 $ — $ 743,528 $ — $ 743,528 There were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 categories of the fair value hierarchy during the years ended January 3, 2025, and December 29, 2023. As of January 3, 2025, the carrying amount of the principal under the Company’s 2022 Credit Facility - Incremental Term Loans and Revolver approximated fair value because they had variable interest rates that reflected market changes in interest rates and changes in the Company’s net leverage ratio. The Company mitigate the cash flow risk associated with changes in interest rates on its variable rate debt through interest rate swap agreements. Refer to Note 11. Derivatives and Hedging for additional details of the agreements. In accordance with ASC 815, interest rate swap contracts are recognized as assets or liabilities on the condensed consolidated balance sheets and are measured at fair values. The fair values were estimated based on expected cash flows over the life of the swaps. These expected cash flows were determined using a pricing model that incorporated reasonable assumptions and available market data. The Company invests in marketable securities to mitigate the risk associated with the investment return on the non-qualified deferred compensation plan provided to executives and non-employee directors. The investments are recorded as cash and cash equivalents at their quoted market price. 106 FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) 17. Retirement Plan The Company established a 401(k) plan to provide tax deferred salary deductions for all eligible employees. Participants may make voluntary contributions to the 401(k) plan, limited by certain IRS restrictions. The Company made matching contributions of $ 3,687 , $ 3,873 , and $ 3,649 for each of the years ended January 3, 2025, December 29, 2023 and December 30, 2022, respectively. 18. Acquisitions Acquisition of Custom Wheel House On February 17, 2023 the Company entered into a Securities Purchase Agreement with CWH Holdco, LLC (“CWH”), CWH Blocker Corp., (“Blocker”), Thompson Street Capital Partners V, L.P., and each other member of CWH to purchase all of the outstanding equity of Blocker, and thereafter Blocker acquired all of the outstanding equity interest of CWH. CWH is the parent company of Custom Wheel House, LLC. Custom Wheel House is a designer, marketer, and distributor of high-performance wheels, performance off-road tires, and accessories, including the premier flagship brand Method Race Wheels. The Company believes that this acquisition will be complementary to its upfitting businesses and will help to expand its product offerings. This acquisition was financed through the Company’s existing 2022 Credit Facility. The acquisition was closed on March 3, 2023 and accounted for as a business combination. The purchase price of Custom Wheel House is allocated to the assets acquired and liabilities assumed based on their estimated respective fair values as of March 3, 2023 with the excess purchase price allocated to goodwill. During the year ended January 3, 2025, the Company recorded an increase of $ 1,608 to net assets and a decrease of the same amount to goodwill. The weighted average amortization period of the total acquired intangible assets was 11 years. The weighted average amortization periods of the acquired trade name, customer relationship and core technology assets were 12 , 7 , and 10 years, respectively. The acquired goodwill represents the value of combining operations of Custom Wheel House and the Company, $ 25,000 of which is deductible for tax purposes. The Company’s allocation of the purchase price to the net tangible and intangible assets acquired and liabilities assumed is as follows: Fair market values Tangible assets acquired $ 34,622 Liabilities assumed ( 19,593 ) Intangible assets 48,753 Goodwill 66,002 Total $ 129,784 The Company incurred $ 1,001 of transaction costs related to the acquisition of Custom Wheel House during the year ended December 29, 2023. These costs are classified as general and administrative expenses in the accompanying consolidated statements of income. The results of operations for Custom Wheel House have been included in the Company's consolidated statements of income since the closing date of the acquisition on March 3, 2023. The total revenue and pre-tax income for the year ended January 3, 2025 amounted to $ 75,769 and $ 8,163 , respectively. The total revenue and pre-tax loss for the year ended December 29, 2023 amounted to $ 65,558 and $ 1,630 , respectively. 107 FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) Acquisition of Marucci Sports LLC On November 14, 2023, the Company, through Fox Factory, Inc., acquired 100 % of the issued and outstanding stock of Wheelhouse Holdings Inc. ("Wheelhouse") from Compass Group Diversified Holdings LLC for $ 567,236 , net of cash acquired. Wheelhouse is the parent company of Marucci, which is an industry-leading designer, manufacturer, and distributor of premium performance baseball, softball, and other sports-related products. Marucci also develops and licenses franchises for sports training facilities, and its customer base is primarily located in the United States and certain international markets. The Company believes the acquisition advances FOX’s position as a diversified provider of market-leading branded products with a proven ability to win over both professional athletes and passionate consumer bases, while positioning the combined company for future profitable growth. This transaction was accounted for as a business combination. The purchase price of Marucci is allocated to the assets acquired and liabilities assumed based on their estimated respective fair values as of November 14, 2023 with the excess purchase price allocated to goodwill. During the year ended January 3, 2025, the Company updated the purchase price allocation and recorded adjustments to net assets of $ 713 and goodwill of $ 670 . The following table summarizes the fair values of the identifiable assets acquired and liabilities assumed at the date of the acquisition: Acquisition consideration Cash consideration, net of cash acquired $ 567,092 Due to sellers 144 Total consideration at closing $ 567,236 Fair market values Accounts receivable $ 31,268 Inventory 52,672 Prepaid and other current assets 1,256 Property, plant and equipment 19,257 Lease right-of-use assets 9,423 Trademarks and brands 174,700 Customer and distributor relationships 83,800 Core technologies 20,600 Goodwill 244,120 Other assets 583 Total assets acquired $ 637,679 Accounts payable $ 13,626 Accrued expenses 10,512 Other current liabilities 1,854 Deferred Taxes 37,462 Other liabilities 6,989 Total liabilities assumed $ 70,443 Purchase price allocation $ 567,236 The gross contractual accounts receivable acquired in the acquisition was $ 32,455 , of which $ 1,187 was not expected to be collected. The Company incurred $ 3,798 of acquisition costs in conjunction with the Marucci acquisition, of which $ 672 were incurred during the year ended January 3, 2025. These costs are classified as general and administrative expenses in the accompanying consolidated statements of income. Additional debt issuance costs of $ 6,709 were incurred in association with financing the transaction and will be amortized over the term of the Incremental Term Loan A. Refer to Note 10 - Debt for further details. The values assigned to the identifiable intangible assets were determined by discounting the estimated future cash flows associated with these assets to their present value. The goodwill of $ 244,120 reflects the strategic fit of Marucci with the 108 FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) Company’s operations. The weighted average amortization period of the total acquired intangible assets was 16 years. The weighted average amortization periods of the customer and distributor relationship, trade name and trademark, and developed technology assets were 18 , 15 , and 13 years, respectively. Goodwill is expected to have an indefinite life and will be subject to impairment testing. The goodwill is not deductible for income tax purposes. Marucci previously purchased intangibles in asset acquisitions with a remaining net tax basis approximating $ 57,735 , which the Company may deduct for income tax purposes. The results of operations for Marucci have been included in the Company's consolidated statements of income since the closing date of the acquisition on November 14, 2023. The total revenue and pre-tax income for the year ended January 3, 2025 amounted to $ 192,372 and $ 9,989 , respectively. The total revenue and pre-tax loss for the year ended December 29, 2023 amounted to $ 16,791 and $ 3,150 , respectively. Acquisition of Marzocchi Suspension S.r.l. On December 19, 2024, the Company, through Marzocchi Suspension Holding S.r.l., acquired all of the outstanding equity of Marzocchi from VRM S.P.A. for $ 20,501 , net of cash acquired. Marzocchi is a leader in motorbike suspension manufacturing. The Company believes that this acquisition will be complementary to its powered vehicle businesses and will help to expand its product offerings. This transaction was accounted for as a business combination. The purchase price of Marzocchi is preliminary allocated to the assets acquired and liabilities assumed based on their estimated respective fair values as of December 19, 2024 with the excess purchase price allocated to goodwill. The following table summarizes the provisional fair values of the identifiable assets acquired and liabilities assumed at the date of the acquisition: Acquisition consideration Cash consideration, net of cash acquired $ 20,501 Total consideration at closing $ 20,501 Fair market value Accounts receivable $ 6,706 Inventory 12,097 Prepaids and other current assets 1,527 Property, plant, and equipment 5,888 Trademarks and brands 1,491 Customer and distributor relationships 2,000 Core technologies 12 Goodwill 3,475 Other assets 4,854 Total assets acquired $ 38,050 Accounts payable $ 12,175 Accrued expenses 2,176 Deferred tax liability 840 Other liabilities 2,358 Total liabilities assumed $ 17,549 Purchase price allocation $ 20,501 109 FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) The amounts above represent the Company’s provisional fair value estimates related to the acquisition as of December 19, 2024, and are subject to subsequent adjustments as additional information is obtained during the applicable measurement period. The primary areas of estimates that are not yet finalized include certain tangible assets acquired and liabilities assumed, as well as the identifiable intangible assets. The Company incurred $ 1,476 of acquisition costs in conjunction with the Marzocchi acquisition, of which $ 999 were incurred during the year ended January 3, 2025. These costs are classified as general and administrative expenses in the accompanying consolidated statements of income. The values assigned to the identifiable intangible assets were determined by discounting the estimated future cash flows associated with these assets to their present value. The goodwill of $ 3,475 reflects the strategic fit of Marzocchi with the Company’s operations. The weighted average amortization periods of the customer and distributor relationships and trade names and trademarks were 15 years. Goodwill is expected to have an indefinite life and will be subject to impairment testing. In the acquisition of Marzocchi, the Company stepped up the intangibles by $ 3,503 , which is not deductible for Italian income tax purposes. 110 FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) 19. Accumulated Other Comprehensive Income (Loss) The following table summarizes the changes in accumulated other comprehensive income (loss): Interest Rate Swaps Foreign Currency Translation Total Balance as of December 30, 2022 17,770 ( 2,988 ) 14,782 Change in interest rate swaps fair value 830 — 830 Net gain reclassified to interest expense ( 6,775 ) — ( 6,775 ) Income tax provision on interest rate swaps ( 1,303 ) — ( 1,303 ) Foreign currency translation adjustments — 1,507 1,507 Balance as of December 29, 2023 10,522 ( 1,481 ) 9,041 Change in interest rate swaps fair value 6,418 — 6,418 Net gain reclassified to interest expense ( 8,460 ) — ( 8,460 ) Income tax provision on interest rate swaps ( 466 ) — ( 466 ) Foreign currency translation adjustments — ( 6,309 ) ( 6,309 ) Balance as of January 3, 2025 $ 8,014 $ ( 7,790 ) $ 224 111 FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) 20. Segment Information Due in part to how we operate our business and to best serve our customers, we manage our activities based on three operating segments: Powered Vehicles Group, Aftermarket Applications Group, and Specialty Sports Group. All of our segments design, engineer and manufacture performance-defining products and systems for customers worldwide. The following is a description of our operating segments. Powered Vehicles Group: This segment operates 2 plants in the United States and 1 plant in Italy. Our premium products sold under the FOX brand are for off-road vehicles and trucks, side-by-sides, on-road vehicles with and without off-road capabilities, ATVs, snowmobiles, specialty vehicles and applications, motorcycles, and commercial trucks. These products are sold through both OEM and aftermarket channels. Aftermarket Applications Group: This segment operates 15 plants across the United States. Our range of aftermarket applications products includes premium products under the BDS Suspension, Zone Offroad, JKS Manufacturing, RT Pro UTV, 4x4 Posi-Lok, Ridetech, Tuscany, Outside Van, SCA, and Custom Wheel House brands designed for off-road vehicles and trucks, side-by-sides, on-road vehicles with or without off-road capabilities, specialty vehicles and applications, and commercial trucks. Specialty Sports Group: This segment operates 10 plants and 13 distribution facilities (12 in the United States, 4 in Taiwan, and one facility each in Australia, Canada, Germany, Japan, Sweden, Switzerland, and United Kingdom). Our bike product offerings are used on a wide range of performance mountain bikes, e-bikes and gravel bikes under the FOX, Race Face, Easton Cycling and Marzocchi brands. These products are sold through both OEM and aftermarket channels. Our products for diamond sports include premium baseball and softball equipment under the Marucci, Victus, Lizard Skins, and Baum Bat brands and are sold through dealers and distributors and through direct-to-customer channels. Net sales and expenses are measured in accordance with the policies and procedures described in Note 1 – Business and Summary of Significant Accounting Policies . We measure the profitability and financial performance of our operating segments based on adjusted EBITDA. Adjusted EBITDA provides a measure of our underlying segment results that is in line with our approach to risk management. We define adjusted EBITDA as net income adjusted for (a) interest expense, (b) income tax or tax benefits, (c) amortization including amortization of purchased intangibles, (d) depreciation, (e) stock-based compensation, (f) litigation and settlement related expenses, (g) organizational restructuring expenses, (h) acquisition and integration-related expenses, and (i) strategic transformation costs. Adjusted EBITDA Margin is defined as adjusted EBITDA divided by net sales. Segment asset information is not presented because it is not evaluated by the CODM at the segment level. All transactions between reportable segments are eliminated in consolidation. The tables that follow show selected segment financial information including information for prior comparative periods. Unallocated corporate expenses are 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. 112 FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 Net sales Powered Vehicles Group $ 461,403 $ 523,862 $ 432,388 Aftermarket Applications Group 421,453 551,143 489,132 Specialty Sports Group 511,065 389,173 680,971 Net sales $ 1,393,921 $ 1,464,178 $ 1,602,491 Net income 6,512 120,846 205,278 (Benefit) provision for income taxes ( 5,500 ) 17,817 28,486 Depreciation and amortization 83,566 58,603 49,241 Non-cash stock-based compensation 9,606 16,465 16,351 Litigation and settlement-related expenses 4,329 2,724 4,222 Other acquisition and integration-related expenses (1) 8,054 19,214 1,710 Organizational restructuring expenses 3,218 3,952 — Loss on fixed asset disposals related to organizational restructure — 1,027 — Strategic transformation costs 1,689 — 2,769 Non-recurring property tax assessment — — 841 Interest and other expense, net 55,539 20,400 12,933 Adjusted EBITDA $ 167,013 $ 261,048 $ 321,831 Powered Vehicles Group 53,819 79,159 ( 6,163 ) Aftermarket Applications Group 51,745 126,784 130,947 Specialty Sports Group 117,811 117,766 260,101 Unallocated corporate expenses ( 56,362 ) ( 62,661 ) ( 63,054 ) Adjusted EBITDA $ 167,013 $ 261,048 $ 321,831 (1) Represents various acquisition-related costs and expenses incurred to integrate acquired entities into the Company’s operations and the impact of the finished goods inventory valuation adjustment recorded in connection with the purchase of acquired assets, per period as follows: For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 Acquisition related costs and expenses $ 3,569 $ 6,206 $ 1,710 Purchase accounting inventory fair value adjustment amortization 4,485 13,008 — Other acquisition and integration-related expenses $ 8,054 $ 19,214 $ 1,710 113 FOX FACTORY HOLDING CORP. Notes to Consolidated Financial Statements - Continued January 3, 2025 (in thousands) Individual expenses are not a primary focus in segment-level decision-making as the CODM relies on adjusted EBITDA as the key financial metric for assessing performance and allocating resources across segments. The following table presents the Company’s other segment items that consist of costs of sales and operating expenses excluding depreciation and amortization, non-cash stock-based compensation, litigation and settlement-related expenses, other acquisition and integration-related expenses, organizational restructuring-related expenses, strategic transformation costs, and non-recurring property tax assessment. For the fiscal years ended January 3, 2025 December 29, 2023 December 30, 2022 Powered Vehicles Group $ 407,584 $ 444,703 $ 438,551 Aftermarket Applications Group 369,708 424,359 358,185 Specialty Sports Group 393,254 271,407 420,870 Unallocated corporate expenses 56,362 62,661 63,054 $ 1,226,908 $ 1,203,130 $ 1,280,660 114