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Item 2. Management’s Discussion and Analysis

2025-05-09 compared with 2024-11-01 · 124 added, 175 removed, 157 unchanged (66% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 29, 2023, as filed with the SEC on February 23, 2024, and our other reports and registration statements that we file with the SEC from time to time.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended January 3, 2025, as filed with the SEC on February 27, 2025, and our other reports and registration statements that we file with the SEC from time to time.

In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs.

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Forward-looking statements contained in this Quarterly Report on Form 10-Q are subject to numerous risks and uncertainties, including but not limited to risks related to:

• changes in general economic conditions, including market and macro-economic disruptions resulting from escalating tensions between China and Taiwan, the on-going Russian war in Ukraine, the Israel-Palestine conflict, or due to growing inflation or higher interest rates;

• our dependency on a limited number of suppliers for materials, product parts, and vehicle chassis could lead to an increase in material costs, disruptions in our supply chain, or reputational costs;

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• the loss of key customers;

• our ability to accurately forecast demand for our products;

• our ability to improve operating and supply chain efficiencies;

• changes in commodity, freight, and tariff costs (including tariff relief or our ability to mitigate tariffs, particularly in light of the policies of the new presidential administration and retaliatory actions in response thereto);

• our ability to mitigate increasing input costs through pricing or other measures;

• economic conditions that impact consumer spending or consumer credit, including changes in inflation or interest rates;

• our ability to enforce our intellectual property rights;

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• our ability to selectively add additional dealers and distributors in certain geographic markets;

• the growth of the markets in which we compete, our expectations regarding consumer preferences and our ability to respond to changes in consumer preferences;

• the growth of the markets in which we compete, our expectations regarding consumer preferences and our ability to respond to changes in consumer preferences and effectively compete against competitors;

• changes in demand for performance-defining products;

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• future disruptions in the operations of our manufacturing facilities;

• our ability to adapt our business model to mitigate the impact of certain changes in tax laws;

• our ability to adapt our business model to mitigate the impact of certain changes in tax laws, tariffs, and international trade policies;

• changes in the relative proportion of profit earned in the numerous jurisdictions in which we do business and in tax legislation, case law and other authoritative guidance in those jurisdictions;

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Critical Accounting Policies and Estimates

There have been no changes to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 29, 2023, as filed with the SEC on February 23, 2024, that had a material impact on our condensed consolidated financial statements and related notes.

There have been no changes to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended January 3, 2025, as filed with the SEC on February 27, 2025, that had a material impact on our unaudited condensed consolidated financial statements and related notes, except as described below.

Goodwill Impairment

During the three month period ended April 4, 2025, we recognized a non-cash goodwill impairment charge of $262.1 million within operating expenses, which impacted all reporting units.

The impairment resulted from a triggering event related to adverse changes in U.S.

tariff policies, new and expanded tariffs enacted by the current presidential administration and resulting sustained decline in its stock price.

The impairment charge reflects the amount by which the carrying values of the reporting units exceeded their estimated fair values.

The Company determines the fair value of the reporting unit based on a weighting of income and market approaches.

The income approach employs a discounted cash flow model, projecting revenue and cash flows over a multi-year period.

These projections are based on management’s estimates, historical performance trends, and industry outlooks.

These cash flows, along with a terminal value, are discounted to their present value using a WACC that reflects a market rate appropriate for each reporting unit.

The company performs sensitivity analyses to determine how fluctuations in forecasts could affect the fair value relative to the carrying amount.

The market approach employs multiples for public companies that reasonably compare to the reporting units.

Sensitivity analyses were performed to assess the impact of changes in key assumptions.

While the Company believes that the estimates and assumptions used in the impairment test were reasonable, changes in key assumptions, including lower revenue growth, terminal growth rate, or increase in WACC could result in a future impairment of the reporting units.

Such charge could have a material effect on the condensed consolidated statements of income (loss) and the condensed consolidated balance sheets.

As a reasonableness check, the impairment assessment also included a comparison of the aggregate estimated fair value of the reporting units to the Company’s total market capitalization.

The Company will continue to monitor its goodwill balances for further potential impairments.

See “Goodwill, Intangible Assets, and Long-Lived Assets” within Note 1.

Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies for goodwill activity by reporting unit.

Recent Accounting Pronouncements

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The table below summarizes our results of operations:

For the three months ended For the nine months ended

(in millions) September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

For the three months ended

(in millions) April 4, 2025 March 29, 2024

Net sales $ 355.0 $ 333.5

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Operating expenses:

Goodwill impairment 262.1 —

General and administrative 37.3 37.4

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Total operating expenses 360.3 94.3

Income from operations 18.8 41.4 46.3 148.8

(Loss) Income from operations (250.6) 8.9

Interest expense 12.9 13.3

Other income, net (0.5) (0.9) (0.5) (0.3)

Income before income taxes 5.0 38.8 5.3 137.8

Provision (benefit) for income taxes 0.3 3.5 (1.4) 21.0

Net income $ 4.8 $ 35.3 $ 6.7 $ 116.8

Other (income) expense, net (0.2) 0.3

Loss before income taxes (263.4) (4.8)

Benefit from income taxes (3.6) (1.3)

Net loss $ (259.7) $ (3.5)

net loss attributable to non-controlling interest — —

Net loss attributable to FOX stockholders $ (259.7) $ (3.5)

*Amounts may not foot due to rounding.

The following table sets forth selected statement of income data as a percentage of net sales for the periods indicated:

For the three months ended For the nine months ended

September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

For the three months ended

April 4, 2025 March 29, 2024

Net sales 100.0 % 100.0 %

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Operating expenses:

Goodwill impairment 73.8 —

General and administrative 10.5 11.2

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Total operating expenses 101.5 28.3

Income from operations 5.2 12.5 4.4 13.2

(Loss) Income from operations (70.6) 2.7

Interest expense 3.6 4.0

Other income, net (0.1) (0.3) — —

Income before income taxes 1.4 11.7 0.5 12.2

Provision (benefit) for income taxes 0.1 1.1 (0.1) 1.9

Net income 1.3 % 10.7 % 0.6 % 10.3 %

Other (income) expense, net — 0.1

Loss before income taxes (74.2) (1.4)

Benefit from income taxes (1.0) (0.4)

Net loss (73.2) % (1.0) %

net loss attributable to non-controlling interest — —

Net loss attributable to FOX stockholders (73.1) % (1.0) %

*Percentages may not foot due to rounding.

Three months ended September 27, 2024 compared to three months ended September 29, 2023

Three months ended April 4, 2025 compared to three months ended March 29, 2024

Consolidated net sales

For the three months ended

(in millions) September 27, 2024 September 29, 2023 Change ($) Change (%)

(in millions) April 4, 2025 March 29, 2024 Change ($) Change (%)

Net sales $ 355.0 $ 333.5 $ 21.5 6.5 %

Total net sales for the three months ended September 27, 2024 increased $28.0 million, or 8.5%, compared to the three months ended September 29, 2023.

The increase in net sales is primarily due to the inclusion of $49.6 million in net sales from Marucci that was acquired in November 2023, and a $27.9 million increase in bike sales, partially offset by a shift in product mix, higher interest rates impacting industry and consumer demands, and higher inventory levels at dealerships.

Although bike sales improved compared to prior year, the ongoing channel inventory recalibration and, to a lesser extent, lower end consumer demand remain headwinds.

Total net sales for the three months ended April 4, 2025 increased $21.5 million, or 6.5%, compared to the three months ended March 29, 2024.

The increase in net sales is driven by higher upfitting sales due to a shift in product mix, increased demand for aftermarket products, growth in bike sales, and the expansion of motorcycle business, which offset lower industry demand in the traditional powersports product lines.

Although, net sales increased, high interest rates impacting industry and consumer demands, high inventory levels at dealerships, the bike channel inventory recalibration, and to a lower extent, lower bike consumer demand, and impacts related to tariff policies remain headwinds.

Cost of sales

For the three months ended

(in millions) September 27, 2024 September 29, 2023 Change ($) Change (%)

(in millions) April 4, 2025 March 29, 2024 Change ($) Change (%)

Cost of sales $ 245.4 $ 230.3 $ 15.1 6.6 %

Cost of sales for the three months ended September 27, 2024 increased $27.7 million, or 12.4%, compared to the three months ended September 29, 2023.

The increase in cost of sales and a decrease in gross margin of 250 basis points to 29.9% for the three months ended September 27, 2024 as compared to the same prior fiscal year period are primarily due to a shift in our product line mix and reduced operating leverage on lower volume.

Cost of sales for the three months ended April 4, 2025 increased $15.1 million, or 6.6%, compared to the three months ended March 29, 2024.

The increase in cost of sales is mainly due to our increased sales.

Our gross margin increased 0 basis points to 30.9% for the three months ended April 4, 2025 as compared to the same prior fiscal year period primarily due to our product mix.

Operating expenses

For the three months ended

(in millions) September 27, 2024 September 29, 2023 Change ($) Change (%)

(in millions) April 4, 2025 March 29, 2024 Change ($) Change (%)

Operating expenses:

Goodwill impairment $ 262.1 $ — $ 262.1 100.0 %

General and administrative 37.3 37.4 (0.1) (0.3) %

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Total operating expenses $ 360.3 $ 94.3 $ 266.0 282.1 %

Total operating expenses for the three months ended September 27, 2024 were $88.7 million, compared to $65.9 million for the three months ended September 29, 2023.

General and administrative expenses increased $6.8 million, and sales and marketing expenses increased $4.6 million primarily due to the inclusion of Marucci operating expenses.

Research and development expenses increased $7.2 million mainly due to personnel investments to support future growth and product innovation and additional benefit from a state research and development tax credit received in prior year.

Amortization of purchased intangibles increased by $4.2 million driven by amortization of additional acquired intangibles.

Total operating expenses for the three months ended April 4, 2025 were $360.3 million, compared to $94.3 million for the three months ended March 29, 2024.

During the three months ended April 4, 2025, we recognized an impairment charge of $262.1 million as a result of our quantitative assessment on goodwill.

Research and development expenses and sales and marketing expenses increased $2.6 million and $1.7 million, respectively, mainly due to investments to support future growth and product innovation.

Income from operations

For the three months ended

(in millions) September 27, 2024 September 29, 2023 Change ($) Change (%)

(in millions) April 4, 2025 March 29, 2024 Change ($) Change (%)

Income from operations $ (250.6) $ 8.9 $ (259.5) (2,915.7) %

As a result of the factors discussed above, income from operations for the three months ended September 27, 2024 decreased $22.6 million, or 54.6%, compared to income from operations for the three months ended September 29, 2023.

As a result of the factors discussed above, income from operations for the three months ended April 4, 2025 decreased $259.5 million, or 2,915.7%, compared to income from operations for the three months ended March 29, 2024.

Interest and other expense, net

For the three months ended

(in millions) September 27, 2024 September 29, 2023 Change ($) Change (%)

(in millions) April 4, 2025 March 29, 2024 Change ($) Change (%)

Interest expense $ 12.9 $ 13.3 $ (0.4) (3.0) %

Other income, net (0.5) (0.9) 0.4 (44.4)

Other (income) expense, net (0.2) 0.3 (0.5) (166.7)

Interest and other expense, net $ 12.7 $ 13.6 $ (0.9) (6.6) %

Interest and other expense, net for the three months ended September 27, 2024 increased by $11.1 million to $13.7 million, compared to $2.6 million for the three months ended September 29, 2023.

Interest expense increased by $10.7 million due to additional debt and higher interest rates.

Interest and other expense, net for the three months ended April 4, 2025 decreased by $0.9 million to $12.7 million, compared to $13.6 million for the three months ended March 29, 2024.

For the three months ended

(in millions) September 27, 2024 September 29, 2023 Change ($) Change (%)

Provision for income taxes $ 0.3 $ 3.5 $ (3.2) (91.4) %

The effective tax rates were 5.0% and 9.0% for the three months ended September 27, 2024 and September 29, 2023, respectively.

For the three months ended September 27, 2024, the difference between the Company’s effective tax rate of 5.0% and the 21% federal statutory rate was due to a benefit from the U.S.

research and development tax credit, offset by the impact of discrete items on lower levels of pre-tax income, including a modification of the tax treatment of certain research and development expenditures recognized in prior years.

For the three months ended September 29, 2023, the difference between our effective tax rate of 9.0% and the 21% federal statutory rate was due to a benefit from the U.S.

research and development tax credit related to multiple periods and a lower tax rate on foreign derived intangible income.

These benefits were partially offset by other non-deductible expenses and state taxes.

(in millions) April 4, 2025 March 29, 2024 Change ($) Change (%)

Benefit from income taxes $ (3.6) $ (1.3) $ (2.3) 176.9 %

The effective tax rates were 1.4% and 26.6% for the three months ended April 4, 2025 and March 29, 2024, respectively.

For the three months ended April 4, 2025, the difference between the Company’s effective tax rate of 1.4% and the 21% federal statutory rate was due to the impairment impact of the non-deductible goodwill recognized during the same period.

For the three months ended March 29, 2024, the difference between our effective tax rate of 26.6% and the 21% federal statutory rate was due to the impact of discrete items and pre-tax loss.

For the three months ended

(in millions) September 27, 2024 September 29, 2023 Change ($) Change (%)

(in millions) April 4, 2025 March 29, 2024 Change ($) Change (%)

Net income $ (259.7) $ (3.5) $ (256.2) 7,320.0 %

As a result of the factors described above, our net income decreased $30.5 million, or 86.4%, to $4.8 million in the three months ended September 27, 2024 from $35.3 million for the three months ended September 29, 2023.

As a result of the factors described above, our net loss increased $256.2 million, or 7,320.0%, to a net loss $259.7 million in the three months ended April 4, 2025 from a net loss of $3.5 million for the three months ended March 29, 2024.

Segment Review

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.

We manage our activities based on three operating segments:

PVG, AAG, and SSG.

For additional financial information related to our operating segments including the reconciliation of net income attributable to our common stockholders to adjusted EBITDA, see Note 15 – Segment Information .

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For the three months ended

(in millions) September 27, 2024 September 29, 2023 Change ($) Change (%)

(in millions) April 4, 2025 March 29, 2024 Change ($) Change (%)

Powered Vehicles Group $ 122.1 $ 118.1 $ 4.0 3.4 %

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Powered Vehicles Group

Powered Vehicles Group net sales decreased by $13.7 million, or 11.2%, due to lower industry demand in Power Sports and automotive because of higher interest rates.

Powered Vehicles Group adjusted EBITDA decreased by $17.5 million, or 66.3%, driven by a decrease in gross profit, an increase in personnel investments and additional benefit from a state research and development tax credit received in prior year.

Powered Vehicles Group net sales increased by $4.0 million, or 3.4%, due to the inclusion of $12.0 million in net sales from Marzocchi acquired in December 2024, partially offset by lower industry demand in power sports because of higher interest rates and higher inventory levels.

Powered Vehicles Group adjusted EBITDA decreased by $1.5 million, or 9.4%, primarily due to our product mix.

Aftermarket Applications Group

Aftermarket Applications Group net sales decreased by $35.8 million, or 26.3%, driven by lower upfitting sales due to product mix, higher interest rates impacting industry dealers and consumers, and higher inventory levels at dealerships.

Aftermarket Applications Group adjusted EBITDA decreased by $22.5 million, or 70.5%, mainly due to lower gross profit.

Aftermarket Applications Group net sales increased by $10.1 million, or 9.9%, driven by higher upfitting sales due to our product mix and increased demand for aftermarket products;

however, high interest rates impacting dealers and consumers, and high inventory levels at dealerships continue to pose challenges.

Aftermarket Applications Group adjusted EBITDA increased by $2.1 million, or 14.1%, mainly due to higher gross profit.

Specialty Sports Group

Specialty Sports Group net sales increased by $77.5 million, or 107.6%, primarily due to the inclusion of $49.6 million in net sales from Marucci, which we acquired in November 2023, and a $27.9 million increase in bike sales.

Although bike sales improved compared to prior year, the ongoing channel inventory recalibration and, to a lesser extent, lower end consumer demand remain headwinds.

Specialty Sports Group adjusted EBITDA increased by $16.8 million, or 85.3%, primarily due to an increase in gross profit driven by the inclusion of Marucci.

Specialty Sports Group net sales increased by $7.5 million, or 6.6%, primarily due to the growth in bike sales.

Although bike sales improved compared to prior year, the channel inventory recalibration, and to a lower extent, lower end consumer demand remain headwinds.

Specialty Sports Group adjusted EBITDA decreased by $0.7 million, or 2.9%, primarily due to our product mix.

Unallocated corporate expenses

Unallocated corporate expenses consist of corporate overhead expenses that are not directly attributable to one of our business segments and include unallocated occupancy costs for our corporate headquarters, acquisition costs, other benefit and compensation programs, including performance-based compensation, and administrative expenses such as accounting, finance, legal, human resources, and information technology expenses.

Unallocated corporate expenses decreased by $1.5 million, or 10.5%, driven by cost containment measures.

Nine months ended September 27, 2024 compared to nine months ended September 29, 2023

Consolidated net sales

For the nine months ended

(in millions) September 27, 2024 September 29, 2023 Change ($) Change (%)

Net sales $ 1,041.1 $ 1,131.7 $ (90.6) (8.0) %

Total net sales for the nine months ended September 27, 2024 decreased $90.6 million, or 8.0%, compared to the nine months ended September 29, 2023.

The decrease in net sales is primarily due to product mix, higher interest rates impacting industry and consumer demands, higher levels of inventory at dealerships, and the ongoing bike channel inventory recalibration, offset by the inclusion of $150.8 million in net sales from Marucci that was acquired in November 2023.

Cost of sales

For the nine months ended

(in millions) September 27, 2024 September 29, 2023 Change ($) Change (%)

Cost of sales $ 719.5 $ 759.1 $ (39.6) (5.2) %

Cost of sales for the nine months ended September 27, 2024 decreased $39.6 million, or 5.2%, compared to the nine months ended September 29, 2023.

The decrease in cost of sales is primarily due to our decreased sales.

Our gross margin decreased by 200 basis points to 30.9% for the nine months ended September 27, 2024 as compared to the same prior fiscal year period is primarily due to a shift in our product line mix and operating leverage on lower volume.

Operating expenses

For the nine months ended

(in millions) September 27, 2024 September 29, 2023 Change ($) Change (%)

Operating expenses:

General and administrative $ 106.8 $ 89.7 $ 17.1 19.1 %

Sales and marketing 89.8 74.7 15.1 20.2

Research and development 45.3 39.4 5.9 15.0

Amortization of purchased intangibles 33.4 20.0 13.4 67.0

Total operating expenses $ 275.3 $ 223.7 $ 51.6 23.1 %

Total operating expenses for the nine months ended September 27, 2024 were $275.3 million, compared to $223.7 million for the nine months ended September 29, 2023.

General and administrative expenses increased $17.1 million and sales and marketing expenses increased $15.1 million primarily due to the inclusion of Marucci operating expenses and the full nine months of Custom Wheel House operating expenses, partially offset by our cost containment measures.

Research and development expenses increased $5.9 million driven by personnel investments to support future growth and product innovation and the inclusion of Marucci expenses.

Amortization of purchased intangibles increased by $13.4 million mainly due to amortization of additional acquired intangibles.

Income from operations

For the nine months ended

(in millions) September 27, 2024 September 29, 2023 Change ($) Change (%)

Income from operations $ 46.3 $ 148.8 $ (102.5) (68.9) %

As a result of the factors discussed above, income from operations for the nine months ended September 27, 2024 decreased $102.5 million or 68.9%, compared to income from operations for the nine months ended September 29, 2023.

Interest and other expense, net

For the nine months ended

(in millions) September 27, 2024 September 29, 2023 Change ($) Change (%)

Interest expense $ 41.4 $ 11.4 $ 30.0 263.2 %

Other expense, net (0.5) (0.3) (0.2) 66.7

Interest and other expense, net $ 40.9 $ 11.1 $ 29.8 268.5 %

Interest and other expense, net for the nine months ended September 27, 2024 increased by $29.8 million to $40.9 million, compared to $11.1 million for the nine months ended September 29, 2023.

Interest expense increased by $30.0 million to $41.4 million due to additional debt and higher interest rates.

For the nine months ended

(in millions) September 27, 2024 September 29, 2023 Change ($) Change (%)

(Benefit) provision for income taxes $ (1.4) $ 21.0 $ (22.4) (106.7) %

The effective tax rates were (26.2)% and 15.2% for the nine months ended September 27, 2024 and September 29, 2023, respectively.

For the nine months ended September 27, 2024, the difference between the Company’s effective tax rate of (26.2)% and the 21% federal statutory rate was due to a benefit from the U.S.

For the nine months ended September 29, 2023, the difference between our effective tax rate of 15.2% and the 21% federal statutory rate resulted primarily from a lower tax rate on foreign derived intangible income and benefit from the U.S.

research and development tax credit related to multiple periods.

These benefits were partially offset by other non-deductible expenses and state taxes.

For the nine months ended

(in millions) September 27, 2024 September 29, 2023 Change ($) Change (%)

Net income $ 6.7 $ 116.8 $ (110.1) (94.3) %

As a result of the factors described above, our net income decreased $110.1 million, or 94.3% to $6.7 million for the nine months ended September 27, 2024 from $116.8 million for the nine months ended September 29, 2023.

Segment Review

The following table summarizes consolidated net sales and adjusted EBITDA by segment:

For the nine months ended

(in millions) September 27, 2024 September 29, 2023 Change ($) Change (%)

Powered Vehicles Group $ 345.2 $ 405.5 $ (60.3) (14.9) %

Aftermarket Applications Group 309.3 430.4 (121.1) (28.1)

Specialty Sports Group 386.6 295.8 90.8 30.7

Net sales $ 1,041.1 $ 1,131.7 $ (90.6) (8.0) %

Adjusted EBITDA

Powered Vehicles Group $ 40.7 $ 67.9 $ (27.2) (40.1) %

Aftermarket Applications Group 38.4 106.0 (67.6) (63.8)

Specialty Sports Group 89.8 95.7 (5.9) (6.2)

Unallocated corporate expenses (42.3) (47.3) 5.0 (10.6)

Adjusted EBITDA $ 126.6 $ 222.3 $ (95.7) (43.0) %

Powered Vehicles Group

Powered Vehicles Group net sales decreased by $60.3 million, or 14.9%, due to lower industry demand in Power Sports and automotive because of higher interest rates.

Powered Vehicles Group adjusted EBITDA decreased by $27.2 million, or 40.1%, mainly due to a decrease in gross profit.

Aftermarket Applications Group

Aftermarket Applications Group net sales decreased by $121.1 million, or 28.1%, driven by lower upfitting sales due to product mix, higher interest rates impacting industry dealers and consumers, and higher inventory levels at dealerships.

Aftermarket Applications Group adjusted EBITDA decreased by $67.6 million, or 63.8%, mainly due to lower gross profit.

Specialty Sports Group

Specialty Sports Group net sales increased by $90.8 million, or 30.7%, primarily due to the inclusion of $150.8 million in net sales from Marucci, partially offset by a reduction in bike sales of $60.0 million because of the ongoing bike channel inventory recalibration and, to a lesser extent, lower end consumer demand.

Specialty Sports Group adjusted EBITDA decreased by $5.9 million, or 6.2%, primarily due to a decline in gross profit driven by reduced operating leverage on lower volume, offset by the inclusion of Marucci which grew year over year.

Unallocated corporate expenses

Unallocated corporate expenses decreased by $5.0 million, or 10.6%, driven by cost containment measures.

Unallocated corporate expenses increased by $0.8 million, or 5.6%, mainly due to higher research and development expenses and sales and marketing expenses.

Liquidity and Capital Resources

Our primary cash needs are to support working capital, interest on debt, employee compensation, capital expenditures, acquisitions, debt repayments, and other general corporate purposes.

Historically, we generally financed our liquidity needs with operating cash flows, borrowings under our Prior Credit Facility and our 2022 Credit Facility, and the issuance of common stock.

Historically, we generally financed our liquidity needs with operating cash flows, borrowings under our 2022 Credit Facility, and the issuance of common stock.

These sources of liquidity may be impacted by events described in Cautionary Note Regarding Forward-Looking Statements and Part II, Item 1A.

Risk Factors .

As of September 27, 2024, we held $31.0 million of our $89.2 million of cash and cash equivalents in accounts of our subsidiaries outside of the U.S., which we may repatriate.

As of April 4, 2025, we held $17.8 million of our $68.6 million of cash and cash equivalents in accounts of our subsidiaries outside of the U.S., which we may repatriate.

A summary of our operating, investing and financing activities is shown in the following table:

For the nine months ended

(in millions) September 27, 2024 September 29, 2023

Net cash provided by operating activities $ 50.1 $ 126.7

For the three months ended

(in millions) April 4, 2025 March 29, 2024

Net cash (used in) provided by operating activities $ 0.7 $ 9.4

Net cash used in investing activities (7.2) (15.3)

Net cash used in financing activities (1.7) (16.2)

Net cash provided by (used in) financing activities 3.3 (7.9)

Effect of exchange rate changes on cash and cash equivalents 0.1 (0.2)

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Operating activities

In the nine months ended September 27, 2024, net cash provided by operating activities was $50.1 million.

Our investment in operating assets and liabilities is a result of an increase in inventory of $29.0 million, a decrease in income taxes payable of $25.3 million, and an increase in accounts receivable of $21.8 million, partially offset by an increase in accounts payable of $24.2 million, an increase in accrued expenses and other liabilities of $11.3 million, and a decrease in prepaids and other assets of $9.9 million.

The decrease in income taxes payable is mainly due to lower income tax expense and our income tax payments.

The increase in inventory is mainly due to timing and some seasonal inventory.

The change in our accounts receivable reflects an increase in our sales and the timing of customer collections.

The decrease in prepaids and other assets is primarily due to lower chassis deposits as we worked to sell through model year 2024.

The increase in accrued expenses and other liabilities is mainly due to additional leases.

In the three months ended April 4, 2025, net cash used in operating activities was $0.7 million.

Our investment in operating assets and liabilities is a result of a decrease in accounts payable of $25.2 million, an increase in accounts receivable of $11.3 million, a decrease in accrued expenses and other liabilities of $9.0 million, an increase in inventory of $1.8 million, and a decrease in income taxes payable of $1.9 million, partially offset by a decrease in prepaids and other assets of $25.7 million.

The change in our accounts payable is driven by timing of inventory purchases and vendor payments.

In the nine months ended September 29, 2023, net cash provided by operating activities was $126.7 million.

Our investment in operating assets and liabilities is a result of increases in prepaids and other assets of $53.5 million primarily due to carrying more chassis to meet current year production needs for the upfitting product lines, and decreases in accounts payable of $51.4 million, income taxes payable of $20.4 million and accrued expenses and other liabilities of$7.3 million, partially offset by decreases in accounts receivable of $53.3 million and inventory of $20.4 million.

The change in our accounts receivable reflects a shift in our product line mix and the timing of customer collections.

The change in our accounts receivable reflects an increase in our sales and the timing of customer collections.

The decrease in accrued expenses and other liabilities is mainly due to a decrease in warranty reserve, a decrease in lease liabilities due to lease terminations, and payments for various accruals.

The decrease in income taxes payable is mainly due to our income tax payments.

The decrease in prepaids and other assets is primarily due to lower chassis deposits driven by working capital optimization efforts.

In the three months ended March 29, 2024, net cash provided by operating activities was $9.4 million.

Our investment in operating assets and liabilities is a result of increases in prepaids and other assets of $37.3 million and decreases in accounts payable of $2.4 million, accrued expenses and other liabilities of $1.3 million, and income taxes payable of $0.8 million, partially offset by decreases in inventory of $20.0 million and accounts receivable of $5.3 million.

The increase in prepaids and other assets is primarily due to carrying new model year chassis to meet current year production needs for the upfitting product lines and, to a lesser degree, slowing sales of older model years.

The change in our accounts receivable reflects the timing of customer collections.

The change in our accounts payable is driven by timing of inventory purchases and vendor payments.

The change in accrued expenses and other liabilities is primarily due to payments made for compensation and tax related accruals.

The change in accrued expenses and other liabilities is primarily due to settlements of sales rebate accruals.

The decrease in inventory reflects our continued efforts to optimize inventory levels.

Investing activities

In the nine months ended September 27, 2024 and September 29, 2023, net cash used in investing activities consisted of $42.5 million and $165.4 million, respectively.

Investing activities for the nine months ended September 27, 2024 consisted of $32.1 million of property and equipment additions, $5.3 million of cash consideration for our acquisition of other assets, and $5.0 million of cash consideration for our acquisitions.

Investing activities for the nine months ended September 29, 2023 consisted of $130.9 million of cash consideration for our purchase of Custom Wheel House, $32.0 million of property and equipment additions and $2.4 million in cash consideration for our purchase of other assets.

In the three months ended April 4, 2025 and March 29, 2024, net cash used in investing activities consisted of $7.2 million and $15.3 million, respectively.

Investing activities for the three months ended April 4, 2025 consisted of $7.2 million of property and equipment additions.

Investing activities for the three months ended March 29, 2024 consisted of $9.9 million of property and equipment additions, $5.0 million of cash consideration for our acquisitions, and $0.4 million of cash consideration for our purchase of other assets.

Financing activities

In the nine months ended September 27, 2024, net cash used in financing activities was $1.7 million, and consisted of the proceeds from our 2022 Credit Facility revolver of $169.0 million and draw from the Delayed Draw Term Loan of $200.0 million that were used to support our working capital, offset by payments of $329.0 million to reduce the revolver borrowings, $13.2 million repayments on our term loans, $25.0 million to repurchase shares of our common stock for retirement, and payments of $2.6 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program.

In the nine months ended September 29, 2023, net cash provided by financing activities was $16.2 million, and consisted of the proceeds from our 2022 Credit Facility of $210.0 million that were used to support our working capital and the purchase of Custom Wheel House, offset by payments of $220.0 million to reduce the revolver borrowings and payments of $6.2 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program.

In the three months ended April 4, 2025, net cash used in financing activities was $3.3 million, and consisted of the proceeds from our 2022 Credit Facility revolver of $37.0 million that were used to support our working capital, offset by payments of $27.0 million to reduce the revolver borrowings, $6.1 million repayments on our term loans, and payments of $0.6 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program.

In the three months ended March 29, 2024, net cash used in financing activities was $7.9 million, and consisted of the proceeds from our 2022 Credit Facility of $70.0 million that were used to support our working capital, offset by payments of $48.0 million to reduce the revolver borrowings, $3.6 million quarterly repayment on our Term A Loan, $25.0 million to repurchase shares of our common stock for retirement, and payments of $1.3 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program.

2022 Credit Facility

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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 $650.0 million.

On April 5, 2022, the Company borrowed $475.0 million under the 2022 Credit Facility, which was used to repay all outstanding amounts owed under the 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 $2.0 million in debt issuance costs in connection with the 2022 Credit Facility, which were allocated to the revolver and amortized on a straight-line basis over the term of the facility.

Additionally, the Company had $4.5 million of remaining unamortized debt issuance costs related to the Prior Credit Facility.

The Company expensed $1.9 million of the remaining unamortized debt issuance costs and allocated $2.5 million to the 2022 Credit Facility.

The Company may borrow, prepay and re-borrow principal under the 2022 Credit Facility during its term.

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Base rate revolving loans bear interest on the outstanding principal amount thereof at a rate per annum equal to the highest of (i) Federal Funds Rate plus 0.50%, (ii) the rate of interest in effect for such day as publicly announced from time to time by the lender as its “prime rate”, and (iii) Adjusted Term SOFR rate for a one-month tenor plus 1.00%, subject to the interest rate floors set forth therein, plus a margin ranging from 0.00% to 1.00%.

At September 27, 2024, the one-month SOFR and three-month SOFR rates were 5.21% and 5.33%, respectively.

At September 27, 2024, our weighted-average interest rate on outstanding borrowing was 6.30%.

At April 4, 2025, the one-month SOFR and three-month SOFR rates were 4.34% and 4.35%, respectively.

At April 4, 2025, our weighted-average interest rate on outstanding borrowing was 6.36%.

On November 14, 2023, in connection and concurrently with the closing of the Marucci acquisition, the Company entered into the First Incremental Facility Amendment (the “Amendment”) amending the 2022 Credit Facility.

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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, the Company entered into the Third Amendment to the Credit Facility to secure an improved covenant profile on its capital structure to provide more flexibility given the uncertain macro environment.

The Company continues to work on gaining further flexibility.

On July 31, 2024 and December 20, 2024, the Company entered into the Third and Fourth Amendment to the Credit Facility, respectively to secure an improved covenant profile on its capital structure to provide more flexibility given the uncertain macro environment.

The 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 September 27, 2024.

The Company was in compliance with the covenants as of April 4, 2025.

Impact of Global Trade Actions and Tariffs

New and expanded tariffs recently announced under the Trump administration and triggered retaliatory actions by certain affected countries, and other foreign governments have introduced additional costs and uncertainty into our supply chain, which may impact our cost structure and working capital needs in the near term.

We are evaluating the potential effect on our supply chain and sourcing strategies, and while we expect some volatility in cash flows as we adjust, we believe our existing liquidity and access to the 2022 Credit Facility provide sufficient flexibility to manage these developments.

Please read “U.S.

policies related to global trade and tariffs could have a material adverse effect on our results of operations” within Item 1A.

Risk Factors of this Quarterly Report on Form 10-Q.

Material Cash Requirements

There have been no material changes to the information in our material cash requirements related to commitments or contractual obligations from those reported in our Annual Report on Form 10-K for the fiscal year ended December 29, 2023, as filed with the SEC on February 23, 2024.

Historically, inflation has not had a material effect on our results of operations.

However, significant increases in inflation, particularly those related to wages and increases in the cost of raw materials have and could continue to have an adverse impact on our business, financial condition and results of operations.

There have been no material changes to the information in our material cash requirements related to commitments or contractual obligations from those reported in our Annual Report on Form 10-K for the fiscal year ended January 3, 2025, as filed with the SEC on February 27, 2025.

Significant increases in inflation, particularly those related to wages and increases in the cost of raw materials have and could continue to have an adverse impact on our business, financial condition and results of operations.

Interest Rates

Interest rate volatility can impact our borrowing costs and overall financial condition.

Significant increases could lead to higher interest expense on our variable-rate debt.

To mitigate this risk and enhance predictability, we utilize interest rate swaps to manage our exposure to interest rate fluctuations.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to the disclosures discussed in the section “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 29, 2023, as filed with the SEC on February 23, 2024.

There have been no material changes to the disclosures discussed in the section “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended January 3, 2025, as filed with the SEC on February 27, 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis