Business Context and Reporting Period
Company: Fox Factory Holding Corp. (FOXF)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Three and six months ended July 3, 2026
Business Overview: Fox Factory designs, engineers, and manufactures premium performance products for bicycles, powered vehicles (side-by-sides, trucks, ATVs), and baseball/softball gear. Operations are organized into three segments: Powered Vehicles Group (PVG), Aftermarket Applications Group (AAG), and Specialty Sports Group (SSG).
Key Financial Metrics
| Metric (in thousands) | 3 Months Ended July 3, 2026 |
6 Months Ended July 3, 2026 |
6 Months Ended July 4, 2025 |
|---|---|---|---|
| Net Sales | $358,122 | $726,779 | $729,894 |
| Gross Profit | $109,693 | $216,081 | $226,670 |
| Gross Margin | 30.6% | 29.7% | 31.1% |
| Operating Income (Loss) | $17,507 | $23,458 | $(232,059) |
| Net Income (Loss) | $4,034 | $(10,984) | $(257,029) |
| Adjusted EBITDA | $59,662 | $111,074 | $117,558 |
| Cash from Operations | N/A | $13,150 | $37,476 |
| Cash & Equivalents | $61,276 | $61,276 | $81,451 |
| Total Debt (Principal) | $677,200 | $677,200 | $677,200 |
Note: Total Debt includes $163,000 Revolver and $514,200 Term Loan (current + long-term). The filing lists Term Loan principal as $512,344 plus current portion of $26,875, totaling $539,219 in the table, but the balance sheet lists Term Loan less current portion as $477,827 and current portion as $26,875, totaling $504,702 net of issuance costs. The principal amount outstanding is approximately $537.5M Term Loan + $163M Revolver = $700.5M based on Note 7, though the balance sheet reflects specific net carrying values.
Material Changes vs. Prior Period
- Revenue: Net sales for the six months ended July 3, 2026, decreased slightly by 0.4% ($3.1 million) compared to the prior year. This was driven by OEMs and dealers reducing inventory levels and lost revenue from divested businesses, partially offset by strengthening demand in powersports and AAG products.
- Profitability: Operating income improved significantly to $23.5 million from a loss of $232.1 million in the prior year. The prior year loss was heavily impacted by a $262.1 million goodwill impairment charge, which did not recur in the current period.
- Margins: Gross margin decreased 140 basis points to 29.7% for the six-month period, primarily due to product mix shifts and the impact of tariffs.
- Divestiture: The company divested its Phoenix, Arizona AAG operations (Shock Therapy, Upfit UTV, Geiser) in February 2026, recording a $10.6 million loss on the transaction.
- Debt Structure: The company entered into a Sixth Amendment to its Credit Agreement in May 2026, adjusting interest rate margins and tightening certain negative covenants while maintaining a Consolidated Net Leverage Ratio cap of 5.00 for the current quarter.
Guidance, Outlook, and Risks
- Outlook: Management expects cash on hand, operating cash flows, and credit facility availability to be sufficient to fund operations for the next 12 months. No specific numerical guidance for future quarters was provided in this text.
- Tariff Risks: Significant uncertainty remains regarding U.S. trade policies. New tariffs ranging from 10% to 12.5% were announced in July 2026 targeting over 60 countries. The company is evaluating potential refunds for previously paid tariffs following a Supreme Court ruling but notes that refunds are not assured.
- Supply Chain: Risks include potential disruptions from the Uyghur Forced Labor Prevention Act (UFLPA) and scrutiny of manufacturing operations in Taiwan, particularly following a Withhold Release Order against a competitor (Giant Manufacturing).
- Legal Proceedings: A securities fraud class action filed in 2024 was dismissed with prejudice in February 2026. Related derivative suits were voluntarily dismissed in May 2026.
- Unusual Items: The $10.6 million loss on divestiture and the absence of the $262.1 million goodwill impairment from the prior year are the primary drivers of the year-over-year earnings comparison.
Investor Verification Checklist
- Tariff Impact: Verify the extent of cost absorption vs. pass-through for new tariffs announced in July 2026 and the status of refund applications for prior tariffs.
- Inventory Levels: Monitor inventory trends ($382.9 million) as the company noted increases due to planned builds, which could impact future working capital and cash flow.
- Debt Covenants: Confirm continued compliance with the tightened Consolidated Net Leverage Ratio (max 5.00) and Interest Coverage Ratio (min 2.50) under the Sixth Amended Credit Agreement.
- Divestiture Proceeds: Track the collection of the $22.6 million promissory note receivable from the Arizona divestiture, which matures in June 2028.
- Segment Performance: Assess the sustainability of growth in the Powered Vehicles Group (PVG) which drove revenue increases, versus the decline in the Specialty Sports Group (SSG) due to channel destocking.