Fox Factory Holding (FOXF) risk factors, FY2024 10-K

RISKS RELATED TO OUR BUSINESS AND OPERATIONS

1. 01We depend on a limited number of suppliers for some of our materials, component parts, and products. The loss of any of these suppliers or an increase in the cost of raw materials could harm our business
2. 02If we are unable to continue to enhance existing products and develop, manufacture and market new products that respond to consumer needs and preferences and achieve market acceptance, we may experience a decrease in demand for our products, and our business and financial results could suffer
3. 03We face intense competition in all product lines, including from some competitors that have greater financial and marketing resources. Failure to compete effectively against competitors would negatively impact our business and operating results
4. 04Our business is sensitive to economic conditions that impact consumer spending. Our performance-defining products, including the bikes and powered vehicles into which many of them are incorporated, are discretionary purchases and may be adversely impacted by changes in the economy
5. 05Our business, financial condition, and results of operations have been and may continue to be adversely affected by global public health epidemics or pandemics, including the ongoing effects of the COVID-19 pandemic
6. 06If we are unable to maintain our premium brand image, our business may suffer as a result of brand degradation
7. 07Our growth in the Powered Vehicle and Aftermarket Applications Groups are dependent upon our continued ability to expand our product sales into powered vehicles that require performance-defining products and the continued expansion of the market for these powered vehicles
8. 08A significant portion of our Specialty Sports Group’s sales are highly dependent on the demand for high-end bikes and Marucci products. A material decline in the demand for these bikes, bike suspension components, or Marucci products could have a material adverse effect on our business or results of operations
9. 09Our business depends substantially on our ability to attract and retain experienced and qualified talent, including our senior management team
10. 10Changes in our customer, channel, and product mix could place demands that are more rigorous on our infrastructure and cause our profitability percentages to fluctuate
11. 11A disruption in the operations of our facilities could have a negative effect on our business, financial condition, or results of operations
12. 12Work stoppages, infrastructure issues, or other disruptions, including those that involve our customers, could adversely affect our operating results
13. 13We may not be able to sustain our past growth or successfully implement our growth strategy, which may have a negative effect on our business, financial condition, or results of operations
14. 14Our cost optimization efforts may not succeed or may be significantly delayed, which may impact our ability to deliver improved margins
15. 15The professional athletes, athletic programs, and race teams who use our products are an important aspect of the image of our brands. The loss of the support of professional athletes for our products or the inability to attract new professional athletes may harm our business
16. 16We depend on our relationships with dealers, distributors, and retailers and their ability to sell and service our products. Any disruption in these relationships could harm our sales
17. 17We are a supplier in the high-end bike and powered vehicles markets, and our business largely depends on the orders we receive from our OEM customers and on their success
18. 18Currency exchange rate fluctuations could impact gross margins and expenses
19. 19Our international operations are exposed to risks associated with conducting business globally
20. 20Our sales could be adversely impacted by the disruption or cessation of sales by other manufacturers or if other manufacturers enter the specialty markets in which we operate
21. 21We have been and may become subject to intellectual property disputes that could cause us to incur significant costs, pay significant damages, or prohibit us from selling our products
22. 22If we are unable to enforce our intellectual property rights, our reputation and sales could be adversely affected
23. 23margins, even if we are ultimately successful in limiting the distribution of a product that infringes our rights, which in turn may affect our business, financial condition, or results of operations
24. 24If we inaccurately forecast demand for our products or inaccurately predict OEM and dealer destocking and restocking cycles and production schedules, we may manufacture insufficient or excess quantities or our manufacturing costs could increase, which could adversely affect our business
25. 25Product recalls, and significant product repair and/or replacement due to product warranty costs and claims have had, and in the future could have, a material adverse impact on our business
26. 26An adverse determination in any material product liability claim against us could adversely affect our operating results or financial condition
27. 27We and our employees are subject to certain risks in our manufacturing and in the testing of our products
28. 28Fuel shortages, or high fuel prices, could have a negative effect on the use of powered vehicles that use our products
29. 29We do not control our suppliers, athletic programs, OEMs, other customers, or partners, or require them to comply with a formal code of conduct, and actions that they might take could harm our reputation and sales
30. 30We may incur higher employee costs in the future
31. 31We rely on increasingly complex information systems to manage our manufacturing, distribution, sales, and other functions. If our information systems fail to perform these functions adequately or if we experience an interruption in our operations, our business could suffer
32. 32Our operations may be impaired if our technology systems fail to perform adequately, and we could be negatively impacted by cybersecurity attacks
33. 33We are subject to evolving privacy laws in the U.S. and other jurisdictions that could adversely impact our business and require that we incur substantial costs
34. 34Our vendors’ and commercial partners’ information technology systems may fail or suffer security breaches, which could result in a material disruption of our operations
35. 35We have grown and may continue to grow in the future through acquisitions. Growth by acquisitions involves risks, and we may not be able to effectively integrate businesses we acquire, or we may not be able to identify or consummate any future acquisitions on favorable terms, or at all
36. 36Our operating results are subject to quarterly variations in our sales, which could make our operating results difficult to predict and could adversely affect the price of our common stock
37. 37Because of the current inflation affecting the economy and the Federal Reserve’s changes in interest rates in response, we may be harmed in the future

RISKS RELATED TO OUR INDEBTEDNESS AND LIQUIDITY

1. 38The 2022 Credit Facility places operating restrictions on us and creates default risks
2. 39These restrictions may interfere with our ability to obtain financing or engage in other business activities, which may have a material adverse effect on our business, financial condition, or results of operations
3. 40As of January 3, 2025, we had $705.1 million of indebtedness and $496.8 million in revolving credit available to borrow under the 2022 Credit Facility. Our ability to borrow under the 2022 Credit Facility fluctuates from time to time due to, among other factors, our borrowings under the 2022 Credit Facility
4. 41Our outstanding indebtedness under the 2022 Credit Facility bears interest at a variable rate, which makes us more vulnerable to increases in interest rates and could cause our interest expense to increase and decrease cash available for operations and other purposes
5. 42We may incur losses on interest rate swap and hedging arrangements

RISKS RELATED TO LAWS AND REGULATIONS

1. 43Changes in tax laws and regulations or other factors could cause our income tax obligations to increase, potentially reducing our net income and adversely affecting our cash flows
2. 44Unpredictability in the adoption, implementation, and enforcement of increasingly stringent emission standards by multiple jurisdictions could adversely affect our business
3. 45Increasing focus on environmental, social, and governance responsibility may impose additional costs on us and expose us to new risks
4. 46Climate change and related regulatory responses may adversely impact our business
5. 47We are subject to employment practice laws and regulations. As such, we are exposed to litigation risks and may incur higher employee costs in the future
6. 48We are subject to environmental laws and regulation and potential exposure for environmental costs and liabilities
7. 49Federal, state, local, foreign, and international laws and regulations relating to environmental matters, land-use, and noise and air pollution may have a negative impact on our future sales and results of operations
8. 50Regulations related to conflict minerals may force us to continue to incur additional expenses and otherwise adversely impact our business
9. 51We retain certain personal information about individuals and are subject to various privacy and consumer protection laws
10. 52Our vendors and any potential commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements
11. 53U.S. policies related to global trade and tariffs could have a material adverse effect on our results of operations
12. 54We are, and may in the future be, subject to legal proceedings. If the outcomes of these proceedings are adverse to us, it could have a material adverse effect on our business, financial condition and results of operations

RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

1. 55The trading price of our common stock may be volatile, and you might be unable to sell your shares at or above the price you pay for the shares
2. 56The issuance of additional shares of our common stock, such as the follow-on offering of approximately 2.8 million shares of common stock that we completed in June 2020, could dilute the ownership interest of our common stockholders and could depress the market price of shares of our common stock
3. 57If securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline
4. 58Anti-takeover provisions in our charter documents and Delaware law could discourage, delay, or prevent a change in control of our Company
5. 59We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term stockholder value, and share repurchases could increase the volatility of the price of our common stock
6. 60Failure of our internal controls over financial reporting could adversely affect our business and financial results