GlobeNewswire Inc | Aug 5, 2020 04:05PM EDT

August 05, 2020

Achieves Second Quarter Sales of $183.1 MillionGross Margin Increases 40 Basis Points to 32.8%Reports Earnings per Diluted Share of $0.32Adjusted Earnings per Diluted Share of $0.50

BRASELTON, Ga., Aug. 05, 2020 (GLOBE NEWSWIRE) -- Fox Factory Holding Corp. (NASDAQ: FOXF) (FOX or the Company) today reported financial results for the second quarter and six months ended July 3, 2020.

Second Quarter Fiscal 2020 Highlights

-- Sales decreased 4.7% to $183.1 million, compared to $192.1 million in the same period last fiscal year -- Gross margin increased 40 basis points to 32.8%, compared to 32.4% in the same period last fiscal year; non-GAAP adjusted gross margin increased 40 basis points to 33.1% compared to the same period last fiscal year -- Net income attributable to FOX stockholders was $12.6 million, or 6.9% of sales and $0.32 of earnings per diluted share, compared to $22.9 million, or 11.9% of sales and $0.59 of earnings per diluted share in the same period last fiscal year -- Non-GAAP adjusted net income was $19.7 million, or $0.50 of adjusted earnings per diluted share, compared to $26.6 million, or $0.68 of adjusted earnings per diluted share in the same period last fiscal year -- Adjusted EBITDA was $33.7 million, or 18.4% of sales, compared to $38.2 million, or 19.9% of sales in the same period last fiscal year

"FOX's resilient second quarter results reflect the strength of our diversified customer base and performance-defining product portfolio, as well as the commitment and dedication of our talented management team," commented Mike Dennison, FOXs Chief Executive Officer. "We overcame an unprecedented shutdown of our U.S. factories and economy associated with the COVID-19 pandemic which lasted for over half of our quarter and we were able to not only effectively restart our business but support an incredibly strong surge in demand for our products across all channels. In addition, our Specialty Sports Group was a standout success in the quarter, exceeding our pre-COVID expectations and delivering 10.0% growth."

"We remain optimistic and confident about the growth opportunities ahead of us, grounded in our strategic initiatives as well as the consumer loyalty and power of the FOX brand, Dennison went on to say.

Sales for the second quarter of fiscal 2020 were $183.1 million, a decrease of 4.7% as compared to sales of $192.1 million in the second quarter of fiscal 2019. This decrease in sales reflects a 14.5% decrease in Powered Vehicles Group sales, partially offset by a 10.0% increase in Specialty Sports Group sales. The decrease in Powered Vehicles Group products is primarily due to impacts of the COVID-19 pandemic, including production shutdowns at certain OEM customers, partially offset by the impact of SCA, a subsidiary which was acquired in March 2020. The increase in Specialty Sports Group products is primarily driven by increased demand in both the OEM and aftermarket channels.

Gross margin was 32.8% for the second quarter of fiscal 2020, a 40 basis point increase from gross margin of 32.4% in the second quarter of fiscal 2019. Non-GAAP adjusted gross margin increased 40 basis points to 33.1% from the same prior fiscal year period, excluding the effects of strategic transformation and acquisition related costs. The increase in gross margin was primarily due to the impact of the SCA acquisition, product and channel mix, and improvement in supply chain efficiencies, partially offset by higher factory related costs including incremental costs related to the COVID-19 pandemic. A reconciliation of gross profit to non-GAAP adjusted gross profit and the resulting non-GAAP adjusted gross margin is provided at the end of this press release.

Total operating expenses were $40.6 million for the second quarter of fiscal 2020 compared to $32.7 million in the second quarter of fiscal 2019. The increase in operating expenses is primarily due to the inclusion of SCA operating costs of $4.5 million, amortization expense of $3.7 million, and acquisition-related compensation costs of $1.2 million, partially offset by reductions in various other expenses.

As a percentage of sales, operating expenses were 22.2% for the second quarter of fiscal 2020, compared to 17.0% in the second quarter of fiscal 2019. Non-GAAP operating expenses were $32.7 million, or 17.9% of sales in the second quarter of fiscal 2020, compared to $29.0 million, or 15.1% of sales in the second quarter of the prior fiscal year. Reconciliations of operating expense to non-GAAP operating expense are provided at the end of this press release.

The Companys effective tax rate was 19.5% in the second quarter of fiscal 2020, compared to an effective tax rate of 16.2% in the second quarter of fiscal 2019.

Net income attributable to FOX stockholders in the second quarter of fiscal 2020 was $12.6 million, compared to $22.9 million in the second quarter of the prior fiscal year. Earnings per diluted share for the second quarter of fiscal 2020 were $0.32, compared to earnings per diluted share of $0.59 for the second quarter of fiscal 2019.

Non-GAAP adjusted net income was $19.7 million, or $0.50 of adjusted earnings per diluted share, compared to adjusted net income of $26.6 million, or $0.68 of adjusted earnings per diluted share in the same period of the prior fiscal year. Reconciliations of net income attributable to FOX stockholders as compared to non-GAAP adjusted net income and the calculation of non-GAAP adjusted earnings per diluted share are provided at the end of this press release.

Adjusted EBITDA in the second quarter of fiscal 2020 was $33.7 million, compared to $38.2 million in the second quarter of fiscal 2019. Adjusted EBITDA margin in the second quarter of fiscal 2020 was 18.4%, compared to 19.9% in the second quarter of fiscal 2019. Reconciliations of net income to adjusted EBITDA and the calculation of adjusted EBITDA margin are provided at the end of this press release.

First Six Months Fiscal 2020 Results

Sales for the six months ended July3, 2020, were $367.5 million, an increase of 3.9% compared to the same period in 2019. Sales of Powered Vehicle and Specialty Sports products increased 3.3% and 4.7%, respectively, for the first six months of 2020 compared to the prior year period.

Gross margin was 31.7% in the first six months of fiscal 2020, a 30 basis point decrease, compared to gross margin of 32.0% in the first six months of fiscal 2019. On a non-GAAP basis, adjusted gross margin decreased 30 basis points, excluding the effects of strategic transformation and acquisition related costs. The decrease in year-to-date gross margin was primarily due to factory costs incurred during the government mandated closures in response to the COVID-19 pandemic, partially offset by a change in product and channel mix, and the impact of the SCA acquisition. A reconciliation of gross profit to non-GAAP adjusted gross profit and the resulting non-GAAP adjusted gross margin is provided at the end of this press release.

Net income attributable to FOX stockholders in the first six months of fiscal 2020 was $20.9 million, compared to $41.0 million in the first six months of the prior year. Earnings per diluted share for the first six months of fiscal 2020 was $0.53, compared to $1.05 in the same period of fiscal 2019.

Non-GAAP adjusted net income in the first six months of fiscal 2020 was $40.2 million, or $1.02 of adjusted earnings per diluted share, compared to $48.3 million, or $1.23 of adjusted earnings per diluted share in the same period of the prior fiscal year. Reconciliations of net income attributable to FOX stockholders to non-GAAP adjusted net income and the calculation of non-GAAP adjusted earnings per share are provided at the end of this press release.

Adjusted EBITDA decreased to $65.0 million in the first six months of fiscal 2020, compared to $68.2 million in the first six months of fiscal 2019. Adjusted EBITDA margin decreased to 17.7% in the first six months of fiscal 2020, compared to 19.3% in the first six months of fiscal 2019. Reconciliations of net income to adjusted EBITDA and the calculation of non-GAAP adjusted EBITDA margin are provided at the end of this press release.

Balance Sheet Highlights

As of July3, 2020, the Company had cash and cash equivalents of $218.0 million compared to $43.7 million as of January3, 2020. The cash balance reflects $198.2million from the Company's June 2020 common stock offering of 2.8 million shares. Inventory was $148.5 million as of July3, 2020, compared to $128.5 million as of January3, 2020. As of July3, 2020, accounts receivable and accounts payable were $87.7 million and $64.9 million, respectively, compared to $91.6 million and $55.1 million, respectively, as of January3, 2020. The changes in accounts receivable, inventory and accounts payable reflect the SCA acquisition, seasonality, and the impacts of the COVID-19 pandemic on the Company's shipment, collection and payment cycles. Prepaids and other current assets increased to $46.1 million as of July3, 2020, compared to $17.9 million as of January3, 2020, primarily due to SCA-related items including vehicle chassis deposits and contingent retention incentives held in escrow.

Property, plant and equipment, net was $147.0 million as of July3, 2020, compared to $108.4 million as of January3, 2020 reflecting capital expenditures of $32.8 million as well as the acquisition of SCA.

Total debt was $406.4 million, compared to $68.0 million as of January3, 2020. The increase is primarily due to borrowings to fund the acquisition of SCA in the first quarter of fiscal 2020.

Fiscal 2020 Guidance

Due to the rapidly evolving market conditions domestically and internationally in response to the continued spread of COVID-19, full fiscal 2020 guidance remains suspended as previously reported on April 9, 2020 and the Company does not intend to provide quarterly guidance until the effects of the pandemic can be better assessed.

Announces Chief Financial Officer Appointment

FOX also announced today in a separate press release that veteran strategic and financial executive Scott Humphrey was promoted to the role of Chief Financial Officer (CFO) effective August 4, 2020. Mr. Humphrey will succeed interim CFO, John Blocher, who will reassume the role Senior Vice-President of Finance.

Conference Call & Webcast

The Company will hold an investor conference call today at 1:30 p.m. Pacific time (4:30 p.m. Eastern Time). The conference call dial-in number for North America listeners is (877) 425-9470, and international listeners may dial (201) 389-0878; the conference ID is 13707094. Live audio of the conference call will be simultaneously webcast in the investor relations section of the Company's website at http://www.ridefox.com. The webcast of the teleconference will be archived and available on the Companys website.

About Fox Factory Holding Corp. (NASDAQ: FOXF)

Fox Factory Holding Corp. designs and manufactures performance-defining ride dynamics products primarily for bicycles, on-road and off-road vehicles and trucks, side-by-side vehicles, all-terrain vehicles, snowmobiles, specialty vehicles and applications, motorcycles, and commercial trucks. The Company is a direct supplier to leading powered vehicle original equipment manufacturers ("OEMs"). Additionally, the Company supplies top bicycle OEMs and their contract manufacturers, and provides aftermarket products to retailers and distributors.

FOX is a registered trademark of Fox Factory, Inc. NASDAQ Global Select Market is a registered trademark of The NASDAQ OMX Group, Inc. All rights reserved.

Non-GAAP Financial Measures

In addition to reporting financial measures in accordance with generally accepted accounting principles (GAAP), FOX is including in this press release non-GAAP adjusted gross margin, non-GAAP operating expense, non-GAAP adjusted net income, non-GAAP adjusted earnings per diluted share, adjusted EBITDA, and adjusted EBITDA margin, all of which are non-GAAP financial measures. FOX defines non-GAAP adjusted gross margin as gross profit margin adjusted for certain strategic transformation costs and the amortization of acquired inventory valuation markup. FOX defines non-GAAP operating expense as operating expense adjusted for amortization of purchased intangibles, patent litigation-related expenses, acquisition and integration-related expenses, strategic transformation costs and costs related to tax restructuring initiatives. FOX defines non-GAAP adjusted net income as net income attributable to FOX Stockholders adjusted for amortization of purchased intangibles, patent litigation-related expenses, acquisition and integration-related expenses, strategic transformation costs, and costs related to tax restructuring initiatives, all net of applicable tax. These adjustments are more fully described in the tables included at the end of this press release. Non-GAAP adjusted earnings per diluted share is defined as non-GAAP adjusted net income divided by the weighted average number of diluted shares of common stock outstanding during the period. FOX defines adjusted EBITDA as net income adjusted for interest expense, net other expense, income taxes, amortization of purchased intangibles, depreciation, stock-based compensation, patent litigation-related expenses, acquisition and integration-related expenses, strategic transformation costs, and costs related to tax restructuring initiatives that are more fully described in the tables included at the end of this press release. Adjusted EBITDA margin is defined as adjusted EBITDA divided by sales.

FOX includes these non-GAAP financial measures because it believes they allow investors to understand and evaluate the Companys core operating performance and trends. In particular, the exclusion of certain items in calculating non-GAAP operating expense, non-GAAP adjusted net income and adjusted EBITDA (and accordingly, non-GAAP adjusted earnings per diluted share and adjusted EBITDA margin) can provide a useful measure for period-to-period comparisons of the Companys core business. These non-GAAP financial measures have limitations as analytical tools, including the fact that such non-GAAP financial measures may not be comparable to similarly titled measures presented by other companies because other companies may calculate non-GAAP operating expense, non-GAAP adjusted net income, non-GAAP adjusted earnings per diluted share, adjusted EBITDA and adjusted EBITDA margin differently than FOX does. For more information regarding these non-GAAP financial measures, see the tables included at the end of this press release.

FOX FACTORY HOLDING CORP.Condensed Consolidated Balance Sheets(in thousands, except per share data)

As of As of July 3, January 3 2020 2020 (Unaudited) Assets Current assets: Cash and cash equivalents $ 217,965 $ 43,736 Accounts receivable (net of allowances of $1,212and $810 at July3, 2020 and January3, 2020, 87,670 91,632 respectively)Inventory 148,464 128,505 Prepaids and other current assets 46,085 17,940 Total current assets 500,184 281,813 Property, plant and equipment, net 146,974 108,379 Lease right-of-use assets 19,221 17,472 Deferred tax assets 13,814 25,725 Goodwill 285,758 93,527 Intangibles, net 214,642 81,949 Other assets 4,611 451 Total assets $ 1,185,204 $ 609,316 Liabilities and stockholders? equity Current liabilities: Accounts payable $ 64,939 $ 55,144 Accrued expenses 42,298 35,744 Reserve for uncertain tax positions 992 925 Current portion of long-term debt 10,000 ? Total current liabilities 118,229 91,813 Line of credit 15,000 68,000 Long-term debt, less current portion 381,393 ? Other liabilities 12,543 11,584 Total liabilities 527,165 171,397 Redeemable non-controlling interest 24,975 15,719 Stockholders? equity Preferred stock, $0.001 par value ? 10,000authorized and no shares issued or ? ? outstanding as of July3, 2020 and January3, 2020Common stock, $0.001 par value ? 90,000 authorized;42,327 shares issuedand 41,438 outstanding as of July3, 2020; 39,448 41 39 shares issued and 38,559outstanding as of January3, 2020Additional paid-in capital 321,479 123,274 Treasury stock, at cost; 890 common shares as of (13,754 ) (13,754 )July3, 2020 and January3, 2020Accumulated other comprehensive income 133 150 Retained earnings 325,165 312,491 Total stockholders? equity 633,064 422,200 Total liabilities, redeemable non-controlling $ 1,185,204 $ 609,316 interest and stockholders? equity

FOX FACTORY HOLDING CORP.Condensed Consolidated Statements of Income(In thousands, except per share data)(Unaudited)

For the three months For the six months ended ended July 3, June 28, July 3, June 28, 2020 2019 2020 2019Sales $ 183,102 $ 192,122 $ 367,463 $ 353,822Cost of sales 123,116 129,902 250,862 240,545Gross profit 59,986 62,220 116,601 113,277Operating expenses: Sales and marketing 12,561 11,264 24,624 20,526Research and development 8,236 7,763 16,265 15,066General and administrative 14,566 12,158 36,979 23,338Amortization of purchased 5,264 1,564 7,807 3,057intangiblesTotal operating expenses 40,627 32,749 85,675 61,987Income from operations 19,359 29,471 30,926 51,290Other expense, net: Interest expense 2,892 1,005 4,739 1,834Other expense 71 582 133 569Other expense, net 2,963 1,587 4,872 2,403Income before income taxes 16,396 27,884 26,054 48,887Provision for income taxes 3,204 4,522 4,124 7,123Net income 13,192 23,362 21,930 41,764Less: net income attributable 584 441 1,072 740to non-controlling interestNet income attributable to FOX $ 12,608 $ 22,921 $ 20,858 $ 41,024stockholdersEarnings per share: Basic $ 0.32 $ 0.60 $ 0.54 $ 1.07Diluted $ 0.32 $ 0.59 $ 0.53 $ 1.05Weighted-average shares used to compute earnings per share:Basic 38,991 38,286 38,781 38,164Diluted 39,584 39,181 39,368 39,140

FOX FACTORY HOLDING CORP. NET INCOME TO NON-GAAP ADJUSTED NET INCOME RECONCILIATIONAND CALCULATION OF NON-GAAP ADJUSTED EARNINGS PER SHARE (In thousands, except per share data) (Unaudited)

The following table provides a reconciliation of net income attributable to FOX stockholders, the most directly comparable financial measure calculated and presented in accordance with GAAP, to non-GAAP adjusted net income (a non-GAAP measure), and the calculation of non-GAAP adjusted earnings per share (a non-GAAP measure) for the three and six months ended July3, 2020 and June28, 2019. These non-GAAP financial measures are provided in addition to, and not as alternatives for, the Companys reported GAAP results.

For the three months For the six months ended ended July 3, June 28, July 3, June 28, 2020 2019 2020 2019Net income attributable to $ 12,608 $ 22,921 $ 20,858 $ 41,024 FOX stockholdersAmortization of purchased 5,264 1,564 7,807 3,057 intangiblesPatent litigation-related 707 1,144 1,143 3,187 expensesOther acquisition andintegration-related expenses 1,424 1,003 12,376 1,113 (1)Strategic transformation 1,099 686 1,700 916 costs (2)Tax reform implementation ? 54 ? 186 costsTax impacts of reconciling (1,393 ) (739 ) (3,645 ) (1,233 )items above (3)Non-GAAP adjusted net income $ 19,709 $ 26,633 $ 40,239 $ 48,250 Non-GAAP adjusted EPS Basic $ 0.51 $ 0.70 $ 1.04 $ 1.26 Diluted $ 0.50 $ 0.68 $ 1.02 $ 1.23 Weighted average shares usedto compute non-GAAP adjusted EPSBasic 38,991 38,286 38,781 38,164 Diluted 39,584 39,181 39,368 39,140

(1) Represents various acquisition-related costs and expenses incurred to integrate acquired entities into the Companys 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 three months For the six months ended ended July 3, June 28, July 3, June 28, 2020 2019 2020 2019Acquisition related costs and $ 1,424 $ 575 $ 12,316 $ 685 expensesFinished goods inventory valuation ? 428 60 428 adjustmentOther acquisition and $ 1,424 $ 1,003 $ 12,376 $ 1,113 integration-related expenses

(2) Represents costs associated with various strategic initiatives including the expansion of the Powered Vehicles Groups manufacturing operations. For the three and six month periods ended July3, 2020, $507 and $821 is classified as operating expense, and $592 and $879 is classified as cost of sales, respectively. For the three and six month periods ended June28, 2019, $266 and $496, respectively is classified as cost of sales and $420 is classified as operating expenses.

(3) Tax impact calculated based on the respective year to date effective tax rate, including the full year impact of non-deductible transaction costs.

FOX FACTORY HOLDING CORP. NET INCOME TO ADJUSTED EBITDA RECONCILIATION ANDCALCULATION OF NET INCOME MARGIN AND ADJUSTED EBITDA MARGIN (In thousands) (Unaudited)

The following tables provide a reconciliation of net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to adjusted EBITDA (a non-GAAP measure), and the calculations of net income margin and adjusted EBITDA margin (a non-GAAP measure) for the three and six months ended July3, 2020 and June28, 2019. These non-GAAP financial measures are provided in addition to, and not as alternatives for, the Companys reported GAAP results.

For the three months For the six months ended ended July 3, June 28, July 3, June 28, 2020 2019 2020 2019Net income $ 13,192 $ 23,362 $ 21,930 $ 41,764 Provision for income taxes 3,204 4,522 4,124 7,123 Depreciation and amortization 9,194 4,189 15,030 8,194 Non-cash stock-based 2,076 1,621 3,997 3,350 compensationPatent litigation-related 707 1,144 1,143 3,187 expensesOther acquisition andintegration-related expenses 1,262 1,003 12,161 1,113 (1)Strategic transformation 1,099 686 1,700 916 costs (2)Tax reform implementation ? 54 ? 186 costsOther expense, net 2,963 1,587 4,872 2,403 Adjusted EBITDA $ 33,697 $ 38,168 $ 64,957 $ 68,236 Net Income Margin 7.2 % 12.2 % 6.0 % 11.8 % Adjusted EBITDA Margin 18.4 % 19.9 % 17.7 % 19.3 %

(1) Represents various acquisition-related costs and expenses incurred to integrate acquired entities into the Companys operations, excluding $162 and $215 in stock-based compensation for the three and six month periods ended July3, 2020, 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 three months For the six months ended ended July 3, June 28, July 3, June 28, 2020 2019 2020 2019Acquisition related costs and $ 1,262 $ 575 $ 12,101 $ 685 expensesFinished goods inventory valuation ? 428 60 428 adjustmentOther acquisition and $ 1,262 $ 1,003 $ 12,161 $ 1,113 integration-related expenses

(2) Represents costs associated with various strategic initiatives including the expansion of the Powered Vehicles Groups manufacturing operations. For the three and six month periods ended July3, 2020, $507 and $821 is classified as operating expense, and $592 and $879 is classified as cost of sales, respectively. For the three and six month periods ended June28, 2019, $266 and $496, respectively is classified as cost of sales and $420 is classified as operating expenses.

FOX FACTORY HOLDING CORP. GROSS PROFIT TO NON-GAAP ADJUSTED GROSS PROFIT RECONCILIATION ANDCALCULATION OF GROSS MARGIN AND NON-GAAP ADJUSTED GROSS MARGIN (In thousands) (Unaudited)

The following table provides a reconciliation of gross profit to non-GAAP adjusted gross profit (a non-GAAP measure) for thethree and sixmonths ended July3, 2020 andJune28, 2019, and the calculation of gross margin and non-GAAP adjusted gross margin (a non-GAAP measure). These non-GAAP financial measures are provided in addition to, and not as alternatives for, the Companys reported GAAP results.

For the three months For the six months ended ended July 3, June 28, July 3, June 28, 2020 2019 2020 2019Sales $ 183,102 $ 192,122 $ 367,463 $ 353,822 Gross Profit $ 59,986 $ 62,220 $ 116,601 $ 113,277 Strategic transformation 592 266 879 496 costs (1)Amortization of acquiredinventory valuation ? 428 60 428 markup (2)Non-GAAP Adjusted Gross $ 60,578 $ 62,914 $ 117,540 $ 114,201 Profit Gross Margin 32.8 % 32.4 % 31.7 % 32.0 % Non-GAAP Adjusted Gross 33.1 % 32.7 % 32.0 % 32.3 %Margin

(1) Represents costs associated with various strategic initiatives including the expansion of the Powered Vehicles Groups manufacturing operations.

(2) Represents the impact of the finished goods inventory valuation adjustment recorded in connection with our 2020 acquisition of SCA and our 2019 acquisition of Ridetech.

FOX FACTORY HOLDING CORP. OPERATING EXPENSE TO NON-GAAP OPERATING EXPENSE RECONCILIATION ANDCALCULATION OF OPERATING EXPENSE AND NON-GAAP OPERATING EXPENSE AS A PERCENTAGE OF SALES(In thousands) (Unaudited)

The following tables provide a reconciliation of operating expense to non-GAAP operating expense (a non-GAAP measure) and the calculations of operating expense as a percentage of sales and non-GAAP operating expense as a percentage of sales (a non-GAAP measure), for the three and six months ended July3, 2020 and June28, 2019. These non-GAAP financial measures are provided in addition to, and not as an alternative for, the Companys reported GAAP results.

For the three months ended For the six months ended July 3, June 28, July 3, June 28, 2020 2019 2020 2019Sales $ 183,102 $ 192,122 $ 367,463 $ 353,822 Operating Expense $ 40,627 $ 32,749 $ 85,675 $ 61,987 Amortization ofpurchased (5,264 ) (1,564 ) (7,807 ) (3,057 ) intangiblesPatentlitigation-related (707 ) (1,144 ) (1,143 ) (3,187 ) expensesOther acquisitionand (1,424 ) (575 ) (12,316 ) (685 ) integration-relatedexpenses (1)Strategictransformation (507 ) (420 ) (821 ) (420 ) costs (2)Tax reformimplementation ? (54 ) ? (186 ) costsNon-GAAP operating $ 32,725 $ 28,992 $ 63,588 $ 54,452 expense Operating expenseas a percentage of 22.2 % 17.0 % 23.3 % 17.5 %sales Non-GAAP operatingexpense as a 17.9 % 15.1 % 17.3 % 15.4 %percentage of sales

(1) Represents various acquisition-related costs and expenses incurred to integrate acquired entities into the Companys operations.

(2) Represents costs associated with various strategic initiatives including the expansion of the Powered Vehicles Groups manufacturing operations.

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this press release including earnings guidance may be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends that all such statements be subject to the safe-harbor provisions contained in those sections. Forward-looking statements generally relate to future events or the Companys future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as may, might, will, would, should, expect, plan, anticipate, could, intend, target, project, contemplate, believe, estimate, predict, likely, potential or continue or other similar terms or expressions and such forward-looking statements include, but are not limited to, statements about the impact of the global outbreak of COVID-19 on the Companys business and operations; the Companys continued growing demand for its products; the Companys execution on its strategy to improve operating efficiencies; the Companys optimism about its operating results and future growth prospects; the Companys expected future sales and future non-GAAP adjusted earnings per diluted share; and any other statements in this press release that are not of a historical nature. Many important factors may cause the Companys actual results, events or circumstances to differ materially from those discussed in any such forward-looking statements, including but not limited to: the Companys ability to complete any acquisition and/or incorporate any acquired assets into its business; the Companys ability to improve operating and supply chain efficiencies; the Companys ability to enforce its intellectual property rights; the Companys future financial performance, including its sales, cost of sales, gross profit or gross margin, operating expenses, ability to generate positive cash flow and ability to maintain profitability; the Companys ability to adapt its business model to mitigate the impact of certain changes in tax laws including those enacted in the U.S. in December 2017; changes in the relative proportion of profit earned in the numerous jurisdictions in which the Company does business and in tax legislation, case law and other authoritative guidance in those jurisdictions; factors which impact the calculation of the weighted average number of diluted shares of common stock outstanding, including the market price of the Companys common stock, grants of equity-based awards and the vesting schedules of equity-based awards; the Companys ability to develop new and innovative products in its current end-markets and to leverage its technologies and brand to expand into new categories and end-markets; the Companys ability to increase its aftermarket penetration; the Companys exposure to exchange rate fluctuations; the loss of key customers; strategic transformation costs; the outcome of pending litigation; the possibility that the Company may not be able to accelerate its international growth; the Companys ability to maintain its premium brand image and high-performance products; the Companys ability to maintain relationships with the professional athletes and race teams that it sponsors; the possibility that the Company may not be able to selectively add additional dealers and distributors in certain geographic markets; the overall growth of the markets in which the Company competes; the Companys expectations regarding consumer preferences and its ability to respond to changes in consumer preferences; changes in demand for high-end suspension and ride dynamics products; the Companys loss of key personnel, management and skilled engineers; the Companys ability to successfully identify, evaluate and manage potential acquisitions and to benefit from such acquisitions; product recalls and product liability claims; future economic or market conditions; and the other risks and uncertainties described in Risk Factors contained in its Annual Report on Form 10-K or Quarterly Reports on Form 10-Q or otherwise described in the Companys other filings with the Securities and Exchange Commission. New risks and uncertainties emerge from time to time and it is not possible for the Company to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this press release. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the Companys expectations, objectives or plans will be achieved in the timeframe anticipated or at all. Investors are cautioned not to place undue reliance on the Companys forward-looking statements and the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

CONTACT:

ICRKatie Turner646-277-1228Katie.Turner@icrinc.com