GlobeNewswire Inc | Nov 10, 2020 04:05PM EST

November 10, 2020

Achieves Record Third Quarter Sales of $260.7 MillionGross Margin Increases 130 Basis Points to 34.3%Reports Earnings per Diluted Share of $0.90Record Adjusted Earnings per Diluted Share of $1.07Reinitiates Fiscal 2020 Guidance

BRASELTON, Ga., Nov. 10, 2020 (GLOBE NEWSWIRE) -- Fox Factory Holding Corp. (NASDAQ: FOXF) (FOX or the Company) today reported financial results for the third quarter and nine months ended October 2, 2020.

Third Quarter Fiscal 2020 Highlights

-- Sales increased 23.4% to $260.7 million, compared to $211.3 million in the same period last fiscal year -- Gross margin increased 130 basis points to 34.3%, compared to 33.0% in the same period last fiscal year; non-GAAP adjusted gross margin increased 110 basis points to 34.5% compared to the same period last fiscal year -- Net income attributable to FOX stockholders was $38.0 million, or 14.6% of sales and $0.90 of earnings per diluted share, compared to $29.5 million, or 14.0% of sales and $0.75 of earnings per diluted share in the same period last fiscal year -- Non-GAAP adjusted net income was $45.4 million, or $1.07 of adjusted earnings per diluted share, compared to $32.7 million, or $0.83 of adjusted earnings per diluted share in the same period last fiscal year -- Adjusted EBITDA was $60.1 million, or 23.1% of sales, compared to $43.6 million, or 20.6% of sales in the same period last fiscal year

"Our record third quarter results demonstrate not only the success of our superior products but also the phenomenal resilience and execution by our entire global team. With swift allocation of resources, we were able to take advantage of the strong demand trends within our end markets, while still driving gross margin improvement amid an uncertain and complex manufacturing environment" commented Mike Dennison, FOXs Chief Executive Officer. "The FOX brand is resonating with consumers who are seeking innovative products with high performance and industry defining capabilities, which is evident in the exceptional 32% revenue growth of our Specialty Sports Group. FOXs premium brand positioning is a key differentiator for OEM partners and aftermarket enthusiasts, and our Powered Vehicles Group is the beneficiary of our long heritage as an industry pioneer. Based on the strength of our year-to-date results and our expectation for momentum to continue through the fourth quarter, we are pleased to reinitiate annual guidance for 2020.

Sales for the third quarter of fiscal 2020 were $260.7 million, an increase of 23.4% as compared to sales of $211.3 million in the third quarter of fiscal 2019. This increase in sales reflects a 17.7% increase in Powered Vehicles Group sales, and a 32.4% increase in Specialty Sports Group sales. The increase in Powered Vehicles Group products is primarily due 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 original equipment manufacturer ("OEM") and aftermarket channels.

Gross margin was 34.3% for the third quarter of fiscal 2020, a 130 basis point increase from gross margin of 33.0% in the third quarter of fiscal 2019. Non-GAAP adjusted gross margin increased 110 basis points to 34.5% 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 favorable product and channel mix including 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.

Total operating expenses were $43.9 million for the third quarter of fiscal 2020, compared to $34.5 million in the third quarter of fiscal 2019. The increase in operating expenses is primarily due to the inclusion of SCA operating costs of $4.4 million, amortization expense of $3.6 million, and acquisition-related compensation costs of $1.3 million. As a percentage of sales, operating expenses were 16.8% for the third quarter of fiscal 2020, compared to 16.3% in the third quarter of fiscal 2019. Non-GAAP operating expenses were $36.4 million, or 14.0% of sales in the third quarter of fiscal 2020, compared to $31.5 million, or 14.9%, of sales in the third 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 12.5% in the third quarter of fiscal 2020, compared to an effective tax rate of 12.9% in the third quarter of fiscal 2019.

Net income attributable to FOX stockholders in the third quarter of fiscal 2020 was $38.0 million, compared to $29.5 million in the third quarter of the prior fiscal year. Earnings per diluted share for the third quarter of fiscal 2020 were $0.90, compared to earnings per diluted share of $0.75 for the third quarter of fiscal 2019.

Non-GAAP adjusted net income was $45.4 million, or $1.07 of adjusted earnings per diluted share, compared to adjusted net income of $32.7 million, or $0.83 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 third quarter of fiscal 2020 was $60.1 million, compared to $43.6 million in the third quarter of fiscal 2019. Adjusted EBITDA margin in the third quarter of fiscal 2020 was 23.1%, compared to 20.6% in the third 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 Nine Months Fiscal 2020 Results

Sales for the nine months ended October2, 2020, were $628.2 million, an increase of 11.2% compared to the same period in 2019. Sales of Powered Vehicle and Specialty Sports products increased 8.8% and 14.8%, respectively, for the first nine months of 2020 compared to the prior year period.

Gross margin was 32.8% in the first nine months of fiscal 2020, a 40 basis point increase, compared to gross margin of 32.4% in the first nine months of fiscal 2019. On a non-GAAP basis, adjusted gross margin increased 30 basis points, excluding the effects of strategic transformation and acquisition related costs. The increase in year-to-date gross margin was primarily due to the impact of the SCA acquisition and a change in product and channel mix partially offset by incremental cost due to government mandated closures in response 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.

Net income attributable to FOX stockholders in the first nine months of fiscal 2020 was $58.9 million, compared to $70.5 million in the first nine months of the prior year. Earnings per diluted share for the first nine months of fiscal 2020 was $1.46, compared to $1.80 in the same period of fiscal 2019.

Non-GAAP adjusted net income in the first nine months of fiscal 2020 was $85.6 million, or $2.12 of adjusted earnings per diluted share, compared to $80.9 million, or $2.07 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 increased to $125.1 million in the first nine months of fiscal 2020, compared to $111.8 million in the first nine months of fiscal 2019. Adjusted EBITDA margin increased to 19.9% in the first nine months of fiscal 2020, compared to 19.8% in the first nine 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 October2, 2020, the Company had cash and cash equivalents of $278.2 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 $135.7 million as of October2, 2020, compared to $128.5 million as of January3, 2020. As of October2, 2020, accounts receivable and accounts payable were $114.1 million and $101.4 million, respectively, compared to $91.6 million and $55.1 million, respectively, as of January3, 2020. The changes in inventory, accounts receivable, and accounts payable reflect seasonality as well as timing of vendor payments. Prepaids and other current assets increased to $31.6 million as of October2, 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 $156.8 million as of October2, 2020, compared to $108.4 million as of January3, 2020 reflecting capital expenditures of $46.0 million as well as the acquisition of SCA.

Total debt was $389.2 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

For the fourth quarter of fiscal 2020, the Company is reinitiating guidance and now expects sales in the range of $240.0 million to $250.0 million and non-GAAP adjusted earnings per diluted share in the range of $0.72 to $0.80.

For the fiscal year 2020, the Company expects sales in the range of $868.2 million to $878.2 million and non-GAAP adjusted earnings per diluted share in the range of $2.84 to $2.92. Our guidance assumes there are no additional government restrictions or other unforeseen COVID related impacts.

Non-GAAP adjusted earnings per diluted share exclude the following items net of applicable tax: amortization of purchased intangibles, patent litigation-related expenses, acquisition and integration-related expenses, strategic transformation costs, and costs related to tax restructuring initiatives. A quantitative reconciliation of non-GAAP adjusted earnings per diluted share for the fourth quarter and full fiscal year 2020 is not available without unreasonable efforts because management cannot predict, with sufficient certainty, all of the elements necessary to provide such a reconciliation.

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 13711755. 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 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 October 2, January 3 2020 2020 (Unaudited) Assets Current assets: Cash and cash equivalents $ 278,246 $ 43,736 Accounts receivable (net of allowances of $837and $810 at October2, 2020 and January3, 114,097 91,632 2020, respectively)Inventory 135,687 128,505 Prepaids and other current assets 31,605 17,940 Total current assets 559,635 281,813 Property, plant and equipment, net 156,819 108,379 Lease right-of-use assets 25,695 17,472 Deferred tax assets 18,525 25,725 Goodwill 287,113 93,527 Intangibles, net 209,590 81,949 Other assets 3,149 451 Total assets $ 1,260,526 $ 609,316 Liabilities and stockholders? equity Current liabilities: Accounts payable $ 101,439 $ 55,144 Accrued expenses 61,393 35,744 Reserve for uncertain tax positions 1,055 925 Current portion of long-term debt 10,000 ? Total current liabilities 173,887 91,813 Line of credit ? 68,000 Long-term debt, less current portion 379,242 ? Other liabilities 23,470 11,584 Total liabilities 576,599 171,397 Redeemable non-controlling interest ? 15,719 Stockholders? equity Preferred stock, $0.001 par value ? 10,000authorized and no shares issued or outstanding ? ? as of October2, 2020 and January3, 2020Common stock, $0.001 par value ? 90,000authorized; 42,601 shares issued and 41,712outstanding as of October2, 2020; 39,448 42 39 shares issued and 38,559 outstanding as ofJanuary3, 2020Additional paid-in capital 334,486 123,274 Treasury stock, at cost; 890 common shares as (13,754 ) (13,754 )of October2, 2020 and January3, 2020Accumulated other comprehensive (loss) income (32 ) 150 Retained earnings 363,185 312,491 Total stockholders? equity 683,927 422,200 Total liabilities, redeemable non-controlling $ 1,260,526 $ 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 ended For the nine months ended October 2, September 27, October 2, September 27, 2020 2019 2020 2019Sales $ 260,700 $ 211,317 $ 628,163 $ 565,139 Cost of sales 171,226 141,500 422,088 382,045 Gross profit 89,474 69,817 206,075 183,094 Operating expenses: Sales and marketing 13,667 11,660 38,291 32,186 Research and 8,514 8,376 24,779 23,442 developmentGeneral and 16,463 12,727 53,443 36,065 administrativeAmortization ofpurchased 5,277 1,694 13,084 4,751 intangiblesTotal operating 43,921 34,457 129,597 96,444 expensesIncome from 45,553 35,360 76,478 86,650 operationsOther expense, net: Interest expense 2,291 748 7,030 2,582 Other (income) (189 ) (37 ) (57 ) 532 expenseOther expense, net 2,102 711 6,973 3,114 Income before 43,451 34,649 69,505 83,536 income taxesProvision for 5,431 4,473 9,555 11,596 income taxesNet income 38,020 30,176 59,950 71,940 Less: net incomeattributable to ? 689 1,072 1,429 non-controllinginterestNet incomeattributable to FOX $ 38,020 $ 29,487 $ 58,878 $ 70,511 stockholdersEarnings per share: Basic $ 0.91 $ 0.77 $ 1.48 $ 1.84 Diluted $ 0.90 $ 0.75 $ 1.46 $ 1.80 Weighted-averageshares used to compute earningsper share:Basic 41,616 38,451 39,726 38,259 Diluted 42,206 39,174 40,314 39,151

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 nine months ended October2, 2020 and September27, 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 ended For the nine months ended October 2, September 27, October 2, September 27, 2020 2019 2020 2019Net incomeattributable to FOX $ 38,020 $ 29,487 $ 58,878 $ 70,511 stockholdersAmortization ofpurchased 5,277 1,694 13,084 4,751 intangiblesPatentlitigation-related 484 860 1,627 4,047 expensesOther acquisitionand 1,567 831 13,944 1,944 integration-relatedexpenses (1)Strategictransformation 622 244 2,322 1,160 costs (2)Tax reformimplementation ? ? ? 186 costsTax impacts ofreconciling items (613 ) (445 ) (4,258 ) (1,678 )above (3)Non-GAAP adjusted $ 45,357 $ 32,671 $ 85,597 $ 80,921 net income Non-GAAP adjusted EPSBasic $ 1.09 $ 0.85 $ 2.15 $ 2.12 Diluted $ 1.07 $ 0.83 $ 2.12 $ 2.07 Weighted averageshares used to compute non-GAAPadjusted EPSBasic 41,616 38,451 39,726 38,259 Diluted 42,206 39,174 40,314 39,151

(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 nine months ended ended October 2, September October 2, September 27, 27, 2020 2019 2020 2019Acquisition related costs and $ 1,567 $ 162 $ 13,884 $ 847 expensesFinished goods inventory ? 669 60 1,097 valuation adjustmentOther acquisition and $ 1,567 $ 831 $ 13,944 $ 1,944 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 nine month periods ended October2, 2020, $144 and $965 is classified as operating expense, and $478 and $1,357 is classified as cost of sales, respectively. For the three and nine month periods ended September27, 2019, $244 and $664, respectively is classified as operating expenses and for the nine months ended September27, 2019 $496 is classified as cost of sales.

(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 nine months ended October2, 2020 and September27, 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 nine months ended ended October 2, September October 2, September 27, 27, 2020 2019 2020 2019Net income $ 38,020 $ 30,176 $ 59,950 $ 71,940 Provision for income 5,431 4,473 9,555 11,596 taxesDepreciation and 9,709 4,663 24,739 12,857 amortizationNon-cash stock-based 2,362 1,605 6,360 4,955 compensationPatentlitigation-related 484 860 1,627 4,047 expensesOther acquisition andintegration-related 1,409 831 13,570 1,944 expenses (1)Strategictransformation costs 622 244 2,322 1,160 (2)Tax reform ? ? ? 186 implementation costsOther expense, net 2,102 711 6,973 3,114 Adjusted EBITDA $ 60,139 $ 43,563 $ 125,096 $ 111,799 Net Income Margin 14.6 % 14.3 % 9.5 % 12.7 % Adjusted EBITDA Margin 23.1 % 20.6 % 19.9 % 19.8 %

(1) Represents various acquisition-related costs and expenses incurred to integrate acquired entities into the Companys operations, excluding $158 and $373 in stock-based compensation for the three and nine month periods ended October2, 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 nine months ended ended October 2, September October 2, September 27, 27, 2020 2019 2020 2019Acquisition related costs and $ 1,409 $ 162 $ 13,510 $ 847 expensesFinished goods inventory ? 669 60 1,097 valuation adjustmentOther acquisition and $ 1,409 $ 831 $ 13,570 $ 1,944 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 nine month periods ended October2, 2020, $144 and $965 is classified as operating expense, and $478 and $1,357 is classified as cost of sales, respectively. For the three and nine month periods ended September27, 2019, $244 and $664, respectively is classified as operating expenses and for the nine months ended September27, 2019 $496 is classified as cost of sales.

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 ninemonths ended October2, 2020 andSeptember27, 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 ended For the nine months ended October 2, September October 2, September 27, 27, 2020 2019 2020 2019Sales $ 260,700 $ 211,317 $ 628,163 $ 565,139 Gross Profit $ 89,474 $ 69,817 $ 206,075 $ 183,094 Strategictransformation costs 478 ? 1,357 496 (1)Amortization ofacquired inventory ? 669 60 1,097 valuation markup (2)Non-GAAP Adjusted $ 89,952 $ 70,486 $ 207,492 $ 184,687 Gross Profit Gross Margin 34.3 % 33.0 % 32.8 % 32.4 % Non-GAAP Adjusted 34.5 % 33.4 % 33.0 % 32.7 %Gross 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 nine months ended October2, 2020 and September27, 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 nine months ended October 2, September 27, October 2, September 27, 2020 2019 2020 2019Sales $ 260,700 $ 211,317 $ 628,163 $ 565,139 Operating Expense $ 43,921 $ 34,457 $ 129,597 $ 96,444 Amortization ofpurchased (5,277 ) (1,694 ) (13,084 ) (4,751 )intangiblesPatentlitigation-related (484 ) (860 ) (1,627 ) (4,047 )expensesOther acquisitionand (1,567 ) (162 ) (13,884 ) (847 )integration-relatedexpenses (1)Strategictransformation (144 ) (244 ) (965 ) (664 )costs (2)Tax reformimplementation ? ? ? (186 )costsNon-GAAP operating $ 36,449 $ 31,497 $ 100,037 $ 85,949 expense Operating expenseas a percentage of 16.8 % 16.3 % 20.6 % 17.1 %sales Non-GAAP operatingexpense as a 14.0 % 14.9 % 15.9 % 15.2 %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:

FOXVivek Bhakuni706-471-5241VBhakuni@ridefox.com