Thanks,

Alisa Merrill

Customer Support Center $|$ Arizona

$(623)869-4348|$ Alisa.Merrill@Albertsons.com

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From: Alisa Merrill

Sent: Friday, January $26,20243$:$20$ PM

To: Alisa Merrill

Subject: School

You are playing the role of the divisional manager of the new e$-$bike division of Fox Factory Holding Corporation. The divisional manager is preparing to request funding to introduce the product and begin sales. Three options have been identified:

Produce the new e$-$bike internally,

Outsource manufacturing to another manufacturer, and

License the design to an existing company for royalties on future sales.

In your assignment,

Develop a $3-$year spending and headcount forecast in Excel for the next three years for the three potential options. Please do not forecast the current year.

Explain the key issues and considerations for the forecast.

Note: Please use the relevant required information below:

Fox Factory Holding Corp. $($NASDAQ: FOXF$)($FOX$$ or the $$Company$)$ today reported financial results for the third quarter ended September $29,2023$ and announced the signing of a definitive agreement to acquire Wheelhouse Holdings, Inc., the parent company of Marucci Sports, LLC $($Marucci$)$ from Compass Diversified $($NYSE: CODI$)$ and certain other sellers.

$$We delivered adjusted EBITDA margin of $19\mathrm{.}2\%$ even with a $17\mathrm{.}4\%$ sequential decline in sales as the business was impacted by the UAW strike and a slower bicycle channel inventory destock. At the onset of the strike, we took decisive action to reduce costs and improve cash flows. Our laser focus on cost control and swift execution of cost reduction initiatives allowed us to sequentially maintain EBITDA margins, protect our balance sheet and cash flows and operate from a position of strength to further our capital allocation priorities,$$ commented Mike Dennison, FOX$$s Chief Executive Officer. $$Not only did our Board of Directors authorize a share repurchase plan of up to $8\%$ of our outstanding shares, but we also signed a definitive agreement to acquire Marucci, an industry$-$leading manufacturer and distributor of premium performance baseball, softball, and other sports equipment.$$ The acquisition of Marucci combines two high performance cultures, industry$-$leading brands and product portfolios that expand FOX$$s enthusiast offering. The purchase price for the transaction, which is subject to customary adjustments, is based on an enterprise value of $$572\mathrm{.}0$ million and will be financed through an additional term loan under FOX$$s existing credit facility. We expect Marucci to be accretive to both growth and EBITDA Margins helping us to achieve our $2025$ target of $$2\mathrm{.}0$ billion sales and $25\%$ adjusted EBITDA margin. The transaction is expected to close in November of $2023,$ subject to customary closing conditions.

Marucci, based in Baton Rouge, Louisiana, is a leading designer, manufacturer, and marketer of highly engineered premium wood, aluminum and composite baseball bats as well as other diamond sports products. Marucci is passionate about challenging the impossible and leveraging technology to push performance across its renowned brands Marucci, Victus, Baum, and Lizard Skins. Much like FOX, Marucci leads by winning the professional athlete which drives their next level performance products across the player and enthusiast market. Together, we expect to leverage technology and innovation to extend the value of our brands and further solidify our top and bottom$-$line growth story. We expect product, market, and total addressable market growth opportunities, including continued international expansion and our combined ability to leverage scale, technology, innovation, and operational efficiencies to provide an enhanced platform for our brands to grow further together.

Net sales for the third quarter of fiscal $2023$ were $$331\mathrm{.}1$ million, a decrease of $19\mathrm{.}1\%,$ as compared to net sales of $$409\mathrm{.}2$ million in the third quarter of fiscal $2022.$ This decrease reflects a $$102\mathrm{.}0$ million or $58\mathrm{.}6\%$ decrease in Specialty Sports Group $($SSG$)$ net sales, partially offset by a $$13\mathrm{.}6$ million or $12\mathrm{.}4\%$ and a $$10\mathrm{.}3$ million or $8\mathrm{.}2\%$ increase in Powered Vehicles Group $($PVG$)$ and Aftermarket Applications Group $($AAG$)$ net sales, respectively. The decrease in SSG net sales from $$174\mathrm{.}0$ million to $$72\mathrm{.}0$ million is driven by higher levels of inventory across various channels. The increase in PVG net sales from $$109\mathrm{.}5$ million to $$123\mathrm{.}1$ million is primarily due to strong demand in the original equipment manufacturer $($OEM$)$ channel, partially offset by the impact of the United Auto Workers $($UAW$)$ strike. The increase in AAG net sales from $$125\mathrm{.}7$ million to $$136\mathrm{.}0$ million is primarily due to the inclusion of revenue from our Custom Wheel House subsidiary, which was acquired in March $2023,$ partially offset by the impact of the UAW strike.

Gross margin was $32\mathrm{.}4\%$ for the third quarter of fiscal $2023,$ a $110$