Fox Factory Holding Corp. (NASDAQ: FOXF) (“FOX” or the “Company”)
today reported financial results for the second quarter ended June
30, 2023.
“Strong sales growth in PVG and AAG coupled with
continued efficiency gains in our North American facilities enabled
us to deliver on net sales and to exceed our expectations on
adjusted EBITDA and adjusted EBITDA Margin,” commented Mike
Dennison, FOX’s Chief Executive Officer. “Our solid cash flow
generation and strong balance sheet place us in a position of
strength heading into the second half of the year as we advance our
organic growth strategy, address softness in SSG and continue to
evaluate various acquisition targets that would be accretive to our
brands and our financial performance.”
In the second quarter of fiscal year 2023, the
Company realigned its Powered Vehicles Group into the Powered
Vehicles Group (“PVG”) and the Aftermarket Applications Group
(“AAG”) to be more aligned with the Company’s end customers and
drive additional focus on product development. Net sales for the
second quarter of fiscal 2023 were $400.7 million, a decrease of
1.5%, as compared to net sales of $406.7 million in the second
quarter of fiscal 2022. This decrease reflects a 41.0% decrease in
Specialty Sports Group (“SSG”) net sales, offset by a 32.6% and
26.2% increase in PVG and AAG net sales, respectively. The decrease
in SSG net sales is driven by higher levels of inventory across
various channels. The increase in PVG net sales is primarily due to
strong demand in the original equipment manufacturer (“OEM”)
channel. The increase in AAG net sales is primarily due to the
inclusion of revenue from our Custom Wheel House subsidiary, which
was acquired in March 2023, and strong performance in our upfitting
product lines.
Gross margin was 32.9% for the second quarter of
fiscal 2023, a 220 basis point decrease from gross margin of 35.1%
in the second quarter of fiscal 2022. The decrease in gross margin
was primarily driven by amortization of an acquired inventory
valuation markup and a shift in our product line mix, offset by
increased efficiencies at our North American facilities. Adjusted
gross margin, which excludes the effects of amortization of
acquired inventory valuation markup, decreased 90 basis points to
34.4% from the same prior fiscal year period.
Total operating expenses were $79.2 million, or
19.8% of net sales, for the second quarter of fiscal 2023, compared
to $72.5 million, or 17.8% of net sales in the second quarter of
fiscal 2022. Operating expenses increased by $6.7 million primarily
due to the inclusion of Custom Wheel House operating expenses of
$4.8 million and the amortization of intangibles obtained in our
acquisition of Custom Wheel House. Adjusted operating expenses were
$71.0 million, or 17.7% of net sales in the second quarter of
fiscal 2023, compared to $66.5 million, or 16.3% of net sales, in
the second quarter of the prior fiscal year.
The Company’s effective tax rate was 16.9% in
the second quarter of fiscal 2023, compared to 18.9% in the second
quarter of fiscal 2022. The decrease in the Company’s effective tax
rate was primarily due to the impact of recently finalized U.S. tax
regulations, which resulted in the ability to use certain foreign
tax credits. This was partially offset by a decreased benefit
related to foreign derived intangible income.
Net income in the second quarter of fiscal 2023
was $39.7 million, compared to $53.5 million in the second quarter
of the prior fiscal year. Earnings per diluted share for the second
quarter of fiscal 2023 was $0.94, compared to earnings per diluted
share of $1.26 for the second quarter of fiscal 2022. Adjusted net
income in the second quarter of fiscal 2023 was $51.4 million, or
$1.21 of adjusted earnings per diluted share, compared to adjusted
net income of $58.6 million, or $1.38 of adjusted earnings per
diluted share, in the same period of the prior fiscal year.
Adjusted EBITDA in the second quarter of fiscal
2023 was $79.4 million, compared to $88.1 million in the second
quarter of fiscal 2022. Adjusted EBITDA margin in the second
quarter of fiscal 2023 was 19.8%, compared to 21.7% in the second
quarter of fiscal 2022. “Strong double digit EBITDA margins
demonstrate the strength of our brands, product diversification and
commitment to continuous improvement. Our operating model coupled
with our strong balance sheet and cash flows sets us up well to
achieve our growth goals,” Dennison concluded.
First Six
Months Fiscal 2023
Results
Net sales for the six months ended June 30,
2023 were $800.6 million, an increase of 2.0% compared to the first
six months in fiscal 2022. Net sales of PVG and AAG increased 48.4%
and 19.3%, respectively, and net sales of SSG decreased 35.6% for
the first six months of fiscal 2023 compared to the prior year
fiscal period. The increase in PVG net sales is primarily due to
strong demand in the OEM channel. The increase in AAG net sales is
primarily due to the inclusion of revenue from our Custom Wheel
House subsidiary, which was acquired in March 2023, and strong
performance in our upfitting product lines. The decrease in SSG net
sales is driven by higher levels of inventory across various
channels.
Gross margin was 33.1% in the first six months
of fiscal 2023, a 40 basis point decrease, compared to gross margin
of 33.5% in the first six months of fiscal 2022. The decrease in
gross margin for the first six months of fiscal 2023 was primarily
driven by amortization of an acquired inventory valuation markup
and a shift in our product line mix, offset by increased
efficiencies at our North American facilities. Adjusted gross
margin, excluding the effects of the amortization of an acquired
inventory valuation markup, was 34.3% in the first six months of
fiscal 2023, a 50 basis point increase, compared to 33.8% in the
first six months of fiscal 2022.
Total operating expenses were $157.9 million, or
19.7% of net sales, for the first six months of fiscal 2023,
compared to $138.6 million, or 17.7% of net sales in the first six
months of fiscal 2022. Operating expenses increased by $19.3
million primarily due to the inclusion of Custom Wheel House
operating expenses of $6.2 million, increases in headcount and
benefits related costs, new U.S. facilities expansion costs and the
amortization of intangibles obtained in our acquisition of Custom
Wheel House. Adjusted operating expenses were $141.3 million, or
17.7% of net sales in the first six months of fiscal 2023, compared
to $126.1 million, or 16.1% of net sales, in the first six months
of the prior fiscal year.
Net income in the first six months of fiscal
2023 was $81.5 million, compared to $101.5 million in the first six
months of the prior fiscal year. Earnings per diluted share for the
first six months of fiscal 2023 was $1.92, compared to $2.40 in the
same period of fiscal 2022. Adjusted net income in the first six
months of fiscal 2023 was $102.4 million, or $2.41 of adjusted
earnings per diluted share, compared to $114.4 million, or $2.70 of
adjusted earnings per diluted share in the same period of the prior
fiscal year.
Adjusted EBITDA decreased to $158.6 million in
the first six months of fiscal 2023, compared to $159.9 million in
the first six months of fiscal 2022. Adjusted EBITDA margin
decreased to 19.8% in the first six months of fiscal 2023, compared
to 20.4% in the first six months of fiscal 2022.
Balance Sheet Highlights
As of June 30, 2023, the Company had cash
and cash equivalents of $105.4 million, compared to $145.3 million
as of December 30, 2022. Inventory was $355.2 million as of
June 30, 2023, compared to $350.6 million as of
December 30, 2022. As of June 30, 2023, accounts
receivable and accounts payable were $171.3 million and $99.3
million, respectively, compared to $200.4 million and $131.2
million, respectively, as of December 30, 2022. Prepaids and
other current assets were $214.8 million as of June 30, 2023,
compared to $101.4 million as of December 30, 2022. The
decrease in cash and cash equivalents was primarily due to an
increase in prepaids and other current assets driven by higher
chassis deposits as we ramp up to meet current year demand, which
is in line with our upfitting business cycle. Inventory increased
by $4.6 million driven by the inclusion of $16.5 million of
acquired inventory from Custom Wheel House, offset by the
continuous improvement efforts to optimize inventory levels
throughout the organization. The changes in accounts receivable and
accounts payable reflect the timing of customer collections and
vendor payments. Total debt was $325.0 million as of June 30,
2023, compared to $200.0 million as of December 30, 2022.
During the first quarter of fiscal 2023, the Company incurred
additional debt to support its working capital and the acquisition
of Custom Wheel House, and subsequently, was able to pay down $35.0
million of the revolver borrowings.
Fiscal 2023 Guidance
For the third quarter of fiscal 2023, the
Company expects net sales in the range of $390 million to $410
million and adjusted earnings per diluted share in the range of
$1.00 to $1.20.
For the fiscal year 2023, the Company expects
net sales at the low end of $1,670 million to $1,700 million,
adjusted earnings per diluted share at the low end of the range of
$5.00 to $5.30, and a full year effective tax rate to be within the
range of 15% to 18%.
Adjusted earnings per diluted share exclude the
following items net of applicable tax: amortization of purchased
intangibles, litigation and settlement-related expenses,
acquisition and integration-related expenses and strategic
transformation costs. A quantitative reconciliation of adjusted
earnings per diluted share for the third quarter and full fiscal
year 2023 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 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time). The
conference call dial-in number for North America listeners is (800)
343-4136, and international listeners may dial (203) 518-9843; the
conference ID is FOXFQ223 or 36937223. 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
Company’s 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 certain non-GAAP financial
measures consisting of “adjusted gross profit,” “adjusted gross
margin,” “adjusted operating expense,” “adjusted net income,”
“adjusted earnings per diluted share,” “adjusted EBITDA,” and
“adjusted EBITDA margin,” all of which are non-GAAP financial
measures. FOX defines adjusted gross profit as gross profit
adjusted for certain strategic transformation costs and the
amortization of acquired inventory valuation markup. Adjusted gross
margin is defined as adjusted gross profit divided by net sales.
FOX defines adjusted operating expense as operating expense
adjusted for amortization of purchased intangibles, litigation and
settlement-related expenses, acquisition and integration-related
expenses, and strategic transformation costs. FOX defines adjusted
net income as net income adjusted for amortization of purchased
intangibles, litigation and settlement-related expenses,
acquisition and integration-related expenses, and strategic
transformation costs, all net of applicable tax. These adjustments
are more fully described in the tables included at the end of this
press release. Adjusted earnings per diluted share is defined as
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, litigation and
settlement related expenses, acquisition and integration-related
expenses and strategic transformation costs 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 net
sales.
FOX includes these non-GAAP financial measures
because it believes they allow investors to better understand and
evaluate the Company’s core operating performance and trends. In
particular, the exclusion of certain items in calculating the
non-GAAP financial measures consisting of adjusted gross profit,
adjusted operating expense, adjusted net income and adjusted EBITDA
(and accordingly, adjusted gross margin, adjusted earnings per
diluted share and adjusted EBITDA margin) can provide a useful
measure for period-to-period comparisons of the Company’s 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
adjusted gross profit, adjusted gross margin, adjusted operating
expense, adjusted net income, 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)(unaudited) |
| |
| |
As of |
|
As of |
| |
June 30, 2023 |
|
December 30, 2022 |
| |
|
|
|
|
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
$ |
105,440 |
|
|
$ |
145,250 |
|
|
Accounts receivable (net of allowances of $962 and $443 at
June 30, 2023 and December 30, 2022, respectively) |
|
171,303 |
|
|
|
200,440 |
|
|
Inventory |
|
355,218 |
|
|
|
350,620 |
|
|
Prepaids and other current assets |
|
214,761 |
|
|
|
101,364 |
|
|
Total current assets |
|
846,722 |
|
|
|
797,674 |
|
|
Property, plant and equipment, net |
|
211,578 |
|
|
|
202,215 |
|
|
Lease right-of-use assets |
|
67,777 |
|
|
|
48,096 |
|
|
Deferred tax assets |
|
57,071 |
|
|
|
57,339 |
|
|
Goodwill |
|
385,999 |
|
|
|
323,978 |
|
|
Intangibles, net |
|
214,469 |
|
|
|
178,980 |
|
|
Other assets |
|
10,147 |
|
|
|
10,054 |
|
|
Total assets |
$ |
1,793,763 |
|
|
$ |
1,618,336 |
|
|
Liabilities and stockholders’ equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
$ |
99,296 |
|
|
$ |
131,160 |
|
|
Accrued expenses |
|
108,266 |
|
|
|
127,729 |
|
|
Total current liabilities |
|
207,562 |
|
|
|
258,889 |
|
|
Line of credit |
|
325,000 |
|
|
|
200,000 |
|
|
Other liabilities |
|
55,400 |
|
|
|
38,061 |
|
|
Total liabilities |
|
587,962 |
|
|
|
496,950 |
|
|
Stockholders’ equity |
|
|
|
|
Preferred stock, $0.001 par value — 10,000 authorized and no shares
issued or outstanding as of June 30, 2023 and
December 30, 2022 |
|
— |
|
|
|
— |
|
|
Common stock, $0.001 par value — 90,000 authorized; 43,244 shares
issued and 42,354 outstanding as of June 30, 2023; 43,160
shares issued and 42,270 outstanding as of December 30,
2022 |
|
42 |
|
|
|
42 |
|
|
Additional paid-in capital |
|
361,205 |
|
|
|
356,239 |
|
|
Treasury stock, at cost; 890 common shares as of June 30, 2023
and December 30, 2022 |
|
(13,754 |
) |
|
|
(13,754 |
) |
|
Accumulated other comprehensive income |
|
12,729 |
|
|
|
14,782 |
|
|
Retained earnings |
|
845,579 |
|
|
|
764,077 |
|
|
Total stockholders’ equity |
|
1,205,801 |
|
|
|
1,121,386 |
|
|
Total liabilities and stockholders’ equity |
$ |
1,793,763 |
|
|
$ |
1,618,336 |
|
|
|
|
FOX FACTORY HOLDING CORP.Condensed
Consolidated Statements of Income(in thousands,
except per share data)(unaudited) |
| |
| |
For the three months ended |
|
For the six months ended |
| |
June 30, 2023 |
|
July 1, 2022 |
|
June 30, 2023 |
|
July 1, 2022 |
|
Net sales |
$ |
400,715 |
|
$ |
406,705 |
|
$ |
800,566 |
|
$ |
784,682 |
|
Cost of sales |
|
268,689 |
|
|
263,761 |
|
|
535,242 |
|
|
521,478 |
|
Gross profit |
|
132,026 |
|
|
142,944 |
|
|
265,324 |
|
|
263,204 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
General and administrative |
|
30,221 |
|
|
28,444 |
|
|
63,982 |
|
|
54,011 |
|
Sales and marketing |
|
26,556 |
|
|
24,175 |
|
|
50,225 |
|
|
46,764 |
|
Research and development |
|
15,188 |
|
|
14,214 |
|
|
30,470 |
|
|
26,856 |
|
Amortization of purchased intangibles |
|
7,277 |
|
|
5,636 |
|
|
13,173 |
|
|
10,943 |
|
Total operating expenses |
|
79,242 |
|
|
72,469 |
|
|
157,850 |
|
|
138,574 |
|
Income from operations |
|
52,784 |
|
|
70,475 |
|
|
107,474 |
|
|
124,630 |
|
Interest expense |
|
4,418 |
|
|
1,697 |
|
|
7,939 |
|
|
3,674 |
|
Other expense, net |
|
536 |
|
|
2,816 |
|
|
560 |
|
|
4,508 |
|
Income before income taxes |
|
47,830 |
|
|
65,962 |
|
|
98,975 |
|
|
116,448 |
|
Provision for income taxes |
|
8,095 |
|
|
12,464 |
|
|
17,473 |
|
|
14,900 |
|
Net income |
$ |
39,735 |
|
$ |
53,498 |
|
$ |
81,502 |
|
$ |
101,548 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.94 |
|
$ |
1.27 |
|
$ |
1.93 |
|
$ |
2.41 |
|
Diluted |
$ |
0.94 |
|
$ |
1.26 |
|
$ |
1.92 |
|
$ |
2.40 |
|
Weighted-average shares used to compute earnings per share: |
|
|
|
|
|
|
|
|
Basic |
|
42,359 |
|
|
42,218 |
|
|
42,329 |
|
|
42,181 |
|
Diluted |
|
42,480 |
|
|
42,352 |
|
|
42,492 |
|
|
42,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOX FACTORY HOLDING CORP.Condensed
Consolidated Statements of Cash Flows(in
thousands)(unaudited) |
|
|
|
|
For the six months ended |
|
|
June 30, 2023 |
|
July 1, 2022 |
|
OPERATING ACTIVITIES: |
|
|
|
|
Net income |
$ |
81,502 |
|
|
$ |
101,548 |
|
|
Adjustments to reconcile net income to net cash used in operating
activities: |
|
|
|
|
Depreciation and amortization |
|
28,712 |
|
|
|
24,449 |
|
|
Stock-based compensation |
|
10,184 |
|
|
|
7,090 |
|
|
Amortization of loan fees |
|
453 |
|
|
|
634 |
|
|
Write off of unamortized loan origination fees |
|
— |
|
|
|
1,927 |
|
|
Amortization of deferred gains on prior swap settlements |
|
(2,126 |
) |
|
|
(1,050 |
) |
|
Amortization of inventory fair value step-up |
|
8,895 |
|
|
|
— |
|
|
Deferred taxes |
|
(139 |
) |
|
|
(11,284 |
) |
|
Changes in operating assets and liabilities, net of effects of
acquisitions: |
|
|
|
|
Accounts receivable |
|
32,744 |
|
|
|
(57,444 |
) |
|
Inventory |
|
13,123 |
|
|
|
(74,753 |
) |
|
Income taxes |
|
(16,381 |
) |
|
|
(5,072 |
) |
|
Prepaids and other assets |
|
(112,175 |
) |
|
|
(146,236 |
) |
|
Accounts payable |
|
(41,565 |
) |
|
|
68,708 |
|
|
Accrued expenses and other liabilities |
|
(6,535 |
) |
|
|
6,083 |
|
|
Net cash used in operating activities |
|
(3,308 |
) |
|
|
(85,400 |
) |
|
INVESTING ACTIVITIES: |
|
|
|
|
Acquisitions of businesses |
|
(130,918 |
) |
|
|
— |
|
|
Acquisition of other assets |
|
(2,364 |
) |
|
|
— |
|
|
Purchases of property and equipment |
|
(23,227 |
) |
|
|
(19,912 |
) |
|
Net cash used in investing activities |
|
(156,509 |
) |
|
|
(19,912 |
) |
|
FINANCING ACTIVITIES: |
|
|
|
|
Proceeds from line of credit |
|
210,000 |
|
|
|
582,356 |
|
|
Payments on line of credit |
|
(85,000 |
) |
|
|
(174,336 |
) |
|
Repayment of term debt |
|
— |
|
|
|
(382,500 |
) |
|
Installment on purchase of non-controlling interest |
|
— |
|
|
|
(1,800 |
) |
|
Repurchases from stock compensation program, net |
|
(5,218 |
) |
|
|
(3,770 |
) |
|
Proceeds from termination of swap agreement |
|
— |
|
|
|
12,270 |
|
|
Net cash provided by financing activities |
|
119,782 |
|
|
|
32,220 |
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
|
225 |
|
|
|
2,043 |
|
|
CHANGE IN CASH AND CASH EQUIVALENTS |
|
(39,810 |
) |
|
|
(71,049 |
) |
|
CASH AND CASH EQUIVALENTS—Beginning of period |
|
145,250 |
|
|
|
179,686 |
|
|
CASH AND CASH EQUIVALENTS—End of period |
$ |
105,440 |
|
|
$ |
108,637 |
|
|
|
|
FOX FACTORY HOLDING CORP. NET INCOME TO
ADJUSTED NET INCOME RECONCILIATIONAND CALCULATION
OF ADJUSTED EARNINGS PER SHARE(in thousands,
except per share data) (unaudited) |
The following table provides a reconciliation of
net income, the most directly comparable financial measure
calculated and presented in accordance with GAAP, to adjusted net
income (a non-GAAP measure), and the calculation of adjusted
earnings per share (a non-GAAP measure) for the three and six
months ended June 30, 2023 and July 1, 2022. These
non-GAAP financial measures are provided in addition to, and not as
alternatives for, the Company’s reported GAAP results.
| |
For the three months ended |
|
For the six months ended |
| |
June 30, 2023 |
|
July 1, 2022 |
|
June 30, 2023 |
|
July 1, 2022 |
|
Net income |
$ |
39,735 |
|
|
$ |
53,498 |
|
|
$ |
81,502 |
|
|
$ |
101,548 |
|
|
Amortization of purchased intangibles |
|
7,277 |
|
|
|
5,636 |
|
|
|
13,173 |
|
|
|
10,943 |
|
|
Litigation and settlement-related expenses |
|
659 |
|
|
|
132 |
|
|
|
1,637 |
|
|
|
201 |
|
|
Other acquisition and integration-related expenses (1) |
|
6,125 |
|
|
|
210 |
|
|
|
10,599 |
|
|
|
1,298 |
|
|
Strategic transformation costs (2) |
|
— |
|
|
|
663 |
|
|
|
— |
|
|
|
2,339 |
|
|
Tax impacts of reconciling items above (3) |
|
(2,405 |
) |
|
|
(1,498 |
) |
|
|
(4,486 |
) |
|
|
(1,891 |
) |
|
Adjusted net income |
$ |
51,391 |
|
|
$ |
58,641 |
|
|
$ |
102,425 |
|
|
$ |
114,438 |
|
| |
|
|
|
|
|
|
|
|
Adjusted EPS |
|
|
|
|
|
|
|
|
Basic |
$ |
1.21 |
|
|
$ |
1.39 |
|
|
$ |
2.42 |
|
|
$ |
2.71 |
|
|
Diluted |
$ |
1.21 |
|
|
$ |
1.38 |
|
|
$ |
2.41 |
|
|
$ |
2.70 |
|
| |
|
|
|
|
|
|
|
|
Weighted average shares used to compute adjusted
EPS |
|
|
|
|
|
|
|
|
Basic |
|
42,359 |
|
|
|
42,218 |
|
|
|
42,329 |
|
|
|
42,181 |
|
|
Diluted |
|
42,480 |
|
|
|
42,352 |
|
|
|
42,492 |
|
|
|
42,367 |
|
(1) Represents
various acquisition-related costs and expenses incurred to
integrate acquired entities into the Company’s 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 ended |
|
For the six months ended |
| |
June 30, 2023 |
|
July 1, 2022 |
|
June 30, 2023 |
|
July 1, 2022 |
|
Acquisition related costs and expenses |
$ |
300 |
|
|
$ |
210 |
|
|
$ |
1,704 |
|
|
$ |
1,298 |
|
|
Finished goods inventory valuation adjustment |
|
5,825 |
|
|
|
— |
|
|
|
8,895 |
|
|
|
— |
|
|
Other acquisition and integration-related
expenses |
$ |
6,125 |
|
|
$ |
210 |
|
|
$ |
10,599 |
|
|
$ |
1,298 |
|
(2) Represents costs
associated with various strategic initiatives including the
expansion of the Powered Vehicles Group’s manufacturing
operations.(3) Tax impact calculated based on the respective
year-to-date effective tax rate.
|
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 June 30, 2023 and July 1,
2022. These non-GAAP financial measures are provided in addition
to, and not as alternatives for, the Company’s reported GAAP
results.
| |
For the three months ended |
|
For the six months ended |
| |
June 30, 2023 |
|
July 1, 2022 |
|
June 30, 2023 |
|
July 1, 2022 |
|
Net income |
$ |
39,735 |
|
|
$ |
53,498 |
|
|
$ |
81,502 |
|
|
$ |
101,548 |
|
|
Provision for income taxes |
|
8,095 |
|
|
|
12,464 |
|
|
|
17,473 |
|
|
|
14,900 |
|
|
Depreciation and amortization |
|
15,397 |
|
|
|
12,563 |
|
|
|
28,712 |
|
|
|
24,410 |
|
|
Non-cash stock-based compensation |
|
4,483 |
|
|
|
4,061 |
|
|
|
10,184 |
|
|
|
7,090 |
|
|
Litigation and settlement-related expenses |
|
659 |
|
|
|
132 |
|
|
|
1,637 |
|
|
|
201 |
|
|
Other acquisition and integration-related expenses (1) |
|
6,125 |
|
|
|
210 |
|
|
|
10,599 |
|
|
|
1,184 |
|
|
Strategic transformation costs (2) |
|
— |
|
|
|
663 |
|
|
|
— |
|
|
|
2,339 |
|
|
Interest and other expense, net |
|
4,954 |
|
|
|
4,513 |
|
|
|
8,499 |
|
|
|
8,182 |
|
|
Adjusted EBITDA |
$ |
79,448 |
|
|
$ |
88,104 |
|
|
$ |
158,606 |
|
|
$ |
159,854 |
|
| |
|
|
|
|
|
|
|
|
Net Income Margin |
|
9.9 |
% |
|
|
13.2 |
% |
|
|
10.2 |
% |
|
|
12.9 |
% |
| |
|
|
|
|
|
|
|
|
Adjusted EBITDA Margin |
|
19.8 |
% |
|
|
21.7 |
% |
|
|
19.8 |
% |
|
|
20.4 |
% |
(1) Represents
various acquisition-related costs and expenses incurred to
integrate acquired entities into the Company’s operations,
excluding $114 in stock-based compensation for the six month period
ended July 1, 2022, 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 ended |
|
For the six months ended |
| |
June 30, 2023 |
|
July 1, 2022 |
|
June 30, 2023 |
|
July 1, 2022 |
|
Acquisition related costs and expenses |
$ |
300 |
|
|
$ |
210 |
|
|
$ |
1,704 |
|
|
$ |
1,184 |
|
|
Finished goods inventory valuation adjustment |
|
5,825 |
|
|
|
— |
|
|
|
8,895 |
|
|
|
— |
|
|
Other acquisition and integration-related
expenses |
$ |
6,125 |
|
|
$ |
210 |
|
|
$ |
10,599 |
|
|
$ |
1,184 |
|
(2) Represents costs
associated with various strategic initiatives including the
expansion of the Powered Vehicles Group’s manufacturing
operations.
|
FOX FACTORY HOLDING CORP. GROSS PROFIT TO
ADJUSTED GROSS PROFIT RECONCILIATION
ANDCALCULATION OF GROSS MARGIN AND ADJUSTED GROSS
MARGIN (in thousands)
(unaudited) |
The following table provides a reconciliation of
gross profit to adjusted gross profit (a non-GAAP measure) for
the three and six months ended June 30, 2023
and July 1, 2022, and the calculation of gross margin and
adjusted gross margin (a non-GAAP measure). These non-GAAP
financial measures are provided in addition to, and not as
alternatives for, the Company’s reported GAAP results.
| |
For the three months ended |
|
For the six months ended |
| |
June 30, 2023 |
|
July 1, 2022 |
|
June 30, 2023 |
|
July 1, 2022 |
|
Net sales |
$ |
400,715 |
|
|
$ |
406,705 |
|
|
$ |
800,566 |
|
|
$ |
784,682 |
|
| |
|
|
|
|
|
|
|
|
Gross Profit |
$ |
132,026 |
|
|
$ |
142,944 |
|
|
$ |
265,324 |
|
|
$ |
263,204 |
|
|
Strategic transformation costs (1) |
|
— |
|
|
|
663 |
|
|
|
— |
|
|
|
2,339 |
|
|
Amortization of acquired inventory valuation markup |
|
5,825 |
|
|
|
— |
|
|
|
8,895 |
|
|
|
— |
|
|
Adjusted Gross Profit |
$ |
137,851 |
|
|
$ |
143,607 |
|
|
$ |
274,219 |
|
|
$ |
265,543 |
|
| |
|
|
|
|
|
|
|
|
Gross Margin |
|
32.9 |
% |
|
|
35.1 |
% |
|
|
33.1 |
% |
|
|
33.5 |
% |
| |
|
|
|
|
|
|
|
|
Adjusted Gross Margin |
|
34.4 |
% |
|
|
35.3 |
% |
|
|
34.3 |
% |
|
|
33.8 |
% |
(1) Represents costs
associated with various strategic initiatives including the
expansion of the Powered Vehicles Group’s manufacturing
operations.
|
FOX FACTORY HOLDING CORP. OPERATING
EXPENSE TO ADJUSTED OPERATING EXPENSE RECONCILIATION
ANDCALCULATION OF OPERATING EXPENSE AND ADJUSTED
OPERATING EXPENSE AS A PERCENTAGE OF NET SALES(in
thousands) (unaudited) |
The following tables provide a reconciliation of
operating expense to adjusted operating expense (a non-GAAP
measure) and the calculations of operating expense as a percentage
of net sales and adjusted operating expense as a percentage of net
sales (a non-GAAP measure), for the three and six months ended
June 30, 2023 and July 1, 2022. These non-GAAP financial
measures are provided in addition to, and not as an alternative
for, the Company’s reported GAAP results.
| |
For the three months ended |
|
For the six months ended |
| |
June 30, 2023 |
|
July 1, 2022 |
|
June 30, 2023 |
|
July 1, 2022 |
|
Net sales |
$ |
400,715 |
|
|
$ |
406,705 |
|
|
$ |
800,566 |
|
|
$ |
784,682 |
|
|
|
|
|
|
|
|
|
|
|
Operating Expense |
$ |
79,242 |
|
|
$ |
72,469 |
|
|
$ |
157,850 |
|
|
$ |
138,574 |
|
|
Amortization of purchased intangibles |
|
(7,277 |
) |
|
|
(5,636 |
) |
|
|
(13,173 |
) |
|
|
(10,943 |
) |
|
Litigation and settlement-related expenses |
|
(659 |
) |
|
|
(132 |
) |
|
|
(1,637 |
) |
|
|
(201 |
) |
|
Other acquisition and integration-related expenses (1) |
|
(300 |
) |
|
|
(210 |
) |
|
|
(1,704 |
) |
|
|
(1,298 |
) |
|
Adjusted operating expense |
$ |
71,006 |
|
|
$ |
66,491 |
|
|
$ |
141,336 |
|
|
$ |
126,132 |
|
|
|
|
|
|
|
|
|
|
|
Operating expense as a percentage of sales |
|
19.8 |
% |
|
|
17.8 |
% |
|
|
19.7 |
% |
|
|
17.7 |
% |
|
|
|
|
|
|
|
|
|
|
Adjusted operating expense as a percentage of
sales |
|
17.7 |
% |
|
|
16.3 |
% |
|
|
17.7 |
% |
|
|
16.1 |
% |
(1) Represents
various acquisition-related costs and expenses incurred to
integrate acquired entities into the Company’s 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 Company’s 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 Company’s business and operations; the
Company’s continued growing demand for its products; the Company’s
execution on its strategy to improve operating efficiencies; the
Company’s optimism about its operating results and future growth
prospects; the Company’s expected future sales and future 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 Company’s actual results, events or circumstances to
differ materially from those discussed in any such forward-looking
statements, including but not limited to: the Company’s ability to
complete any acquisition and/or incorporate any acquired assets
into its business; the Company’s ability to maintain its suppliers
for materials, product parts and vehicle chassis without
significant supply chain disruptions; the Company’s ability to
improve operating and supply chain efficiencies; the Company’s
ability to enforce its intellectual property rights; the Company’s
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 Company’s ability to adapt its business model to mitigate the
impact of certain changes in tax laws; 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 Company’s common stock, grants of equity-based awards and the
vesting schedules of equity-based awards; the Company’s 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 Company’s ability to increase its
aftermarket penetration; the Company’s 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
Company’s ability to maintain its premium brand image and
high-performance products; the Company’s 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 Company’s 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 Company’s loss of key personnel, management
and skilled engineers; the Company’s ability to successfully
identify, evaluate and manage potential acquisitions and to benefit
from such acquisitions; product recalls and product liability
claims; the impact of change in China-Taiwan relations on our
business, our operations or our supply chain, the impact of the
Russian invasion of Ukraine on the global economy, energy supplies
and raw materials; future economic or market conditions, including
the impact of inflation or the U.S. Federal Reserve’s interest rate
increases in response thereto; and the other risks and
uncertainties described in “Risk Factors” contained in its Annual
Report on Form 10-K for the fiscal year ended December 30,
2022 and filed with the Securities and Exchange Commission on
February 23, 2023, or Quarterly Reports on Form 10-Q or
otherwise described in the Company’s 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 Company’s expectations,
objectives or plans will be achieved in the timeframe anticipated
or at all. Investors are cautioned not to place undue reliance on
the Company’s 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:
Fox Factory Holding Corp.Vivek BhakuniSr. Director
of Investor Relations and Business
Development706-471-5241vbhakuni@ridefox.com
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