Fox Factory Holding Corp. (NASDAQ: FOXF) (“FOX” or the “Company”),
a premium brand and a global leader in the design, engineering and
manufacturing of performance-defining products and systems for
customers worldwide, today reported financial results for the first
fiscal quarter ended March 29, 2024.
First Quarter Fiscal 2024
Highlights
- Strategic
diversification, demonstrated as the mix of aftermarket sales,
increased to 59% of net sales
from 46% in the prior year
quarter
- New product
launches ramp led by the first Fox Factory branded off-road
upfitted truck, model year ’25 bike releases and the introduction
of side-by-side upfits
- Net sales
for the first quarter of fiscal 2024 were $333.5
million and in line with
expectations
- Loss per
diluted share for the first quarter of fiscal 2024 was
$0.08, and adjusted earnings per diluted
share was $0.29 and above our
expectations
- Net income
margin decreased 220 basis points sequentially from 1.2% in the
fourth quarter of fiscal 2023
- Adjusted
EBITDA margin improved sequentially to
12.1% from 11.7% due to the strength of
aftermarket sales
Management Commentary
“We delivered net sales that were in line with
our expectations and adjusted EPS that exceeded our plan,”
commented Mike Dennison, FOX’s Chief Executive Officer. “While the
OEMs that we serve continue to face unique challenges in the
near-term, we remain focused on delivering long term growth through
our uncompromising commitment to innovation and product development
while also being vigilant on managing costs and improving our
balance sheet in the short term.”
Mr. Dennison continued, “We continue to expect
sequential growth in the second quarter and further acceleration in
the second half of fiscal 2024 due to new product launches that are
led by our first Fox Factory-branded off-road upfitted truck, model
year ’25 bike releases, which are showing signs of improvement, and
the introduction of side-by-side upfits. However, we are narrowing
our full year fiscal 2024 outlook towards the bottom-half of our
previous range, effectively removing the upside scenario from our
plan to align with the market’s latest expectations that interest
rate relief will be pushed out beyond fiscal 2024. Our entire team
at Fox Factory remains focused on controlling the aspects of the
business that we can, including expense controls and productivity
optimization, in order to improve margins while keeping our
business positioned to reaccelerate growth as macro conditions
improve.”
First Quarter 2024 Results
Net sales for the first quarter of fiscal 2024
were $333.5 million, a decrease of 16.6%, as compared to net sales
of $399.9 million in the first quarter of fiscal 2023. This
decrease reflects a $36.9 million or 26.6% decrease in Aftermarket
Applications Group (“AAG”) net sales, a $24.1 million or 17.0%
decrease in Powered Vehicles Group (“PVG”), and a $5.4 million or
4.5% decrease in Specialty Sports Group (“SSG”) net sales. The
decrease in AAG net sales from $138.7 million to $101.9 million is
driven by lower upfitting sales due to product mix and higher
interest rates impacting industry dealers and consumers. The
decrease in PVG net sales from $142.2 million to $118.1 million is
primarily due to lower industry demand in Power Sports because of
higher interest rates. The decrease in SSG net sales from $118.9
million to $113.5 million is primarily related to a reduction in
Bike sales of $65.0 million because of the ongoing channel
inventory recalibration and, to a lesser extent, lower end consumer
demand, offset by the inclusion of $59.6 million in net sales from
Marucci which we acquired in November 2023.
Gross margin was 30.9% for the first quarter of
fiscal 2024, a 240 basis point decrease from gross margin of 33.3%
in the first quarter of fiscal 2023. The decrease in gross margin
was primarily driven by a shift in our product line mix and
operating leverage on lower volume. Adjusted gross margin, which
excludes the effects of amortization of acquired inventory
valuation markup, decreased 180 basis points to 32.3% from the same
prior fiscal year period.
Total operating expenses were $94.3 million, or
28.3% of net sales, for the first quarter of fiscal 2024, compared
to $78.6 million, or 19.7% of net sales in the first quarter of
fiscal 2023. Operating expenses increased by $15.7 million
primarily due to the inclusion of Marucci operating expenses of
$20.8 million and a full fiscal quarter of Custom Wheel House
operating expenses. Adjusted operating expenses were $80.3 million,
or 24.1% of net sales in the first quarter of fiscal 2024, compared
to $70.3 million, or 17.6% of net sales, in the first quarter of
the prior fiscal year.
The Company reflected a tax benefit of $1.3
million in the first quarter of fiscal 2024, compared to a tax
expense of $9.4 million in the first quarter of fiscal 2023. The
decrease in the Company’s income tax expense was primarily due to a
decrease in pre-tax income.
Net loss in the first quarter of fiscal 2024 was
$3.5 million, compared to net income and net income margin of $41.8
million and 10.4%, respectively, in the first quarter of the prior
fiscal year. Loss per diluted share for the first quarter of fiscal
2024 was $0.08, compared to earnings per diluted share of $0.98 for
the first quarter of fiscal 2023. Adjusted net income in the first
quarter of fiscal 2024 was $11.9 million, or $0.29 of adjusted
earnings per diluted share, compared to adjusted net income of
$51.0 million, or $1.20 of adjusted earnings per diluted share, in
the same period of the prior fiscal year.
Adjusted EBITDA in the first quarter of fiscal
2024 was $40.4 million, compared to $79.2 million in the first
quarter of fiscal 2023. Adjusted EBITDA margin in the first quarter
of fiscal 2024 was 12.1%, compared to 19.8% in the first quarter of
fiscal 2023.
Reconciliations to non-GAAP measures are
provided at the end of this press release.
Balance Sheet Summary
As of March 29, 2024, the Company had cash
and cash equivalents of $69.6 million, compared to $83.6 million as
of December 29, 2023. Inventory was $354.0 million as of
March 29, 2024, compared to $371.8 million as of
December 29, 2023. As of March 29, 2024, accounts
receivable and accounts payable were $164.9 million and $107.7
million, respectively, compared to $171.1 million and $104.2
million, respectively, as of December 29, 2023. Prepaids and
other current assets were $177.0 million as of March 29, 2024,
compared to $141.5 million as of December 29, 2023. The
decrease in cash and cash equivalents was primarily due to debt
payments and share repurchases. Inventory decreased by $17.8
million driven by the continuous improvement efforts to optimize
inventory levels throughout the organization. The change in
accounts receivable reflects the timing of customer collections.
The change in accounts payable reflects the timing of vendor
payments. The increase in prepaids and other current assets is
primarily due to carrying new model year chassis to meet current
year production needs for the upfitting product lines and, to a
lesser degree, slowing sales of older model years. Total debt was
$762.4 million as of March 29, 2024, compared to $743.5
million as of December 29, 2023. During the first quarter of
fiscal 2024, the Company incurred additional debt of $70.0 million
on the revolver to support its working capital and paid down $48.0
million of the revolver borrowings and $3.6 million on the
incremental term A loan.
Second Quarter and Fiscal
2024 Guidance
For the second quarter of fiscal 2024, the
Company expects net sales in the range of $340 million to $360
million and adjusted earnings per diluted share in the range of
$0.30 to $0.40.
For the fiscal year 2024, the Company expects
net sales in the range of $1.53 billion to $1.61 billion, adjusted
earnings per diluted share in the range of $2.30 to $2.55, and a
full year effective tax rate in 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, organizational
restructuring expenses, and strategic transformation costs. A
quantitative reconciliation of adjusted earnings per diluted share
for the second quarter and full fiscal year 2024 is not available
without unreasonable efforts because management cannot predict,
with sufficient certainty, all of the elements necessary to provide
such a reconciliation. For the same reasons, the Company is unable
to address the probable significance of the unavailable
information, which could be material to future results.
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)
225-9448, and international listeners may dial (203) 518-9708; the
conference ID is FOXFQ124 or 36937124. 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.
Available Information
Fox Factory Holding Corp. announces material
information to the public about Fox Factory Holding Corp. through a
variety of means, including filings with the Securities and
Exchange Commission, press releases, public conference calls,
webcasts, and the investor relations section of its website
(https://investor.ridefox.com/investor-relations/default.aspx) in
order to achieve broad, non-exclusionary distribution of
information to the public and for complying with its disclosure
obligations under Regulation FD.
About Fox Factory Holding Corp. (NASDAQ:
FOXF)
Fox Factory Holding Corp. is a global leader in
the design and manufacturing of premium products that deliver
championship-level performance for specialty sports and on and
off-road vehicles. Its portfolio of brands, like FOX, Marucci,
Method Race Wheels and more, are fueled by unparalleled innovation
that continuously earns the trust of professional athletes and
passionate enthusiasts all around the world. The Company is a
direct supplier of shocks, suspension, and components to leading
powered vehicle and bicycle original equipment manufacturers. The
company acquires complementary businesses to integrate engineering
and manufacturing expertise to reach beyond its core shock and
suspension segment, diversifying its product offerings and
increasing its market potential. It also provides products in the
aftermarket through its global network of retailers and
distributors and through direct-to-consumer channels.
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 operating margin”,
“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 the amortization of acquired inventory
valuation markups. 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, organizational
restructuring expenses, and certain strategic transformation costs.
FOX defines adjusted operating margin as adjusted operating expense
divided by net sales. FOX defines adjusted net income as net income
adjusted for amortization of purchased intangibles, litigation and
settlement-related expenses, acquisition and integration-related
expenses, organizational restructuring 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 or tax benefits,
amortization of purchased intangibles, depreciation, stock-based
compensation, litigation and settlement related expenses,
organizational restructuring 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 operating margin, 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 |
|
March 29, 2024 |
|
December 29, 2023 |
|
|
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
69,583 |
|
|
$ |
83,642 |
|
Accounts receivable (net of allowances of $969 and $1,158 at
March 29, 2024 and December 29, 2023, respectively) |
|
164,943 |
|
|
|
171,060 |
|
Inventory |
|
353,980 |
|
|
|
371,841 |
|
Prepaids and other current assets |
|
176,957 |
|
|
|
141,512 |
|
Total current assets |
|
765,463 |
|
|
|
768,055 |
|
Property, plant and equipment, net |
|
237,355 |
|
|
|
237,192 |
|
Lease right-of-use assets |
|
99,797 |
|
|
|
84,317 |
|
Deferred tax assets |
|
20,692 |
|
|
|
21,297 |
|
Goodwill |
|
637,579 |
|
|
|
636,565 |
|
Trademarks and brands, net |
|
271,563 |
|
|
|
273,293 |
|
Customer and distributor relationships, net |
|
178,046 |
|
|
|
184,269 |
|
Core technologies, net |
|
25,014 |
|
|
|
25,785 |
|
Other assets |
|
12,768 |
|
|
|
11,525 |
|
Total assets |
$ |
2,248,277 |
|
|
$ |
2,242,298 |
|
Liabilities and stockholders’ equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
107,693 |
|
|
$ |
104,150 |
|
Accrued expenses |
|
101,046 |
|
|
|
103,400 |
|
Current portion of long-term debt |
|
14,286 |
|
|
|
14,286 |
|
Total current liabilities |
|
223,025 |
|
|
|
221,836 |
|
Revolver |
|
392,000 |
|
|
|
370,000 |
|
Term A Loan, less current portion |
|
356,144 |
|
|
|
359,242 |
|
Other liabilities |
|
84,619 |
|
|
|
69,459 |
|
Total liabilities |
|
1,055,788 |
|
|
|
1,020,537 |
|
Stockholders’ equity |
|
|
|
Preferred stock, $0.001 par value — 10,000 authorized and no shares
issued or outstanding as of March 29, 2024 and
December 29, 2023 |
|
— |
|
|
|
— |
|
Common stock, $0.001 par value — 90,000 authorized; 42,506 shares
issued and 41,616 outstanding as of March 29, 2024; 42,844
shares issued and 41,954 outstanding as of December 29,
2023 |
|
42 |
|
|
|
42 |
|
Additional paid-in capital |
|
334,860 |
|
|
|
348,346 |
|
Treasury stock, at cost; 890 common shares as of March 29,
2024 and December 29, 2023 |
|
(13,754 |
) |
|
|
(13,754 |
) |
Accumulated other comprehensive income |
|
5,833 |
|
|
|
9,041 |
|
Retained earnings |
|
865,508 |
|
|
|
878,086 |
|
Total stockholders’ equity |
|
1,192,489 |
|
|
|
1,221,761 |
|
Total liabilities and stockholders’ equity |
$ |
2,248,277 |
|
|
$ |
2,242,298 |
|
FOX FACTORY HOLDING CORP.Condensed
Consolidated Statements of Income(in thousands,
except per share data)(unaudited) |
|
|
For the three months ended |
|
March 29, 2024 |
|
March 31, 2023 |
Net sales |
$ |
333,472 |
|
|
$ |
399,851 |
|
Cost of sales |
|
230,314 |
|
|
|
266,553 |
|
Gross profit |
|
103,158 |
|
|
|
133,298 |
|
Operating expenses: |
|
|
|
General and administrative |
|
37,421 |
|
|
|
33,761 |
|
Sales and marketing |
|
31,186 |
|
|
|
23,669 |
|
Research and development |
|
14,439 |
|
|
|
15,282 |
|
Amortization of purchased intangibles |
|
11,237 |
|
|
|
5,896 |
|
Total operating expenses |
|
94,283 |
|
|
|
78,608 |
|
Income from operations |
|
8,875 |
|
|
|
54,690 |
|
Interest expense |
|
13,329 |
|
|
|
3,521 |
|
Other expense, net |
|
309 |
|
|
|
24 |
|
(Loss) Income before income taxes |
|
(4,763 |
) |
|
|
51,145 |
|
(Benefit) provision for income taxes |
|
(1,267 |
) |
|
|
9,378 |
|
Net (loss) income |
$ |
(3,496 |
) |
|
$ |
41,767 |
|
(Loss) Earnings per share: |
|
|
|
Basic |
$ |
(0.08 |
) |
|
$ |
0.99 |
|
Diluted |
$ |
(0.08 |
) |
|
$ |
0.98 |
|
Weighted-average shares used to compute earnings per share: |
|
|
|
Basic |
|
41,650 |
|
|
|
42,298 |
|
Diluted |
|
41,650 |
|
|
|
42,496 |
|
FOX FACTORY HOLDING CORP.Condensed
Consolidated Statements of Cash Flows(in
thousands)(unaudited) |
|
|
For the three months ended |
|
March 29, 2024 |
|
March 31, 2023 |
OPERATING ACTIVITIES: |
|
|
|
Net (loss) income |
$ |
(3,496 |
) |
|
$ |
41,767 |
|
Adjustments to reconcile net (loss) income to net cash provided by
(used in) |
|
|
|
Depreciation and amortization |
|
20,451 |
|
|
|
13,315 |
|
Provision for inventory reserve |
|
(20 |
) |
|
|
2,944 |
|
Stock-based compensation |
|
3,906 |
|
|
|
5,701 |
|
Amortization of loan fees |
|
699 |
|
|
|
226 |
|
Amortization of deferred gains on prior swap settlements |
|
(1,063 |
) |
|
|
(1,063 |
) |
Amortization of inventory fair value step-up |
|
4,485 |
|
|
|
3,064 |
|
Loss on disposal of property and equipment |
|
22 |
|
|
|
25 |
|
Deferred taxes |
|
74 |
|
|
|
51 |
|
Changes in operating assets and liabilities, net of effects of
acquisitions: |
|
|
|
Accounts receivable |
|
5,283 |
|
|
|
9,350 |
|
Inventory |
|
19,963 |
|
|
|
(11,532 |
) |
Income taxes |
|
(757 |
) |
|
|
(3,973 |
) |
Prepaids and other assets |
|
(36,543 |
) |
|
|
(112,245 |
) |
Accounts payable |
|
(2,382 |
) |
|
|
(6,684 |
) |
Accrued expenses and other liabilities |
|
(1,270 |
) |
|
|
(7,781 |
) |
Net cash provided by (used in) operating activities |
|
9,352 |
|
|
|
(66,835 |
) |
INVESTING ACTIVITIES: |
|
|
|
Acquisitions of businesses, net of cash acquired |
|
(5,041 |
) |
|
|
(130,918 |
) |
Acquisition of other assets, net of cash acquired |
|
(350 |
) |
|
|
(2,300 |
) |
Purchases of property and equipment |
|
(9,907 |
) |
|
|
(11,118 |
) |
Net cash used in investing activities |
|
(15,298 |
) |
|
|
(144,336 |
) |
FINANCING ACTIVITIES: |
|
|
|
Proceeds from revolver |
|
70,000 |
|
|
|
190,000 |
|
Payments on revolver |
|
(48,000 |
) |
|
|
(30,000 |
) |
Repayment of term debt |
|
(3,571 |
) |
|
|
— |
|
Purchase and retirement of common stock |
|
(25,000 |
) |
|
|
— |
|
Repurchases from stock compensation program, net |
|
(1,315 |
) |
|
|
(2,156 |
) |
Net cash (used in) provided by financing activities |
|
(7,886 |
) |
|
|
157,844 |
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
|
(227 |
) |
|
|
(31 |
) |
CHANGE IN CASH AND CASH EQUIVALENTS |
|
(14,059 |
) |
|
|
(53,358 |
) |
CASH AND CASH EQUIVALENTS—Beginning of period |
|
83,642 |
|
|
|
145,250 |
|
CASH AND CASH EQUIVALENTS—End of period |
$ |
69,583 |
|
|
$ |
91,892 |
|
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 months ended
March 29, 2024 and March 31, 2023. 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 |
|
March 29, 2024 |
|
March 31, 2023 |
Net (loss) income |
$ |
(3,496 |
) |
|
$ |
41,767 |
|
Amortization of purchased intangibles |
|
11,237 |
|
|
|
5,896 |
|
Litigation and settlement-related expenses |
|
1,529 |
|
|
|
978 |
|
Other acquisition and integration-related expenses (1) |
|
5,163 |
|
|
|
4,474 |
|
Organizational restructuring expenses (2) |
|
107 |
|
|
|
— |
|
Strategic transformation costs (3) |
|
432 |
|
|
|
— |
|
Tax impacts of reconciling items above (4) |
|
(3,047 |
) |
|
|
(2,081 |
) |
Adjusted net income |
$ |
11,925 |
|
|
$ |
51,034 |
|
|
|
|
|
Adjusted EPS |
|
|
|
Basic |
$ |
0.29 |
|
|
$ |
1.21 |
|
Diluted |
$ |
0.29 |
|
|
$ |
1.20 |
|
|
|
|
|
Weighted average shares used to compute adjusted
EPS |
|
|
|
Basic |
|
41,650 |
|
|
|
42,298 |
|
Diluted |
|
41,729 |
|
|
|
42,496 |
|
|
|
|
|
|
|
|
|
(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 |
|
March 29, 2024 |
|
March 31, 2023 |
Acquisition related costs and expenses |
$ |
678 |
|
|
$ |
1,404 |
|
Purchase accounting inventory fair value adjustment
amortization |
|
4,485 |
|
|
|
3,070 |
|
Other acquisition and integration-related
expenses |
$ |
5,163 |
|
|
$ |
4,474 |
|
|
(2) Represents expenses associated with various
restructuring initiatives.
(3) Represents costs associated with various
strategic initiatives.
(4) Tax impact calculated based on the
respective year-to-date effective tax rate.
FOX FACTORY HOLDING CORP. NET INCOME TO
ADJUSTED EBITDA RECONCILIATION AND NET INCOME
MARGIN TO ADJUSTED EBITDA MARGIN RECONCILIATION
(in thousands, except percentages)
(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 a reconciliation of net income
margin to adjusted EBITDA margin (a non-GAAP measure) for the three
months ended March 29, 2024 and March 31, 2023. 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 |
|
March 29, 2024 |
|
March 31, 2023 |
Net (loss) income |
$ |
(3,496 |
) |
|
$ |
41,767 |
|
(Benefit) provision for income taxes |
|
(1,267 |
) |
|
|
9,378 |
|
Depreciation and amortization |
|
20,451 |
|
|
|
13,315 |
|
Non-cash stock-based compensation |
|
3,906 |
|
|
|
5,701 |
|
Litigation and settlement-related expenses |
|
1,529 |
|
|
|
978 |
|
Other acquisition and integration-related expenses (1) |
|
5,163 |
|
|
|
4,474 |
|
Organizational restructuring expenses (2) |
|
63 |
|
|
|
— |
|
Strategic transformation costs (3) |
|
432 |
|
|
|
— |
|
Interest and other expense, net |
|
13,638 |
|
|
|
3,545 |
|
Adjusted EBITDA |
$ |
40,419 |
|
|
$ |
79,158 |
|
|
|
|
|
Power Vehicles Group |
|
15,881 |
|
|
|
17,658 |
|
Aftermarket Applications Group |
|
14,869 |
|
|
|
36,279 |
|
Specialty Sports Group |
|
24,057 |
|
|
|
41,830 |
|
Unallocated corporate expenses |
|
(14,388 |
) |
|
|
(16,609 |
) |
Adjusted EBITDA |
$ |
40,419 |
|
|
$ |
79,158 |
|
|
For the three months ended |
|
March 29, 2024 |
|
March 31, 2023 |
Net income margin |
|
(1.0 |
)% |
|
|
10.4 |
% |
(Benefit) provision for income taxes |
|
(0.4 |
) |
|
|
2.3 |
|
Depreciation and amortization |
|
6.1 |
|
|
|
3.3 |
|
Non-cash stock-based compensation |
|
1.2 |
|
|
|
1.4 |
|
Litigation and settlement-related expenses |
|
0.5 |
|
|
|
0.2 |
|
Other acquisition and integration-related expenses (1) |
|
1.5 |
|
|
|
1.1 |
|
Organizational restructuring expenses (2) |
|
— |
|
|
|
— |
|
Interest and other expense, net |
|
4.1 |
|
|
|
0.9 |
|
Adjusted EBITDA Margin |
|
12.1 |
% |
|
|
19.8 |
% |
|
*Percentages may not foot due to rounding.
(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 |
|
March 29, 2024 |
|
March 31, 2023 |
Acquisition related costs and expenses |
$ |
678 |
|
|
$ |
1,404 |
|
Purchase accounting inventory fair value adjustment
amortization |
|
4,485 |
|
|
|
3,070 |
|
Other acquisition and integration-related
expenses |
$ |
5,163 |
|
|
$ |
4,474 |
|
|
(2) Represents expenses associated with various
restructuring initiatives, excluding $44 in stock-based
compensation for the three month period ended March 29,
2024.
(3) Represents costs associated with various
strategic initiatives including the expansion of the Aftermarket
Applications Group’s 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 months ended March 29, 2024
and March 31, 2023, 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 |
|
March 29, 2024 |
|
March 31, 2023 |
Net sales |
$ |
333,472 |
|
|
$ |
399,851 |
|
|
|
|
|
Gross Profit |
$ |
103,158 |
|
|
$ |
133,298 |
|
Amortization of acquired inventory valuation markup |
|
4,485 |
|
|
|
3,070 |
|
Adjusted Gross Profit |
$ |
107,643 |
|
|
$ |
136,368 |
|
|
|
|
|
Gross Margin |
|
30.9 |
% |
|
|
33.3 |
% |
|
|
|
|
Adjusted Gross Margin |
|
32.3 |
% |
|
|
34.1 |
% |
FOX FACTORY HOLDING CORP. OPERATING
EXPENSE TO ADJUSTED OPERATING EXPENSE RECONCILIATION
ANDCALCULATION OF ADJUSTED OPERATING
MARGIN(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 months ended
March 29, 2024 and March 31, 2023. 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 |
|
March 29, 2024 |
|
March 31, 2023 |
Net sales |
$ |
333,472 |
|
|
$ |
399,851 |
|
|
|
|
|
Operating Expense |
$ |
94,283 |
|
|
$ |
78,608 |
|
Amortization of purchased intangibles |
|
(11,237 |
) |
|
|
(5,896 |
) |
Litigation and settlement-related expenses |
|
(1,529 |
) |
|
|
(978 |
) |
Other acquisition and integration-related expenses (1) |
|
(678 |
) |
|
|
(1,404 |
) |
Organizational restructuring expenses (2) |
|
(108 |
) |
|
|
— |
|
Strategic transformation costs (3) |
|
(432 |
) |
|
|
— |
|
Adjusted operating expense |
$ |
80,299 |
|
|
$ |
70,330 |
|
|
|
|
|
Operating expense as a percentage of net
sales |
|
28.3 |
% |
|
|
19.7 |
% |
|
|
|
|
Adjusted operating expense as a percentage of net
sales |
|
24.1 |
% |
|
|
17.6 |
% |
|
(1) Represents various acquisition-related costs
and expenses incurred to integrate acquired entities into the
Company’s operations.
(2) Represents expenses associated with various
restructuring initiatives.
(3) Represents costs associated with various
strategic initiatives.
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 the negative of
these words or other similar terms or expressions that concern our
expectations, strategy, plans or intentions. Such forward-looking
statements include, but are not limited to, statements with regard
to expectations related to the acquisition of Marucci and the
future performance of Fox and Marucci; the Company’s expected
demand for its products; the Company’s execution on its strategy to
improve operating efficiencies; the Company’s expectation regarding
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 including, but not limited to, the possibility
that the expected synergies and value creation from the Marucci
acquisition will not be realized, or will not be realized within
the expected time period; 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 spread of highly infectious or
contagious diseases, such as COVID-19, causing disruptions in the
U.S. and global economy and disrupting the business activities and
operations of our customers, business and operations; 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 performance-defining
products as well as the Company’s other 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 or the
Israel-Palestine conflict or rising tension in the Middle East 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 29, 2023 and filed with the Securities and
Exchange Commission on February 23, 2024, 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:ICRJeff
Sonnek646-277-1263Jeff.Sonnek@icrinc.com
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