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
second fiscal quarter ended June 28, 2024.
Second Quarter Fiscal 2024
Highlights
- Net sales
for the second quarter of fiscal 2024 were $348.5 million, a
sequential increase of 4.5%, and consistent with
expectations
- Bike
revenues grew 52% sequentially
- Earnings
per diluted share for the second quarter of fiscal 2024 was $0.13,
and adjusted earnings per diluted share was $0.38 and consistent
with expectations
- Net income
margin increased 260 basis points sequentially and adjusted EBITDA
margin improved sequentially to 12.7% from 12.1% due to the
strength of aftermarket sales
- Improved
capital structure and liquidity by drawing on our $200.0 million
Delayed Draw Term Loan and paying down our revolver
- Updates
full year 2024 guidance
- CFO Dennis
Schemm to become President of AAG while retaining existing CFO
responsibilities as Thomas Fletcher leaves the
company.
- Chief
Accounting Officer Brendan Enick to assume Treasurer
responsibilities in support of the AAG leadership
transition
Management Commentary
“Second quarter results were consistent with our
expectations, demonstrating continued sequential improvement in net
sales and profitability in light of challenging conditions,”
commented Mike Dennison, FOX’s Chief Executive Officer. “Although
our broader industries we address remain pressured by the
challenging macro environment, we see encouraging signals of
stabilization within areas of our business that have been facing
disproportionate impacts resulting from industry oversupply of
inventories.”
Mr. Dennison continued, “As we look towards the
second half of fiscal 2024, we are adjusting our expectations in
light of ongoing industry challenges and macroeconomic headwinds.
While we still anticipate sequential improvement from second to
third quarter, the pace of acceleration is likely to be more
moderate than initially projected. It is our commitment to
innovation and our product roadmap that gives us confidence in our
prospects for growth while most of our peers experience declining
sales growth in this environment. In this dynamic environment, we
are intensifying our focus on managing the controllable aspects of
our business, implementing stringent cost management measures, and
engaging in prudent resource allocation. These efforts are designed
to navigate current market conditions while ensuring we remain
strategically positioned to capitalize on long-term growth
opportunities as the market environment improves.”
Mr. Dennison concluded, “We wish Tom well as he
transitions out of Fox, and we want to recognize his leadership in
helping lead our Aftermarket Applications Group (AAG) segment
through a series of strategic acquisitions that have positioned FOX
as a leader in the aftermarket channel. I am looking forward to
Dennis’ contributions as AAG’s new leader, as his past operating
experience and fresh perspectives on FOX’s operations have been
invaluable to our leadership team since joining FOX approximately a
year ago. To further support this transition, Brendan Enick, our
Chief Accounting Officer, will be taking over the role of
Treasurer, where he will continue to work closely with Dennis and
the finance organization to drive our capital allocation strategy
and optimize our balance sheet and cash flows.”
Second Quarter 2024 Results
Net sales for the second quarter of fiscal 2024
were $348.5 million, a decrease of 13.0%, as compared to net sales
of $400.7 million in the second quarter of fiscal 2023. This
decrease reflects a $48.5 million or 31.2% decrease in Aftermarket
Applications Group (“AAG”) net sales and a $22.4 million or 16.0%
decrease in Powered Vehicles Group (“PVG”), partially offset by a
$18.7 million or 17.8% increase in Specialty Sports Group (“SSG”)
net sales. The decrease in AAG net sales from $155.6 million to
$107.1 million is driven by lower upfitting sales due to product
mix and higher interest rates impacting dealers and consumers. The
decrease in PVG net sales from $140.2 million to $117.8 million is
primarily due to lower industry demand in Power Sports because of
higher interest rates. The increase in SSG net sales from $104.9
million to $123.6 million is primarily related to the inclusion of
$41.6 million in net sales from Marucci, which we acquired in
November 2023, partially offset by a reduction in bike sales of
$22.9 million because of the ongoing channel inventory
recalibration and, to a lesser extent, lower end consumer demand.
Sequentially, bike revenues grew by 52.0%.
Gross margin was 31.8% for the second quarter of
fiscal 2024, a 110 basis point decrease from gross margin of 32.9%
in the second quarter of fiscal 2023. The decrease in gross margin
was primarily driven by shifts in our product line mix and reduced
operating leverage on lower volume, partially offset by increased
efficiencies at our North American facilities. Adjusted gross
margin, which excludes the effects of organizational restructuring
expenses, decreased 250 basis points to 31.9% from the same prior
fiscal year period.
Total operating expenses were $92.4 million, or
26.5% of net sales, for the second quarter of fiscal 2024, compared
to $79.2 million, or 19.8% of net sales in the second quarter of
fiscal 2023. Operating expenses increased by $13.2 million
primarily due to the inclusion of Marucci operating expenses of
$19.4 million, and to a lesser extent, our Custom Wheel House
acquisition, which were partially offset by strong cost management
actions. Adjusted operating expenses were $78.4 million, or 22.5%
of net sales in the second quarter of fiscal 2024, compared to
$71.0 million, or 17.7% of net sales, in the second quarter of the
prior fiscal year.
The Company reflected a tax benefit of $0.4
million in the second quarter of fiscal 2024, compared to a tax
expense of $8.1 million in the second quarter of fiscal 2023. The
decrease in the Company’s income tax expense was primarily due to a
decrease in pre-tax income.
Net income in the second quarter of fiscal 2024
was $5.4 million, compared to net income of $39.7 million in the
second quarter of the prior fiscal year. Earnings per diluted share
for the second quarter of fiscal 2024 was $0.13, compared to
earnings per diluted share of $0.94 for the second quarter of
fiscal 2023. Adjusted net income in the second quarter of fiscal
2024 was $15.9 million, or $0.38 of adjusted earnings per diluted
share, compared to adjusted net income of $51.4 million, or $1.21
of adjusted earnings per diluted share, in the same period of the
prior fiscal year.
Adjusted EBITDA in the second quarter of fiscal
2024 was $44.1 million, compared to $79.4 million in the second
quarter of fiscal 2023. Adjusted EBITDA margin in the second
quarter of fiscal 2024 was 12.7%, compared to 19.8% in the second
quarter of fiscal 2023.
First Six
Months Fiscal 2024 Results
Net sales for the six months ended June 28,
2024, were $682.0 million, a decrease of 14.8% compared to the
first six months in fiscal 2023. This decrease reflects a $85.4
million or 29.0% decrease in AAG net sales and a $46.5 million or
16.5% decrease in PVG net sales, partially offset by a $13.3
million or 5.9% increase in SSG net sales. The decrease in AAG net
sales from $294.4 million to $209.0 million is driven by lower
upfitting sales due to product mix and higher interest rates
impacting dealers and consumers. The decrease in PVG net sales from
$282.4 million to $235.9 million is primarily due to lower industry
demand in Power Sports because of higher interest rates. The
increase in SSG sales from $223.8 million to $237.1 million is
primarily related to the inclusion of $101.2 million in net sales
from Marucci, partially offset by a reduction in bike sales of
$87.9 million because of the ongoing channel inventory
recalibration and, to a lesser extent, lower end consumer
demand.
Gross margin was 31.4% in the first six months
of fiscal 2024, a 170 basis point decrease, compared to gross
margin of 33.1% in the first six months of fiscal 2023. The
decrease in gross margin for the first six months of fiscal 2024
was primarily driven by a shift in our product line mix and
operating leverage on lower volume. Adjusted gross margin,
excluding the effects of the amortization of an acquired inventory
valuation markup and organizational restructuring expenses, was
32.1% in the first six months of fiscal 2024, a 220 basis point
decrease, compared to 34.3% in the first six months of fiscal
2023.
Total operating expenses were $186.7 million, or
27.4% of net sales, for the first six months of fiscal 2024,
compared to $157.9 million, or 19.7% of net sales in the first six
months of fiscal 2023. Operating expenses increased by $28.8
million primarily due to the inclusion of Marucci operating
expenses of $40.2 million, partially offset by cost controls.
Adjusted operating expenses were $158.7 million, or 23.3% of net
sales in the first six months of fiscal 2024, compared to $141.3
million, or 17.7% of net sales, in the first six months of the
prior fiscal year.
Net income in the first six months of fiscal
2024 was $1.9 million, compared to $81.5 million in the first six
months of the prior fiscal year. Earnings per diluted share for the
first six months of fiscal 2024 was $0.05, compared to $1.92 in the
same period of fiscal 2023. Adjusted net income in the first six
months of fiscal 2024 was $27.8 million, or $0.67 of adjusted
earnings per diluted share, compared to $102.4 million, or $2.41 of
adjusted earnings per diluted share in the same period of the prior
fiscal year.
Adjusted EBITDA decreased to $84.6 million in
the first six months of fiscal 2024, compared to $158.6 million in
the first six months of fiscal 2023. Adjusted EBITDA margin
decrease to 12.4% in the first six months of fiscal 2024, compared
to 19.8% in the first six months of fiscal 2023.
Reconciliations to non-GAAP measures are
provided at the end of this press release.
Balance Sheet Summary
As of June 28, 2024, the Company had cash
and cash equivalents of $82.2 million, compared to $83.6 million as
of December 29, 2023. Inventory was $380.4 million as of
June 28, 2024, compared to $371.8 million as of
December 29, 2023. As of June 28, 2024, accounts
receivable and accounts payable were $157.9 million and $144.0
million, respectively, compared to $171.1 million and $104.2
million, respectively, as of December 29, 2023. Prepaids and
other current assets were $171.1 million as of June 28, 2024,
compared to $141.5 million as of December 29, 2023. Inventory
increased by $8.6 million driven by driven by planned inventory
builds to ensure sufficient inventory to meet anticipated demand,
partially offset by our strong execution of continuous improvement
efforts to optimize inventory levels across the organization,
particularly within PVG. 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 $758.1 million as of
June 28, 2024, compared to $743.5 million as of
December 29, 2023. During the first six months of fiscal 2024,
the Company drew $200 million on its delayed draw term loan and
used those proceeds to pay down its revolver balance, resulting in
net increase in debt of $14.6 million. The Company recently secured
an improved covenant profile on its capital structure to provide
more flexibility given the uncertain macro environment.
AAG Segment Leadership
Transition
The Company announced that Dennis Schemm, Chief
Financial Officer, has been appointed President of AAG, effective
August 1, 2024. Mr. Schemm will continue to serve as Chief
Financial Officer of the Company. This transition follows the
planned departure of Thomas (Tom) Fletcher, who has served as
President of AAG since May 2021.
As President of AAG, Mr. Schemm will take on
additional responsibilities including oversight of the Segment’s
manufacturing operations, commercial activities, and research and
development efforts, while retaining his existing leadership of the
finance organization. He will continue to report directly to Chief
Executive Officer, Mike Dennison.
To further support the transition, Brendan
Enick, Chief Accounting Officer, has taken on the additional role
of Treasurer, previously held by Mr. Schemm, effective August 1.
His additional responsibilities will include working with Mr.
Schemm and the finance organization to lead the Company’s cash flow
management and provide oversight of the balance sheet and capital
allocation priorities while working to mitigate financial risk.
Third Quarter and Fiscal
2024 Guidance
For the third quarter of fiscal 2024, the
Company expects net sales in the range of $355 million to $385
million and adjusted earnings per diluted share in the range of
$0.35 to $0.50.
For the fiscal year 2024, the Company now
expects net sales in the range of $1.407 billion to $1.477 billion,
adjusted earnings per diluted share in the range of $1.40 to $1.72,
and a full year effective tax rate in the range of 15% to 18%.
The Company’s expectation to achieve sequential
growth in the second half of the year is underpinned by: Bike
stabilizing and launch of new products into the entry-premium Bike
market, Marucci’s launch of CATX2 and growth from its diversified
portfolio, improving chassis mix and availability in AAG and new
product launches in the Aftermarket space. However, the impact of
these positive factors has been tempered by ongoing industry
challenges and macroeconomic headwinds.
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 third 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)
579-2543, and international listeners may dial (785) 424-1789; the
conference ID is FOXFQ224 or 36937224. 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 the Company 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 engineering 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 and
offers premium baseball and softball gear and equipment. 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 |
| |
June 28, 2024 |
|
December 29, 2023 |
| |
|
|
|
|
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
$ |
82,246 |
|
|
$ |
83,642 |
|
|
Accounts receivable (net of allowances of $940 and $1,158,
respectively) |
|
157,949 |
|
|
|
171,060 |
|
|
Inventory |
|
380,408 |
|
|
|
371,841 |
|
|
Prepaids and other current assets |
|
171,117 |
|
|
|
141,512 |
|
|
Total current assets |
|
791,720 |
|
|
|
768,055 |
|
|
Property, plant and equipment, net |
|
238,021 |
|
|
|
237,192 |
|
|
Lease right-of-use assets |
|
97,791 |
|
|
|
84,317 |
|
|
Deferred tax assets |
|
20,640 |
|
|
|
21,297 |
|
|
Goodwill |
|
637,575 |
|
|
|
636,565 |
|
|
Trademarks and brands, net |
|
267,798 |
|
|
|
273,293 |
|
|
Customer and distributor relationships, net |
|
171,911 |
|
|
|
184,269 |
|
|
Core technologies, net |
|
24,646 |
|
|
|
25,785 |
|
|
Other assets |
|
15,519 |
|
|
|
11,525 |
|
|
Total assets |
$ |
2,265,621 |
|
|
$ |
2,242,298 |
|
|
Liabilities and stockholders’ equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
$ |
143,975 |
|
|
$ |
104,150 |
|
|
Accrued expenses |
|
84,566 |
|
|
|
103,400 |
|
|
Current portion of long-term debt |
|
24,286 |
|
|
|
14,286 |
|
|
Total current liabilities |
|
252,827 |
|
|
|
221,836 |
|
|
Revolver |
|
194,000 |
|
|
|
370,000 |
|
|
Term A Loan, less current portion |
|
539,833 |
|
|
|
359,242 |
|
|
Other liabilities |
|
82,578 |
|
|
|
69,459 |
|
|
Total liabilities |
|
1,069,238 |
|
|
|
1,020,537 |
|
|
Stockholders’ equity |
|
|
|
|
Preferred stock, $0.001 par value — 10,000 authorized and no shares
issued or outstanding as of June 28, 2024 and
December 29, 2023 |
|
— |
|
|
|
— |
|
|
Common stock, $0.001 par value — 90,000 authorized; 42,572 shares
issued and 41,682 outstanding as of June 28, 2024; 42,844
shares issued and 41,954 outstanding as of December 29,
2023 |
|
42 |
|
|
|
42 |
|
|
Additional paid-in capital |
|
335,834 |
|
|
|
348,346 |
|
|
Treasury stock, at cost; 890 common shares as of June 28, 2024
and December 29, 2023 |
|
(13,754 |
) |
|
|
(13,754 |
) |
|
Accumulated other comprehensive income |
|
3,398 |
|
|
|
9,041 |
|
|
Retained earnings |
|
870,863 |
|
|
|
878,086 |
|
|
Total stockholders’ equity |
|
1,196,383 |
|
|
|
1,221,761 |
|
|
Total liabilities and stockholders’ equity |
$ |
2,265,621 |
|
|
$ |
2,242,298 |
|
|
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 28, 2024 |
|
June 30, 2023 |
|
June 28, 2024 |
|
June 30, 2023 |
|
Net sales |
$ |
348,491 |
|
|
$ |
400,715 |
|
$ |
681,963 |
|
|
$ |
800,566 |
|
Cost of sales |
|
237,528 |
|
|
|
268,689 |
|
|
467,842 |
|
|
|
535,242 |
|
Gross profit |
|
110,963 |
|
|
|
132,026 |
|
|
214,121 |
|
|
|
265,324 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
General and administrative |
|
36,962 |
|
|
|
30,221 |
|
|
74,383 |
|
|
|
63,982 |
|
Sales and marketing |
|
29,539 |
|
|
|
26,556 |
|
|
60,725 |
|
|
|
50,225 |
|
Research and development |
|
14,789 |
|
|
|
15,188 |
|
|
29,228 |
|
|
|
30,470 |
|
Amortization of purchased intangibles |
|
11,083 |
|
|
|
7,277 |
|
|
22,320 |
|
|
|
13,173 |
|
Total operating expenses |
|
92,373 |
|
|
|
79,242 |
|
|
186,656 |
|
|
|
157,850 |
|
Income from operations |
|
18,590 |
|
|
|
52,784 |
|
|
27,465 |
|
|
|
107,474 |
|
Interest expense |
|
13,865 |
|
|
|
4,418 |
|
|
27,194 |
|
|
|
7,939 |
|
Other (income) expense, net |
|
(311 |
) |
|
|
536 |
|
|
(2 |
) |
|
|
560 |
|
Income before income taxes |
|
5,036 |
|
|
|
47,830 |
|
|
273 |
|
|
|
98,975 |
|
(Benefit) provision for income taxes |
|
(371 |
) |
|
|
8,095 |
|
|
(1,638 |
) |
|
|
17,473 |
|
Net income |
$ |
5,407 |
|
|
$ |
39,735 |
|
$ |
1,911 |
|
|
$ |
81,502 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.13 |
|
|
$ |
0.94 |
|
$ |
0.05 |
|
|
$ |
1.93 |
|
Diluted |
$ |
0.13 |
|
|
$ |
0.94 |
|
$ |
0.05 |
|
|
$ |
1.92 |
|
Weighted-average shares used to compute earnings per share: |
|
|
|
|
|
|
|
|
Basic |
|
41,673 |
|
|
|
42,359 |
|
|
41,662 |
|
|
|
42,329 |
|
Diluted |
|
41,705 |
|
|
|
42,480 |
|
|
41,717 |
|
|
|
42,492 |
|
FOX FACTORY HOLDING CORP.Condensed
Consolidated Statements of Cash Flows(in
thousands)(unaudited) |
| |
| |
For the six months ended |
| |
June 28, 2024 |
|
June 30, 2023 |
|
OPERATING ACTIVITIES: |
|
|
|
|
Net income |
$ |
1,911 |
|
|
$ |
81,502 |
|
|
Adjustments to reconcile net income to net cash provided by (used
in) operating |
|
|
|
|
Depreciation and amortization |
|
40,854 |
|
|
|
28,712 |
|
|
Provision for inventory reserve |
|
572 |
|
|
|
4,309 |
|
|
Stock-based compensation |
|
6,109 |
|
|
|
10,184 |
|
|
Amortization of acquired inventory step-up |
|
4,485 |
|
|
|
8,895 |
|
|
Amortization of loan fees |
|
1,540 |
|
|
|
453 |
|
|
Amortization of deferred gains on prior swap settlements |
|
(2,126 |
) |
|
|
(2,126 |
) |
|
Loss on disposal of property and equipment |
|
(27 |
) |
|
|
408 |
|
|
Deferred taxes |
|
(184 |
) |
|
|
(139 |
) |
|
Changes in operating assets and liabilities, net of effects of
acquisitions: |
|
|
|
|
Accounts receivable |
|
12,003 |
|
|
|
32,744 |
|
|
Inventory |
|
(7,809 |
) |
|
|
8,814 |
|
|
Income taxes |
|
(23,172 |
) |
|
|
(16,381 |
) |
|
Prepaids and other assets |
|
(35,673 |
) |
|
|
(112,583 |
) |
|
Accounts payable |
|
34,633 |
|
|
|
(41,565 |
) |
|
Accrued expenses and other liabilities |
|
2,921 |
|
|
|
(6,535 |
) |
|
Net cash provided by (used in) operating activities |
|
36,037 |
|
|
|
(3,308 |
) |
|
INVESTING ACTIVITIES: |
|
|
|
|
Acquisitions of businesses, net of cash acquired |
|
(5,041 |
) |
|
|
(130,918 |
) |
|
Acquisition of other assets, net of cash acquired |
|
(350 |
) |
|
|
(2,364 |
) |
|
Purchases of property and equipment |
|
(21,188 |
) |
|
|
(23,227 |
) |
|
Net cash used in investing activities |
|
(26,579 |
) |
|
|
(156,509 |
) |
|
FINANCING ACTIVITIES: |
|
|
|
|
Proceeds from revolver |
|
119,000 |
|
|
|
210,000 |
|
|
Payments on revolver |
|
(295,000 |
) |
|
|
(85,000 |
) |
|
Proceeds from issuance of debt |
|
200,000 |
|
|
|
— |
|
|
Repayment of term debt |
|
(7,143 |
) |
|
|
— |
|
|
Purchase and retirement of common stock |
|
(25,000 |
) |
|
|
— |
|
|
Repurchases from stock compensation program, net |
|
(2,545 |
) |
|
|
(5,218 |
) |
|
Net cash (used in) provided by financing activities |
|
(10,688 |
) |
|
|
119,782 |
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
|
(166 |
) |
|
|
225 |
|
|
CHANGE IN CASH AND CASH EQUIVALENTS |
|
(1,396 |
) |
|
|
(39,810 |
) |
|
CASH AND CASH EQUIVALENTS—Beginning of period |
|
83,642 |
|
|
|
145,250 |
|
|
CASH AND CASH EQUIVALENTS—End of period |
$ |
82,246 |
|
|
$ |
105,440 |
|
|
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 28, 2024 and June 30,
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 |
|
For the six months ended |
| |
June 28, 2024 |
|
June 30, 2023 |
|
June 28, 2024 |
|
June 30, 2023 |
|
Net income |
$ |
5,407 |
|
|
$ |
39,735 |
|
|
$ |
1,911 |
|
|
$ |
81,502 |
|
|
Amortization of purchased intangibles |
|
11,083 |
|
|
|
7,277 |
|
|
|
22,320 |
|
|
|
13,173 |
|
|
Litigation and settlement-related expenses |
|
1,231 |
|
|
|
659 |
|
|
|
2,760 |
|
|
|
1,637 |
|
|
Other acquisition and integration-related expenses (1) |
|
470 |
|
|
|
6,125 |
|
|
|
5,633 |
|
|
|
10,599 |
|
|
Organizational restructuring expenses (2) |
|
413 |
|
|
|
— |
|
|
|
520 |
|
|
|
— |
|
|
Strategic transformation costs (3) |
|
822 |
|
|
|
— |
|
|
|
1,254 |
|
|
|
— |
|
|
Tax impacts of reconciling items above (4) |
|
(3,531 |
) |
|
|
(2,405 |
) |
|
|
(6,578 |
) |
|
|
(4,486 |
) |
|
Adjusted net income |
$ |
15,895 |
|
|
$ |
51,391 |
|
|
$ |
27,820 |
|
|
$ |
102,425 |
|
| |
|
|
|
|
|
|
|
|
Adjusted EPS |
|
|
|
|
|
|
|
|
Basic |
$ |
0.38 |
|
|
$ |
1.21 |
|
|
$ |
0.67 |
|
|
$ |
2.42 |
|
|
Diluted |
$ |
0.38 |
|
|
$ |
1.21 |
|
|
$ |
0.67 |
|
|
$ |
2.41 |
|
| |
|
|
|
|
|
|
|
|
Weighted average shares used to compute adjusted
EPS |
|
|
|
|
|
|
|
|
Basic |
|
41,673 |
|
|
|
42,359 |
|
|
|
41,662 |
|
|
|
42,329 |
|
|
Diluted |
|
41,705 |
|
|
|
42,480 |
|
|
|
41,717 |
|
|
|
42,492 |
|
|
|
(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 28, 2024 |
|
June 30, 2023 |
|
June 28, 2024 |
|
June 30, 2023 |
|
Acquisition related costs and expenses |
$ |
470 |
|
|
$ |
300 |
|
|
$ |
1,148 |
|
|
$ |
1,704 |
|
|
Purchase accounting inventory fair value adjustment
amortization |
|
— |
|
|
|
5,825 |
|
|
|
4,485 |
|
|
|
8,895 |
|
|
Other acquisition and integration-related
expenses |
$ |
470 |
|
|
$ |
6,125 |
|
|
$ |
5,633 |
|
|
$ |
10,599 |
|
|
|
(2) Represents
expenses associated with various restructuring initiatives.
(3) Represents costs
associated with various strategic initiatives.
(4) Tax impact
calculated based on the respective annual effective tax rate,
excluding discrete items.
|
|
|
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 and six months ended June 28,
2024 and June 30, 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 |
|
For the six months ended |
| |
June 28, 2024 |
|
June 30, 2023 |
|
June 28, 2024 |
|
June 30, 2023 |
|
Net income |
$ |
5,407 |
|
|
$ |
39,735 |
|
|
$ |
1,911 |
|
|
$ |
81,502 |
|
|
(Benefit) provision for income taxes |
|
(371 |
) |
|
|
8,095 |
|
|
|
(1,638 |
) |
|
|
17,473 |
|
|
Depreciation and amortization |
|
20,403 |
|
|
|
15,397 |
|
|
|
40,854 |
|
|
|
28,712 |
|
|
Non-cash stock-based compensation |
|
2,203 |
|
|
|
4,483 |
|
|
|
6,109 |
|
|
|
10,184 |
|
|
Litigation and settlement-related expenses |
|
1,231 |
|
|
|
659 |
|
|
|
2,760 |
|
|
|
1,637 |
|
|
Other acquisition and integration-related expenses (1) |
|
470 |
|
|
|
6,125 |
|
|
|
5,633 |
|
|
|
10,599 |
|
|
Organizational restructuring expenses (2) |
|
413 |
|
|
|
— |
|
|
|
476 |
|
|
|
— |
|
|
Strategic transformation costs (3) |
|
822 |
|
|
|
— |
|
|
|
1,254 |
|
|
|
— |
|
|
Interest and other expense, net |
|
13,554 |
|
|
|
4,954 |
|
|
|
27,192 |
|
|
|
8,499 |
|
|
Adjusted EBITDA |
$ |
44,132 |
|
|
$ |
79,448 |
|
|
$ |
84,551 |
|
|
$ |
158,606 |
|
| |
|
|
|
|
|
|
|
|
Power Vehicles Group |
$ |
15,889 |
|
|
$ |
23,882 |
|
|
$ |
31,770 |
|
|
$ |
41,540 |
|
|
Aftermarket Applications Group |
|
14,156 |
|
|
|
37,830 |
|
|
|
29,026 |
|
|
|
74,109 |
|
|
Specialty Sports Group |
|
29,214 |
|
|
|
34,109 |
|
|
|
53,271 |
|
|
|
75,939 |
|
|
Unallocated corporate expenses |
|
(15,127 |
) |
|
|
(16,373 |
) |
|
|
(29,516 |
) |
|
|
(32,982 |
) |
|
Adjusted EBITDA |
$ |
44,132 |
|
|
$ |
79,448 |
|
|
$ |
84,551 |
|
|
$ |
158,606 |
|
| |
For the three months ended |
|
For the six months ended |
| |
June 28, 2024 |
|
June 30, 2023 |
|
June 28, 2024 |
|
June 30, 2023 |
|
Net income margin |
|
1.6 |
% |
|
|
9.9 |
% |
|
|
0.3 |
% |
|
|
10.2 |
% |
|
(Benefit) provision for income taxes |
|
(0.1 |
) |
|
|
2.0 |
|
|
|
(0.2 |
) |
|
|
2.2 |
|
|
Depreciation and amortization |
|
5.9 |
|
|
|
3.8 |
|
|
|
6.0 |
|
|
|
3.6 |
|
|
Non-cash stock-based compensation |
|
0.6 |
|
|
|
1.1 |
|
|
|
0.9 |
|
|
|
1.3 |
|
|
Litigation and settlement-related expenses |
|
0.4 |
|
|
|
0.2 |
|
|
|
0.4 |
|
|
|
0.2 |
|
|
Other acquisition and integration-related expenses (1) |
|
0.1 |
|
|
|
1.5 |
|
|
|
0.8 |
|
|
|
1.3 |
|
|
Organizational restructuring expenses (2) |
|
0.1 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
Interest and other expense, net |
|
3.9 |
|
|
|
1.2 |
|
|
|
4.0 |
|
|
|
1.1 |
|
|
Adjusted EBITDA Margin |
|
12.7 |
% |
|
|
19.8 |
% |
|
|
12.4 |
% |
|
|
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 |
|
For the six months ended |
| |
June 28, 2024 |
|
June 30, 2023 |
|
June 28, 2024 |
|
June 30, 2023 |
|
Acquisition related costs and expenses |
$ |
470 |
|
|
$ |
300 |
|
|
$ |
1,148 |
|
|
$ |
1,704 |
|
|
Purchase accounting inventory fair value adjustment
amortization |
|
— |
|
|
|
5,825 |
|
|
|
4,485 |
|
|
|
8,895 |
|
|
Other acquisition and integration-related
expenses |
$ |
470 |
|
|
$ |
6,125 |
|
|
$ |
5,633 |
|
|
$ |
10,599 |
|
|
|
(2) Represents
expenses associated with various restructuring initiatives,
excluding $44 in stock-based compensation for the six month period
ended June 28, 2024.
(3) Represents costs
associated with various strategic initiatives.
|
|
|
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 28, 2024 and June 30,
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 |
|
For the six months ended |
| |
June 28, 2024 |
|
June 30, 2023 |
|
June 28, 2024 |
|
June 30, 2023 |
|
Net sales |
$ |
348,491 |
|
|
$ |
400,715 |
|
|
$ |
681,963 |
|
|
$ |
800,566 |
|
| |
|
|
|
|
|
|
|
|
Gross Profit |
$ |
110,963 |
|
|
$ |
132,026 |
|
|
$ |
214,121 |
|
|
$ |
265,324 |
|
|
Amortization of acquired inventory valuation markup |
|
— |
|
|
|
5,825 |
|
|
|
4,485 |
|
|
|
8,895 |
|
|
Organizational restructuring expenses (1) |
|
86 |
|
|
|
— |
|
|
|
86 |
|
|
|
— |
|
|
Adjusted Gross Profit |
$ |
111,049 |
|
|
$ |
137,851 |
|
|
$ |
218,692 |
|
|
$ |
274,219 |
|
| |
|
|
|
|
|
|
|
|
Gross Margin |
|
31.8 |
% |
|
|
32.9 |
% |
|
|
31.4 |
% |
|
|
33.1 |
% |
| |
|
|
|
|
|
|
|
|
Adjusted Gross Margin |
|
31.9 |
% |
|
|
34.4 |
% |
|
|
32.1 |
% |
|
|
34.3 |
% |
|
|
(1) Represents
expenses associated with various restructuring initiatives.
|
|
|
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 and six months ended June 28, 2024 and
June 30, 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 |
|
For the six months ended |
| |
June 28, 2024 |
|
June 30, 2023 |
|
June 28, 2024 |
|
June 30, 2023 |
|
Net sales |
$ |
348,491 |
|
|
$ |
400,715 |
|
|
$ |
681,963 |
|
|
$ |
800,566 |
|
|
|
|
|
|
|
|
|
|
|
Operating expense |
$ |
92,373 |
|
|
$ |
79,242 |
|
|
$ |
186,656 |
|
|
$ |
157,850 |
|
|
Amortization of purchased intangibles |
|
(11,083 |
) |
|
|
(7,277 |
) |
|
|
(22,320 |
) |
|
|
(13,173 |
) |
|
Litigation and settlement-related expenses |
|
(1,231 |
) |
|
|
(659 |
) |
|
|
(2,760 |
) |
|
|
(1,637 |
) |
|
Other acquisition and integration-related expenses (1) |
|
(470 |
) |
|
|
(300 |
) |
|
|
(1,148 |
) |
|
|
(1,704 |
) |
|
Organizational restructuring expenses (2) |
|
(327 |
) |
|
|
— |
|
|
|
(435 |
) |
|
|
— |
|
|
Strategic transformation costs (3) |
|
(822 |
) |
|
|
— |
|
|
|
(1,254 |
) |
|
|
— |
|
|
Adjusted operating expense |
$ |
78,440 |
|
|
$ |
71,006 |
|
|
$ |
158,739 |
|
|
$ |
141,336 |
|
|
|
|
|
|
|
|
|
|
|
Operating expense as a percentage of net
sales |
|
26.5 |
% |
|
|
19.8 |
% |
|
|
27.4 |
% |
|
|
19.7 |
% |
|
|
|
|
|
|
|
|
|
|
Adjusted operating expense as a percentage of net
sales |
|
22.5 |
% |
|
|
17.7 |
% |
|
|
23.3 |
% |
|
|
17.7 |
% |
|
|
(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
Fox Factory (NASDAQ:FOXF)
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