Fox Factory Holding Corp. (FOXF) Q4 2024 Earnings Conference Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals mixed signals: while there is growth in net sales and gross margin, net income and adjusted EBITDA have declined, indicating financial challenges. The Q&A highlights cautious optimism, with uncertainties around the MLB partnership and tariffs. Despite a positive outlook for Marucci and potential upside in the bike business, the overall guidance remains conservative. Given the company's market cap of approximately $2 billion, these factors suggest a neutral stock price movement over the next two weeks.
Key Financial Performance
Total Consolidated Net Sales Q4 2024 $352.8 million, an increase of 6.1% from $332.5 million in Q4 2023, primarily due to the Marucci acquisition and growth in the bike business.
Gross Margin Q4 2024 28.9%, up 120 basis points from 27.7% in Q4 2023, mainly due to the absence of acquisition-related inventory costs from Marucci.
Adjusted Gross Margin Q4 2024 29.2%, an increase of 20 basis points compared to the prior year quarter.
Total Operating Expenses Q4 2024 $90.6 million, or 25.7% of net sales, compared to $81 million, or 24.4% of net sales in Q4 2023, primarily due to $18.7 million of operating expenses from the Marucci acquisition.
Net Loss Q4 2024 $0.1 million, or $0.00 per diluted share, compared to net income of $4.1 million, or $0.10 per diluted share in Q4 2023, driven by increased interest expense.
Adjusted Net Income Q4 2024 $12.8 million, or $0.31 per diluted share, compared to $20.3 million, or $0.48 per diluted share in Q4 2023.
Adjusted EBITDA Q4 2024 $40.4 million, compared to $38.8 million in Q4 2023, with an adjusted EBITDA margin of 11.5%, down from 11.7% in Q4 2023, reflecting challenges faced by customers impacting volumes.
Net Sales for Fiscal Year 2024 $1.39 billion, down from $1.46 billion in the prior year, reflecting a 23.5% decrease in AAG net sales and a 12% decrease in PVG net sales.
Net Income for Fiscal Year 2024 $6.6 million, or $0.16 per diluted share, compared to $120.8 million, or $2.85 per diluted share in fiscal 2023.
Adjusted Net Income for Fiscal Year 2024 $55.4 million, or $1.33 per diluted share, compared to $167.5 million, or $3.95 per diluted share in fiscal 2023.
Adjusted EBITDA for Fiscal Year 2024 $167 million, compared to $261 million in the prior year.
Working Capital Improvement Q4 2024 $55 million improvement year-over-year, driven by chassis inventory optimization actions.
Debt Paydown Q4 2024 $63 million paid down during the fourth quarter.
Inventory Increase for Fiscal Year 2024 $32.9 million, or 8.8%, compared to year-end 2023, driven by planned seasonal inventory builds.
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Operating Highlights
New Product Launches: Launched the AGwagon, a performance-built vehicle for farmers and ranchers, and a suspension package with Grand Design RV for Ford chassis vehicles.
New OEM Partnerships: New partnerships with CFMoto, Buell, BMW, Ducati, and Triumph in 2024 and 2025.
Market Expansion: Expanded focus on suspension for motorized two-wheel vehicles and aftermarket business, with resilience in both domestic and international channels.
Cost Reduction Initiatives: Progress in $25 million cost reduction initiative, with $63 million debt paydown in Q4 2024.
Operational Efficiencies: Improved working capital by $55 million year-over-year, with better inventory controls and chassis mix management.
Facility Consolidation: Closure of Colorado facility and ongoing consolidation in PVG and AAG operations.
Strategic Shifts: Focus on operational excellence and strategic positioning across segments, with a commitment to innovation and long-term value.
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Risk or Challenges
Competitive Pressures: The company faces ongoing headwinds from OEM production issues, particularly in the automotive sector, where consumer purchasing behaviors remain conservative. OEMs are managing production levels aggressively, leading to expectations of flat-to-down retail sales in 2025.
Regulatory Issues: The company is monitoring potential and planned tariffs, particularly affecting their bike business, which operates out of Taiwan. The impact of aluminum tariffs on the U.S. bike industry is still uncertain, and the company is executing plans to mitigate potential impacts through cost reductions and pricing adjustments.
Supply Chain Challenges: The company has noted complexities in their supply chain due to global manufacturing footprints of OEMs, which may create inflationary pressures for consumers. While Fox's core manufacturing is based in the U.S., they still face challenges related to imported materials.
Economic Factors: The overall market environment is expected to remain challenging in 2025, with tempered growth expectations. The company is focused on operational efficiency and cost management to protect margins amid these economic pressures.
Inventory Management: The company has experienced imbalances in expected versus fulfilled orders, leading to increased inventory levels. They are taking decisive actions to optimize inventory in alignment with current demand levels.
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Guidance & Outlook
Cost Reduction Initiative: The company is executing a $25 million cost reduction initiative across the organization, with benefits expected to materialize in 2025 and full realization in 2026.
Operational Efficiency: Fox Factory is focused on operational excellence and strategic positioning across segments, including optimizing operations and strengthening partnerships with OEM customers and dealers.
Product Development: The company is committed to ongoing product development initiatives, which are creating new customer engagements and opportunities.
Facility Consolidation: The closure of the Colorado facility was completed, and additional footprint consolidation in PVG and AAG operations is underway.
New Market Expansion: Fox Factory is expanding into new categories, including the AGwagon for agricultural use and a suspension package for RVs.
2025 Net Sales Guidance: The company expects net sales in the range of $1.385 billion to $1.485 billion for fiscal year 2025.
2025 Adjusted EPS Guidance: Adjusted earnings per diluted share are expected to be in the range of $1.60 to $2.60 for fiscal year 2025.
Q1 2025 Net Sales Guidance: For the first quarter of fiscal 2025, net sales are expected in the range of $320 million to $350 million.
Q1 2025 Adjusted EPS Guidance: Adjusted earnings per diluted share for Q1 2025 are expected to be in the range of $0.12 to $0.32.
Cost Savings Breakdown: Approximately 15% to 20% of the $25 million cost reduction will come from expense reductions, with the remainder from cost of goods.
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Shareholder Return Plan
Debt Paydown: $63 million of debt paydown during the fourth quarter.
Cost Reduction Plan: A $25 million cost reduction initiative was discussed, with approximately 15% to 20% of savings coming from expense reductions and the remainder from cost of goods.
Adjusted Earnings Guidance: Adjusted earnings per diluted share for fiscal year 2025 is expected to be in the range of $1.60 to $2.60.
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Key Q&A
Q:Can you give us an update on the Taiwan facilities consolidation, where capacity sits relative to pre-COVID levels?
A:The capacity is about in line with preprint perspective. We've increased our capacity even within that same footprint. Future growth projections would take us probably off the island.
Q:Can you give us an update on the upfitting business and dealership dialogue?
A:There is a lot of hard work going on right now. We've received positive feedback from dealers and are cultivating strong relationships to ensure we deliver the right products.
Q:Can you help us understand the flat revenue year over year in the bike business for 2025?
A:We think there could be upside in the bike business this year, but we're being conservative due to previous forecasting challenges. Inventory is better controlled, and product launches are promising.
Q:Can you frame what the new MLB partnership means in terms of size and timing?
A:Timing is easier; growth is expected in Q2 and Q3. We're not ready to put a number to it yet as we need to grow into the relationship.
Q:Can you expand on how your conversations with key partners are going regarding tariffs?
A:Our business is less affected by tariffs due to the specific chassis we work with. We feel good about our product set's resilience.
Q:Is the growth in Marucci still expected to be in the low double-digit range?
A:Yes, that is still the right way to benchmark that business.
Q:Can you comment on the guidance range for EPS?
A:The high end of the EPS range is dependent on strong execution and cost management.
Q:Can you provide more color on tariffs and their impact?
A:It's fluid, and while we have some mitigating factors, we can't predict the exact impact on the economy and consumer demand.
Q:What are the overall demand trends in the automotive side?
A:Demand for high-end products remains intact, but other areas may be softer. Interest rates are a headwind for truck sales.
Q:Can you comment on EBITDA margin by segment?
A:Margins will start off soft but are expected to recover in the second half as volumes and cost-saving initiatives ramp up.
Q:Are you seeing any signs that the consumer is feeling better in Q1?
A:We're seeing some positive signs, but it's too early to be bold about 2025.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the specific size and impact of the new MLB partnership, stating it was premature to put a number to it. Additionally, they provided vague language around the impact of tariffs, indicating it is fluid and hard to quantify.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AAG chassis
AGwagon
China
FOX
Fox Factory
Fox brand
MLB
OEM partner
RV
Taiwan
Toby
action bike
aftermarket inventory
alignment production
aluminum
bike inventory
chassis inventory
consolidation
cost optimization
cost reduction
expectation margin
focus
holiday
improvement capital
improvement prepaids
inventory action
inventory control
inventory optimization
manufacturing footprint
margin basis
margin improvement
market condition
opportunity market
optimization action
optimization work
pattern
position
recovery
remainder
resilience
sale increase
saving
sport
suspension
tariff
team
FOXF Transcript
Fox Factory Holding Corp. (FOXF) Q3 2025 Earnings Call Transcript
Unknown11-6
The earnings call reveals mixed signals: strong revenue growth in key segments and raised sales guidance, but concerns over economic uncertainty, increased operating expenses, and net loss. The Q&A highlights supply chain disruptions and labor issues, but also optimism in premium products. Adjusted EPS guidance is narrowed, with no specific guidance for 2026. The company's market cap suggests moderate volatility, leading to a neutral stock price prediction.
Fox Factory Holding Corp. (FOXF) Q2 2025 Earnings Call Transcript
Positive8-8
The earnings report reveals a mix of positive and negative elements. Despite a decline in net income, the company demonstrated strong adjusted EBITDA growth and improved working capital. The raised sales guidance and focus on new product development and market expansion are positive indicators. However, concerns about higher tariffs affecting profitability and lowered EPS guidance due to tariff impacts temper the outlook. The Q&A section reflects optimism about growth in several business segments, offsetting some negative aspects. Given the company's small-cap status, the stock is likely to react positively in the short term.
Fox Factory Holding Corp. (FOXF) Q4 2024 Earnings Conference Call Transcript
Unknown2-27
The earnings call reveals mixed signals: while there is growth in net sales and gross margin, net income and adjusted EBITDA have declined, indicating financial challenges. The Q&A highlights cautious optimism, with uncertainties around the MLB partnership and tariffs. Despite a positive outlook for Marucci and potential upside in the bike business, the overall guidance remains conservative. Given the company's market cap of approximately $2 billion, these factors suggest a neutral stock price movement over the next two weeks.
Fox Factory Holding Corp. (FOXF) Q3 2024 Earnings Conference Call Transcript
Unknown11-1
The earnings call highlights several challenges: macroeconomic pressures, quality issues, competitive pressures, and operational inefficiencies. Despite a revenue increase, margins have declined, and net income has dropped significantly. The Q&A session reveals concerns about demand, OEM pricing, and inventory management, with management providing unclear responses. The company prioritizes debt paydown over share repurchases, indicating financial caution. Although Marucci's growth is optimistic, overall guidance is conservative. Given the market cap, these factors suggest a negative stock price movement in the range of -2% to -8% over the next two weeks.
FOXF Report
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