Fox Factory Holding reported earnings on an adjusted basis declined slightly in the first quarter. Revenues grew 14 percent as strong gains in Powered Vehicles Group due to acquisitions offset a 1.8 percent decrease in Specialty Sports Group sales.

First Quarter Fiscal 2020 Highlights

  • Sales increased 14.0 percent to $184.4 million, compared to $161.7 million in the same period last fiscal year;
  • Gross margin decreased 90 basis points to 30.7 percent, compared to 31.6 percent in the same period last fiscal year; Non-GAAP adjusted gross margin decreased 80 basis points compared to the same period last fiscal year;
  • Net income attributable to FOX stockholders was $8.3 million, or 4.5 percent of sales and $0.21 of earnings per diluted share, compared to $18.1 million, or 11.3 percent of sales and $0.46 of earnings per diluted share in the same period last fiscal year;
  • Non-GAAP adjusted net income was $20.5 million, or $0.52 of adjusted earnings per diluted share, compared to $21.6 million, or $0.55 of adjusted earnings per diluted share in the same period last fiscal year; and
  • Adjusted EBITDA was $31.3 million, or 17.0 percent of sales, compared to $30.1 million, or 18.6 percent of sales in the same period last fiscal year.

“In an unprecedented operating environment, our global team has done a tremendous job to come together and support the needs of our customers,” commented Mike Dennison, Fox’s chief executive officer. “The health and safety of our employees remain our number one priority, and we believe we are well-positioned with our diversified business model to manage through these challenging times and emerge stronger. The resilience of our people, the power of the FOX brand and our performance-defining ride dynamics products combined with the strength of our valued OEM partners will continue to provide competitive advantages in the market as we move forward.”

Sales for the first quarter of fiscal 2020 were $184.4 million, an increase of 14.0 percent as compared to sales of $161.7 million in the first quarter of fiscal 2019. This increase in sales reflects a 24.6 percent increase in Powered Vehicles Group sales and a 1.8 percent decrease in Specialty Sports Group sales. The increase in Powered Vehicles Group products is primarily due to the Ridetech and SCA acquisitions, and the continued success of its broad product lineup. The decrease in Specialty Sports Group products is due to a shift in the timing of OEM orders.

Gross margin was 30.7 percent for the first quarter of fiscal 2020, a 90 basis point decrease from gross margin of 31.6 percent in the first quarter of fiscal 2019. Non-GAAP adjusted gross margin decreased 80 basis points to 30.9 percent from the same prior fiscal year period. The decrease in gross margin was primarily due to approximately $1.8 million of factory costs incurred during mandated closures in response to COVID-19 that are not added back to adjusted gross margin. A reconciliation of gross profit to non-GAAP adjusted gross profit and the resulting non-GAAP adjusted gross margin is provided at the end of this press release.

Total operating expenses were $45.0 million for the first quarter of fiscal 2020 compared to $29.2 million in the first quarter of fiscal 2019. The increase in operating expenses is primarily due to acquisition-related costs associated with SCA of $10.9 million, as well as the inclusion of SCA’s operating costs and amortization expense. The company’s expenses for the first quarter of fiscal 2020 also include operating costs related to Ridetech which was acquired in the second quarter of fiscal 2019, as well as increases in line with business growth. These increases were partially offset by lower patent litigation-related costs.

As a percentage of sales, operating expenses were 24.4 percent for the first quarter of fiscal 2020, compared to 18.1 percent in the first quarter of fiscal 2019. Non-GAAP operating expenses were $30.9 million, or 16.7 percent of sales in the first quarter of fiscal 2020, compared to $25.5 million, or 15.7 percent of sales in the first quarter of the prior fiscal year. Reconciliations of operating expenses to non-GAAP operating expenses are provided at the end of this press release.

The company’s effective tax rate was 9.5 percent in the first quarter of fiscal 2020, compared to an effective tax rate of 12.4 percent in the first quarter of fiscal 2019.

Net income attributable to FOX stockholders in the first quarter of fiscal 2020 was $8.3 million, compared to $18.1 million in the first quarter of the prior fiscal year. Earnings per diluted share for the first quarter of fiscal 2020 was $0.21, compared to earnings per diluted share of $0.46 for the first quarter of fiscal 2019.

Non-GAAP adjusted net income was $20.5 million, or $0.52 of adjusted earnings per diluted share, compared to adjusted net income of $21.6 million, or $0.55 of adjusted earnings per diluted share in the same period of the prior fiscal year.

Adjusted EBITDA in the first quarter of fiscal 2020 was $31.3 million, compared to $30.1 million in the first quarter of fiscal 2019. Adjusted EBITDA margin in the first quarter of fiscal 2020 was 17.0 percent, compared to 18.6 percent in the first quarter of fiscal 2019.

Balance Sheet Highlights
As of April 3, 2020, the company had cash and cash equivalents of $76.2 million compared to $43.7 million as of January 3, 2020. Inventory was $156.6 million as of April 3, 2020, compared to $128.5 million as of January 3, 2020. As of April 3, 2020, accounts receivable and accounts payable were $85.7 million and $88.6 million, respectively, compared to $91.6 million and $55.1 million, respectively, as of January 3, 2020. The changes in accounts receivable, inventory and accounts payable reflect the SCA acquisition and the impacts of the COVID-19 pandemic on the company’s shipment, collection and payment cycles. Prepaids and other current assets increased to $75.8 million as of April 3, 2020, compared to $17.9 million as of January 3, 2020, primarily due to SCA-related items including vehicle chassis deposits and contingent retention incentives held in escrow.

Property, plant and equipment, net were $127.6 million as of April 3, 2020, compared to $108.4 million as of January 3, 2020 reflecting capital expenditures of $12.8 million as well as the acquisition of SCA.

Total debt was $479.2 million, compared to $68.0 million as of January 3, 2020. The increase is primarily due to the acquisition of SCA in the quarter, as well as additional draws on the company’s line of credit to increase cash on hand.

Fiscal 2020 Guidance
The company previously issued its fiscal year 2020 guidance on March 3, 2020. However, due to the rapidly evolving market conditions domestically and internationally in response to the continued spread of COVID-19, the full fiscal year 2020 guidance remains suspended as previously reported on April 9, 2020 and the company does not intend to provide quarterly guidance until further notice. The company continues to expect to maintain compliance with its amended and restated credit facility.

Photo courtesy Fox Factory