Fox Factory Holding Corp. reported its sales of bicycle components grew 23.9 percent in the second quarter primarily due to the addition of Race Face/Easton Cycling, but also because growth resumed at its legacy cycling business, which makes forks and rear shocks for premium mountain bikes.
The growth was partially offset by a 3.0 percent decline in sales at Fox Factory's Powered Vehicle segment, which was largely due to the temporary production hiatus of the Ford Raptor program, partially offset by higher sales to other OEMs.
Fox Factory's total net sales reached $97.2 million, up 12.5 percent compared to the second quarter of fiscal 2014.
Gross margin was 30.7 percent for the second quarter of fiscal 2015, a 50 basis point decrease from gross margin of 31.2 percent in the second quarter of fiscal 2014. The decrease was primarily attributable to changes in product and customer mix as well as supply chain and production inefficiencies associated with the logistics of accelerating the ramp up of bike rear shock production in Taiwan and the subsequent reconfiguration of the company's Watsonville, California facility.
Margins were also impacted by the company making additional infrastructure investments in its El Cajon, CA facility to increase the company's production capacity to meet anticipated powered vehicle product demand, including the anticipated resumption of Ford Raptor shock production in late 2016. Management remains confident with its long-term margin improvement goals. Although the company experienced gross margin challenges in the first half of the year, it anticipates that gross margins will improve slightly in the back half of the year as compared to the last six months of fiscal 2014.
Total operating expenses were $19.3 million for the second quarter of fiscal 2015 compared to $15.2 million in the second quarter of the prior fiscal year. The increase in operating expenses was primarily due to the inclusion of Race Face/Easton Cycling's operating expenses within the company's consolidated results. As a percentage of sales, operating expenses increased from 17.5 percent in the second quarter of fiscal 2014 to 19.9 percent for the second quarter of fiscal 2015, primarily due to acquisition related compensation expense associated with Race Face/Easton Cycling, with no corresponding expense in the second quarter of fiscal 2014.
Operating income was $10.5 million for the second quarter of fiscal 2015, compared to operating income of $11.7 million in the second quarter of fiscal 2014.
Net income in the second quarter of fiscal 2015 was $6.8 million, compared to $11.6 million in the second quarter of the prior fiscal year. The results for the three months ended June 30, 2014 reflect a one-time tax benefit, net of cost, of $3.7 million with no corresponding benefit in 2015. Earnings per diluted share for the second quarter of fiscal 2015 was $0.18, compared to $0.31 in the second quarter of fiscal 2014.
Operating income and net income were both negatively impacted in the second quarter of fiscal 2015 by the acquisition related compensation expenses, discussed above. Non-GAAP adjusted net income of $9.8 million and non-GAAP adjusted earnings per diluted share of $0.26 in the second quarter of fiscal 2015 were both unchanged as compared to the second quarter of the prior fiscal year. Reconciliations of net income to non-GAAP adjusted net income and the calculation of non-GAAP adjusted earnings per share are provided at the end of this press release.
Adjusted EBITDA in the second quarter of fiscal 2015 was $17.3 million, compared to $16.6 million in the second quarter of fiscal 2014. Adjusted EBITDA margin in the second quarter of fiscal 2015 was 17.8 percent, compared to 19.2 percent in the second quarter of fiscal 2014. Reconciliations of net income to adjusted EBITDA and the calculation of adjusted EBITDA margin are provided at the end of this press release.
