Fox Factory Holding Corp., the maker of bicycles and power vehicles, reported second-quarter sales increased 12.5 percent to $97.2 million.
Fox Factory also makes the side-by-side vehicles, on-road and off-road vehicles and trucks, all-terrain vehicles, snowmobiles, specialty vehicles and applications, and motorcycles.
The sales gain reflected a 23.9 percent increase in sales of bike products.
“The increase in bike was due to our acquisitions and an increase in mountain bike suspension sales, which is an indication of an early positive industry response to our model year 2016 products,” said Larry Enterline, CEO, on a conference call with analysts. The quarter included Race Face/Easton Cycling.
In the second quarter, growth also returned for its legacy Fox mountain bike business. Added Enterline, “While we are pleased with our bike business growth in the second quarter, we remain concerned that macro-economic factors in China and Western Europe could negatively impact consumer sell-through of our bike products in the second half of 2015.”
The gains in bicycles were partially offset by a 3.0 percent decline in sales of powered vehicle products. The decrease in powered vehicles was largely due to the temporary production hiatus of the Ford Raptor program, partially offset by higher sales to other OEMs.
Non-GAAP adjusted net income was $9.8 million, or 26 cents a share, which is in line with the same period last fiscal year. Adjusted EBITDA improved 4.2 percent to $17.3 million. On a reported basis, net income was $6.8 million, or 18 cents per share, compared to $11.6 million, or 31 cents, last year
Gross margin decreased 50 basis points to 30.7 percent. 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, CA facility. Margins were also impacted by infrastructure investments in its El Cajon, CA facility. Gross margins are still expected to improve slightly in the back half of the year as compared to the last six months of 2014.
As a percentage of sales, operating expenses increased to 19.9 percent from 17.5 percent a year ago, primarily due to acquisition related compensation expense associated with Race Face/Easton Cycling.
For the third quarter, Fox expects sales in the range of $103 million to $108 million and non-GAAP adjusted EPS in the range of 33 to 37 cents a share.
For the fiscal year, the company raised its outlook. It now expects sales in the range of $347 million to $363 million and non-GAAP adjusted EPS in the range of 91 cents to $1.00. This compares to the company's previous outlook of sales in the range of $333 million to $357 million and EPS in the range of 88 cents to $1.00.
