Fox Factory Holding Corp. reported profits in the third quarter missed plan due to cautious ordering by dealers in its Specialty Sports Group (SSG) segment, which includes cycling brands such as Fox as well as the baseball and softball brand Marucci. The company slashed its earnings guidance for the year, with marketplace pushes toward reduced inventory levels expected to continue.

Third Quarter Fiscal 2025 Highlights

  • Net sales increased 4.8 percent year-over-year to $376.4 million; year-to-date net sales up 6.3 percent
  • AAG net sales up 17.4 percent to $117.8 million and 3.2 percent sequentially; PVG net sales up 15.1 percent to $125.9 million and 1.9 percent sequentially
  • Gross margin improved 50 basis points year-over-year to 30.4 percent
  • Net loss of $0.6 million, or 2 cents per diluted share, compared to net income of $4.8 million, or 11 cents per diluted share, in the prior year quarter
  • Adjusted EBITDA of $44.4 million, up 5.7 percent year-over-year; adjusted EBITDA margin of 11.8 percent up 10 basis points
  • Adjusted earnings per diluted share of 23 cents, compared to 35 cents in the prior year quarter; year-over-year decline reflects higher tariff costs and strategic launch investments
  • Extended credit agreement maturity through October 2030, enhancing financial flexibility
  • Company guidance had called for sales in the range of $370 million to $390 million and adjusted earnings per diluted share in the range of 45 cents to 65 cents.

Mike Dennison, Fox’s chief executive officer, commented, “Our third quarter results reflect overall improvement year-over-year, in a challenging environment. We delivered net sales growth of 5 percent and improved adjusted EBITDA by 6 percent. The increases were driven by organic growth in AAG up 17 percent with continued strength in aftermarket components—and the PVG segment up 15 percent in two wheel automotive. However, SSG underperformed expectations as OEMs, distributors and retail partners actively managed toward leaner inventories ahead of year-end, which impacted our third quarter results and is reflected in our updated full-year outlook. Despite these challenges, we strengthened our balance sheet, reducing debt by $17 million and extending our credit agreement through 2030.”

Dennison added, “Our $25 million cost reduction program remains on track for full delivery this year and we are preparing for phase two of this initiative. During the quarter, we further addressed tariff headwinds, and we made necessary investments in innovation and products. Although these investments created near-term margin pressure that wasn’t in our initial expectations, we believe they are cementing our competitive position. We are updating our near-term outlook to reflect these dynamics and remain focused on executing what we can control—operational excellence, product innovation, and strengthening our balance sheet so that we’re positioned to deliver enhanced operating leverage as markets recover.”

Third Quarter 2025 Results
Net sales for the third quarter of fiscal 2025 were $376.4 million, an increase of 4.8 percent, as compared to net sales of $359.1 million in the third quarter of fiscal 2024. This increase reflects a $17.5 million or 17.4 percent increase in Aftermarket Applications Group (“AAG”) net sales, and a $16.5 million or 15.1 percent increase in Powered Vehicles Group (“PVG”) net sales, partially offset by a $16.8 million or 11.2 percent decrease in Specialty Sports Group (“SSG”) net sales. The increase in AAG net sales from $100.3 million to $117.8 million is driven by increased demand for aftermarket products; while high interest rates, high vehicle costs and macroeconomic conditions continue to impact dealers and consumers. The increase in PVG net sales from $109.3 million to $125.9 million is driven by strategic customer program launches and market share gains in motorcycle and powersports applications, which more than offset lower industry demand in the automotive original equipment (“OE”) product lines. The decrease in SSG net sales from $149.5 million to $132.7 million is primarily due to original equipment manufacturers, distributors, and dealers reducing inventory levels in response to market-wide economic conditions.

Gross margin was 30.4 percent for the third quarter of fiscal 2025, compared to gross margin of 29.9 percent in the third quarter of fiscal 2024. The increase in gross margin was primarily driven by favorable shifts in our product line mix. Third quarter margins include investments of intentional timing shifts related to accelerated strategic customer launches and facility consolidation activities that have since been completed.

Total operating expenses were $99.4 million, or 26.4 percent of net sales, for the third quarter of fiscal 2025, compared to $88.7 million, or 24.7 percent of net sales in the third quarter of fiscal 2024. Operating expenses increased by $10.7 million driven by accelerated investments in research and development and sales and marketing to support strategic customer launches and product innovation, and organizational restructuring initiatives. Adjusted operating expenses were $85.7 million, or 22.8 percent of net sales, in the third quarter of fiscal 2025, compared to $75.8 million, or 21.1 percent of net sales, in the third quarter of the prior fiscal year.

Income tax expense was $2.3 million in the third quarter of fiscal 2025, compared to $0.3 million in the third quarter of fiscal 2024. For the third quarter of fiscal 2025, the difference between the company’s effective tax rate of 140.8 percent and the 21 percent federal statutory rate was primarily attributable to the unfavorable impact of discrete items in proportion to lower levels of pre-tax income.

Net loss attributable to FOX stockholders in the third quarter of fiscal 2025 was $0.6 million, compared to net income attributable to FOX stockholders of $4.8 million in the third quarter of the prior fiscal year. Net loss per diluted share for the third quarter of fiscal 2025 was 2 cents, compared to earnings per diluted share of 11 cents for the third quarter of fiscal 2024. Adjusted net income in the third quarter of fiscal 2025 was $9.9 million, or 23 centsof adjusted earnings per diluted share, compared to adjusted net income of $14.8 million, or 35 cents of adjusted earnings per diluted share, in the same period of the prior fiscal year.

Adjusted EBITDA in the third quarter of fiscal 2025 was $44.4 million, compared to $42.0 million in the third quarter of fiscal 2024. Adjusted EBITDA margin in the third quarter of fiscal 2025 was 11.8 percent, compared to 11.7 percent in the third quarter of fiscal 2024.

First Nine Months Fiscal 2025 Results
Net sales for the nine months ended October 3, 2025, were $1,106.2 million, an increase of 6.3 percent compared to the nine months ended September 27, 2024. This increase reflects a $34.6 million or 11.2 percent increase in AAG net sales, a $26.2 million or 7.6 percent increase in PVG net sales, and a $4.4 million or 1.1 percent increase in SSG net sales. The increase in AAG net sales from $309.3 million to $343.8 million is driven by increased demand for aftermarket products; however, high interest rates, high vehicle costs and macroeconomic conditions impacting dealers and consumers continue to pose challenges. The increase in PVG net sales from $345.2 million to $371.5 million is primarily due to the expansion of the motorcycle business, which offset lower industry demand in automotive OE product lines.

Gross margin was 30.8 percent in the nine months ended October 3, 2025, compared to gross margin of 30.9 percent in the nine months ended September 27, 2024. Adjusted gross margin, excluding the effects of the amortization of an acquired inventory markup and organizational restructuring expenses, was 30.9 percent in the nine months ended October 3, 2025, compared to 31.3 percent in the nine months ended September 27, 2024. The decrease in adjusted gross margin is primarily driven by shifts in our product line mix and impact of tariffs.

Total operating expenses were $558.1 million, or 50.4 percent of net sales, in the nine months ended October 3, 2025, compared to $275.3 million, or 26.4 percent of net sales in the nine months ended September 27, 2024. Operating expenses increased by $282.8 million primarily due to the impact of goodwill impairment of $262.1 million, organizational restructuring expenses, and higher investments in research and development and sales and marketing to support future growth and product innovation. Adjusted operating expenses were $253.6 million in the nine months ended October 3, 2025, compared to $234.5 million in the nine months ended September 27, 2024.

Net loss attributable to FOX stockholders in the nine months ended October 3, 2025 was $257.6 million, compared to net income attributable to FOX stockholders of $6.7 million in the nine months ended September 27, 2024. Net loss per diluted share for the nine months ended October 3, 2025 was $6.17, compared to earnings per diluted share of 16 cents in the corresponding nine-month period of fiscal 2024. Adjusted net income in the nine months ended October 3, 2025 was $36.3 million, or 87 centsof adjusted earnings per diluted share, compared to $42.6 million, or $1.02 of adjusted earnings per diluted share in the corresponding nine-month period of the prior fiscal year.

Adjusted EBITDA increased to $133.3 million in the nine months ended October 3, 2025, compared to $126.6 million in the nine months ended September 27, 2024. Adjusted EBITDA margin was 12.1 percent in the nine months ended October 3, 2025, compared to 12.2 percent in the corresponding nine-month period of the prior fiscal year.

Balance Sheet Summary
As of October 3, 2025, the company had cash and cash equivalents of $65.4 million, compared to $71.7 million as of January 3, 2025. Inventory was $412.1 million as of October 3, 2025, compared to $404.7 million as of January 3, 2025. As of October 3, 2025, accounts receivable and accounts payable were $198.4 million and $148.7 million, respectively, compared to $165.8 million and $144.1 million, respectively, as of January 3, 2025. Prepaids and other current assets were $82.9 million as of October 3, 2025, compared to $85.4 million as of January 3, 2025. Goodwill was $378.9 million as of October 3, 2025, compared to $639.5 million as of January 3, 2025. Total debt was $687.7 million as of October 3, 2025 compared to $705.1 million as of January 3, 2025. The decrease in cash and cash equivalents was mainly due to capital expenditures, debt repayments, and changes in working capital. Inventory increased by $7.4 million, driven by planned inventory builds to support anticipated demand, foreign currency translation, and the impact from higher tariffs, 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 is due to higher sales in the fiscal quarter ended October 3, 2025 compared to the fiscal quarter ended January 3, 2025. The change in accounts payable reflects the timing of vendor payments. Goodwill decreased after the company conducted its quantitative impairment assessment in the first quarter of fiscal 2025 triggered by adverse changes to U.S. tariff policies, new and expanded tariffs enacted by the current presidential administration, and resulting sustained decline in the company’s stock price, leading to a non-cash impairment charge.

Outlook
For the fourth quarter of fiscal 2025, the company is updating its expectations. Net sales are now expected to be in the range of $340 million to $370 million and adjusted earnings per diluted share are now expected to be in the range of 5 cents to 25 cents.

For the fiscal year 2025, it now expects net sales in the range of $1.445 billion to $1.475 billion, adjusted earnings per diluted share in the range of 92 cents to $1.12, and a full year adjusted tax rate in the range of 15 percent to 18 percent.

Under its previous guidance for the full year, sales were expected in the range of $1.45 billion to $1.51 billion and adjusted earnings per diluted share in the range of $1.60 to $2.00.

Fox Factory said in its statement, “For the fiscal year 2026, the company believes the macroeconomic environment is setting up to be increasingly challenging. Interest rates, while declining, remain elevated and continue to constrain consumer spending and business investment. The labor market has softened considerably, with job growth slowing significantly and unemployment rising. These factors, combined with extended decision-making cycles within the various industries the company serves, are creating headwinds for its businesses.

“Given these conditions, management expects to begin phase two of its optimization initiative in fiscal 2026, which builds upon its work in 2025. This work will continue to be focused on executing operational initiatives to managing costs tightly toward its goals of driving margin improvement, generating improved rates of free cash flow to reduce balance sheet leverage, and positioning the business to capitalize on end-market recovery. The company will provide additional detail surrounding its expectations for fiscal 2026 on its fourth quarter earnings call.”

Image courtesy Fox Factory