In its first earnings report since its initial public offering of its stock, Fox Factory Holding Corp. reported sales for the third quarter reached $82.3 million, an increase of 12.9 percent from sales of $72.9 million in the third quarter of fiscal 2012.
Sales of mountain bike and powered vehicle products increased 10.8 percent and 18.2 percent, respectively, for the third quarter ended Sept. 30 compared to the prior year period.
“Continued growing demand for our high-performance mountain bike and powered vehicle products enabled us to report third quarter results at the high-end of our expectations,” said Larry Enterline, CEO for the Scotts Valley, CA company. “We remain optimistic about our future growth prospects given our established, premium brand and strong OEM relationships along with our track record of successful innovation.”
Gross margin was 30.8 percent for the third quarter of fiscal 2013, a 320 basis point increase from gross margin of 27.6 percent in the third quarter of fiscal 2012. Approximately 140 basis points of the improvement in gross margin relates to the company's successful execution of initiatives designed to improve operating efficiencies. The remaining 180 basis points is largely due to additional warranty and other related costs incurred in the third quarter of 2012 to upgrade certain dampers contained in the company's suspension products which costs did not recur in 2013.
Total operating expenses were $10.6 million, or 12.8 percent of sales, for the third quarter of fiscal 2013, compared to $9.1 million, or 12.5 percent of sales in the third quarter of the prior year. Operating income was $14.8 million for the third quarter of fiscal 2013, a 34.6 percent increase compared to operating income of $11.0 million in the third quarter of fiscal 2012.
Net income in the third quarter of fiscal 2013 was $9.9 million, an increase of 81.5 percent compared to $5.5 million in the third quarter of the prior year. Earnings per diluted share for the third quarter of fiscal 2013 was $0.27, calculated on 36.4 million weighted average diluted shares outstanding, compared to $0.16, calculated on 33.7 million weighted average diluted shares outstanding in the third quarter of fiscal 2012.
Non-GAAP adjusted net income in the third quarter of fiscal 2013 was $12.1 million, an increase of 94.2 percent compared to non-GAAP adjusted net income of $6.2 million in the third quarter of the prior year. Non-GAAP adjusted earnings per diluted share for the third quarter of fiscal 2013 was $0.33, calculated on 36.4 million weighted average diluted shares outstanding, compared to non-GAAP adjusted earnings per diluted share of $0.18, calculated on 33.7 million weighted average diluted shares outstanding in the third quarter of fiscal 2012. A reconciliation of non-GAAP adjusted net income to the GAAP measure 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 third quarter of fiscal 2013 was $17.3 million, a 29.8 percent increase compared to $13.4 million in the third quarter of the prior year. Adjusted EBITDA margin in the third quarter of fiscal 2013 improved 270 basis points to 21.0 percent, compared to 18.3 percent in the prior year period, reflecting the company's ability to leverage its operating platform and the aforementioned damper warranty issue. A reconciliation of adjusted EBITDA to the GAAP measure net income and the calculation of adjusted EBITDA margin are provided at the end of this press release.
Nine months ended Sept. 30
Sales for the nine months ended Sept. 30, 2013, were $207.5 million, an increase of 15.7 percent compared to the same period in 2012. Sales of mountain bike and powered vehicle products increased 14.4 percent and 18.6 percent, respectively, for the first nine months of 2013 compared to the prior year period.
Gross margin increase 190 basis points to 29.6 percent for the nine-month period, including 120 basis points from improved operating efficiencies and 70 basis points from the aforementioned damper warranty issue.
Net income in the first nine months of fiscal 2013 was $19.2 million, an increase of 54.5 percent compared to $12.4 million in the first nine months of the prior year.
Fox Factory ended the quarter with cash and cash equivalents of $3.5 million. Total debt was $24.5 million, compared to $59.3 million as of Dec. 31, 2012. Inventory was $46.4 million as of Sept. 30, 2013, compared to $34.3 million as of Dec. 31, 2012 primarily due to the increased level of business during the period ended Sept. 30, 2013 and the normal seasonality of the company's business. As of Sept. 30, 2013, accounts receivable and accounts payable were $39.3 million and $22.4 million, respectively, compared to $25.2 million and $19.6 million as of Dec. 31, 2012, respectively, also primarily due to the increased level of business during the period ended Sept. 30, 2013 and the seasonality of the company's business.
The company expects fourth quarter fiscal 2013 sales in the range of $58 to $62 million and earnings per diluted share in the range of 8 to 12 cents based on 37.6 million weighted average diluted shares outstanding. For the full year fiscal 2013, the company expects sales in the range of $266 to $270 million and earnings per diluted share in the range of $0.63 to $0.67 based on 35.9 million weighted average diluted shares outstanding.
