Fox Factory Holding Corp. reported sales for the third quarter increased 17.8 percent to $409.2 million, compared to $347.4 million in the comparable period last fiscal year. This increase reflects a 25.1 percent increase in Powered Vehicles Group sales and a 9.1 percent increase in Specialty Sports Group sales. The increase in Powered Vehicles Group sales is primarily due to strong performance in its upfitting product lines and increased demand in the original equipment manufacturer (OEM) channel. The increase in Specialty Sports Group sales is driven by continued strong demand in the OEM channel.

Gross profit increased 18.3 percent to $137.3 million in Q3, compared to $116.0 million in the comparable period last year. Gross margin increased 10 basis points to 33.5 percent of sales, compared to 33.4 percent in the same period last fiscal year. Non-GAAP adjusted gross margin percentage increased 10 basis points to 33.9 percent of sales compared to 33.8 percent in the year-ago period. The increase in gross margin was primarily driven by a favorable product mix and efficiencies gained at our Gainesville, GA facility.

Total operating expenses were $71.9 million for the third quarter of fiscal 2022, compared to $60.8 million in the third quarter of fiscal 2021. Operating expenses increased by $11.1 million primarily due to higher employee-related costs, insurance and facility-related expenses, commission costs, and professional fees. As a percentage of sales, operating expenses for the third quarter of fiscal 2022 were 17.6 percent, compared to 17.5 percent in the third quarter of fiscal 2021. Non-GAAP operating expenses were $64.8 million, or 15.8 percent of sales in the third quarter of fiscal 2022, compared to $53.8 million, or 15.5 percent of sales, in the third quarter of the prior fiscal year.

Adjusted EBITDA was $85.1 million, or 20.8 percent of sales, compared to $72.8 million, or 21.0 percent of sales in the same period last fiscal year.

Net income was $50.8 million, or 12.4 percent of sales and $1.20 of earnings per diluted share, compared to $43.8 million, or 12.6 percent of sales and $1.03 of earnings per diluted share in the year-ago period. Non-GAAP adjusted net income was $57.4 million, or $1.35 of non-GAAP adjusted earnings per diluted share, compared to $50.5 million, or $1.19 of non-GAAP adjusted earnings per diluted share in the same period last fiscal year.

“We are pleased to report another quarter of record sales, crossing one and a half billion in revenue on a trailing twelve-month basis. I am incredibly proud of our Fox team members and their unwavering commitment against a backdrop of growing economic headwinds,” commented Mike Dennison, CEO, Fox Factory. “As the last two years have shown, our agility has been one of our greatest strengths. As we adjust our focus to 2023, which arguably could be more challenging than 2022, we are closely monitoring end-market demand, global resilience and volatility in currency exchange rates. However, even with the heightened risk of a global recession, we remain confident in our ability to achieve our 2025 vision.”

Balance Sheet Highlights
As of September 30, 2022, the company had cash and cash equivalents of $153.1 million compared to $179.7 million as of December 31, 2021. Inventory was $354.2 million as of September 30, 2022, compared to $279.8 million as of December 31, 2021. As of September 30, 2022, accounts receivable and accounts payable were $194.4 million and $131.7 million, respectively, compared to $142.0 million and $100.0 million, respectively, as of December 31, 2021. Prepaids and other current assets were $175.4 million as of September 30, 2022, compared to $123.1 million as of December 31, 2021. The increase in cash used for working capital was primarily due to increased inventory, accounts receivable, as well as prepaids and other current assets. The increase in prepaids and other current assets is primarily due to increased chassis deposits as we work to secure supply for the remainder of the year for its upfitting business. The increase in inventory is due to several factors, including receipt of long lead time items that had been delayed, higher levels of safety stock to mitigate uncertainty, and natural growth to meet anticipated demand. The increases in accounts receivable and accounts payable reflect business growth as well as the timing of vendor payments. Total debt was $325.0 million as of September 30, 2022, compared to $378.5 million as of December 31, 2021, due to additional payments made on our line of credit.

Fiscal 2022 Guidance
For the fourth quarter of fiscal 2022, the company expects sales in the range of $370 million to $390 million and non-GAAP adjusted earnings per diluted share in the range of $1.10 to $1.30.

For the fiscal year 2022, the company expects sales in the range of $1,565 million to $1,585 million and non-GAAP adjusted earnings per diluted share in the range of $5.15 to $5.35. For purposes of our fiscal 2022 guidance, it expects full-year effective tax rate to be approximately 16 percent.

Non-GAAP adjusted earnings per diluted share exclude the following items net of applicable tax: amortization of purchased intangibles, litigation and settlement-related expenses, acquisition and integration-related expenses, strategic transformation costs, and other non-recurring items. A quantitative reconciliation of non-GAAP adjusted earnings per diluted share for the fourth quarter and full fiscal year 2022 is not available without unreasonable efforts because management said it could not predict, with sufficient certainty, the elements necessary to provide reconciliation.

Photo courtesy Fox Factory.