Fox Factory Holding Corp. reported earnings on an adjusted basis grew 44.5 percent in the first quarter ended April 1 on a 34.4 percent revenue gain.

First Quarter Fiscal 2022 Highlights

  • Sales increased 34.4 percent to $378.0 million, compared to $281.1 million in the same period last fiscal year
  • Gross profit increased 22.8 percent to $120.3 million, compared to $97.9 million in the same period last fiscal year. Gross margin percentage decreased 300 basis points to 31.8 percent, compared to 34.8 percent in the same period last fiscal year; non-GAAP adjusted gross margin percentage decreased 270 basis points to 32.3 percent compared to 35.0 percent in the same period last fiscal year
  • Net income was $48.1 million, or 12.7 percent of sales and $1.13 of earnings per diluted share, compared to $38.0 million, or 13.5 percent of sales and $0.90 of earnings per diluted share in the same period last fiscal year
  • Non-GAAP adjusted net income was $55.8 million, or $1.32 of non-GAAP adjusted earnings per diluted share, compared to $44.5 million, or $1.05 of non-GAAP adjusted earnings per diluted share in the same period last fiscal year
  • Adjusted EBITDA was $71.8 million, or 19.0 percent of sales, compared to $60.4 million, or 21.5 percent of sales in the same period last fiscal year

“We are pleased to report record revenue and profitability in the first quarter of 2022. This accomplishment reflects the focus and continued execution of our people and FOX’s strategic initiatives while responding to various ongoing macro challenges,” commented Mike Dennison, FOX’s Chief Executive Officer. “Our immediate goal is the optimization of our Gainesville facility and while we saw improvements in productivity late in the quarter, we have significant work remaining to deliver our expected results. In addition, while inflation and supply chain challenges continue to pose obstacles, I am confident in our world-class team to continue to constructively drive the business toward our 2025 objectives.”

Sales for the first quarter of fiscal 2022 were $378.0 million, an increase of 34.4 percent as compared to sales of $281.1 million in the first quarter of fiscal 2021. This increase reflects a 43.5 percent increase in Specialty Sports Group sales and a 27.9 percent increase in Powered Vehicles Group sales. The increase in Specialty Sports Group sales is driven by continued strong demand in both the original equipment manufacturer (“OEM”) and aftermarket channels. The increase in Powered Vehicles Group sales is primarily due to strong performance in our upfitting product lines.

Gross margin was 31.8 percent for the first quarter of fiscal 2022, a 300 basis point decrease from gross margin of 34.8 percent in the first quarter of fiscal 2021. Non-GAAP adjusted gross margin decreased 270 basis points to 32.3 percent from the same prior fiscal year period, excluding the effects of strategic transformation costs. The decrease in gross margin was primarily driven by continued increases in supply chain related costs, including increased prices for raw materials and freight. Additionally, the completion of the planned shutdown of our Watsonville, California facility and transition of those production lines resulted in inefficiencies as we ramp up our Gainesville, Georgia facility. A reconciliation of gross profit to non-GAAP adjusted gross profit and the resulting non-GAAP adjusted gross margin is provided at the end of this press release.

Total operating expenses were $66.1 million for the first quarter of fiscal 2022, compared to $52.1 million in the first quarter of fiscal 2021. Operating expenses increased by $14.0 million primarily due to higher employee related costs, higher commission costs, and higher insurance and facility related expenses. As a percentage of sales, operating expenses were 17.5 percent for the first quarter of fiscal 2022, a decrease of 100 basis points, compared to 18.5 percent in the first quarter of fiscal 2021. Non-GAAP operating expenses were $59.6 million, or 15.8 percent of sales in the first quarter of fiscal 2022, compared to $45.4 million, or 16.1 percent of sales, in the first quarter of the prior fiscal year. Reconciliations of operating expense to non-GAAP operating expense are provided at the end of this press release.

The company’s effective tax rate was 4.8 percent in the first quarter of fiscal 2022, compared to 9.5 percent in the first quarter of fiscal 2021. The decrease in the company’s effective tax rate was primarily due to the impact of recently finalized U.S. tax regulations, which resulted in the full release of our valuation allowance against foreign tax credit carryforwards. This impact was partially offset by decreased benefits from the effects of stock-based compensation and discrete items.

Net income in the first quarter of fiscal 2022 was $48.1 million, compared to $38.0 million in the first quarter of the prior fiscal year. Earnings per diluted share for the first quarter of fiscal 2022 were $1.13, compared to earnings per diluted share of $0.90 for the first quarter of fiscal 2021.

Non-GAAP adjusted net income in the first quarter of fiscal 2022 was $55.8 million, or $1.32 of adjusted earnings per diluted share, compared to adjusted net income of $44.5 million, or $1.05 of adjusted earnings per diluted share, in the same period of the prior fiscal year. Reconciliations of net income as compared to non-GAAP adjusted net income and the calculation of non-GAAP adjusted earnings per diluted share are provided at the end of this press release.

Adjusted EBITDA in the first quarter of fiscal 2022 was $71.8 million, compared to $60.4 million in the first quarter of fiscal 2021. Adjusted EBITDA margin in the first quarter of fiscal 2022 was 19.0 percent, compared to 21.5 percent in the first quarter of fiscal 2021. Reconciliations of net income to adjusted EBITDA and the calculation of adjusted EBITDA margin are provided at the end of this press release.

Balance Sheet Highlights

As of April 1, 2022, the company had cash and cash equivalents of $68.8 million compared to $179.7 million as of December 31, 2021. Inventory was $315.0 million as of April 1, 2022, compared to $279.8 million as of December 31, 2021. As of April 1, 2022, accounts receivable and accounts payable were $177.9 million and $157.0 million, respectively, compared to $142.0 million and $100.0 million, respectively, as of December 31, 2021. Prepaids and other current assets were $293.9 million as of April 1, 2022, compared to $123.1 million as of December 31, 2021. The decrease in cash and cash equivalents and increase in prepaids and other assets are primarily due to increased chassis deposits as we work to secure supply for the remainder of the year for our upfitting business. The increase in inventory is primarily due to additional raw materials purchases to mitigate risks associated with supply chain uncertainty. The increases in accounts receivable and accounts payable reflect business growth as well as the timing of vendor payments. Accrued expenses were $103.8 million as of April 1, 2022, compared to $112.4 million as of December 31, 2021, primarily due to decreases in income taxes payable and accrued bonuses, which were partially offset by increases in various other expenses.

Fiscal 2022 Guidance

For the second quarter of fiscal 2022, the company expects sales in the range of $385 million to $405 million and non-GAAP adjusted earnings per diluted share in the range of $1.10 to $1.25.

For the fiscal year 2022, the company expects sales in the range of $1,500 million to $1,530 million and non-GAAP adjusted earnings per diluted share in the range of $5.00 to $5.30. For purposes of our fiscal 2022 guidance, we expect our full year effective tax rate to be within the range of 11 percent to 15 percent.