Fox Factory Holding Corp. reported sales grew 41.2 percent in the fourth quarter. This increase reflects a 44.6 percent increase in Specialty Sports Group sales and a 38.7 percent increase in Powered Vehicles Group sales.

Sales increased 41.2 percent to $262.4 million, compared to $185.9 million in the same period last fiscal year

Fourth Quarter Fiscal 2020 Highlights

  • Sales increased 41.2 percent to $262.4 million, compared to $185.9 million in the same period last fiscal year;
  • Gross margin decreased 30 basis points to 31.8 percent, compared to 32.1 percent in the same period last fiscal year; non-GAAP adjusted gross margin decreased 10 basis points to 32.0 percent compared to 32.1 percent in the same period last fiscal year;
  • Net income attributable to FOX stockholders was $31.8 million, or 12.1 percent of sales and $0.75 of earnings per diluted share, compared to $22.5 million, or 12.1 percent of sales and $0.58 of earnings per diluted share in the same period last fiscal year;
  • Non-GAAP adjusted net income was $38.2 million, or $0.90 of adjusted earnings per diluted share, compared to $25.4 million, or $0.65 of adjusted earnings per diluted share in the same period last fiscal year; and
  • Adjusted EBITDA was $51.2 million, or 19.5 percent of sales, compared to $34.4 million, or 18.5 percent of sales in the same period last fiscal year.

“We are pleased to report record revenue and profitability in 2020, despite the numerous labor, supply chain and production challenges created by the pandemic. This feat was only made possible because of our teams’ sheer resilience, dedication and adaptability as we came back from the unprecedented global shut down, delivering back-to-back record quarters to wrap up 2020,” commented Mike Dennison, FOX’s Chief Executive Officer. “We feel optimistic about our prospects as we move into 2021 with solid business momentum, expanded OEM relationships and enhanced production capabilities. We are excited about the growth opportunities ahead of us with our compelling and diversified performance-defining product offerings, expanding end-user customer base and a world-class team.”

Sales for the fourth quarter of fiscal 2020 were $262.4 million, an increase of 41.2 percent as compared to sales of $185.9 million in the fourth quarter of fiscal 2019. This increase in sales reflects a 44.6 percent increase in Specialty Sports Group sales and a 38.7 percent increase in Powered Vehicles Group sales. The increase in Specialty Sports Group products is primarily driven by increased demand in both the original equipment manufacturer (OEM) and aftermarket channels. The increase in Powered Vehicles Group sales is primarily due to the impact of SCA, a subsidiary that was acquired in March 2020, along with increases in off-road products including side-by-sides.

Gross margin was 31.8 percent for the fourth quarter of fiscal 2020, a 30 basis point decrease from a gross margin of 32.1 percent in the fourth quarter of fiscal 2019. Non-GAAP adjusted gross margin decreased 10 basis points to 32.0 percent from the same prior fiscal year period, excluding the effects of strategic transformation and acquisition-related costs. The decrease in gross margin was primarily due to higher transit costs due to the increase in demand, costs related to the transition and ramp of its U.S. manufacturing facilities and inefficiencies due to the COVID-19 pandemic, which was partially offset by favorable product and channel mix including the impact of the SCA acquisition. 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 $45.8 million for the fourth quarter of fiscal 2020, compared to $33.5 million in the fourth quarter of fiscal 2019. The increase in operating expenses is primarily due to SCA-related expenses including acquisition-related costs, operating costs and amortization expenses. Additionally, it incurred higher headcount costs as it expanded administrative support functions and higher incentive compensation. As a percentage of sales, operating expenses were 17.5 percent for the fourth quarter of fiscal 2020, compared to 18.0 percent in the fourth quarter of fiscal 2019. Non-GAAP operating expenses were $39.4 million, or 15.0 percent of sales, in the fourth quarter of fiscal 2020, compared to $30.3 million, or 16.3 percent of sales, in the fourth 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 9.2 percent in the fourth quarter of fiscal 2020, compared to an effective tax rate of 10.0 percent in the fourth quarter of fiscal 2019.

Net income attributable to FOX stockholders in the fourth quarter of fiscal 2020 was $31.8 million, compared to $22.5 million in the fourth quarter of the prior fiscal year. Earnings per diluted share for the fourth quarter of fiscal 2020 were $0.75, compared to earnings per diluted share of $0.58 for the fourth quarter of fiscal 2019.

Non-GAAP adjusted net income was $38.2 million, or $0.90 of adjusted earnings per diluted share, compared to adjusted net income of $25.4 million, or $0.65 of adjusted earnings per diluted share, in the same period of the prior fiscal year. Reconciliations of net income attributable to FOX stockholders 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 fourth quarter of fiscal 2020 was $51.2 million, compared to $34.4 million in the fourth quarter of fiscal 2019. Adjusted EBITDA margin in the fourth quarter of fiscal 2020 was 19.5 percent, compared to 18.5 percent in the fourth quarter of fiscal 2019. Reconciliations of net income to adjusted EBITDA and the calculation of adjusted EBITDA margin are provided at the end of this press release.

Fiscal Year 2020 Results
Sales for the fiscal year ended January 1, 2021, were $890.6 million, an increase of 18.6 percent compared to the same period in 2019. Sales of Specialty Sports and Powered Vehicle products increased 22.4 percent and 16.1 percent, respectively, for fiscal 2020 compared to the prior-year period.

Gross margin was 32.5 percent in fiscal 2020, a 20 basis point increase, compared to a gross margin of 32.3 percent in fiscal 2019. On a non-GAAP basis, adjusted gross margin increased 20 basis points, excluding the effects of strategic transformation and acquisition-related costs. The increase in year-to-date gross margin was primarily due to the impact of the SCA acquisition and a change in product and channel mix partially offset by incremental cost due to the COVID-19 pandemic. 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 in fiscal 2020 were $175.4 million or 19.7 percent of sales, as compared to $129.9 million or 17.3 percent of sales, in fiscal 2019. The increase in operating expenses is primarily due to SCA-related expenses including acquisition-related costs, operating costs and amortization expenses. Non-GAAP operating expenses were $139.4 million, or 15.7 percent of sales as compared to $116.3 million, or 15.5 percent of sales.

Net income attributable to FOX stockholders in fiscal 2020 was $90.7 million, compared to $93.0 million in the prior fiscal year. Earnings per diluted share for the fiscal year 2020 were $2.22, compared to $2.38 in fiscal 2019.

Non-GAAP adjusted net income in fiscal 2020 was $123.8 million, or $3.03 of adjusted earnings per diluted share, compared to $106.3 million, or $2.72 of adjusted earnings per diluted share in the prior fiscal year. Reconciliations of net income attributable to FOX stockholders to non-GAAP adjusted net income.

Adjusted EBITDA increased to $176.3 million in fiscal 2020, compared to $146.2 million in the fiscal 2019. Adjusted EBITDA margin increased to 19.8 percent in fiscal 2020, compared to 19.5 percent in fiscal 2019.

Balance Sheet Highlights
As of January 1, 2021, the company had cash and cash equivalents of $245.8 million compared to $43.7 million as of January 3, 2020. The cash balance reflects $198.2 million from the company’s June 2020 common stock offering of 2.8 million shares. Inventory was $127.1 million as of January 1, 2021, compared to $128.5 million as of January 3, 2020. As of January 1, 2021, accounts receivable and accounts payable were $121.2 million and $92.4 million, respectively, compared to $91.6 million and $55.1 million, respectively, as of January 3, 2020. The changes in inventory, accounts receivable and accounts payable reflect business growth and timing of vendor payments. Prepaids and other current assets increased to $87.9 million as of January 1, 2021, compared to $17.9 million as of January 3, 2020, primarily due to SCA-related items including vehicle chassis deposits and contingent retention incentives held in escrow.

Property, plant and equipment, the net was $163.3 million as of January 1, 2021, compared to $108.4 million as of January 3, 2020 reflecting capital expenditures of $56.7 million as well as the acquisition of SCA.

Total debt was $389.6 million as of January 1, 2021, compared to $68.0 million as of January 3, 2020. The increase is primarily due to borrowings to fund the acquisition of SCA in the first quarter of fiscal 2020.

Fiscal 2021 Guidance
For the first quarter of fiscal 2021, the company expects sales in the range of $255.0 million to $275.0 million and non-GAAP adjusted earnings per diluted share in the range of $0.75 to $0.85.

For the fiscal year 2021, the company expects sales in the range of $1,035 million to $1,085 million and non-GAAP adjusted earnings per diluted share in the range of $3.30 to $3.60. The company’s full-year 2021 guidance assumes a tax rate range of 15.0 percent to 19.0 percent.

Fox Factory Announces The Retirement Of Larry L. Enterline As Executive Chair
FOX also announced today, in a separate press release, that Larry L. Enterline will retire as Executive Chair of the Board of Directors on April 2, 2021 after being a part of the FOX family for nearly a decade. The Board appointed Dudley Mendenhall, who currently serves as the Lead Independent Director and Chair of the Audit Committee, to succeed Enterline effective April 2, 2021. The Board appointed Jean Hlay, who currently serves as a member of both the Audit Committee and Compensation Committee, to succeed Mendenhall as Chair of the Audit Committee, effective April 2, 2021.

Photo courtesy Fox Factory