Powered by strength in both its bike and powered vehicle segments, Fox Factory Inc.’s fourth-quarter earnings and revenues both surpassed internal expectations.
On a reported basis, net income for the fourth quarter grew 44.1 percent to $9.8 million, or 26 cents a share. On a pro-forma basis, which exclude acquisition-related costs, profits rose 25 percent to $12 million, or 32 cents a share.
Sales were $111.6 million, an increase of 16.6 percent. This increase reflects a 27.5 percent and 7.8 percent increase in sales of powered vehicle products and bike products, respectively.
The increase in sales of powered vehicle products was primarily due to continued high demand for on and off-road suspension products and increased OEM sales. The increase in sales of bike products primarily reflects favorable model year spec placements with OEMs and new product interventions.
Gross margin was 30.5 percent for the fourth quarter of fiscal 2016, a 60-basis point increase due to lower acquisition related inventory costs as compared to the prior fiscal year period. Total operating expenses were reduced to 18.4 percent of sales from 20 percent due to sales leverage.
On a non-GAAP basis, adjusted EPS of $1.23 reached the high-end of its guidance expectations and came in 10 cents a share higher than the high-end of its original guidance for the year.
Sales increased approximately 10 percent to $403 million, ahead of guidance of $395.5 million to $401.5 million.
“We had continued success with our brand building efforts for bike products around key product launches and we further strengthened dealer relationships,” said Larry Enterline, CEO, on a call with analysts. ‘On the powered vehicle side, we experienced solid demand for on and off-road suspension products with sales up approximately 14 percent driven particularly by after-market on-road replacement shocks and automotive OEM growth. Bike products were up approximately 7 percent driven by improved spec position and new product introductions.”
Discussion some current trends, Mario Galasso, EVP and Chief Technology Officer, noted that Pinkbike again awarded Fox product with its Mountain Bike Suspension Product of the Year in 2016 with its Factory Series 36 FLOAT.
“Our brand momentum continues to build and grow steadily with consistent performance from our current product offerings as well as with early ride experiences on our model year 2018 products,” said Galasso. “Our brand strength is built on successful key product launches, strengthened dealer relationships, race wins, favorable media reviews and awards and our ability to release quality innovative products.”
He said the company expects the momentum to continue as it prepares to launch its model year 2018 products and as the 2017 race season ramps up in the spring. Added Galasso, “So far in 2017, we’ve won two of the New Zealand downhill series races, the New Zealand Open and the Nevada State Downhill Championships. Fox Suspension was also used by Marcus Stokel, to bring a mountain bike, to break a mountain bike downhill speed record. Marcus went 167.6 kilometers/hour down a mountain topping his previous speed record of 164.95 kilometers/hour.”
Fox’s powered vehicle segments likewise found success at the 2017 Best in the Desert Parker 425 and 2017 King of the Hammers. The company ended the fourth quarter in full production of the new Ford Raptor 3 internal bypass shocks and continued production for the 2.5 internal bypass shocks for the 2017 Toyota Tacoma TRD Pro. He added the company is “excited by the positive reactions these vehicles have received for their capability.”
For the first quarter, sales are expected in the range of $96 million to $100 million and non-GAAP adjusted earnings per diluted share in the range of 24 cents to 28 cents. For fiscal 2017, sales are expected in the range of $430 million to $450 million and non-GAAP EPS in the range of $1.31 to $1.41.
Said Enterline, “2017 has gotten off to a solid start and we believe we are well positioned to generate future growth and enhance shareholder value.”
Photo courtesy Fox Factory.