Fox Factory Holding Corp. reported sales in the second quarter ended July 2 surged 79.2 percent. This increase in sales reflects a 92.4 percent increase in Powered Vehicles Group sales and a 63.9 percent increase in Specialty Sports Group sales.
Second Quarter Fiscal 2021 Highlights
- Sales increased 79.2 percent to $328.2 million compared to $183.1 million in the same period last fiscal year;
- Gross margin increased 110 basis points to 33.9 percent compared to 32.8 percent in the same period last fiscal year. Non-GAAP adjusted gross margin increased 100 basis points to 34.1 percent compared to 33.1 percent in the same period last fiscal year;
- Net income, attributable to FOX stockholders, was $44.3 million, or 13.5 percent of sales and $1.05 of earnings per diluted share, compared to $12.6 million, or 6.9 percent of sales, and $0.32 of earnings per diluted share in the same period last fiscal year;
- Non-GAAP adjusted net income was $51.0 million, or $1.20 of adjusted earnings per diluted share, compared to $19.7 million, or $0.50 of adjusted earnings per diluted share, in the same period last fiscal year;
- Adjusted EBITDA was $69.7 million, or 21.2 percent of sales, compared to $33.7 million, or 18.4 percent of sales, in the same period last fiscal year.
“I am proud to report that we have not only delivered a fourth consecutive quarter of record revenue in a complex manufacturing environment but also surpassed the one billion revenue mark on a TTM basis for the first time in our company’s history. In addition, we made two acquisitions during the second quarter, welcoming SOLA Sport in Australia and Outside Van in Portland, Oregon to the Fox family. These acquisitions fit perfectly with our growth strategy, providing us with geographic and new market expansion respectively,” commented Mike Dennison, Fox, CEO. “The ongoing growth story at Fox is a testament to the experience, resilience and dedication of our world-class team, despite the challenging manufacturing and supply chain environment in the world today. Achieving one billion in sales is a major milestone for Fox, and we are very excited about our plans for future growth.”
Sales for the second quarter of fiscal 2021 were $328.2 million, an increase of 79.2 percent as compared to sales of $183.1 million in the second quarter of fiscal 2020. This increase in sales reflects a 92.4 percent increase in Powered Vehicles Group sales and a 63.9 percent increase in Specialty Sports Group sales. The increase in Powered Vehicles Group sales is primarily due to increased demand in its original equipment manufacturer (“OEM”) and aftermarket channels, including strong performance in its upfitting product lines. Also, its results in the same prior-year period were impacted by production shutdowns at a majority of its OEM customers. The increase in Specialty Sports Group sales is driven by continued strong demand in the OEM channel with execution by its employees in meeting demand.
Gross margin was 33.9 percent for the second quarter of fiscal 2021, a 110 basis point increase from a gross margin of 32.8 percent in the second quarter of fiscal 2020. Non-GAAP adjusted gross margin increased 100 basis points to 34.1 percent from the same prior fiscal year period, excluding the effects of strategic transformation and acquisition-related costs. The increase in gross margin was primarily driven by favorable product and channel mix led by higher volume sales in its Specialty Sports Group and the strong performance of its upfitting product lines. Also, its prior fiscal year period results were negatively impacted by higher factory-related costs including incremental costs related to the pandemic.
Total operating expenses were $58.4 million for the second quarter of fiscal 2021, compared to $40.6 million in the second quarter of fiscal 2020. Operating expenses increased by $17.8 million primarily due to higher employee-related costs, higher commission costs and higher investments to right-size its administrative support functions. As a percentage of sales, operating expenses were 17.8 percent for the second quarter of fiscal 2021 compared to 22.2 percent in the second quarter of fiscal 2020. Non-GAAP operating expenses were $51.4 million, or 15.7 percent of sales, in the second quarter of fiscal 2021, compared to $32.7 million, or 17.9 percent of sales, in the second quarter of the prior fiscal year.
The company’s effective tax rate was 13.3 percent in the second quarter of fiscal 2021, compared to an effective tax rate of 19.5 percent in the second quarter of fiscal 2020 primarily due to excess tax benefits on stock-based compensation.
Net income attributable to Fox stockholders in the second quarter of fiscal 2021 was $44.3 million, compared to $12.6 million in the second quarter of the prior fiscal year. Earnings per diluted share for the second quarter of fiscal 2021 were $1.05, compared to earnings per diluted share of $0.32 for the second quarter of fiscal 2020.
Non-GAAP adjusted net income was $51.0 million, or $1.20 of adjusted earnings per diluted share, compared to adjusted net income of $19.7 million, or $0.50 of adjusted earnings per diluted share, in the same period of the prior fiscal year.
Adjusted EBITDA in the second quarter of fiscal 2021 was $69.7 million, compared to $33.7 million in the second quarter of fiscal 2020. Adjusted EBITDA margin in the second quarter of fiscal 2021 was 21.2 percent, compared to 18.4 percent in the second quarter of fiscal 2020.
First Six Months Fiscal 2021 Results
Sales for the six months ended July 2, 2021 were $609.3 million, an increase of 65.8 percent, compared to the first six months in fiscal 2020. Sales of Powered Vehicle and Specialty Sports products increased 60.7 percent and 73.2 percent, respectively, for the first six months of fiscal 2021 compared to the prior year fiscal period.
Gross margin was 34.3 percent in the first six months of fiscal 2021, a 260 basis point increase compared to gross margin of 31.7 percent in the first six months of fiscal 2020. On a non-GAAP basis, adjusted gross margin increased 250 basis points, excluding the effects of strategic transformation and acquisition-related costs. The increase in gross margin for the first six months of fiscal 2021 was primarily due to higher volume sales in its Specialty Sports Group and the strong performance of its upfitting product lines, as well as favorable product and channel mix. Additionally, its gross margin for the first six months of the prior fiscal year period was negatively impacted by incremental costs related to the pandemic.
Net income attributable to Fox stockholders in the first six months of fiscal 2021 was $82.3 million, compared to $20.9 million in the first six months of the prior fiscal year. Earnings per diluted share for the first six months of fiscal 2021 was $1.94, compared to $0.53 in the same period of fiscal 2020.
Non-GAAP adjusted net income in the first six months of fiscal 2021 was $95.5 million, or $2.25 of adjusted earnings per diluted share, compared to $40.2 million, or $1.02 of adjusted earnings per diluted share in the same period of the prior fiscal year.
Adjusted EBITDA increased to $130.1 million in the first six months of fiscal 2021, compared to $65.0 million in the first six months of fiscal 2020. Adjusted EBITDA margin increased to 21.3 percent in the first six months of fiscal 2021, compared to 17.7 percent in the first six months of fiscal 2020.
Balance Sheet Highlights
As of July 2, 2021, the company had cash and cash equivalents of $275.0 million compared to $245.8 million as of January 1, 2021. Inventory was $208.6 million as of July 2, 2021, compared to $127.1 million as of January 1, 2021. As of July 2, 2021, accounts receivable and accounts payable were $149.7 million and $154.1 million, respectively, compared to $121.2 million and $92.4 million, respectively, as of January 1, 2021. The increase in inventory is primarily due to additional raw materials purchases to mitigate risks associated with supply chain uncertainty. The changes in accounts receivable and accounts payable reflect business growth as well as the timing of vendor payments. Property, plant and equipment, net increased to $177.6 million as of July 2, 2021, compared to $163.3 million as of January 1, 2021, reflecting capital expenditures of $27.6 million. Goodwill increased to $299.8 million as of July 2, 2021, compared to $289.3 million as of January 1, 2021, due to its acquisition of Outside Van in its second quarter of fiscal 2021.
Fiscal 2021 Guidance
For the third quarter of fiscal 2021, Fox expects sales in the range of $300 million to $320 million and non-GAAP adjusted earnings per diluted share in the range of $0.95 to $1.15.
For the fiscal year 2021, the company expects sales in the range of $1,200 million to $1,240 million and non-GAAP adjusted earnings per diluted share in the range of $4.25 to $4.45. Fox’s full-year effective tax rate is expected to be on the lower end of its previously guided range of 15.0 percent to 19.0 percent.
Photo courtesy Fox Factory