FOX FACTORY HOLDING CORP Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Business Updates: Q3 revenue was $359 million, a 8.5% increase year-over-year, led by bike business (22% sequential growth) and Marucci acquisition. However, results were at the lower end of guidance due to OEM forecast reductions, macroeconomic uncertainties, and quality issues at automotive OEMs.
• Initiatives: Four key initiatives: simplify/consolidate footprint, reduce/eliminate non-performing products, reduce inventory, and reduce costs. AAG leadership transition with focus on inventory optimization. Cost control measures implemented across segments.
• Product Launches and Diversification: PVG announced partnerships with Buell USA, CFMOTO, BRP, and Ford. AAG had aftermarket launches like Race Wheels and Ridetech products. SSG expanded into entry premium bike segment, launched NEO Live Valve wireless solutions, and Marucci partnered with MLB for 2025.

Segment Performance

• Powered Vehicle Group (PVG): Net sales were $109 million, down from $123 million in the prior year quarter. This reflects reduced demand forecast from OEM partners and deferral of discretionary spending. The aftermarket business improved 28.3% sequentially. PVG represented approximately 30.4% of total net sales ($359 million).
• Aftermarket Applications Group (AAG): Net sales were $100 million compared to $136 million in the prior year quarter. AAG accounted for around 27.9% of total net sales. Phase 1 of strategic assessment completed, Phase 2 ongoing, focusing on inventory optimization and dealer relationships. Phase 3 will focus on diversification and brand accessibility.
• SSG (Sports Segment Group): Net sales were $150 million compared to $72 million last year, primarily due to the inclusion of Marucci and growth in the bike business. Bike sales increased $28 million year-over-year and had a 22% sequential increase in Q3. SSG made up approximately 41.8% of total net sales.

Guidance

• Full year 2024 sales expected to be in the range of $1.341 billion to $1.381 billion, adjusted earnings per diluted share $1.27 to $1.42. Q4 2024 sales预计 to be $300 million to $340 million, adjusted earnings per diluted share $0.25 to $0.40.
• Focus on cost savings initiatives (> $25 million) through simplification/consolidation of footprint, reducing non-performing products, inventory reduction, and cost reduction. Plan to provide update on progress during Q4 call.

Risks

• Macro-economic uncertainties including consumer discretionary spending, high interest rates, and political uncertainty.
• OEM production challenges, including quality issues and model year changeovers impacting chassis mix and availability.
• Inventory management risks due to varying channel and customer destocking rates.
• Competition in the markets served by the company.

Q: Larry Solow asks about main obstacles being demand and quality issues, with demand being a greater issue going into 2025.

A: Michael Dennison responds that quality issues at automotive OEMs are abating, but demand remains the greater issue with potential longevity.

Q: Anna Glaessgen inquires about SSG margin and Marucci's performance.

A: Michael Dennison states Marucci's spending ahead on MLB and softball launches impacted margins, and Marucci had a strong Q3 but faces macro softness in Big Box. Dennis Schemm adds on cost alignment with demand.

Q: Scott Stember asks about bike and Marucci progress and outlook.

A: Michael Dennison mentions bike top 10 OEMs showing growth, smaller players softening; Marucci expects double-digit growth in 2025 with MLB partnership and product launches.

Q: Jim Duffy asks about upfitting channel inventories and product offering vision.

A: Michael Dennison talks about mixed inventory by brand, focusing on new model years; Dennis Schemm discusses product road map and strategy for multiple price points and dealer count growth.

Q: Bret Jordan asks about MLB Marucci agreement and AAG inventory liquidation.

A: Michael Dennison says MLB agreement is net-positive with low minimum commitments; AAG inventory liquidation is focused on up-fit chassis to get new model years in.

Q: Craig Kennison asks about upfitting market framing and product pricing.

A: Dennis Schemm discusses broader total addressable market with focus on chassis mix, new products, and dealer count growth; Michael Dennison talks about mixed pricing requests but innovation driving pricing.