FOX FACTORY HOLDING CORP Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Key Initiatives: Footprint consolidation efforts advancing (Taiwan in PVG, Indiana in AAG, Arizona consolidation). Portfolio optimization focusing on high-performing SKUs. Working capital management showing results in supply chain and inventory. $25M cost reduction program 30% benefits realized.
• PVG: Focus on motorcycle expansion, supply chain optimization (20% in-sourced parts increase), and offsetting tariff pressures via OEM partnerships and price increases.
• AAG: Growth in aftermarket components, but margin impacted by tariffs and delayed consolidations; focus on upfitting and footprint optimization.
• SSG: Bike business strength, Marucci's product launches (Victus bats, RCKLESS line) and MLB partnership, though tariffs impacted Marucci margins.

Segment Performance

• Powered Vehicles Group (PVG): Second quarter net sales were $123.5 million, a 4.9% increase year-over-year. Driven by expansion of motorized 2-wheel business offsetting softness in powersports OE. Sequential adjusted EBITDA margin improved 150 basis points to 13.3%.
• Aftermarket Applications Group (AAG): Net sales reached $114.1 million, a 6.5% increase year-over-year from $107.1 million. Growth from aftermarket products like wheels and lift kits, but margin compressed due to tariffs and delayed consolidations.
• Specialty Sports Group (SSG): Net sales rose to $137.2 million, an 11% increase year-over-year. Adjusted EBITDA margin improved 280 basis points to 22.1% due to bike business strength and cost savings from Taiwan facility consolidation. Marucci's product launches and MLB partnership contributed.

Guidance

• Full Year Sales: Raised to $1.45 billion to $1.51 billion from prior range due to strong first half performance.
• EPS Guidance: Adjusted to $1.60 to $2, narrowing original range due to unmitigated tariff pressure (~$50M pre-mitigated tariff impact).
• Third Quarter: Expected net sales $370 million to $390 million, adjusted EPS $0.45 to $0.65.

Risks

• Tariffs: Incremental costs from tariff rate changes, impacting margins in segments like Marucci and PVG.
• Macro Environment: Consumer discretionary and interest rate factors affecting market stability and growth.

Question and Answer

Q: On the guidance and outlook, is the sales raise driven by specific segments?

A: Yes, solid first half performance across all segments gave confidence in back half execution, with no significant change by one segment.

Q: How does the tariff impact break down by segment?

A: Pre-mitigation tariff impact up to $50M, with AAG at $10M, Marucci at $15M, and PVG at $25M.

Q: What's the outlook for powersports and motorcycle?

A: Powersports stabilizing, motorcycle new business adds offset softness; interest rates needed for further growth.

Q: Talk about bike business model year sequencing.

A: First half growth from bike OEMs eliminating inventory excesses; back half moderation as OEMs manage inventory for model year '26.

Q: Marucci's growth vectors?

A: Global growth (Japan up), product diversification (shoes, softball), and MLB partnership.

Q: Why the EPS guide adjustment?

A: Unmitigated tariff pressure, with mitigation efforts ongoing across segments.

Q: Motorized 2-wheel business margin and growth?

A: Consistent margin with powersports, significant grower offsetting powersports decline.