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Fox Factory Holding Corp (FOXF) Q1 2024 Earnings Call Transcript Highlights: Navigating ...

GuruFocus Research
·4-min read

  • Total Revenue: $333.5 million in Q1 2024, down 16.6% from $399.9 million in Q1 2023.

  • Gross Margin: 30.9% in Q1 2024, down from 33.3% in Q1 2023.

  • Net Loss: $3.5 million in Q1 2024, compared to net income of $41.8 million in Q1 2023.

  • Earnings Per Share: Loss of $0.08 per diluted share in Q1 2024, down from earnings of $0.98 per diluted share in Q1 2023.

  • Adjusted EBITDA: $40.4 million in Q1 2024, down from $79.2 million in Q1 2023.

  • Adjusted EBITDA Margin: 12.1% in Q1 2024, down from 19.8% in Q1 2023.

  • Segment Performance: Powered Vehicle Group net sales $118 million, down from $142 million; Specialty Sports Group net sales $114 million, down from $119 million.

  • Inventory Reduction: Decreased by $17.9 million or 5% compared to year-end 2023.

  • Full Year 2024 Guidance: Sales expected between $1.53 billion and $1.61 billion; adjusted EPS expected between $2.30 and $2.55.

Release Date: May 02, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Diversified product portfolio across multiple sectors and markets helps mitigate risks and drives future growth.

  • First quarter revenue of $333.5 million met expectations, with adjusted earnings per share of $0.29 exceeding plans.

  • Strong demand in the automotive space from major OEMs, particularly for model-year 25 products.

  • Positive signs of recovery in Q2, especially in the bike segment, with expectations of sequential improvement in operating results.

  • Robust product roadmap and spec share gains in the OEM market expected to drive growth in the second half of the year.

Negative Points

  • Ongoing inventory recalibration in the bike segment impacting results, with slow recovery anticipated.

  • Powersports segment affected by dealer inventory levels leading to reduced OEM demand and lower sales.

  • High interest rates causing consumer fatigue, impacting discretionary spending and cautious inventory management by dealerships and OEMs.

  • Net sales in the Powered Vehicle Group and Specialty Sports Group saw declines due to challenging market conditions.

  • Full year 2024 outlook adjusted to the lower end of previous range due to prolonged high interest rates and less favorable macroeconomic conditions.

Q & A Highlights

Q: Can you clarify the impact of high interest rates on your guidance for the second half of the year? A: (Michael Dennison - CEO) Yes, the back half of our guidance was adjusted mainly due to the persistent high interest rates, which we had hoped would decrease. These rates particularly affect our powersports and agricultural segments concerning upfit trucks. The high rates generally dampen consumer discretionary spending, impacting our overall performance.

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Q: How are the new, higher content customizations expected to perform given the current economic conditions influenced by interest rates? A: (Michael Dennison - CEO) Our higher content customizations, like the Fox Factory branded trucks, are targeted at more affluent buyers who are less sensitive to interest rate fluctuations. We've seen strong demand for these premium offerings, indicating a robust market despite broader economic pressures.

Q: What is your outlook for the bike segment, and what gives you confidence in its recovery? A: (Michael Dennison - CEO) We believe we've hit the bottom as Q1 performed above our expectations and Q2 bookings are already looking strong. The launch of new products, which are significantly innovative, gives us confidence in the bike segment's recovery. These new launches are expected to attract consumer interest and drive sales.

Q: Could you discuss the performance and integration of recent acquisitions like Marucci and Custom Wheelhouse? A: (Michael Dennison - CEO) Both Marucci and Custom Wheelhouse are performing well and align with our strategic goals. We see potential synergies, particularly in supply chain efficiencies, which we plan to realize more fully in 2025. These acquisitions are also contributing positively to our EBITDA margins.

Q: How are you managing the inventory challenges in the powersports segment? A: (Michael Dennison - CEO) The powersports segment is experiencing soft demand, which we anticipate will continue in the near term. We are actively managing our inventory levels and working closely with dealers to navigate these challenges effectively.

Q: What are your expectations for the new Fox Factory branded upfit trucks and side-by-sides? A: (Michael Dennison - CEO) We are excited about these new offerings, which represent a significant move upmarket. These products are designed to meet the demands of a niche, affluent customer base and are expected to open new channels and drive growth without cannibalizing our existing lower-end market products.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.