Fox Factory Q3 Earnings Call Highlights

Key Points

• Third-quarter sales fell 10.1% to $338.4 million, weighed down by supply disruptions, higher costs and operational challenges. Adjusted net income rose to $22.7 million from $9.9 million a year earlier, with margin gains partly benefiting from tariff refunds.
• Powered Vehicles sales grew 4.1%, led by a 28.8% increase in powersports, but Aftermarket Applications sales dropped 20.4% amid chassis shortages and upfit weakness. Management said it is working to improve factory execution, supply-chain reliability and upfit operations.
• The $225 million Marucci sale helped reduce debt by $270.3 million quarter over quarter and lowered net leverage to about 2.4 times. Fox Factory maintained its fourth-quarter sales and EBITDA outlook and narrowed its full-year adjusted EBITDA forecast to $143 million–$148 million, excluding tariff refunds.

Fox Factory NASDAQ: FOXF reported lower third-quarter sales and said supply disruptions, higher costs and operational challenges weighed on results, even as the sale of its Marucci business helped the company substantially reduce debt.

Interim Chief Executive Officer Doug Grimm said results fell short of the expectations management set in August. He described demand in powersports and aftermarket brands as healthy, but said the company must improve execution in its factories, supply chain and upfit business.

“These challenges are real, but they are fixable, and we are working on each of them,” Grimm said on the earnings call.

Sales Decline as Costs Weigh on Operations

Third-quarter net sales fell 10.1% from a year earlier to $338.4 million. The figure included approximately $33 million from Marucci through its Sept. 25 sale, compared with roughly $49 million in the prior-year quarter. Management had assumed approximately $46 million in Marucci sales for the full quarter.

Adjusted net income rose to $22.7 million, or $0.54 per diluted share, from $9.9 million, or $0.23 per share, a year earlier. Gross margin increased to 31.5% from 30.4%, primarily because of International Emergency Economic Powers Act tariff refunds, partly offset by product mix and higher freight, commodity and fuel costs.

Excluding tariff refunds, adjusted earnings before interest, taxes, depreciation and amortization were approximately $38 million, with an adjusted EBITDA margin of about 11.3%. Chief Financial Officer Dennis Schemm said the result was at the low end of the preliminary range provided in October, partly because cost savings arrived later than anticipated.

Fox Factory captured approximately $41 million in gross savings during the first nine months of the year against its $50 million goal, Schemm said. The company plans to continue its cost-saving work and pursue price recovery to offset inflation.

Powersports Growth Offset by Upfit Weakness

Powered Vehicles Group sales rose 4.1% to $131 million, helped by a 28.8% increase in powersports sales. Segment adjusted EBITDA declined to $15 million from $18.9 million, reflecting a spring supplier disruption, higher operating costs and unfavorable mix.

Grimm said the company used expedited freight and overtime to protect customers after a supplier could not keep pace with demand. Fox Factory has shifted volume to other qualified suppliers and is adding capacity, although its outlook assumes the disruption will continue through the fourth quarter.

Aftermarket Applications Group sales fell 20.4% to $93.8 million, while segment adjusted EBITDA declined to $8.5 million from $12.4 million. Schemm attributed the sales decline to limited chassis availability for upfit businesses, pressure on dealers and consumers, and revenue lost from divested businesses.

Management said the upfit business needs better productivity, inventory management and chassis planning. Schemm said some F-150 chassis were arriving later than expected, while partnerships with Ford and Stellantis were providing steadier volumes for the company’s plants.

Specialty Sports Group sales decreased 14.4% to $113.6 million, largely because of retail softness at Marucci and its reduced contribution. Segment adjusted EBITDA rose to $39.6 million from $27.5 million, primarily reflecting tariff refunds. Bike sales were modestly below expectations because of order timing and inventory reductions by OEMs and distributors, Schemm said.

Marucci Sale Strengthens Balance Sheet

Fox Factory sold Marucci for an enterprise value of $225 million and applied the $200 million received at closing to debt reduction. Total debt fell to $397.4 million at quarter-end, down $270.3 million from the second quarter. Net leverage declined to approximately 2.4 times from 3.7 times at the end of the prior quarter.

Schemm said the debt reduction lowered annualized interest expense by approximately $16 million. The company expects the reduction to reach $17 million once it receives and applies the remaining $25 million payable on or before Dec. 31, 2026.

Fox Factory had about $250 million remaining under its share repurchase authorization, which runs through November 2028. Schemm said lower leverage gives the company flexibility to consider repurchases, high-return capital investments and further debt reduction.

Outlook and Leadership Transition

For the fourth quarter, Fox Factory maintained its forecast for sales of $287 million to $313 million and adjusted EBITDA of $25 million to $30 million, excluding Marucci and any additional tariff refunds.

For full-year 2026, the company maintained its sales outlook of $1.35 billion to $1.38 billion and narrowed its adjusted EBITDA forecast to $143 million to $148 million, excluding approximately $14 million of tariff refunds received in the second and third quarters. Including those refunds, the forecast is $157 million to $162 million. The full-year outlook includes Marucci results through the sale’s closing.

Management did not provide 2027 guidance and expects to discuss its operating plan on the fourth-quarter call in February. Grimm said his priorities include operational improvements, supply chain optimization and recovering inflation-related costs through customer discussions.

Grimm also said Fox Factory has hired Heidrick & Struggles to search for a permanent CEO and is considering internal and external candidates. The company has not set a timetable, although Grimm said four to six months would be a reasonable timeframe based on his experience.

The board also plans to ask shareholders at the 2027 annual meeting to approve a phased declassification of the board, Grimm said. The company will provide details in its proxy statement.

About Fox Factory (NASDAQ:FOXF)

Fox Factory Holding Corp. designs, engineers, manufactures and markets performance products for cycling, powered vehicles and other recreational applications. The company is best known for its suspension systems and components, including forks, shocks and related technologies used on mountain bikes, motorcycles, snowmobiles, trucks and side-by-side vehicles.

Through brands including FOX, Race Face, Easton Cycling, Marzocchi, Ride Concepts, Bell, Giro and CamelBak, Fox Factory offers bicycle components, wheels, drivetrain and cockpit products, cycling shoes, helmets, protective equipment, hydration products and apparel.

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