Fox Factory (FOXF) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales were $348.5M, down 13% year-over-year but up 4.5% sequentially, with net income dropping 86.4% to $5.4M, mainly due to lower demand, product mix, and higher interest rates, partially offset by Marucci acquisition sales.

• Adjusted EPS was $0.38, with adjusted EBITDA margin improving to 12.7% from 12.1% in the prior quarter, though both metrics declined sharply year-over-year.

• Aftermarket business now represents 57% of sales, up from 47% in 2021, supporting diversification and risk mitigation.

• Leadership transitions include Dennis Schemm assuming the AAG segment presidency while retaining CFO duties, and Brendan Enick becoming treasurer.

• Bike revenues rebounded 52% sequentially, and Marucci acquisition contributed $41.6M in Q2 sales.

Financial highlights

• Q2 2024 gross margin was 31.8%, down from 32.9% a year ago, mainly due to product mix and lower operating leverage.

• Adjusted EBITDA for Q2 was $44.1M (12.7% margin), down from $79.4M (19.8% margin) year-over-year.

• Net income was $5.4M ($0.13 per diluted share), compared to $39.7M ($0.94 per share) last year.

• Q2 2024 operating income was $18.6M, down 64.8% year-over-year; interest expense rose to $13.9M.

• First six months 2024 net sales were $682.0M (down 14.8% YoY); net income $1.9M (down from $81.5M YoY).

Outlook and guidance

• Full-year 2024 sales expected between $1.407B and $1.477B; adjusted EPS between $1.40 and $1.72.

• Q3 2024 sales guidance: $355M–$385M; adjusted EPS: $0.35–$0.50.

• Sequential growth expected in the second half, with year-over-year growth resuming in Q3 and Q4, driven by bike stabilization, new product launches, and Marucci growth.

• Management expects cash on hand, cash flow from operations, and credit facility availability to be sufficient for operations over the next 12 months and beyond.

• Improved debt covenant flexibility secured to navigate the uncertain macro environment.