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Fox(FOXF) - 2023 Q1 - Earnings Call Transcript
FOXFFox(FOXF)2023-05-07 15:48
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Financial Data and Key Metrics Changes - The company reported first-quarter sales of approximately 400million,anincreaseof5.8400 million, an increase of 5.8% compared to the same period last year [41] - Earnings per diluted share for the quarter were 0.98, a decrease of 13.3% from 1.13inthesameperiodin2022[37]−Non−GAAPadjustedearningsperdilutedsharewere1.13 in the same period in 2022 [37] - Non-GAAP adjusted earnings per diluted share were 1.20, down 9.1% from 1.32inthefirstquarterof2022[43]−Grossmarginincreasedto33.31.32 in the first quarter of 2022 [43] - Gross margin increased to 33.3%, up 150 basis points from 31.8% in the prior year [29] - Adjusted EBITDA increased by 10.3% to 79.2 million, with an adjusted EBITDA margin of 19.8% [31] Business Line Data and Key Metrics Changes - The Powered Vehicles Group (PVG) achieved a 35% growth in sales, reaching 281million,markingafifthconsecutiverecordrevenuequarter[25]−TheSpecialtySportsGroup(SSG)sawa30281 million, marking a fifth consecutive record revenue quarter [25] - The Specialty Sports Group (SSG) saw a 30% decline in sales compared to the first quarter of 2022, primarily due to seasonality and inventory issues [29][75] Market Data and Key Metrics Changes - The company noted a significant inventory glut in the bike business, impacting sales and leading to a conservative outlook for the SSG [75] - There are positive signs of end customer demand in certain markets, although the overall inventory situation remains challenging [49] Company Strategy and Development Direction - The company is focusing on long-term sustainable growth, with cost reductions and workforce alignment as key strategies [24] - Plans to bifurcate the Powered Vehicles Group into two new product groups to better align go-to-market strategies [73] - The company is actively pursuing M&A opportunities in the bike business, taking advantage of lower valuations [16] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the SSG for the second quarter, anticipating continued revenue mix normalization in the PVG [61] - The company expects to see further margin expansion in the PVG as volume increases, with a line of sight to additional improvements over the next 12 to 18 months [26] Other Important Information - The company completed the acquisition of Custom Wheel House, contributing 6.9 million to the top line in Q1, with an expected full-year revenue contribution of 60millionto60 million to 70 million [38] - General and administrative expenses increased by approximately $8.1 million due to higher employee-related costs and legal fees [30] Q&A Session Summary Question: Inventory issues in the bike business - Management clarified that the inventory issue is primarily in the supply chain, with a need for faster movement into dealers [5][6] Question: Gross margin performance - The better-than-expected gross margin was attributed to factory optimization and efficiencies achieved in Q1 [7][8] Question: Incremental margin potential from Gainesville - Management indicated that only a slight increase in volume is needed to see further margin accretion, emphasizing the importance of consistent volume [14] Question: Chassis deposits and inventory management - Management expects Q1 to be the seasonal peak for chassis inventory, with gradual work through expected for the rest of the year [15] Question: M&A opportunities in the bike business - Management confirmed that the current inventory situation does create M&A opportunities, with a recent acquisition already completed [16] Question: Marketplace inventory posture between regions - Management noted that both North America and Europe are experiencing similar inventory challenges, with no significant demand issues [57][68]