Fox Factory Reports Mixed Q3 Results with 8.5% Revenue Growth, Sharp Decline in Profitability

Fox Factory Holding Corp. reported its financial results for the three and nine months ended September 27, 2024, revealing significant changes in revenue and profitability compared to the previous fiscal period. For the third quarter, net sales increased to $359.1 million, an 8.5% rise from $331.1 million in the same period of 2023. This growth was primarily driven by the acquisition of Marucci Sports, which contributed $49.6 million, and a $27.9 million increase in bike sales. However, net sales for the nine months decreased to $1,041.1 million, down 8.0% from $1,131.7 million in the prior year, attributed to product mix shifts, higher interest rates, and increased dealership inventory levels.

Operating expenses surged to $88.7 million for the third quarter, up 34.6% from $65.9 million in 2023, with notable increases in general and administrative expenses, sales and marketing, and research and development costs. Consequently, income from operations fell sharply to $18.8 million, a 54.6% decline from $41.4 million in the prior year. For the nine-month period, income from operations decreased to $46.3 million, down 68.9% from $148.8 million.

Net income for the third quarter plummeted to $4.8 million, an 86.4% decrease from $35.3 million in 2023. For the nine months, net income was $6.7 million, a staggering 94.3% drop from $116.8 million. The effective tax rate for the third quarter was 5.0%, influenced by a benefit from the U.S. research and development tax credit.

The company’s total assets increased to $2,288.3 million as of September 27, 2024, from $2,242.3 million at the end of 2023. However, total liabilities also rose to $1,091.2 million, up from $1,020.5 million, with term loans increasing significantly. Stockholders’ equity decreased to $1,197.1 million from $1,221.8 million.

Strategically, Fox Factory completed the acquisition of Wheelhouse Holdings Inc., the parent company of Marucci Sports, for $567.2 million, enhancing its portfolio in the sports equipment sector. The acquisition is expected to position the company for future growth, despite the challenges faced in its core segments, particularly the Powered Vehicles and Aftermarket Applications groups, which reported declines in sales and adjusted EBITDA.

Overall, Fox Factory's financial performance reflects a complex landscape of growth through acquisition juxtaposed with significant declines in profitability and operational challenges.