FOXF - Earnings call transcript Q2 2018 | Fox Factory Holding Corp.

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Operator

Greetings and welcome to Fox Factory Holding Corporation Second Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, David Haugen, General Counsel.

David Haugen

Thank you. Good afternoon and welcome to Fox Factory’s second quarter fiscal 2018 earnings conference call.

Treasurer. are President Chief and and Chief Officer today Galasso, Officer; Zvi call Financial Vice Executive Chief and the Larry Executive Enterline, Mario Glasman, On Technology Officer; the By earnings at now, X:XX p.m. have everyone access approximately release, went out should which today to Time. Eastern

on or at we If available FOX www.ridefox.com. Factory company. that this had call, Please refer release, not portion to as Relations have chance to note Investor you the of will Fox review the a it’s the our website throughout

factors forward-looking in the cause the XX-K issued Before management to and and known afternoon and are or significantly prepared can this of company’s statements to such report we future earnings or response risks remind everyone statements. achievements on the in implied the differences such expressed risks filed remarks Commission. contain performance Such by from annual cause uncertainties, and I Form detailed the Important undertakes which to would release forward-looking contribute events number begin, or the obligation could unknown as like and company a any additional are control in and Except results, differ that forward-looking herein with may statements questions. a performance the statements or forward-looking of to new by law, or update whether statements information, many or future your Securities no other as Exchange of and required results, achievements result to involve otherwise. make outside company’s that the

measures note related and margin diluted these we expenses, adjusted non-GAAP are useful financial remarks, non-GAAP believe that release non-GAAP share, to performance been has net with income, GAAP call comparable Enterline. per are to also Larry their operating non-GAAP our reconciliation in basis. to financial within Mr. non-GAAP our posted of that that on are included most is non-GAAP turn measures which financial And our adjusted ongoing items, business our earnings gross A adjusted better release, reflect metrics prepared addition, my CEO, to an are today’s over In directly important It is EBITDA EBITDA on of the non-GAAP these in income measures press referenced. adjusted pleasure the tax and today’s it earnings that, website. margin, and

Larry Enterline

diverse we financials appreciate Zvi will will to products up you, provide We and built XX% growth Mario position in existing and you today’s and quarterly earnings fuel adjusted up our discuss update on and our a and FOX’s of vehicle our joining business brand delivered bike will second on new on We highlights. the To and the our market our Thank powered start, across The call. quarter differentiated guidance. for second Good underlying review questions. After the markets afternoon, and in and bike second our then end quarter call more broad-based David. us discuss products are fundamentals we I continues categories. XXXX everyone. year start XX%. development. the record financial strong sales, strength quarter, to EBITDA. business offerings. our Sales your that, powered will In were and experienced vehicles strong product open were detailed

base remains making FOX our the $XXX.X athletes believe with from we We share team value our to markets. diverse of as and raising remainder consistent our strong EBITDA outlook and operational the future our diluted this our per are employees expand resonates brand We reinforcing well the non-GAAP financial to the operations. in achieve our well-positioned our adjusted FOX in last XX% helping million, across more growth. annual manufacturing of U.S. for primarily efforts later expectations. In light our appreciate customer as We we our our Based our and results. The our million. strong with these QX quarter provide record growth an of above us our generated $X.XX current sales Zvi for and results year, outlook, dedicated and the were will capacity, on passion starts record for compared and increase brand year, the are profitability $XX.X and of detail investments future in and call. opportunistically record Second of of sales our of on guidance. guidance adjusted earnings

the on area Now, in an growth category business. more our focusing our exciting business the side, of remains vehicle powered on detail,

aftermarket quarter growth the Tuscany. by second were on-road capable off-road strong Our truck high OEM driven addition of vehicles, sales categories, and in side-by-side vehicles

a dynamics done Tuscany innovations. this believe and along job consumer growth. the to supply favor product from market industry chain end leverage long-term product has resources over have and we powered years products the for We front distribution as offerings sales, acquisitions Truck premium bikes. team synergies we preference great collectively Our performance continued global great higher X last creating continue in marketing, our develop and will to compelling and completed bring examples our of branded fuel vehicles are engineering, to and Sport categories with our our to

well. bike, our in the to and our team committed existing In presence broadening continues FOX pursuing categories brand new consistently markets. our ahead, remains perform business Looking vehicle further to

Our customers year in product and been sales aftermarket well as OEM our has our by demonstrated new channels. strength model lineup by received

provide also point make on continue price segment want series tariffs. to mountain down premium regarding an our we next bike Additionally, with of update line. Rhythm the the our expanded perspective to penetrating progress sport I

in that and guidance. input direct first believe call, increases our cost are As to our on impact we I contained the from continue quarter tariffs mentioned

remain the our XXXX. we optimistic the I and trade However, first summary, with prospects of will we the great about as year. remain turn concerned of have the our we And of that, the progress a about In for we could through experienced to escalating of call results possibility the Mario. on tensions, over balance negative impact half a year which remainder

Mario Galasso

Thank good afternoon and Larry you, everyone.

reader reviews, highlights. During our in a touch to in marketplace with will recent XXXX best bike my brand awards fork. Marzocchi model fork survey the survey its resulting Schmidt reader After position our of testing Series fork in Beginning and our brand XX XXX called millimeter Step-Cast planning had continued buy. ZX it as to best editor-in-chief brand was competition Magazine are We fork as Bike Factory top readers year year award praises. BIKE FOX our the Germany’s business building the of garnered say voted magazine our customer and the strengthen XXXX Mountain enhanced gave efforts value Magazine and Mountain best products And to recently remarks, Enduro business, relationships. André their XXXX it. media these favorable Germany’s I fork, on few this our about Bike model Bomber the

simply series a on want to nudges your over of the to took damper Gwin the Marzocchi ZX first Rude those refined more who Cup of Vergier with a Pro the budget X great For Bomber in UCI bang Luca the to buck offers season effortless Loris for hit of Huck the take ahead of World FMB competition. close Downhill few secured the Slopestyle, share Aaron and the the his at first at it UCI fellow Erin will series win the race of career is the XCT. the Marzocchi in Cup of seconds the Shaw the Andorra, Crankworx trails, First World the place. division are ZX Catharine World grip X and in and Genon won Pendrel a took in in best the Tour setup segments. by victory while second. results while fifth Rheeder third X bike women’s of the Enduro value won recent Brett our Diamond at Rotorua, In currently World Richie stop Croatia, Thomas I second At Series in American event Downhill round a Bomber At now the award. coming and France,

adjust XXXX integrate sensors control instantaneously May the our process are so announcement it Raptor announced demands will our suspension. into vehicle proprietary We F-XXX off-road very vehicle move to excited we reactions to can it suspension this the worked to electronic changing Valve feature the data market. system On capable, and multiple will Live to Ford virtually of terrain. the that to Now, business. from introduce Ford meet into that the Initial to technology have we semi-active vehicle been truck on on-road XX, their with their positive powered

each corner, but computer FOX computer. the front adjust about excerpt an fundamentally were to ride-height similar Ford is wheel at terrain roadshow already sensors constantly the by solenoid the that feed shock now absorbers force suspension allows is from the damping with at a that to Here truck’s The to employed write-up. that Raptor, each the new CNET’s information

whether and Ford’s in-house the modes. algorithms handling Raptor in you off-road ride normal, sport are or are designed to improve driving

I with For our Sims UTV June, in In the segments. will respectively. the sixth the this aspirated I roll. in Class, to Rentsch mode, when suspension road first recent took the CFO, now review over for Desert powered more McMillin in and race In the turn Brandon softer suspension class off-road like as dampers to Zvi? much be Zvi financial the reduce would outright vehicle body your took naturally title to won results the Baja Luke turbo and the speed few Tatts In class Australia. at the second generally driving, will and compliance instance, FOX and and Rob cornering past results. increases MacCachren Shannon and won conclude stiffens stiffen overall drivers handling. for Kristen our a overall Matlock our title will call the Race Finke Glasman of the to the damping outside

Zvi Glasman

increase XX.X% quarter existing or intangible. invest acquired and XX.X% investments gross to basis the $X an litigation categories. in efficiencies. focus sales an in you, expenses, were everyone. sales results as improvements primarily $XX.X products second marketing $XXX.X of future detail. acquired investments The growth in on last as result Good the quarter a better QX of primarily our which and the Non-GAAP of the volumes versus or of leverage more in to second grow of costs year. expenses sales higher of at increased spending research second compared all in we XX.X% point guidance. expenses support to this in will in XXX Sales product review the subsidiary, the our which and $X.X to outperformance I second the marketing, QX continue lag The subsidiary from last $XXX.X prior patent of sales product expense our stated operating to XX.X% XXXX. R&D well Focused across guidance recently a of to due operating business operating in and quarter in million XXXX and due increase level second percentage at to XXXX operating year, million expense previous of XXXX, innovation Tuscany sales on manufacturing in in of of in up of primarily million $X.X versus afternoon, year the as is engineering $XX.X quarter Tuscany from record margin, business XX.X% expenses brand. higher expense a amortization were development growth Gross year, in operating resources tend Total margin second XX.X% last on due quarter XX.X% million to a Thank were our up our inclusion was acquired million increased sales. was was sales in than was improved Sales our lines in and of the increase million was expenses as quarter, was our promote as and on and in million, period. incurred Mario. quarter approximately of

promotional number stated, As cycles. R&D timing of often factors years expenses on we launch have including consistently product and changes of depending the and quarters between

Tuscany. period. million in expenses Our in the general $XX.X $X.X compared in prior were year to and million litigation at The to million of due the a expenses expenses change $X.X quarter $X.X million was primarily of and ongoing second XXXX increase administrative incurred related

quarter a same adjusted $XX.X compared second quarter to was EBITDA EBITDA quarter in in Adjusted of second to in Adjusted to per compared XXXX per $XX was margin as XX.X% prior prior the our earnings was income income increase year million $X.XX the million $X.XX fiscal of the $X.XX rate in of $XX.X of second XXXX. was diluted compared our fiscal million, in XX.X% million share XXXX. net on the income and an of adjusted for XX%, diluted GAAP million $XX year the net Non-GAAP period. the in XXXX, XXXX our of in or Non-GAAP were million million to share per of for with quarter prior second last compared compared quarter. share to to quarter $XX.X guidance $X.X earnings second year year. basis, second the of For tax of the XX.X% effective the net previous $XX.X the was compared the quarter second quarter consistent On quarter $X.XX period.

on focusing our balance Now, sheet.

million June as compared was December XX, as the XX, million of June of XXXX to receivable were to as compared seasonal $XX.X inventory hand had Accounts XX, $XX.X December we of XXXX, compared of payable as of June XXXX. million accounts of Inventory $XX.X as changes are to debt was XXXX as in $XX.X accounts to XXXX. as and $XX.X growth $XX.X business as primarily on XXXX. was $XX.X As attributable XX, outstanding Accounts our of as million factors. Total December million of to well XX, receivable, XXXX million XX, The cash of $XX.X million. as payable as as June as December compared million million XXXX. XX, XX, $XX.X of

share outlook, expect million third the to the sales $X.XX. per of of $XXX $X.XX our for to to Turning of non-GAAP range XXXX, million $XXX adjusted the earnings range diluted in and we quarter in

the for acquisition Tuscany. assumes shift recent $X our from attributable year new sales to to QX number million timing to of product $X the balance QX guidance a of of to sales million related of factors, a Our including in introductions,

percentage that is lower of QX Given XX points expect outpacing XXXX a expense to be growth to of basis OpEx sales our than as non-GAAP sales near-term, investments operating the last we year. XXX our QX in

in our guidance range and the of the now million $XXX and fiscal to previous to sales expect For of diluted per year XXXX, $XXX in earnings adjusted are we million raising $X.XX range non-GAAP $X.XX. share

cents earnings the the Given expect also to EBITDA our on consistent we initial drag now out currently to-date. based be guidance year-to-date plan to have to our XXXX. and margins to we guidance includes of and for To of point to improve and balance for expect business, our X% the would available X% outlook the which a that adjusted costs, year, input few relative increasing and our CapEx and we on like of a results the between on higher XXXX impact with tariffs of on strength information capitalize sales. XXXX range of I

model our single-digits At expect for sales. of Beyond this no capital double-digits X% low there our longer point, growth to of revenue return term XXXX, to bike powered to term change and to X% of longer expenditures high to vehicles. is we mid targets for

quarter provide will XXXX for call. during We fourth our guidance fiscal earnings

to also GAAP of XX% as tax a assumes guidance EPS we that on would to accurately XXXX predicting provided and reconciliation. reasonably efforts guidance like cannot due providing rate are to now XX%. back note be the call of to not without year guidance necessary full the turn the elements to to provide unreasonable Our it over like difficulty Larry. I such would I

Larry Enterline

to With would like for Jeremy? Zvi. that, questions. you, Thank open the we call

Operator

of King line Stember questions. Associates. Scott comes proceed & with Please your the [Operator Our first question Instructions] from from CL

Scott Stember

guys. evening, Good

Larry Enterline

Scott. Hey, How are you?

Scott Stember

you ORV obviously of other you more just powered the get amount talk doing a and side segments you with helped, organic of some the Tuscany what of you a it guys In industry maybe significant just little backdrop about vehicle looks granular the items, sales mentioned just so are Can Good. growth some differently? the there. but obviously, like have

Larry Enterline

big whole the I that sales are nice across we performed Yes. categories we a pretty a very Obviously, had in well, were The would OEM we mentioned that offer are side-by-sides that capable on-road was just I mean, again, the the automotive piece. pleased vehicle say certainly one are bike were is quarter, about things just aftermarket – of quarter most I truck broad-based too. good. as broad-based. the bike of market but we strength in the our great

Mario Galasso

to what our pleased Tuscany performance. with was Just We Larry the add were to said, strength broad-based.

on continue on remainder guidance like initial powered We our obviously basis. our an exceeding to is exceeded growth for it the year, inorganic of pleased, an and of be our but term double-digit the business longer has business, even the low target organic vehicle

Scott Stember

in Thanks. are it side, if and business, Maybe backdrop moving it. on products. good talk And about for just the Got backdrop as shape well? very just the there, your the the inventories the things really growth sounds are as nicely bike strong of industry of talk about very maybe

Larry Enterline

would be couple I would think had now. seems comment, in on even segment making channels, year think we it. in Yes. of from the that participate an that’s we I good we having a I but clearly One, that. comments position obviously inventory inventory it’s And say pretty not again in about a also the to few. just you tell industry a inventory feel standpoint, better that better our doing industry are I than general an than last

feel America the standards. strong historical bit in think remained just still in Germany, is is highlight Scott? It I we is bike, Europe UK good by that about a general, So, North would doing particular Does and challenged I that. well. help, for

Scott Stember

just And soon potential of it’s now? least that it actually view that’s contained, level, about talk stuff just sounds what’s billion too been today, been some on or much that last how gone maybe just does. announced but is the at announced other question it right say worth and the pretty you to it Yes, tariffs, and through high $XXX

Zvi Glasman

is the what our should and to guidance. within know continue we enough. impact contained escalate, tensions today, – Well, based should tensions don’t continue to we Longer know term disputes on

in different economy. no are the else anybody We than

we exposure sticky, we out some – point to approach are past had taking the the across relates would power, degree set in the to it pricing. past increases have and but We we are that the that these in cost see as pricing away

We take get new This away resolved. these this are can that hopeful disputes approach.

Scott Stember

all for questions. That’s had. Thanks it. I taking my Got

Larry Enterline

you, Thank Scott.

Operator

the with question Stifel. from Please comes line from of proceed next Jim Our your question. Duffy

Jim Duffy

Thanks. guys. Good afternoon,

Larry Enterline

Hey, Jim. How doing? you are

Jim Duffy

well. Thanks. Very

cylinders it here. firing or challenges in the strong You with in you all any demand is there is, guys areas? seem as keeping on you up to be Question for manufacturing as coming shortages on facing are with demand any

Larry Enterline

Well, clearly, the certainly you have demand have seen challenges. kind of see we our that original plan, when above we

the with are running we just job wouldn’t passionate I great job a normally think you we expedite these That customer kind this it. that but a we jumping defining team tell our frictional you cost comes would as but to have, and able on with parts territory again has products team think being that I responding terrific some I products to see. around, for and provide done of of done our performance that growth in base has

Zvi Glasman

input see front necessarily year. to half lift add result said, in margins, the gross costs, and Larry in same don’t the a higher kind in what back frictional but of the gross guidance to uptick of the a the tariffs, margin Coming have the year of assumes of half seen we of that the we the costs the slight both back maybe half our as

Jim Duffy

been seeing in have objective for talked nice mean, leverage volume when a catch the you some business years to margins. our with you always the as long investments and think out-years running you we we have run spoken gross to Okay. margin about the ahead, up, SG&A. the upside Zvi, both you look are in that should modeling? way the previous SG&A from I have In about to

Zvi Glasman

You should.

be year. I EBITDA initial Our to the guidance year. comments gave last similar my non-GAAP OpEx mentioned our will we the in run below that margin of beginning that in will the

growth the would beginning growth to significantly that fact is EBITDA is point and take opportunity achieve spoke recall which it strategy continue of the and the R&D, in for margins think in have little continue the reinvest you we market lag especially the you strategy, is you longer revenue rates the advantage indicated of business a gross stated no years to to have be we we to at the way and and achieved long-term our marketing about, what EBITDA margins the attack our best the because us expand change to continue to plan, is due revenue the and tends If investments and business, execute margins of that at higher above sales OpEx term. year, on that lower we targets, that that just that the but the

Jim Duffy

have solution if you maybe how upgrade Raptor? from currently of that in future And more is this return One that as revenue mentioned, good you work from The so does to addressed the the you Mario, more best that I come suspension And versions seen per vehicle marketplace? is what’s Raptor is you. a that. it look that with on if standpoint, an pricing may, to

Mario Galasso

questions two so Yes, there.

First utilized is since and technology Live electronic on inception. grafted Ford on semi-active Raptor technology question, internal the Valve the the to had bypass that control

Live that So, the base it’s adding enhancement and using Valve. of technology

really about may not paid that’s our in still content said talk on customers be what as for run we our past, we the don’t far have plan. get paying, to content, we innovation, and like front that may As so that or but pricing they and

Jim Duffy

that. for Thanks good. Very

Mario Galasso

you. thank Jim,

Operator

question from proceed CJS Our of comes Securities. line your Larry Solow question. with from next the Please

Unidentified Analyst

is Larry. this Good Hi, on for actually afternoon. [indiscernible]

Larry Enterline

you? how are Yes,

Unidentified Analyst

So about of starting years, with you next can CapEx increased of the couple growth the the talk the components that? of portions over

Zvi Glasman

X% in is tell the to range. We model would for our that X% you CapEx long-term

way the platform recently targets. the term for have take we The growth X% to think growth our of of kind above X% in to us saying next that clearly our the that fact to growth achieved longer about the part of X% for is couple – now and position X% the of anything business. the it normal we we future are advantage years and assumes So trying is

Unidentified Analyst

is you So spending the is facility mean that kind that, what all that ERP, of on? expansion, is I money

Zvi Glasman

Yes.

in So, normal the of the the platform. targets some manufacturing that the of is annual upside X% expansion and of to of all contains on kind additional that X%

Unidentified Analyst

the bike switching now season Okay. gears it, are into done and in of talk And or your And a you good that selling the from XXXX initial aftermarket terms expectations? to you about outlook much of how can versus basically as the that, positive then just the to how well share comes of we then guidance the with and they the follow-up stuff enthusiasm maybe market shift going on in and some saw compare OEM? raise

Larry Enterline

Yes.

are is a cycle. first in we industry calls that we got. have So, kind think with the sort a inventory what the positions what your our have position. years, of the job comes share prior have like gain And we are with the with out. plays said the as We we XXXX good we we and is for year sell-through to think see QX we done sell-in previous But of think how pleased of see question good pleased that some on in categories balance now to of and in spec that that, product, were we

your of terms your second was In question, question? what second

Zvi Glasman

the take will second I question.

aftermarket. the amount, OEM broad-based same tell as had, aftermarket, between that We we the versus that would OEM but have necessarily Larry talked business. and equally strength strength broad-based we the have equally, we said, about we of terms would not in you In apply

one not was So guess business. ready really it I the we Yes, segment of to particular one? to there another ascribe are

Larry Enterline

our both are them. about Yes. was I mean, enthusiastic it. think we I yes, Yes, No, the that was think of enthusiasm, I pretty on question

Unidentified Analyst

in back That sounds will great. hop guys. Thanks, I queue.

Operator

the comes your of Craig question with question. Baird. next line from from proceed Kennison Please Our

Craig Kennison

Thanks for guys. Hi, taking my questions.

function any what Scott’s strength a for strength follow-up in background regarding spec powered strength on noise. is to extent question kind of ORVs, in versus end-market I vehicles your Sorry wins? of to wanted as

Larry Enterline

certainly pretty from would We industry surveys is we we good across, and your year, well. that a the you again pretty Craig, Well, pretty is it. retail think the yes, and I having think inventory this good think doing ORV know is balanced characterize

have been I think we fortunate.

models that’s pretty We have on some been think and again of popular that strategy we I speced have. part

to defining that. Our coming that with going we want continue these are folks up buy technologies and to to performance people do

think I combination. it is the So

top over I think think clearly market we market, I the that think on that within years. well of I last few improved have is an but done pretty

Craig Kennison

And your product then success high-end with Polaris. Raptor, got on and now particular applied give the follow-up the an to Valve broadly that I products how technology it grow on business? Live on you that on could wanted us on appears Ford what have update Maybe be to the

Mario Galasso

see. Let’s

products So, it back. and Razor on for products, launch high-end we a weeks a us Live location now product our kind of in of We had have Asheville Razor Ford. of Polaris bike. with bring was couple out market Valve first to it their to

go. a fairly has more it the extremely think are are adoption has we a range with we It it that taking difference, applications. wide it’s gotten So, notice, and of to makes people pleased places

Larry Enterline

Yes.

we you little Right now, of at think broader end it’s see it end adopted here. like I lot adoption. electronic, hope a a are and gets high that being technologies the would Craig, higher will of based sort that

a before damper think a I put it your be will on screen low. while we it to

Craig Kennison

your an how know on what might kind this those. the of quarter I just and And on maybe market did of in results last update about are question you show need the future? up Well, don’t at E-BIKE optimistic market, growth E-BIKE all the you is extent one that. to

Mario Galasso

in strength We Yes. sales, quarter, tell the it the strength in I the I would business. E-BIKE out relative but to in did I you mean, remainder specifics. of wouldn’t have we breakout don’t call the

Larry Enterline

we Yes. continue remain to E-BIKEs. enthusiastic I that about mean, I think

want We think specific able a ride. clearly more into development be we money to continue product. I E-BIKE to And to that’s put wave to

Craig Kennison

time. for Hey, your great. thanks That’s

Larry Enterline

Craig. you, Thank

Operator

Our comes Please next Mike from question proceed from of SunTrust Swartz question. line your the Robinson Humphrey. with

Mike Swartz

guys. good evening Hey,

Larry Enterline

Hey, Mike. How doing? you are

Mike Swartz

think missed for guidance? as for $XX business said you prior expectations relative the Just year may around to that million, change you have standing. of I the gone but this, did into kind has that, something like I year? your I $XX Tuscany higher million, was you this gotten have it know

Zvi Glasman

my Yes. mentioned vehicle remainder it was point exceeded that ex-Tuscany, our double-digits powered expectations, has longer target term I initial earlier, of of well our business comments ahead out low the rate. In I even the but wouldn’t

Mike Swartz

would I And part infrastructure CapEx historical next your the Thank perfect. thing with just or new manufacturing over of El the guess investment American it capacity? that’s the And of years, you then that footprint? Okay, I we going across return are Cajon new return question think be then more to is you. as that guess maybe on about that few that to is, regards sit on North investment, an making or the is typical within second

Larry Enterline

me let let and in, Zvi chime then Mike. Yes, will I start

driving market demand platform. I to think it. is, manufacturing have are One obviously, here out, we couple as look good has this as things we of pretty year in developed we our that seen want invest

attention to I deployed bike about that have U.S. that the fully have manufacturing think we would also be we to Taichung our before talked we now turning platform.

and have powered looking both facilities things vehicle in you going is at will those, work a got production on think we So area done for lot continue here. have two of and that One optimizing that existing I to. we

capacity. the is ahead we wanted look developed get and other I got at have think we has year this a book, though of to good the order that as

have So, manufacturing a extend team at we looking we Zvi? platform. our how

Zvi Glasman

Yes.

costs, with your in sales before, between is be. footprint when have necessarily growing going with always target, we a trade-off to – are it capacity and there tend you you frictional run higher efficiency, said has as isn’t above and efficient frictional as grow doesn’t right because necessarily costs, about as could to talked years Larry As

this time-to-time is so, And From tends work you ahead. function a an step to way in lags, opportunity. sometimes CapEx a of – sometimes when gets it make it kind

of And us so this opportunities function for with CapEx. step is one those

the bike Larry this the as the have As improvement is to of seen investments part significant we point share step next higher have similar ongoing, that of platform. and that’s is we powered result a made on gross in mentioned, maybe margin a the going various exercise in lion’s platform North of the and move the our been some journey of of Taiwan vehicle rate but the to goes a American initiatives, on through our kind

Larry Enterline

didn’t And we you a we other good these wouldn’t them. return think can on be I Mike, making the assure if thing investments, I see

Mike Swartz

Understood a guys. lot. Thanks

Operator

the Our Jefferies. Konik next from line comes question from proceed question. with of your Randy Please

Randy Konik

engineering a adjacencies it that’s move looked what’s have story at was Yes, into and to types you, be the I allowed leadership leadership, covering product there be broadening guess have newcomer I and to I a about of I it kind or more interesting products. what product about would business but vehicles thanks now of to a the is screen where about on this brand Larry seems joke on company and I lot. product the to more door with meet it think kind of going types story when and the think a here, of allowed a get it know strong earlier of

sense, and a are So platform. you that broadening out scaling really the out business in

the So, interesting to over the opportunities? think have That’s the about product next curious be X question. look that these of here of across I in do where setup R&D you the expertise this to just years? really changes other way is has can lines that how am when X you business and how or continue the R&D opportunity I over at first think how that structure of me to the next areas that because vehicles my maybe guess, or other for extended X how dollars today you other kind you those X the most changes you to and of organization, hear you and years, kind it’s of utilize the seem

Larry Enterline

Yes.

engineering start me this we think understand are comment have driven brand that will this consumers. have the turn the in our a I that of them – in that’s the got these really hands the the think are how way categories to these understand we I Zvi couple but of we backhand Let and about here, and is And let we markets all market. company, it, and Mario business very and out performance-defining we but resonates beliefs I foremost, have first think and to into get in blessed – way people much of passionate an business driven the I think the on products

pre-sub. a So, that is

to continue So, going those are in invest to things. we

both believe and we direct that’s maintain. got move I we strength that a are well. shown nimble Now, been to think to at intend acquisition, by opportunities we and we We smaller FOX that have into in can have that traditional get I sold teams and customer one quickly think organically and adjacencies pretty can engineering that do and same and passionate respond

changing. that see don’t I So,

also I itself. in Tier is we trick dealing pretty a how been out again to to have figure stay nimble X right of automotive and while think which suppliers, we able are with

see us doing So, more that. keep I of will you think

have are got continue. R&D new both markets in. And and applications that we have new extending money see will going given our you got that into I work within going and think segments into we We money

our the a I rate point think consistent as investing earlier, as right. keep made we we here to intend at revenue grows, pretty do

So think are bigger market. the get. us I on the products edge maintain these we more target in what that helps And getting Guys, that’s into innovative we getting any? stew

Zvi Glasman

going kind mentioned Yes. that say as of that far. and caliber talented lag, this I engineers same integrate so many this have we I when find, maintain into attracted growth, b) is would the talent because the earlier, that, maybe of only I it’s tend have cadence operations excess revenue to there we we can can that we actually to guess a) of our

lack – our also for as says, opportunities. revenue Larry don’t We we

terms we opportunities to we we that we a are about choices factors, no have ROI but based deploy a going and markets choose of ensuring markets are go are after. after between high can to priorities lot them, that and competing to on have of make in we number we that markets that the tend where in, a those we think dearth R&D resources success including of we going want So, we of on

Larry Enterline

saying that low list is Yes, Randy what now. Zvi on is damper screen the door pretty is right

Randy Konik

offense evening debt, the out like well have on this all business actual follow-up through interesting. maintained. and you is I you pay-down strength know deploying into the between, the and it’s of strategy it capital as the back the more So, is is if being will balance the so you the the of came print kind Then of then capital very structure

acquisition, gas on So, kind pedal pedal how the CapEx just over do to of – about there? foot long-term, of business acquisition combined the further with – of philosophy Tuscany think putting you the you the the the are your curious post

Zvi Glasman

Yes.

amortization of so question. the pretty to than In for acquisition EBITDA maintain foreseeable and Larry and there financial capital we at would well will not we terms of our maybe debt pass below paying reason future, principal normal that non-financial rest screening would answer down And any we to ration now least we like capital further debt. as strategy plan a like leverage of financial I let deploy flexibility and – near-term that allocation to be opportunities for that the Xx that should the loan our opposed is the down under have the to low GTM pay

Larry Enterline

Yes.

and across M&A of business, I think bike parts run both we our screens vehicle. active powered continue to

do takes on we would said think will just willing have that. be we a continue a think I great before, we deal. to And as There that are make seller things there it again to additions. help

think, to M&A available. deploying keep with capital his when consideration as growing that not shy of balance we know they business in to and call, opportunities do that is a the going don’t Zvi those organically happen. as indicated are too portion our to about you in we So, are also I selective going are prime come

Zvi Glasman

nothing redeploying the second we is own is the that business the Yes. number priority. today. support is priority That us, I for number to in number one mean growth the one one even the and there

Our future not we increase we a to by on capital think. the that have, and sacrifice have to pretty strategy and number one it’s amount of the EBITDA execute this want our business is we we because into margin exciting redeploying is year priority business EBITDA, business

Randy Konik

very was you. Alright, Thank guys. Thanks, great. helpful. That

Larry Enterline

you, Thank Randy.

Operator

of question. with your question comes line Bank next America. Rafe Our proceed from from Please the Jadrosich of

Rafe Jadrosich

for Thanks taking Rafe. it’s questions. my Hi,

Larry Enterline

are you? Hey, Rafe. How

Rafe Jadrosich

Thanks. Good.

color So, Zvi, I shift sale $XX million on the XQ, can driving give what’s – million, was if little shift bit XQ the to wondering you a from of $X that? more

Zvi Glasman

mean vary from I difference cycles. our to They Look, introduction in company Yes. just year product has year.

out initial inclusive seasonality to versus but it I main were. am of that So is it’s expectations in that, any not than – we would shifts that tell are Tuscany further our those you what their and drivers. break the going

Rafe Jadrosich

on you historically Can just – then to your you confidence the your what’s year raising for sales visibility $XX a think conservatively, high-end high-end what’s around second $X you and then at of you give beat around by by raise million. to pretty close and by you And giving order then the the helpful. revenue giving much? have that color little guided And the that’s you guidance on of Okay, your full guidance the high-end least the for at are the book? confidence quarter the at by I the million

Larry Enterline

we before, we as And is obviously, confidence. the thing are tell of That’s book, one have so the order that at we terms gives said would OEM another us the customers right, look that Well, they their will forecast first foremost in thing seeing our some with element. you, closely I in and and businesses. work be what

those of reaching have of levels. active aftermarket are inventory in variety activity and We and the a ways we terms of with channels

not So, all. above. our methodology and if asking we it’s all I think you changed is business, the how have I at the what of view think don’t are we

to the we is think before muted are strength to our accelerated. what has we I Does though And in with reacting thing numbers able are progressive and think that being have guidance. have I And think this the bigger. year how of seen consistent raise terms help? that we it’s good is I that

Rafe Jadrosich

have help. compare production Ford think started shipping that expectation? is the your in – the the how I Yes, okay, initial versus then when that Ranger it, and started timing you And it July, for of then that – does Raptor, it does

Mario Galasso

I you, I would shipping we tell begun am was not is yet I with have the or sorry, I shipping. on believe Well, start production? will question –

Rafe Jadrosich

you will Raptor? when you estimate Yes, Ranger you shipping, start have will an shipping when for do the start for

Mario Galasso

would are providing that typically quarter. thought end difference it’s tail any would in the start of ship could but this we in tell driver major shipping here. year, might we – what – beginning change we you a there of Yes, we I that a there be slight the towards of mean the would of I guidance not

customer, but has We have vehicle year. versus thought breakout the enthused what it. the changed are for we any beginning specifics We the lot high at or not for expectations we and of don’t it a about

Rafe Jadrosich

final has like know as lot is for does of guidance, how the somebody – current impact your you can you And are then in does your of about of to you who of that sourcing Asia, a how positioned – I tariff who have at your baked increases? – tariffs potential the just into exposure Yes. lot further talk question in terms but tariffs

Zvi Glasman

I right two business, terms components, our the Well, if you down think serve. about in into major it break markets we of

only the happens directly U.S. the to into side that all aftermarket Taiwan back the production keep felt we of in our ship what dealers. in our On and and bike business, mind we of

customers into Now, from ship might for the U.S. market sales. Taiwan end our

because Taiwan and we on get nature. that exposure So, things the of heard other have don’t places of business, our any to direct get from we imported haven’t for tariffs imported anything side that bike

doesn’t what tariffs products indicate at markets we seen bike right have bikes I any now. announced So, far are selling we we in this the so on guess point for or that are

Those We motors E-BIKE directly have some China. in us. made not announcement of do affect

shape than of in shape part in form. not less little significantly or is exposed really of that any current business roughly – half that the the business, our So,

powered We think side aluminum know products business, of vehicle to fear but our it be in I The other lot is tariff aluminum we the use tends that aluminum. affect we that a us processed aluminum. could we use major that even our in the of highly

cost, we and – heard we that actual it a has a of have this is actual Steel, it alloy we big major we think what’s we what it’s not that, for have the think we they impact. but the don’t we exposure But some tariffs a it. use that, but impact do and some the so material itself And some don’t it of part alloy to on itself point, tell use from discussed some we to our it is now you been heard steel, is impact. at point, won’t this have all watching as because relatively it feel confident we time say it Should announced. going ourselves. the based eye concerned, and to on would it, and that I we are predict concerned guidance keep are an are we our on it sits, what overall we in I contained not based future change, on are far what been and so it but has can’t we

well. ultimately, labor able things been environments, we increases time, using comes navigate these And certain internally. whether cost have, be at including successfully efficiency equation it for faced reasons, been XX input number or of things as that or have I we of a into are oil or pretty the had nature. points We time-to-time sticky, price from And currency to dollar years the different over if cost increasing other have during fluctuation have, or in levers, here,

extra actual bicycles are putting We themselves, products end trying consult the dampening consumer customers upward and vehicles actual side-by-sides are our demand by on just themselves. we by pressure conscious – to the of actual the end through the themselves,

short is a So, taking to relatively I now. confident a right we and we approach question are wait-and-see feel long answer guess

Rafe Jadrosich

helpful, really That’s Thanks.

Operator

from Blair. your question. line William proceed Please the Sundby comes of next with Our from Ryan question

Ryan Sundby

there quarter to cost thanks it could you, just hey, the it there, like powered Zvi, i.e., for vehicles? guys. side most focused on something on your line end like on but the of the maybe follow-up to pertains impact seems wanted as tariffs, demand that commentary on any question. on it pressure Yes, Congrats are the and on farmers concerns is

Zvi Glasman

affect serve – mean, – course are have an tariffs can to affect economy is they I ultimately, the think there they prices we or and to who a they the I degree think you their the conversely I right Look, of effect. that of then I raise mean our part have customers

been got things don’t one we and and like segments that past we particular are other the the do serve of serve, in and up markets farmers. business the overexposed we has oil and when affected certain FOX markets the the of hard segment but certain for. the pretty geographies a in think but seen always prices of we markets, hurt we are confident takes, where model as about to made any we have We diversity are think strength puts such diversity I that

Larry Enterline

Zvi pretty this drive stuff rate obviously because I they quite product to to day and mean, bit that, sure sets seem I across that we it, be and think Yes, I point transient right. but demand age, not And us, are from to around have are markets value, things also closely and we closely said we to this look add overreact good Ryan. we am comes we this entertainment it providing out it would that want but tends time, great things, to as in serve. are I know tend at at at looking as as a we looking looking to to And our right. you at again, these

I to think a to in would will helpful hope Zvi reacting was and hung reading trade it what what Now watch we to. But help worldwide folks’ I you could general we to referring prefer before and in have the contribute up don’t that’s other going we have and am also get know We to too bad as it start that, sure to tensions. anyone’s we that in not I I we think on, terms continue obviously business continues. of do. think I announcements are right, we that maybe situation, been need commented to short-term that’s

innovative of hands price get in can conscious end day at are an passionate a the afford a that the We at product to we want he consumer’s today.

activity have if two take with things, and use one we government So to stick we to longer, it’s when and of I that, thumb rule we to are be going good they it’s will we fine. whatever a And is disappointed. for probably us. philosophy, won’t think not that two say they be we be And going for I think again, done,

Ryan Sundby

thinking there insight any The of of I that. from on opportunities government types for on whitespace of know the you Larry, I trucking updates add. time-to-time, helpful. will And really is Thanks it. comment Got activity some might kind of guess there, you group the

Thanks. there will any perspective be great. Just

Larry Enterline

I mean, I would Yes. I again, tell that are have mean you anxious. – the one we got, we

over on one, get obviously to but we in next am right category that again into a a some recreational that with has production getting pleased hesitant have, we but closest We we are but get so it all are we the bit where we behind not what the commercial on our I think far, have launch. quite not be trucks it’s I release through we to about one it think but kind got are think and that quite stuff of a we would into soon be there, that test are technology bigger we positive, out truck get to that new commercial the deep see very because is that varieties that one The commercial vehicles, little opportunity. would helps. now, it’s excited

Ryan Sundby

lot guys. a Thanks Great.

Operator

reached the have call like remarks. end session. the And for we question-and-answer I Ladies would back gentlemen, of management the to and closing turn to

Larry Enterline

for to interest earnings our look for questions your as go plans we FOX. you quarterly thank hard you these all forward and and enthusiastic your progress I a calls. and our and day. of forward on you and of Thank Thank keys execute in thankful to customers continuing also our We continued to success. our updating of suppliers employees, great all good am and with the you work support the have group our

Operator

This concludes today’s conference.

at this your your disconnect participation. Thank time. you lines for may You

Fox Factory Holding (FOXF) 4 Aug 182018 Q2 Earnings call transcript