FOXF - Earnings call transcript Q1 2020 | Fox Factory Holding Corp.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings and welcome to the Fox Factory Holding Corp.

First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

to Haugen, conference and Vice like host to Secretary. now David today, President, would turn over the your I General Counsel Thank you, sir.

begin. may You

David Haugen

First Conference Thank Fiscal Good afternoon welcome Fox you. and XXXX Call. Factory’s Earnings to Quarter

On should and Financial Blocher, Officer; Chief X:XX John today to access Eastern today the the now, which Interim PM everyone at went are out call By Dennison, Executive Mike Officer. have Chief earnings Time. release, approximately

on review you’ve Relations the had available chance release, If at Investor to of the website not our portion it’s a www.ridefox.com.

call, Please throughout will that Factory note Fox as or this we company. refer the to Fox

Such I’d performance many Before involve control known of may begin, remarks outside implied of additional future a contain everyone or statements and achievements like are we questions. can that make expressed the cause statements. response the prepared performance by statements to or forward-looking which remind to uncertainties, in results, forward-looking the number management achievements and statements or and forward-looking unknown company’s your such differ from significantly results, to

Securities events Form Exchange future or obligation filed factors detailed in to that or on and company risks annual could contribute of and otherwise. and the whether herein, cause as forward-looking law, or statements information, undertakes XX-Q report by to the Except company’s Commission. required no other such in differences the any latest result Important with Form the update as are new a XX-K

better that metrics It non-GAAP is are we measures EBITDA earnings the ongoing per operating In income, adjusted business adjusted of EBITDA non-GAAP share, non-GAAP margin our that addition, remarks, performance adjusted believe income basis. financial net today’s an these prepared non-GAAP on gross are referenced. within to earnings that expenses, and important note margin, non-GAAP in useful our release reflect are and non-GAAP adjusted diluted tax,

which has these are in our on also comparable directly release, website. of today’s GAAP been to measures non-GAAP included reconciliation financial measures press posted A financial their most

CEO, it turn my that, our Mike Dennison. pleasure over to with to And is the call

Mike Dennison

and to join us pandemic We on the David, everyone caused reported and you, Since our taking our earnings, good lives appreciate COVID-XX global daily Thank our afternoon. impact unprecedented economy, for an call. last we has business. today’s the rapidly time

to First operations go those on and all whom and foremost, by COVID-XX. thoughts extend sincerest of would facilities war to appreciation virus. prayers helping running to workers all like and possible, our I continue this affected our where to out keep the win working my our employees, to our in the to healthcare

health priority number has our ensuring Our and been families. the X employees and their safety of

We as are possible to organization business ensure now working the and together future. of nimble and as be health informed our also the to an for as

and on to to quarter XXXX, I focus dynamic then highlights unprecedented going sharing in will along responding of we’re a results perspectives this key few some and we start how the of John first month forward. through our fiscal of on our and on of provide as with cash sheet, more business I’m by business April environment. will balance go perspective in move financial the quarter. then our quarter the first detail flow second elements our and

our COVID-XX-related operations, costs $X.X up million our facilities. best the results. to of experienced enhanced gross in according reflected key all quarter new the and which first in CDC at stepping areas, we visitors to our practices We profit have operational policies guidelines, including social in for expect, health-checks and sanitation, would you implemented our manufacturing and As in support approximately distancing is

are impacted commensurate of with quarter. And as time for these QX, costs, we are amount we expect a COVID-XX-related in the costs within step-up the the

new responsibly and COVID-XX procedures are environment. operating in We a our and ensure to as place practices keep as in will these business we possible enhanced safely

daily teams employees, our and and business, partners. the evaluate valued and financial to impacts supply-chain Our the OEM it’s of meet on having social health, pandemic

with are to daily of consistently potential very There proud measures, actions managing time how I our We our circumstances. am and quickly through near-term. team policies new minimize to and responding a are any developments our negative business is and impact way unpredictable

Shortly Taiwan outbreak around began the other China, COVID-XX. earlier in than spread much world. These to measures started after of the taking countries prevent actions the

Taiwan than As to parts most speaking, and a relatively maintaining closer normal of the of life result, other business is world.

running quickly. our changes situation ensure we and that continuously are to fortunate in any and We that respond are to monitoring are to are anticipate smoothly, the operations we potential Taiwan able

In and SSG them stronger daily are our working emerge and supporting to as able partners to we ensure to course. team due Canada now is Europe, closely customers with in and our suppliers, talking them

We follow more ensure normal site. government authority have on we employees on-site practice to operations health to from and measures, and good operations social continue to to including guidance of and prepare home as a health we return currently mix distancing, working

with several operations, are orders U.S., that In manufacturing faced partners states our degrees we end-consumers. impacting and varying are stay-at-home the in of OEM

our the government across guidelines. affected necessary and taking actions orders in the locations to key all of and are We compliance adhere to

operations. same working we how are levels time, determine with the best to to government all continue At maintain at authorities to minimum

important to services stands remain are business and during It minimal needs to capacity in it to at to to essential we currently limited us community. continue meet even as right enable at operational demand we provide levels us customer able all changing times. our at continue to for these operate is now, to As least facilities, impacted

had from with while ahead differentiated diversified sustain product early Both quarter. started the ultimately for very had unique of we and with of market generally half our March to profiles year spite And the demand first with We great they of in the momentum global strong results the revenue rising businesses ability COVID-XX. of happy pandemic. business position spread of the onward, our were their offerings

with commercial product military lines. slowdown experiencing In OEM temporary Vehicles Group customers is in aftermarket, sales Powered a strong but general, vehicle and the booking currently the is

Vehicles progress Powered expand to in powered make excellent efforts to we our Group, Georgia. the vehicles our continued footprint manufacturing on Within

track. remains facility on The Hall development of our new County in

in in is of set shift a the The quarter set QX from work Specialty up on sales in up slight what this phase and their speak. from project but channel. order be running this be – Sports bright as experienced based late later first preproduction Group spot seen books beginning a to into we been we QX, have first we’re is The has our quarter, and to expansion

Overall, quarter last in quarter, $XXX.X the of first first compared sales to generated the year. we increase a XX% million,

powered channel prior to continued particularly pandemic. in the OEM by driven sales were our quarter vehicles Powered results the line-up, Our XX.X% the success product Group of up product the to Vehicles first XXXX. compared broad of were

X.X% in Sports sales were the year creating were approximately mind, year-on-year for compared quarter, the Specialty first Group last as prior up And difficult mentioned quarter comparison. a the in shift reflecting earlier. orders, to a OEM Specialty Sports Group of Keep year, in down XX% timing of sales QX

are the said, year introductions model well we pleased aftermarket received by Group thus Specialty that Sports far. both OEMs our That XXXX and been have

believe X%. our production overall X% to difficult it is beginning quantify, by to While we in sales approximately impacted operating limited March with fully

the U.S., shut on down in the to post-QX were same month SSG Focusing a results environment. our more PVG April, during function trend, able during impacted time, OEMs our which production Yet normalized in the that was of at time.

in top-line severely both April our with sides While challenged, been order of our business. results books pleased have we’re the for

expect quarter. do XXXX in to We sales versus prior Powered Group year Vehicles QX be down

as we intermittent we challenges are some back potential production vehicle powered begin normalized for levels. assuming addition, more In our re-ramp to to

majority positive know, month already and developing. beginning likely coming their timing that trend. back are The resumes OEMs of indications but our we starting you is throughout as from production OEMs, of is bookings of pace restart a this to see the many As and production plan of which May, good the exact still we at to news key view of the more

issue. Keep mind from nature, are issues COVID-XX we strongly these this we end unprecedented market demand work as not through in environment that and operating transitory more pandemic resulting an the believe in

less turned and activities by home to powered as Consumers specialty outdoor, while or traveling enjoyed keeping sports distant. and at staying recreational our products families, have they inherently are physically vehicle friends

reaccelerate to consumer base and emerge for that could much both growing stronger environment a post-COVID-XX a move businesses. demand believe we expect We into as

confident America and North As the growth in as economies, and the ahead power we about begin opportunities our of Europe us, grounded optimistic consumer and remain brand. of to as reopen their well the FOX loyalty initiatives strategic

revised their the excited capable, we’re vehicle as and and remain on-road the are automotive bring and our on make the on believe line. to see market reflected Ford, the that We expect back platforms truck strong Toyota OEM continue and prospects to for they about consumer jeep demand customers, FCA. with moves off-road in We focused that remains to plants on forecast

conjunction pleased with of are cash our the In sufficient in we to completed We and provides with amended forward. cash we with mid-March. flexibility have the us financial of in flow and as closing that, on move the operating credit acquisition believe facility our combination transaction, hand SCA

to business, growth these solid product our combination business. manufacturing stated, brand diversifying footprint continued vehicles portfolio. As our previously we’ve and and The with our our SCA runway benefits is platform a of leading Tuscany creates complementary powered expanding in American North for

automotive it expand addition, significantly will our In dealer network.

monthly XXX shipments. from dealers, expanded we financing truck. per truck options to driven which the another This volume trend into by attractive and truck in XX% our quarter, was prices led continued base first April This a for fact, increase higher-than-average solid In with OEMs. by dealer great nearly positive SCA

last continued team. sequential we SCA part QX executed The drove to Another last XX% of leads since the from XX% of where generated and look the transaction, extremely notable forward increase period. point internet-led growth is This in data the XXXX. online, FOX same we sales has weeks for up focused their and well team closed in year actual a development to QX internet the several as

the generate necessary and we products. our to Directors team, our they we strong to best environment performance-defining sustainable to support in as summary, long-term value upon taking our of safety, deliver manage efforts across the to our Board In of we products we accomplishments of other our the deliver remain our our We business confident as our are plan executive appreciate growth operating continue for our reinforces build behalf and objectives, brands. our organization, continue base, financial On current of measures shareholders. to and differentiated customer as value team passionate and in existing which

call over that, the with turn And to I’ll John.

John Blocher

more over Mike. Thanks, everyone. of our go XXXX the fiscal results our financial I’ll then COVID-XX status relative in pandemic and the recent to actions review detail. afternoon, Good quarter first

first in XXXX. sales of quarter of versus the Sales XX% of million increase million, of XXXX $XXX.X an first quarter in were $XXX.X the

mid-March. sales Our in million $X.X which included from SCA, approximately closed

slightly was at orders, least the our due it COVID-XX quarter, of first the to month. the in record a below original and were orders the was early the March in sales it that While shelter-at-home Prior back plan. shelter-at-home company quarter in for expectations later began ahead our SCA to

XX.X% prior million of to year was decrease to the a decrease costs factory in XX associated primarily with not basis period. margin The basis that the decreased Non-GAAP quarter from the margin Gross margin. pandemic COVID-XX due gross XX.X%. back XX added to of points point in was in margin non-GAAP first our $X.X XX.X% gross were XXXX, gross approximately

to of expect increase impact of due most due are costs we the COVID-XX. will These likely the continue continued Mike to length second orders. that to the difficult mentioned, shelter-at-home and these predict these As quarter unknown costs in

quarter $XX last amortization XXXX year. related basis The to transaction, of Total dollar were costs operating XX.X% the inclusion and their a $XX.X operating first in or XX.X% costs increase was on the first primarily the acquisition of of expenses the in SCA or quarter sales in of due million to compared million along expenses with of to expense. operating sales

expenses quarter operating as in XX.X% Ridetech were compared the as include our sales the line Non-GAAP year well expenses percentage prior to also XXXX related of a as costs subsidiary second to with acquired first Our growth. in period. XX.X% of increases operating in quarter business

marketing and commissions higher various subsidiaries, to Sales of up and detail. by $X.X SCA the million $XXX,XXX. more due our slightly approximately Ridetech in expenses. R&D increased expenses on Focusing inclusion was other and

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

patent primarily general and in Our compared were million the quarter the other the change SCA XXXX million, operating $XX.X totaling administrative was million various XXXX. and administrative costs $XX.X quarter lower in to expenses. costs first of facility first partially expenses by and of litigation to expenses, and approximately The offset due $XX transaction

effective quarter our primarily our tax our XXXX, reduction first rate long-term due rate in the is of quarter to a tax to the For than resulting rate tax tax global lower was fiscal initiative. of foreign X.X%. expected This from mid-

$XX.X was earlier $XX.X XXXX. EBITDA margin is same The my to non-GAAP million expenses year. XXXX was the to to quarter of to in last for the in in comments operating due the increase EBITDA of Adjusted compared the Adjusted first XX% change due lower the and highlighted in primarily quarter XX.X% million first growth. margin EBITDA margin compared gross in quarter

for On period. basis, net prior last share share was million or XXXX year. the compared adjusted FOX XXXX. million to per first approximately to or first quarter decrease adjusted a of income year of million $X.XX a of million GAAP $X.XX quarter compared in $XX.X per was quarter in of the million, attributable the to XXXX in $X.X diluted first earnings income the was compared in diluted diluted $X.XX $XX.X $X.XX Non-GAAP net share of $X.X per to Non-GAAP quarter $XX.X the first

EPS Our original slightly quarter due the to to first to was COVID-XX mid- impact in below expectation late-March. related primarily our

Now balance sheet. focusing on our

with to pro XXXX, Prepaid to to were first of X, was $XXX.X we the to million was other Accounts million. receivable ratio Accounts hand million. quarter of compared was a $XX.X compared And $XX.X forma X.X gross was compared million and million. outstanding a basis. approximately XXXX, on January payable and compared Inventory assets to on net million $XXX.X and was cash As basis X, million to $XX.X $XX.X X.X approximately leverage debt April million. current $XX.X million, million total $XXX.X $XX.X ended million. on our times $XX.X compared times compared $XX

accounts collection and increase on accounts due escrow. The retention shipment, payable inventory pandemic COVID-XX cycles. chassis in from our and current reflect company’s prepaid in including and items, SCA, impacts to changes business receivable, in contingent with The and deposits assets SCA-related addition the growth and of the held the primarily vehicle other payment was incentives along

to facility Our increase of net at well SCA million property, to acquisition end Georgia. equipment million of $XXX.X XXXX. in as $XXX.X increased our April and The plant as investments reflects as new compared manufacturing in XXXX, the X, the PVG

global we April As announced and cash have uncertainty. manage conserve on taken time action costs we to X, this of during

by pay and and management reduced and nonessential enacted expenses, salaried XX% operating hourly more. or have We employees on furloughed temporary reductions executive positions

if will action further needed. to is continue We the situation monitor

original As annual of and and this the continue to to remains reduce facility facility. costs track, a the we to further ramp maintain some liquidity, expect the throughout Georgia anticipate or duplicative we mitigate year. costs to and The measure in working production to million to from this expect $XX XXXX during our million we’ll in but our CapEx quarter by on invest begin balance more are plans, new ramp possible. production We where these $X

credit $XXX credit facility. agreement, have our million revolving a under Finally, we

we flexibility our on forward under support credit flow financial business cash availability mentioned, our move believe operating existing based Mike As on and to cash we as we hand, facility. the our have

broader While and will the second begin of the we within to reopen, economy our be while quarter continue U.S. covenants. global we and challenging believe remain to will the compliance

guidance XXXX the fiscal pandemic, response Now turning Due to guidance. do necessary domestically such provide COVID-XX have and visibility to we March X guidance the full we to rapidly and on intend the we year to outlook. in suspended, conditions to provide the quarterly remains evolving internationally, until our not market provided

like would to Mike. turn to back With call the that, now I

Mike Dennison

strength remains people, our move our we bike The OEM resilience to ride of advantages the are diversified X well the emerge this and our performance-defining health priority, and as continue our businesses market and and situation stronger. forward. competitive dynamics vehicle and through the Thanks, of believe the be we to products, power brand manage FOX of valued with partners, with combined our John. will in number the of safety positioned powered our we employees In closing,

now I call the would open questions. to like Operator? for

Operator

Larry question this from conduct Please with a comes your At Instructions] proceed with time, CJS first Our question-and-answer you. Thank [Operator Solow session. question. we will Securities.

Lawrence Solow

to and and are doing good guys. hear and voices families you Good pretty thanks Great, and hope well okay. your afternoon your

Mike Dennison

You you. Good too, from Larry. hear to

Lawrence Solow

great. Yeah,

know you’re couple of I I giving know, a not would don’t guidance. – I questions. recommend you that. Just realize I

Just bit to closures in more get terms to and the of a inability impacted powered least probably little – short whatnot and and the sounds in run it like get is vehicle, to at purchase – vehicles. due going

side, April on vehicle sales what I the But can I can suppose, an give mean, are right, know sales the I idea into what going of mean, mean, just side. like I April you don’t of more terms double-digits, give of, you’re us an us the well powered you looked sort I in just seeing idea on down? in if

Mike Dennison

Yeah, Larry, this Mike. is

you about helpful. be in in give comments reports of SCA actually probably so should that strong. some seen you terms remained Tuscany. me my our just prepared strong business, and Let it SCA, remaining on U.S. the outfitting standpoint data and points of from sales That End-customer truck the here demand, across April, have incredibly think

good the think, is a options I their being impact that created April So being the by OEMs factories that’s vehicles. to The of function this and of, is thing financing move shut deals down.

and facilities across-the-board were vehicles, of Toyota, powered fundamentally you and Chrysler and of April. think down you shut when for So think Ford those

at small weren’t means our conjunction So any were product taking that runs. receiving in with which down us, least very or production they facilities or shut from running

when Sports, April think the Taiwan, That normal closer business. running bike water good. Power across was in of different our Similar was you and to

it’s on remained parts strong. depending story, Other of our the different a coming of the bit have part from. a business it’s business So of

didn’t for really Of military beat. course, lose that a

phenomenal, continued on. and trucking was Ridetech Our commercial business

the in that support was of factories OEMs major a shut being a it function directly we terms So really factor. that of down into was

because would we those well. the some down of as shut were the aftermarket, environments sell where that of folks You see into, a the aftermarket distributors just retailers, lot in in and channels of some in our

April So month of you that, saw continue. lumpiness some the you’ll see with in some that and of probably

And in as not in of see May relative on power I the some all mentioned to you’ll earlier, sports that OEMs line. they’re

know it’s they throughout on back kind As of of May come May you the line. X, course

Lawrence Solow

run. been been super Right, it’s to said, okay. happens a there’s in question good. would powered predict what of economic like, sales on have especially prior obviously, I be bike in side. the lot And short know or hard but recessions guess, that work. I specialty And, I No, or – better of And – your like does truck incentives sports sound sort really a slowdown, in the

been and things discretionary. these have than customers necessities view super Your of more resilient as

up average Obviously, I of the customer, maybe a there’s side-by-sides, shift are mix trailing a and some sounds impacts more eventually in the get slowdown it, doing profiling out thoughts of vehicles, big-ticket it people we about on, these But How vehicles on maybe is powered buying like sales powered side? on under items, maybe to that? to look within economy the so is get activity might see outdoors of you as their your the economy, legs but now, actually any truck some early just are okay. terms sort to XXXX vehicles.

Mike Dennison

response. a a It strong. of pandemic been recessionary my It’s end-customer couple response, different. are kind I been Yes. has be I on those demand our would and Larry, think One, slightly hasn’t position points. remained that, of guess, a

– to out of it or get like. XXXX paycheck going be think on a I hard at salaried point, bit end-customer your an what employee our think who’s able we hourly a today does into are pandemic work probably go is predict to more an to stay crystal not working situation versus enough, home So who end-customer a again, that may which to I it’s have probably long demographic, really ball, a impact person Now, is to demographics a in if look

in and products, happy We to who our believe, way stays can premium products with of a that go time enjoy outside their families the their believe right now, that social We distancing those our products are end-customer use demand strong. outdoors. want and sort products, albeit very be people in

the that So resonates well, we given still circumstances. really current think

Lawrence Solow

Indeed.

hate And lastly, a powered just benefits, the get the of waiting got on you then, that’ll out capacity XXXX. you a terms I particularly And Georgia. you will, of the a I vehicles helps bit opportunities in also, early little catch tractor – thoughts just sort the and little in about ability on X? in in how off maybe benefit, trailer but truck Okay. if those that in of your to or up slowdown wings, call you side, calling a of spinning some side, commercial build know a of you in COVID on sort maybe to bit there the bigger opening then Any afford so terms

Mike Dennison

Yes.

which Georgia built We’re really happy getting about out in the we’re pace production. and into

think So opportunity win, the a point, great to migrate opportunity, associated call said, do But to a Georgia to gives pause with the business, production it for that’s We an high-volume facility. I in migrate you maybe activities other pandemic a won’t to us production as us. Larry. anything your

some we for ready months still a for believe about there advantage Georgia I getting and us. think XXXX, to the opportunity So over be next are that several which fantastic is as we can we of things take going think

Lawrence Solow

guys. I thanks. Right, it, appreciate

Operator

Our question with from question. comes Mike Swartz SunTrust. Please proceed your with next

Michael Swartz

guys. evening. Hey, Good

Mike Dennison

Mike. Hi,

Michael Swartz

out Yeah, of number around you’ve measures and results, a laid you preservation taken. guys you quarter couple a X ago cash and weeks preannounced cost-cutting of that

actions again of think some those those way benefit to of some highlighted the from about any annualized what there maybe is? You’ve tonight. Is

Mike Dennison

associated course. it helpful depends the facilities that’s was start Mike, and Yes. reduction Layoffs, of definitely cost furloughs question. pretty when about stated up. It measures, place, publicly we how are our tough really to back haven’t on though. production in correlated directly of good to specify those a to That’s we long furloughs, the think value one When with those layoffs.

for know, et And myself, team, cetera. team, our then, also, done pay-cuts executive management you we’ve as

safety really and offset incremental all with run, associated measures that. will So extra costs production like help. limited things They those

sure do the is And And, do to I have So make John, I for the number can haven’t a add… to year. other, if me, think on else put you we don’t it, anything about you to it. way want you think, the

John Blocher

No.

I think Yeah. it. you – got you think I

Mike Dennison

Yeah.

Michael Swartz

Okay.

best of it mean, merely think cost as you’re you’re is way the to headwinds guess some offsetting these about the from I to So, million temporary down reductions $XX well, took And just you of those facing. I so million CapEx $X some there.

Mike Dennison

Yeah, CapEx just – for CapEx is we’re $X on things $XX million, was right. That that with based weren’t moving million associated at. to was year to things the about out XXXX, where and currently necessary that XXXX

at to don’t So, spend. we every we we’re nickel we’re obviously, it right not And to now, if it. going spend spend looking need

of that we and this same situation, mentality went we’ll just through we’ve started mentality with the So continue as balance that’s that of kind into the it.

Michael Swartz

run rate mean, to just mean, there or of about second million And estimate regard faced outlined you be as $X.X quarter. I could provide can that on that the quarter, a of us? COVID, I think is for anything first basis? the to thumb Is costs the we you some in that way to a you attempt think rule to related what with there I a

John Blocher

as that of couple initial relative well there’s there weeks able direct then of difficult, Mike. because produce closures, not really cost of is those March. And of incremental overhead being the It’s to kind cost. with plant cost last is to unabsorbed there John, It’s kind

those also change. of some kind a things think number facilities, production estimate spend to we our difficult of some here going you be now. PVG begin we’re for again about really mean, to incremental it’s environment if I doing new ramp kind this in. to investing things relative So new of the we’re in in back operating up to can right And in as there’s factories

to today, it’s So really course, of difficult predict.

– it we’re say QX, were going think to from though. safe do that up it’s I in see pretty where we we

Mike Dennison

some factory One mention, continue. in mid-March sure going we shutdowns weren’t is California to into those specifically, got I note, how that Mike, would in too, long these we when of were that

initial If and in X-week a announcements And from you it that middle remember period of was were they down from believed of shutting the about counties the we time. probably talked a California, in governor different or minimum March X- then the for shutdown. those

And of sort on of go employees immediately even of just so what said, payroll kept safe. was employees home production we and and furloughing the all our did actually be instead we hourly

and all your furloughs to obviously, until wasn’t made potentially go to to we to to time that April in going do, April longer cover didn’t be at layoffs We’re on that moves that, do just and we some want costs had recognized going until and do. least X. of It that was that, we and – had but

did those costs So course. change

weren’t higher, were In had costs we workforce, those employees March, because entire literally even we though producing. of our production workforce on payroll,

time doesn’t if that’s shift like frame. apply in QX see So that the from QX in helpful. to That it QX you did QX, would

Michael Swartz

that, Thanks very Yeah. That’s helpful. guys. for

Operator

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

Craig Kennison

what’s attractive pandemic, the as optimistic. be trying the We’ve the reports in but like Thanks of well. I’m to outdoor anecdotes dealers my afternoon. the guess, taking a perspective? you’re for of during being this phase lifestyle market from bike going questions Good that on there I may Sounds in read are retail context. struggling also shutdown of understand, some

of trends, do. we sure better So believe I’m retail in than you guess, to not but I’m what I terms data have sure

Mike Dennison

there different That’s there. a question, points great And Craig. of data out lot a is what

with come of kind try to to together all a mix to them have perspective. you So up

backlog conversations. that we’ve with about some already Going products if into bikes will, our was was really book, QX, talked great for order – lot our our you that model associated was strong. of A in XXXX prior

So QX into going and were in set well we up QX. really

We year-on-year believe believe things we the their has we’re on the in those products reported associated know. probably business others. the had We as that some challenges that this just didn’t performed than We see Shimano mix better issues. of of space. and revenue, with and definitely do probably have some same parts you that’s with

that, of we is has that end As our – majority Europe bikes, U.S., strong. the in the within right sit and customer is America, which predominant sell both now where where we North demand remained

most and of they’re And in in a product. remain our dealers lot selling most operational cases states,

quite seems that positive. So

I and think, I’d know the be scenario. hesitant same perpetually to say what We QX yet. going like that, that’s to just QX don’t looks be

then see kind we we’re looks get that we We the – we we right From and QX further speak, of will the demand feel and seeing like. we’re to though, where market, past, done profile how – terms in into sit so like of as QX what now, market perform. up holds in to have have how QX as beating into we

Craig Kennison

Mike. that, bike dealers channel visibility open well that orders? to Do if have Curious for that those if it can through into channel because whether and are functioning some as be whether still stay-at-home of or is closed, just all dealer may you make you’re tough this time. the dealers Thanks of independent confident

Mike Dennison

bit the different is lot it with of parts We have, the in country. We situational. lot of and a know bike We of a dealers dealers. a bike work the

hiring bikes and of of situations for of those do while lots because they’re – couldn’t old service in them, are have their bikes. we where something to keep one very selling looking we positive I can’t bringing bikes to out for may however speak – they’re So people people They to be. every bikes service, of they’re examples

and have and able been American it this we well. of quite done and to open of remain the bike have kind shops, will for functional open what remain and a comment, the time tell, majority can is, bikes again, European/North from So

process of going of fierce, certain It I bike that understand been saying parts take severely pretty Spain, in sale Italy New think, Italy or clearly, say, where, or to by more have City, or caveat rocket impacted. that. in Spain certain a shutdown York course, much I’d those in to has be markets, let’s the probably to scientist situations is doesn’t

begin in one to as it’s premium New bike And markets, of mountain larger like of those our with. probably some not York, markets in

remained And of open. I the okay. or part, our again, lot So where a we think those markets of we’re products, the doing produce bike shops in for sell most have

Craig Kennison

Do well? the direct-to-consumer is demand some market that you to both aftermarket performing I business for bike Thanks. you is for in units. your and frame in you how not general service guess, able would the, need sports channel And event functioning how components aftermarket in trends power curious then Just the options market of aftermarket more the Are

Mike Dennison

give And in pieces. to Yeah. that you X I’ll

through On I referenced. the side, just those is our SSG aftermarket bike dealers

So and things those done to ride upgraded remained strong, bikes and people getting bikes. to then continued them. their serviced And their they and were

been that’s So fine.

you’ve we’ve seen from of vehicle but retail side, think what in those business their lot And down, from we’ve with their from business up. other online channels been strong our have is factor. consistent that’s that sell-through seen And I distributors and or has online powered the retailers product partners has markets. who notionally what been And large our On benefited and a a other presence. industries

those people believe products we So also would piece. though, important performance installers lot require on our to put that suggest, a that function actually online I and products vehicles. of high is an

that installers been or time requires work. have down, So an it where those to a are shut the do because installer cause part implication the a of that of does shut for time on in – aftermarket down still side, period markets an

Craig Kennison

Mike. That’s helpful. so much, Thanks

Mike Dennison

Craig. Thanks,

Operator

from comes Our King. next with CL Stember question. proceed question your Scott Please with

Scott Stember

evening. And taking thanks for my Good questions.

Mike Dennison

Scott. Hi,

Scott Stember

Difficulty] [Technical

Mike Dennison

– lost I we I’m Scott. we not don’t Scott, lost where you. know. sure what

Operator

live. line Scott, your is

You can speak.

Scott Stember

me? hear you Can

Mike Dennison

hear now. I you can

Scott Stember

Okay.

Yeah. the powered up Sorry lot bike about about side obviously, a that’s seems vehicles. of that. the It better holding business. than Talking like,

second in down they’re year-over-year well? the second you You quarter being other be expect in talked the as Would up about would of side powered the vehicles quarter. business that that the

Mike Dennison

we standpoint book the year stating I the in fluid, earlier Yeah. a change and in from I talked about right. that second of be If continues, from think things the want model better just trend order are though, to going quarter, that quarter. will pretty do careful, the SSG the into Again,

and that QX. and things the the QX So see try again, see want not half be to of cautious but and – not But guidance, we feel to the and how over we I can out I’m happening, QX order that what’s going book to back give let’s play you know, extent about as to understand course bike. good of

Scott Stember

guys enough. you markets variability your structure, you cost the us it could to the Okay. That’s remind cost just is it of how on up for fair And easy when structure? change? down the And flex and

John Blocher

John. This Yes. is

be cost costs side of our the to variable manufacturing structure, manufacturing the fixed. in than So more tend

material. things got labor things. sorts of like those You’ve and We’ve some direct got

tend they So to be than more fixed. variable

operating management Now move Down tend side, traveling obviously, in to direction. more little in and other just primarily. it things bit something have, like Various a people. you up to variable. spending, things that because about pivot a expenses that other expenses related those and think we expense, the we’re be of the direction have to primarily whenever expense it Obviously, cuts tend fixed we talked kind takes in a They’re those be time tightly. pretty impacted the little to that types and discretionary like some than expense. of variable, that people or kind now doing a manage expenses are of lot relative pay fixed make we But expense operating that, change to more in of

Mike Dennison

and note, thing which use we a powered labor almost business, the California, temporary impacted, add. labor. – is workforce, always too, full just to we had In vehicles well temp with we course, of One probably as did our time as I’ll most

more And in like a so for resource labor is us times temp variable this.

need. that on So up we down based to we were able flex and what

production of have So that your workforce always temporary a percentage helpful, is as labor. to

Scott Stember

right. covenants to so? you you again, or on guidance it. Thank do But guys. And the your get are. trying out us positive remain then sheet, over to I’m what balance just not lastly, remind of know the you. expect cash And quarter next I All Got – flow of

John Blocher

Yeah.

X.XX. in mentioned So that at And our net is covenant our our at leverage ratio came grows at at ratio on script X.X. about X.X, around I quarter the

it’s additional the quarter we If mind quarter gross I to have cash – balances I flow of liquidity. if more ratio X.X were in remember side, the leverage for that to than pulled keep that been at normal like near-term the important, the X.X. our at cash end on some in would we think kind of end

to things on ramp how for quickly will like is and challenging as This quarter this depend think quarter of we and continuing Mike us. there. a quarter A going be has – is Taiwan up produce said, to can kind this I do impacted with of production that, lot really not

position the in perspective, ability got kind bit from on right – have cash But in confident to – this goes. a cash flow. within we now, we little manage longer-term covenants. basis, QX. feel kind it’ll a cash to flow And be a I think cash We’ll about of we’ve think, think our feel long-term I maintain how our our see of positive our to and dependent our ability I confident I we’re on think pretty

Operator

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

Rafe Jadrosich

good question. taking Hi, It’s afternoon. Rafe. for my Thanks

Mike Dennison

Hi, Rafe.

Rafe Jadrosich

So you book you long Can bit like how visibility give the more lead how just mentioned and order from a you color much is little times have the book? strong. your order are

Mike Dennison

for of ready strong, year. our the products quarter. of the into because was sales a in of year QX, retail it on model XXXX depends going and a order Clearly, book balance produced was getting the it reflection Yeah, the lot

going a March So towards nice of real we that into into visibility April. the end had

that So was great.

You about quarter usually ahead. get a

saw So at the QX. of end QX we

the at fantastic of to of I year I QX. earlier, of You referenced want – really think the be Q&A QX, the the would bit we that kind QX of make sense? my see see still. QX for get with to that’s because Does of a half is skis, saying which is end the ahead of whole why And it’s fluid until end why the don’t back bikes, going too some I in year don’t

Rafe Jadrosich

the period. through really demand been has strong, then like the manufacturing shutdown retail even helpful. And Okay. That’s

whenever as everything the side? period Or reopens, demand could on shutdown you think there lost? think are do are happens, sales that be you other that So like do the pent-up from

Mike Dennison

Rafe, of about. I on business both, think you’re depending the there’s a the parts talking of little bit

one So I’ll that question didn’t cetera. business powered I you like demand, I’ll et be pent-up think there of to concerns to ask, part And that another you enough give vehicles your you, my is for OEs Ford, out especially of coming actually, get this. is we tell from make so GM, sure vehicles of in going our our

with So in to in down, more vehicles stay we or sell the sell longer the dealers shut get backlog we of need terms dealers. they through

But perishable if – with think in of early as some believe as And I I almost other pent-up be there because demand products. a the it’s of of those tell. think we demand. in or supply might fulfill that I it’s think, of a issue, associated not to that demand because So of parts the could issue you do business, too demand can’t terms the

back it’ll spend think to you hang go and as and money. I in as about out able there, people long get their to

Rafe Jadrosich

the some then like aftermarket highlighted the past, and important trade your side. think And product, for shows I showcases you’ve events on especially in as key racing

that lot there Or I to delayed for you do Like will can product move you market? is how around launches will year other canceled. adjust this those a that? probably the way any will of think think events be you business? reallocate impact or your Like XXXX

Mike Dennison

of on to in It’s and to events, the there’s Obviously, a and not the we’ve at quickly great it. were know, doing side vehicle One, by side, money you question. some that. big, the events powered a We’ve both lot reacted across America bike really it. We getting of parts as of having trucks, and a lot events elsewhere. very saved events trucks a Europe to staff and North couple

So that’s saving. obviously cost been a

supporting it and vehicle time, reach launches those sure that partners, how new make launches. amped product whether our up bike consumers our and to same or we’re be the around new marketing we’ve go-to-market At with launches powered new really

more pad a and So launch in channels as kind way in we’ve OEMs. a our just using products, partnership of go for events our tilted to that and different away digital direction from with doing new

for now, to, we But doing like than we’re XXXX doing think thing. those to think XXXX. I ways and back getting we differently we’re We’ll it’s get in it same hopefully So And of area. to that really events well do I used launches great. very with different working end and and the and temporary things in that that’s a started

Rafe Jadrosich

That’s thank you. Great, very helpful.

Operator

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

Jim Duffy

vehicles the Thanks. of couple side. to a Mike, Good on start guys. afternoon, I with wanted powered questions

of mentioned your the of vehicles the once behind possibility speak comment? increased that mix turns to of some Can indicators on. You you production

Mike Dennison

Increased vehicles mix our to of when on. production turns some

Jim Duffy

Yeah.

when I vehicle of manufacturing production featuring of mix said there increased think your platforms an OEMs that may your be think products. you with up, ramps – even you

Mike Dennison

yeah, but think – Yes. speak we I is referring do which bit is a when to My might to don’t I Well, do ramp back the can’t else, maybe. up. companies these I been I still, how question wrong, something perspective have

powered seen in and first, health clearly and thing tilting think, you’ve a vehicles big the I’ll to be winner for pickup That’s to back pickup towards light about talk the trucks. them, what and business are market, been faster. it’s I OEMs the that lot SUVs and going their brings a them

books ready. for we’re for and see, re-ramping already vehicles, a those seeing companies vehicles, that support to input we’re to order to we’re So those sure of from those make going us lot strong those those vehicles,

as believe to use to back those way us. health that benefits they’re and going So get to really good their about pretty feel we We that.

and think the see side-by-sides, on also go done. powered can like on I out do do doing spend outdoors money in have things or from versus their standpoint that vehicles, that a other they general they going can on just will strong as they it markets and as we otherwise vehicles things, might back turn things people vacations

So well that categories the we think serve. that benefits different us in as we

that a that or in money a they’ll trend side will whether go traditional well. benefit bike, extra holds bike Same the but may on but on again, it’s not on And little we as true true spend side, vacation, a mountain same an from bike cases, bit different, the people, the bike. those new holds e-bike take bit that a mountain really

Jim Duffy

on it the Got new it. of impacts expect impact timing strategies introductions? to relates vehicle OEMs, of And the pandemic of you then to as do any the the the

Mike Dennison

year, about a amount a good to think it’s their truck, powered challenge potentially, planned you think in units I that the vehicles, Potentially, like pickup really X produce those good, got say, were of a April It’s if time in constructed chains May, had drafted cases, but for question. ago. XXXX from let’s were to same pushed need of a ago. long still produce just They as to example. lot those They time long a Contracts an a vehicles. supply they

a So do? bit as get probably next model pushed, they year those the that does Jim. would yes, start traditionally future than later mean is think their answer I

completed get that, what think see later. way think I guess, the those will they about models I but we’ll as I the XXXX back So XXXX is ramp start then up, a vehicles, little bit

Jim Duffy

balance can on John, then for to please? vehicle us callout SCA the And business there? detail a sheet, of chassis you question you you more the deposits, about with mention can Okay. model with different speak notably What’s to on the help and the respect And receivables payables?

John Blocher

to capital going AR, be there’s Yes, side. detail to fairly the on filed. standpoint, they light more working we Sure. tend a inventory Q their in From be the that

AR of AP be think to similar and fairly our their kind I numbers. would historical

ahead ship a sheet out, balance go and a SCA amount on on they’ll bit us. work, dependent the those. chassis, that come way the the talked went to works can on come chassis, Tuscany. things they them bit. we vehicle the is that There’s for for chassis they of about then with the And our both in similar before itself. up to have from But little ship think I how our those of OEM how is we line, at off in that we’ve prepaid to like kind credit-line It’s a whenever they it’s come when the

of those in so where I of a of one It’s some that goes. of chassis SCA mind, say the too, also, always such where our, keep just we’ve prepaid as type us. It’s just we our charge that’s that pass-through for don’t entity, and chassis. thing Now of things a kind increase for in things well. would a of it’s the type of had is as larger Tuscany kind similar bigger

if So that helps you at all.

Jim Duffy

Thank you, it. appreciate Got I guys. it.

Mike Dennison

bet. You

Operator

question. Maroccia question from Alex next Our Berenberg. your with with proceed Please comes

Alex Maroccia

an of the the the evening, my Sports you Group without or Can guys. shift decline good idea taking give us OEM questions. growth that Hey, for in quarter? Thanks Specialty for

Mike Dennison

So, this on comment yeah. me year, And just the remarks, had last same I the business grew again. so let that In in prepared think quarter. we it XX% in

comp pretty tough the in So quarter. this was

So you shifts things, pandemic March talked prepared could and remarks was factor in that in. and X% And think the impact, on X%. about the to today then based we we just then

like. what So that would you can of kind look model

it shift Again, on model depends interesting, a changes. because and one really in bike it’s production a year bit

at to a quarter can that shifts changed really next. It It next. one million doesn’t it to just the the one bucks few from So year the easily from change quarter does be all. like

Alex Maroccia

is of on a bike, Got dirt out then what bit Can judge in Okay. of powered the the recovery end-market whether a recession That’s second give trends different, I and it. et a can so mix that know one non-auto your a it. helpful. And looks cetera. it’s it’s of a vehicles, like? coming side-by-side, you we just us sense

Mike Dennison

consumers have. what their kinds buy get kind lot partners companies, go-to-market have, even loans, options they in to or vehicles. ability they think power parked finance – our A if a and they and Non-auto of based about guess which kind it’s talked products, business I we like that powered way is you, so for sports, financing vehicles spaces in of function our things what those try vehicle recession are, to side-by-sides, recovery. I the of all those of snow-mobiles, those to automotive frame to strategies you of I Well, all to that’s just of bring would on

than I very in think or a recession. XXXX XXXX – it’s in than today different normal a scenario like

were recession-resistant back we those in I fairly days. think

In think I for sports quite or have power I our the did me, fact, you. I in XXXX in can’t quote I’d don’t so well. them front XXXX business of numbers But and

would in that house nice different is that go this than resurgence of recession those I out do even markets that go to we’ll though so, allowed a are and as get expect And see their something. people

Alex Maroccia

Thank stay you helpful. there. safe down Okay, very and

Mike Dennison

Alex. thanks, Yeah,

You too.

Operator

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

Ryan Sundby

Mike, ultimately bigger on for guess you one for a period I manufacturing OEM a my being Jim’s there. you hi, guess of questions time, thanks of with Yeah, I down you create could partners follow-up to taking with kind from these for the this just that of shut scratch and new an plans a question. opportunity opens back do your forced spec longer-term position this or business think step up maybe just some scratch down where maybe doors build to or plan of partners innovation a before kind to past? and new the sit win had to from hadn’t in

Mike Dennison

Ryan, carefully. let Yeah, answer that me question

the happening that’s production lot a their partners. engineering this on our about this been not from there team teams development partners we’ve So teams their facilities between time had with those of been had one new shutdown work is of And shutdown things OEM large a those interesting throughout of our and from period. product

a I yes, I’d there’s answering us with a of way opportunity to question, partners grow great answering our your business. our say, believe for opportunities in new OEM maybe not to So question, your with find

Of this go been event, downturn. for during tomorrow-type a course, it’s for a that’s to the long. us But roadmap work on those not this because great opportunity pretty is

Ryan Sundby

yourselves kind of kind through, X perspective And powered demand maybe like happened have of just help a and to through us what helpful. follow-up Got the understand of what can just in then or it. on quarter, That’s then weeks a the that? mid-March, on did the demand like you look just question, last vehicle

Mike Dennison

I almost it in any signals, your almost ship was saw literally, of elated you We fantastic we with And and of we pretty seeing production. into call the results. the and days And up Yeah, March, wake for quarter just demand shut Please can going Everything the remember beginning for of day, specifically, more of it were say, all don’t one year terms sorry, we wasn’t. customers factories. terms products. in the then were down great. our was and what you

middle that – end the stop March. much of brakes, apply of end everything of was the literally towards It

and drastic. hard was was the So it incredibly for team. it It was dramatic

production they hard a I job That’s was great for but through it a to to situation working did facilities it, to basically overnight. bring us an stop. incredibly try think

Ryan Sundby

for Got there. Thanks. Thanks the it. color

Mike Dennison

bet. You

Operator

to the At I turn back comments. closing like this time, for call to would over management

Mike Dennison

we’ll for you. your Stay nice thank and Thanks, Have we We talk out a soon. evening Thank safe operator. on your today’s participation questions FOX. you appreciate in interest call, and and there.

Operator

This concludes today’s teleconference.

have You this at great may time, disconnect your and evening. lines a

Fox Factory Holding (FOXF) 10 May 202020 Q1 Earnings call transcript