FOXF - Earnings call transcript Q2 2020 | Fox Factory Holding Corp.

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Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Fox Factory Holdings Corporation Second Quarter 2020 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. the to turn Haugen, host, now Counsel. General will conference your over David I you. Thank

begin. may You

David Haugen

Thank and Good XXXX you. afternoon, earnings quarter Factory's conference fiscal second call. welcome to Fox

Officer; went John Blocher, the have Time. Vice today X:XX Dennison, are available On also Finance, accessed out earnings Senior approximately Humphrey, now, for Eastern the Officer. Chief to Q&A. President call By Executive today Financial at Chief and will Mike which be of release, Scott should everyone

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

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

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

Mike Dennison

Thank join appreciate afternoon. time and you, call. the taking We everyone good David, for today's to us

second our our we as a will believe and forward. thank has both our results, of who prepared a Scott discuss I'd our years tremendous helped organization questions I our key Financial Chief take accomplishments, and also opportunity go direct asset record this excellence and discipline financial strong to like highlights our operational to business quarter recap be help I'd Humphrey Scott to forward. Before Officer. introduce I as new Blocher, tremendous I a to to John of contributions, his list look year, done along past will his John's during Scott at accomplishments long any has tireless interim propel for to work future John the CFO. eight his and have be remarks. during FOX, with forward after available job and our as like

the Turning quarter. now to

operating of profitability during defining achieving The near safety performance our employees Our ensure minimize term. and health families for in our potential very with the ahead any diversified business a second strength difficult against expectations an and revenue and environment quickly pandemic. executed to our our the of impacts quarter well portfolio U.S. fueled and At of incredibly we committed COVID-XX policies in actions capable our dynamic and onset the the and our the of due business team product backdrop unprecedented results, and responded pandemic, the to measures, their

continuing meet financial is customers. having impact current to social communities, and on environment are our and supply that to the teams our health, evaluate our valued regularly chain Our employees, our

the and OEM the orders faced varying degrees of that manufacturing PVG end-consumers. impacted durations and our across we partners stay-at-home quarter, During operations, US

While the remain situation facilities manufacturing all to of our continues US are fluid, operational.

very are the and facility meet at hard the levels is Our our safety increased employees our working team main In with to end tirelessly we from at ensure remain and for at contact products in continues authorities procedures markets. facilities. proper to Taiwan, all effectively, work run and government demand our to SSG measures

we product our provides the Specialty third optimism of us across Group's in general of Sports profitability for current order we expectations. for where as our sales which continued, our with the suspension were XXXX. OEM solid XXXX. Group illustrates the business from quarter of was This also million. aftermarket ahead We our the in year both anticipated depth fuel the helped Specialty second see benefited products half our into sales robust strength product than of has increased also We as Sports In the not platforms serve. book generated if category sales, In model well This our Sports up demand success we social and of outdoor element second in quarter new better and our distancing the a sports quarter. the growth $XXX.X results. second XX% channels, to of activities XXXX SSG quarter, aftermarket lift Specialty second of is about recreational with heading terms lineup and with the year trend increased, product Overall, this the this a pleased nine core in into momentum our of compared to

the quarter. our Group shipments down second product Powered Vehicles expected, were in As

directly in to the and for As customers. automotive we this the have previously to of do factories requirements our as same our shipments as large was Sports communicated, reduction shut our US well tied requirements Power OEM to

to a headwind to the throughout and back facilities of We US. have are performed the continues while our even production are significant thankful be well, that pandemic all

customers' however, challenges temporary addition, are supply to our associated recovered. are in from with shipments back COVID-XX those and without work, have and facilities not chains. factories improving their factories These factories In daily,

relationships products than manufacturer our with ever stronger Toyota a drive development a are key that high-performance trusted and of Ford, as we customers, OEM FCA, consumer automotive and Our partner are demand.

We in are thrilled our to about spec which XXXX wins these eager will year. platform and the wins, new debut coming share over

recently Our Behlmann and also new Tuscany SCA to am I Jeep strong, demand have and agreement a with we share FCA. happy signed remained

premium in Jeep. Rubicon [ph] dealer upfitted of first America. for Jeep The The Tuscany strong, remain sought-after upcoming deal through our the that provide for demand kind and and to truck North SCA and will We introductions us Gladiators product consumer continuing be through platforms Jeep hundreds our our relationships divisions. of opportunities its believe offerings, accelerate with and and provides sold compelling

adjustments that The Maverick XXXX our the that semi-active lineup In controlled their also with four-seat We RR for XXXX sensor vehicles X XX two-seat inputs, virtually vehicle's their real-time shock rebound Can-Am dunes. product providing Turbo are and the on XX XX compression products. electronically and adjust within smart two launches maximize the Maverick smart and based launched vehicles performance. dynamically shocks. have Sports Maverick rs suspension performance-tuned MAX some Power July, desert integrates in system RR These hero off-road exciting Turbo are rs X and

of remain new of our running our first footprint we and track up and expansion for phase in Georgia, on further is terms manufacturing In roll-out.

to demand traveling they we turning Specialty that are keeping Sports distanced. now what reminder, quarter would As and our our operations. operational for our optimizes our vehicle continue I is growing customer and supply like a products while to enjoyed friends minutes and to excellence. and second providing our inherently a and see home base facility further powered staying the physically color of we PVG customer is accelerate into the believe year. fourth significant to Consequently, as on activities our expect on chain to strengthen to this We half spend outdoor firmly this end few quarter. a Georgia families commitment It some less, by boost and footprint manufacturing delivers to closer

shutdowns, optimistic customers fundamentally own that We or our are us. behind either reasonably factory are our

the federal should our However, keep actions. everyone to different take industry, in be FOX, to else and us operations in need adjust will mind, states governments like required

the and our that two As we we is deliver including support the positioned and future best from assuming no well growth, performance-defining or as adverse In across social measures taking and environment for are any FOX customers progresses organization, environment products. it business are in environment month necessary significant safety we our external believe continue supply to move there as we our consumers, disruptions current forward, chain, unrest. manage issues operating summary, increased to other last the the additional for has to or macroeconomic

sustainable existing as build turn generate for to Scott. over and financial and our the long-term I'll working to are We that, confident upon growth our remain shareholders. our accomplishments value call objectives in And with we

Scott Humphrey

on costs, of period. by margin which in point of in of second increase increase million our Mike. supply Mike, the earnings and of family we this related million, by our offset continued expenses XX.X% at due by financial $XXX.X $XX.X quarter the second in to forward was from basis of rest year to same XX XXXX, review Sales afternoon, operating March Thanks, quarter OEM to here the XX production FOX. to as in our XXXX. amortization my XX% XX.X% and I'll COVID-XX a higher of of of $XX.X factory The of customers and of quarter expenses. the chain XX.X% performance-defining related to million, other increased a margin this year, SCA demand XXXX various it's related $X.X in as year. quarter full a be points or everyone. of compared these from driven in inclusion The Powered the success of year be the operating FOX at decrease decrease also in Specialty expense I'm sales XXXX, look offset percentage second primarily operating second of basis to XX% to from reflected a compared channel our high sales of offset were a acquisition-related million costs shutdowns FOX's quarter prior sales million results. of in sales the and expenses acquired Vehicles channels. call growth on $XXX.X of and impacts SCA, to experienced gross quarter gross products. partially Non-GAAP the SCA certain the pandemic. talented quarter Group first portfolio a a today in compensation quarter XX.X% $X.X were XXXX second in to costs dollar Sales increase prior basis John great sales the part The increase been the in second million, Sports to by of working Good Gross were fiscal period. Since effect compared due was XX.X% and was The of of year. primarily company of excited costs now of efficiencies, joining primarily by production last It's second the Total the million product margin of reductions both June was aftermarket year, acquisition, CFO. or to XXXX the XX.X% partially joining the you XX.X%. the Non-GAAP pleasure to better in partially the of expenses shutdowns to operating team compared OEM for X.X% incremental with mix the of COVID-XX. versus in and last in including improved period a due sales Group $X.X

quarter to transaction to lower quarter to second XX%, quarter million the the long-range lines fiscal Adjusted our or tax The attributable to was the $XX.X impact our results. of $XX.X second to was income of non-deductible in slightly on by was sales pandemic, the compared of in the XXXX a well margin our last diluted due million impact second year. higher the the basis, due approximately On year XX.X%. million XXXX a rate This of share of of to quarter in $X.XX related SCA our net as was is the second the of EBITDA income Non-GAAP some quarter primarily XX% of partially the positive in $XX.X diluted of SCA. earnings compared acquisition XXXX. compared For business XXXX, quarter compared offset million per period. than $X.XX GAAP or million our of $XX.X per EBITDA prior $XX.X in related second rate was guidance is net legacy share XX.X% in for effective $X.X quarter adjusted last to XXXX to second year. million, $X.XX previous to FOX per million XXXX. to margin share diluted from to XX.X% adjusted quarter lower the COVID-XX of decrease the second incremental for was Adjusted costs $XX.X EBITDA as same $X.XX of Non-GAAP in primarily compared costs

on sheet. Now focusing our balance

pro was million million. $XX.X million ratio compared compared current shipment, As of payable Prepaids a approximately times. assets SCA, July to changes $XX.X our million. addition leverage $XX.X forma we quarter million receivable, pandemic seasonality the compared million. finally, ended the accounts And accounts million Accounts typical debt $XXX.X second to impacts X.X in $XX.X basis from And outstanding inventory retention COVID-XX was were other incentives and due to Xrd, $XXX.X primarily with and and was to million. cycles. The Xrd, to SCA-related of net reflect million to on compared $XX.X million. payable to The and cash in Accounts compared $XXX.X deposits was $XX escrow. the $XX.X current was contingent prepaids and XXXX, collection January Inventory hand vehicle of million. total other compared including the on held on increase chassis XXXX, receivable was assets $XXX and payment in items, company's

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

million, net we credit borrowing on our from long-term a the economic strategic financial and million in business through execute this As in we proactively facility have we under to by we have $XXX financial proceeds measure a of to cash enhance now not flexibility, our to the the to and believe approximately than raised X.XX also follow-on more June time our strength offering. million share liquidity $XXX continue capacity created the but hand pandemic, support our only on objectives. of uncertainty Between

over in do turn domestically that, to internationally Mike. response at due we the market call to evolving rapidly quarterly the conditions, to intend time. Lastly, I With guidance this and now to not COVID-XX provide like pandemic, back to would

Mike Dennison

XXXX, half to FOX support of our XXXX closing, believe with Scott. bike is enthusiasts that of Vehicle well businesses their and for you, active. Thank In Powered products our the diversified positioned a second into and lives safe, and heading we make enjoyable base to growing use customer

like as of Our second and continue of our We advantages partners will would combined I products. when the the the strength forward. competitive valued with questions. now the to FOX competencies in market OEM network, be people, the the the agile performance-defining of Operator? for to move resilience we call open operating demonstrate our brand these our strength quarter power dynamics ride believe of core results our

Operator

Instructions] Solow first Thank time, from will question Securities. we with question-and-answer CJS a [Operator session. Larry is be Our this you. conducting At

Lawrence Solow

congratulations afternoon a Factory. welcome, on to Scott, and Fox and quarter, Good good

Scott Humphrey

Thanks.

Lawrence Solow

And a couple just of quickies.

them? and growth. on how customer some of Or in of a sustainability of your And obviously, is also Specialty for strong you just get the sort is Sports Just category? it And And you coming I'm -- nine increased kind is -- to is COVID number. maybe, just on view sort obviously a new well very clearly, -- platforms. bikes? the trying what the side, the the guys changing to Mike, resurgence Can demand, or more are positioned core -- John, that just of picture you the speak with that for into a just of that

Mike Dennison

to Thanks, Larry. Yes. you. Good from hear

the demand word business, in seeing past, renaissance industry a the the we're So bike across and in increased and bit all in is it experiencing. the definitely general. we're across a bike product used mix of that renaissance I've

is changing. demographic I think the

higher bikes into the also have the entrants seeing just against there that is and benefiting lower-level bikes demand are may prior. you're also the people that that that think much available, into bikes looking at we're I premium-level been new pushes so fact but sport from

benefit So people entrants closer they're of money both that the vacation, for that outdoors. we're the enjoy getting from they wanting they using roads -- go have and non-bikes to of the their and new if demographics spent from out home buy And to some get -- seeing just would outside. dirt and would they on were normally they on get

future. really the this sustain out of see So does believe question the becomes, demographic into I future? will sustainability into long-term increased that the some you And

see year across and now, to we're a I the but the think absolutely years increased two have see to wait people. from that like of spectrum broader what we looks or happy demand

Lawrence Solow

Absolutely. And Powered gears then the on Vehicle side. switching

and believe, total kind I is were not it have of OEMs up, were because -- opening in a should it down access should now much of an I demand. mostly challenge of of number doesn't a Vehicle Powered QX? a approximate? and you organic it's sales, function XX%. to inability a vehicle And think function like Do get declines, function And an actually or some nice with dealers a an that rebound or closed, mostly these you just the -- seem a really -- places

Mike Dennison

Yes.

of in book get that demand order it that for time-frame. We QX, really, shutdown inhibited really wasn't and ability factories the customers have which was a in buy Larry. vehicles It gets function to QX -- customer out and a the to strong shutdown issue, is point your a consumers

demand, not and to grew. we to prepared anything, shutdown a really the change remarks, -- in as we that demand customer specifically customer in really if the So attribute

quarter organic in inorganic. SCA versus the million. about $XX Just to around was clarify your question

from take of kind can that. you So

Lawrence Solow

Yes…

Mike Dennison

Yes.

okay. -- we Good. So

Lawrence Solow

gross more SCA up just the just and that the last discuss a you on function And there or bit. down. is -- of impacting or was constraints gross know maybe operating little a I the then you then, you? actually, is still that? mix just at -- surprisingly, the is has Okay. and a bit margin, just or efficiencies, capacity -- of question Is EBITDA little overall Thanks. Can of was margin margin

Mike Dennison

of answer really the channel Yes. benefit simple and is The mix and it's SCA.

to that's factories to of So running our answer in quarter is, to that shut efficiently negative simple the we The benefit. more were had complex and less costs that the attributed answer. course, factories in down

are of improvements some California see However, starting up. to the is Georgia in we operations and coming course,

little So terms California bit are a the running downside, in efficiencies of it's not running factories getting less by mix of of then of the Georgia. issues in or a at and capacity, of benefit just healthier who offset course, on caused and

Lawrence Solow

going expect is been would a and running, become sort you that actually up But now over-time? forward, headwind, Georgia a tailwind and can that's of

Mike Dennison

we've before, XXXX think a as headwind of Georgia. Overtime, we to convert Larry, tailwind. But that probably talked absolutely as we to for we a that expect And sure. function kind complete of into that's transition

Lawrence Solow

the Great. a for Excellent. Thanks Thanks color. lot.

Operator

Swartz next Mike Truist from with is Securities. Our question

Michael Swartz

evening Good guys.

the positive end touch probably something bike own have going in looks companies very and about you're or seeing, from markets backlog? in Just the Maybe XXXX? terms reported Power a like retail demand. it's people perspective whether your that from on that things the into and public this are that's in customers there's strength hearing the hearing you're maybe Sports. -- end of Is and backlogs talk some Obviously, markets, particularly and results

Mike Dennison

it incremental into and It's you're and Yes. specifically, talk and in about to pretty we meet distributors, Mike, it's sport. quarter. remarks, to and the But on can we're demand, as the our challenge QX, of significant. our bikes, pretty in consistent QX the come we're apart probably across sure that making that prepared all have OEM I that across And board, working and the our that seeing -- hard the new seeing demand probably is the partners. bigger just we dealers, fulfill piece is in demand from by that mentioned that's continues which demand

QX. into continues That good. that's think we So

what or too I tell into of will and to think very holidays that sell-through. get of think it's And in once deliver all watching kind passed we're seeing the QX what early happens. I you aware terms of

what reading markets and yes, it's that as fulfill and customers strength end continue positive I on, into that with to the you're see and working to said too. we're we But and that and think reports wait to think to, see. in before, the will extent, of we'll QX the we're And same XXXX. that QX. hard demand, Sports, demand demand that working the I to On have I Power

our differently the So is, we this Sports Power of spend than think to and use again, the customer field businesses, would people have and and that bike benefiting out go done both probably those their backdrop are in past. pushing in they from money products

that's we're seeing. So what

think what it's to too early about that in means I talk XXXX.

to I and economically just got on, see lots think what the have far half of of happens over. that's a from we macroeconomics you've and back pandemic year, including this the things of going

need plays we -- at see impact have into and the back So, it XXXX to into out how XXXX. to relative the that might

Michael Swartz

That's great Thank similar you, color. maybe lines. And Mike.

all impacts near-term constraints, talk of or talk this, supply Powered could that bit? that Just can little various globe the businesses? your constraints Obviously, either COVID, other. in have any you and a with Maybe you about your spans shipping of about and bike chain that supply kind have you chain a the the the Vehicle

Mike Dennison

Yes. Thanks, Mike.

supply chain to bit the responsive we're side, broader It's that demand. just bike to a make than working increased challenge the a hard box. On of

think we've chain shipped. where place, good built got controls in a well, of our very part one needs bike that and we're to While managing get I supply

in dealers. folks the to bikes to really back onto struggling try industry get that are racks the the think some And bike seeing so I you're of where in

us as on it impacting have others, impact some if it's possibly can it while actually so significantly impacts others, And us indirectly. not

respond it's our and basis in understand I probably I as happening think issue. less with bigger customers that's day-by-day to and -- bigger improving. think a recognize of partners, It's on people an what's But prettier coming it. and in

boutique challenge maybe just purchasing like supplier the components of you're If do you a of guys have or bikes, it's a bigger because don't the more bigger us. leverage that

So looking cognizant impact not a at QX. has dramatic again, we're watching, we're for that's but that what something on it's something and of very it's -- we're

making terms pretty it's of We've some US-based chain, healthy, sure that other been we've got sit wouldn't supply through different worse been supply the a chains states issue We're in doesn't of to of In and so actually. support able Powered increased book it. to respond now more we is the to And from which increased a pandemic operate where pretty major the good. be to chain support But well us factories that supply or the order QX today, needs so demand. for working I Vehicles, in our and get far in we in. expect assuming

Michael Swartz

lot. a Thanks

Operator

is question Scott King. Stember with next Our from CL

Scott Stember

evening for taking thanks Good and my questions.

Mike Dennison

Hi, Scott.

Scott Stember

obviously, Within markets, they're the doing. know Powered Vehicles, what we end of all

Ford issues the faster quarters talk guess, specifically I three -- couple any big and for the you about other running? could and getting guess, others I to, and limit you and you things others, than than back to coming on notably expecting chassis next And are, their Can products. up how in of SCA? are the the production back on Raptor for availability Some and stronger of some

Mike Dennison

pushing acquire chassis We those shut the which Scott, three first, demand. come the question second those from that to beyond don't too, within the take FOX real were to meet [indiscernible] that's I'll hard, of right? of those SCA kind conversation, shutdown, because and they trucks back. include in get down factories, those Tuscany entities is they when So big both Yes.

sure work need to units we the make need support we we the to demand. so And to get hard that

we prepared remarks of we've units the in benefits a will that vehicles with of gap fresh the that of one the other supply Ford actually help mentioned I and support. QX and brand So created QX Jeep hundreds of by any really and we us models in is chassis that cover new this had, had

something and are we about again, we that we that it, the get, feel it's very So okay on need. we all focused but chassis ensuring

have line a have that's of mentioned bit they earlier, down their shut down production, they not part impact as a COVID just their elegant or a cases a a stop/start production factory as scenario think line. to stuttered of terms And to manufacture, or shut I In like way production, imagine. a at bit least you of or an is can where I their

dealing of we that, we're how with running material demands. on. in kind be the I to Again, their of with supportive how and they're that But something to meet okay. I flex -- daily work implications operations, So of they're and them it's we adjust we'll think don't something changes those and unless have monitor and

So well. automotive think other about as to thing use the chains Mexico supply the big from is manufacturers

in And efficiency. similar be to those chains have some operating of supply struggled come of the pandemic back and responsive to at kind

Scott Stember

Tuscany, model that and product guys. the when revenues SCA talk maybe start little the will will And be it. that and just Gladiator generating maybe through a about talk Got bit, for you about that

Mike Dennison

Yes.

start So in generating QX. in revenues QX. We'll that's

vehicles something know, while. a those on So win. Jeep us, It's a as great so historically, it's pretty to would kind But a it it's because been one-off for was it's probably the and it upfit, it send you dealer. to dealer it did immediate. We're scenario. now. back we of working really a send upfit we've We when working on a would And

it Now [indiscernible] models. from create directly, allows more that we're Jeep us volume, to much do getting

market a specific customer and see can already on base. new websites really our those models You to

actually very upfit it. excited for a upfitting I we're So effective think Jeep is vehicle a about purpose.

So we us. think this is a positive long-term on for basis a

Scott Stember

have. I it. again. Got Thanks, all That's

Mike Dennison

Scott. Thanks,

Operator

with Rafe Jadrosich from comes Merrill question next of Bank America Our Lynch.

Rafe Jadrosich

questions. going forward. Can Thanks And the it's the forward? And you're more bit kind of of strategy and still for priorities the my taking remind about timing? I us your equity afternoon. little Rafe. for cash good the of Hi, M&A the Guys, speak and going priority, raise kind behind you what is the looking for rationale maybe a mean top

Mike Dennison

raise, available equity and too. back such, to I'll that put of speak the Rafe, us becoming was to jump the position. markets in, and of take offensive can did an it and to us Yes, really John kind When action for this a function we on

the about So really, of think acquisition to middle good for to fit of having come about companies from pandemic an the and us it out from when equity, at we turn ability we challenge we look fit as and run. to kind that the are offense criteria a we perspective business the think of defense in

a position for liquidity offense, sheet first balance So a on but and strong beyond. should gives and that ability us it this XXXX pandemic to strong into having allows have continue foremost, does

a it's So thoughts? of a inorganic our any other And bit cash managing Scott, our and offense little fundamentally, of sheet. use growth then growth, and bit But of organic is defense. balance little

Scott Humphrey

I about, just just with hope. amendment if the than in longer we to strong extends on raise conjunction going either to of think say, this equity is defense or pandemic our liquidity position either was of agreement for the adds that credit also on Yes, play out to I talking what Mike to kind offense go

Rafe Jadrosich

end you market are like, about -- side, Good. you you've see bike -- Thank like, like, the And for just segments about? OEM other of some commented talked then side the that vehicle seeing, on similar Sports. the off-road on little that you demand Power a uptick auto you're in still you've demand momentum in a in the the what on you. seeing talk bit Can

Mike Dennison

relationships the perspective business. sector premium that as automotive seeing OEM an and We're meaning trucks, our of upfitting OEM the more and well as in significant we're demand absolutely. in from both business, seeing expensive Yes, our

of any categories. types or desire So of in it seen both demand crosses those kind And for haven't those that of slowdown products. over that we

be strong to continues into that QX. think we So

I the demand that QX now, bigger issue at kind the happens think part support enough XXXX. I late very that in have to of Again, getting supply right what But of we'll to demand is look into think remains business demand. versus strong. in the the

Rafe Jadrosich

expect even mix cost? expected had that drive kind Was just we was Like, forward forward? gains than about think higher you the from final do then going quarter or Obviously, how gross continue better Great. And that a of margin despite incremental in benefit to the we question expenses. better me. one-time going efficiency the to though some should second

Scott Humphrey

Rafe, Scott. is Yes. this

earlier, I the and some benefit from quarter that. we got look at think Mike We've mentioned mix will channel. in

more half we quarter of roughly up basis down a the one-time than say, aftermarket business on and with, production shut And had because it's let's so so OEMs yes, for more a the facility ended their normally would. we percentage

Rafe Jadrosich

Okay. Thank Got it. you.

Operator

Jim next with Stifel. Duffy question from comes Our

Jim Duffy

you. Good Thank guys. afternoon

Mike Dennison

Hi, Jim.

Jim Duffy

of channel You you to year. How the I you the demand to the current end in about of to characterize would accelerate in deficiency that demand relates when to expect the want the inventory channel Do rate for the of back rates? an have demand? right it inventories. channel expect you stands as of in rate Vehicles to the Powered continues relative context with catch-up to might now as estimate relative talk production half market OEM actually it inventories

Mike Dennison

model Yes, probably depends -- on change. on it their Jim, the it and it's year OEM, depends

in really about model year two know, things. shift. think would as the of do you past, One, into they that really shutdown a the right the I function a talked with So, it's we've was pandemic when associated yes, as

So it model and to out were they with continue nuances or dealers, go year to thought ahead new a back caused about vehicles current them going how model lot switch into year. on the they of getting

them going course, What We're They've I premium as of set the supply to would we now, it just category. dynamic can. challenging now their in for demand as I of we're plan. for beyond fast that. us moved kind say say and just So forecast. producing us. forecast right all right would They their they've given very those and trails is created a

our think, lagging you're going that Obviously, to order But see doing months. forecast in right that work supply sits the course, hard I strong support of And North you're are of that now. American But I we demand to have the to they the market demand. fulfill that to we're incredibly going to see for continue. because what So several books next think that. can demand,

Jim Duffy

Difficulty] [Technical that? anything like

Mike Dennison

Yes. that. Jim, about sorry

we You -- I there. couldn't I that if operator better than don't did, broke caught up the know but

Jim Duffy

you I again. ask Difficulty]. can [Technical

Mike Dennison

-- didn't didn't I Jim, I that. catch

Jim Duffy

drop off in. someone else I'll and jump Okay. let

Mike Dennison

Jim. Thanks, Okay.

Sorry. We'll you later. catch

Operator

from Berenberg. comes question Alex next Our with Maroccia

Alex Maroccia

the guys. or your OEMs questions. you about taking updates to Have lack from good afternoon any my got current auto automotive delays for shows demand Hi, vehicle due coming potential the quarters? Thanks of in

Mike Dennison

just I today was the SEMA word where word to autos we canceled. got -- today actually words got shows just Some that

So obviously, that's is November. everybody that and those But things. to well a in happens this kind big auto virtual of launches event show responding kinds world pretty of new of all

the that data opening So terms and lack product just it's new events haven't headwind more associated in of really of any of launches, with suggest we function had factories. they've I a haven't their any -- seen

Alex Maroccia

separately, Tuscany them? Can quarter, or early And the if that the two experienced QX discuss OEM in factory uplift provide the how evolved will for got think SCA and Okay, then, early addition of subsidiaries, shutdown, reopening they online least. only you an these at you. to quarter sales had many in you dealers for closures factory

Mike Dennison

We dealers operational sales these consistent online to support was Yes. our teams and were both the of QX, throughout who function demand which a pretty saw marketing dealers. a that of digital online did

us quarter. for up in and QX. it So us not well both we of useful of happened strong present help acquisition FOX, SCA and was sure quite really capability into we spent SCA and I'm bit quarter to and back. time the the a the digital that actually, it go and in prepare And And through to the sure integration businesses energy making set will really for those finish

for digital for is drive I and an our something will that find to vehicles or think end online in-person upfitting future. us consumers space sales through those to for an in tie dealers, sales growth consumers into that go capability us either the the

this where one that like at phenomenal throughout approach responsive of the in things great learn teams we QX. situations So be to to new you working it's had a the have did of way and just you in it. And success

Alex Maroccia

XX-Q helpful. that? comment at one you just Tuscany. just I that that's in noticed stake all at purchased one. on And XX% right, last you then Can that remaining the All

Mike Dennison

to of We catch. SCA do was the that the next great Yes, to years. transaction, With did the option that do because the over go course several thought business of into a back-end very built have the synergies lot the through FOX and really of front-end of business we integration created and Tuscany in completion that can we that. There's had a market. right upfitting of it We time the that SCA. with the be nice integration

of done to for kind to we're and more on. up we're strategic have us, So on that that get just about sure glad making was to move cleaning can completed glad so activities it was and it figuring that we that and

Alex Maroccia

All everything. great. right, a Thanks Well, I lot. appreciate

Operator

[Operator William Instructions] is Our Blair. from question next with Ryan Sundby

Ryan Sundby

your you little progress this feels assume of guys, SSG has in start-off of looked like Hi for necessarily what premium that a as new up FOX maybe riders kind in would taking years. participants large a way chain through earlier. their I high-performance value your period over like and maybe PVG? of influx typical Yes. my but thanks they about that can what a into high most Because don't categories, such maybe historically touched But you questions. a rider categories, Mike, on talk coming work

Mike Dennison

and and consumer make, going in you additional a suggest a add that consumer affluent color. Ryan. I'm to any been we costly, fairly really that typical that fairly The Yes. our are would to Scott historically. let I'm and different as John jump has I going way know, attack products

wherewithal you has purchase So range be them. the not the to at they're need the somebody who so low and financial able to end of

expand go the demographic versus e-bike start One, hills a rides. I areas. can are also their do sport go ability to benefit climb. are a I same and or to small money wouldn't experiencing older something migration on that think who And like couldn't to longer to and else. can do younger myself, I keep new into be from bike in allowed I younger the that bit the for seen with have on different on money and riders meaning really you mount mountain guys. out a get who the a traditional the sport spending I the out seeing we able and two you're can spend that who way bike, whole climb up --

the younger that on seeing mountain out folks opportunity be maybe ends, both So of back the it both folks the and they getting into to it. we're I space now thought think are in biking were

that So both ends. we see on

to it upfitted and think of you in terms ways. buyer. In Sports about from a and truck off-road buying have a our One, dealer two you're truck to that $XXX,XXX, pretty $XX,XXX an you're business, truck is Power affluent if

way ran the shocks of the able be lift you're or college fairly that way. a F-XXX off able otherwise of new in kits in we're truck in go that's go able $XXX,XXX a you're attract a economical whole just own inexpensive buy said, side terms our upfit truck. seeing Silverado, aftermarket you're to You're those folks that that XXXX buying brands affluent. XXXX vehicle wouldn't And from buy and probably to and older to Truck fairly audience our bit out probably of to upfit your Sport a there. little shocks your fairly on get driveway, have not and in -- a where of And you whether Fox That business

it's pretty So broad. yes,

really before. I we into think board hadn't migration we're a demographics nice seeing the across seen

Ryan Sundby

Georgia. talk Just in then, a didn't the Have Maybe people facility love at hire lot Mike, information the with Got gone? new been just the out talk little production you you you more ramp COVID-XX about there. today? what of a bit able how has it. you there? about level are And would Can to

Mike Dennison

Yes. up. Georgia is actually manufacturing well. it track the lines going transitions really We're both of bringing and in on

is like get and in had was on it the that to actually excited excited us like capabilities effective really run the ago, now job in and has went we're the that the drive-up we we're a going using fair really great We a could really to down did so the it I the more So we basis. factory to traffic shut people, what up very that of bring it We way pandemic. well very to weeks success proud a hire FOX power new did. help things actually to just freeway about, backed anodizing creative that, long-term been We which of couple terms point, to was handle. had to had of some that, early all your people because team. we to it. about company and a really due people of the they But and for things brand

So well. just going it about continues and it, excited really Georgia [ph]; is track so along on-track. We're it's to

Ryan Sundby

to you. Thank Thanks. hear. Good

Operator

We follow-up have a from Stifel. Duffy with Jim question

Jim Duffy

on another the us wondering I'm try. follow drop I I'll of giving production? QX, order us some figure promise dynamic sense or can another that I have stand give for relative issues. where terms a if Thanks a you depleted. dealer that, do you for to up Yes. wanted to being question the guess And I'd in there's book-to-bill of of book like then for have to something sort related that. inventories I

Mike Dennison

Yes, Jim.

Power you out there Sports was saw part and in while, what business business, So think, QX to I dynamics are the back of happening order in understand an to -- people bike ramp really the of of a kind in forecast that took slow we book. our a our the market. part especially It for know our

it in as into much out we as of QX saw it QX. coming see didn't QX we So

I'd those are going into order say strong QX. pretty books So

call in depleted QX book fulfill. it, are we you that a I the of QX that referred that very business, go in to for us you early probably -- inventory significant now has kind But sell-through, parts what now, think, which large that's much depletion a order So seeing so has of our And sell-through and to QX. think of created I call book-to-bill. sell I function

Jim Duffy

And still it Mike, [indiscernible]. also inventory is the

Mike Dennison

know again. don't we you lost I just happened. Jim, what

moved. You

Operator

It sounds him we've gentlemen. lost again, like

Mike Dennison

Yes.

Operator

question-and-answer would to to like I remarks. the end closing Mike Dennison the call back We of for turn have the reached session.

Mike Dennison

and nice evening. your healthy, appreciate for participation We stay thank a you today's everyone. FOX. With And questions in on safe interest and call. have and Thanks, your that,

Operator

conference. concludes This today's you. Thank

You may at disconnect time. your lines this

Fox Factory Holding (FOXF) 11 Aug 202020 Q2 Earnings call transcript