Earnings call transcript Q4 2022

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Operator

Good afternoon, ladies and gentlemen and thank you for standing by. Welcome to Fox Factory Holding Corporation’s Fourth Quarter and Full Year 2022 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. I’d now like to turn the conference over to Vivek Bhakuni, Senior Director of Investor Relations and Business Development. Thank you, sir.

begin. may You

Vivek Bhakuni

and afternoon and Good am to Factory’s Executive Fox today Officer Chief Thank Treasurer. and year and XXXX quarter Officer Chief our full Mike I Humphrey, earnings fourth our by Financial you. Dennison, welcome Scott conference joined call.

Mike business closing by Scott remarks Mike. updates. First, will and quarter followed the will the financial year outlook, provide full results Then review and then from

open the call up questions. your then for will We

which have By today to access went now, release, X:XX out approximately earnings Time. should or X:XX everyone at the Eastern

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

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

these better our and these performance that remarks release, useful has are release, of their non-GAAP addition, GAAP Reconciliations measures evaluate on metrics will are to non-GAAP press website. posted our prepared basis. directly comparable earnings been appropriate today’s ongoing in reflect as we measures an on business we financial which refer most to In to within also financial today’s the business our of financial our measures in included where believe

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

Mike Dennison

you, afternoon. taking for year record both join pleased today’s We good and Vi another Thank time delivered to revenue and to everyone I that the appreciate earnings. call. we us announce am for

our and We as are opportunities and relationships and they between challenges separation creating more navigating propelled OEMs significant This our strategy. team’s by dedication meaningful throughout of XXXX. the is competition, us have well thanks enthusiasts the capitalize with our differentiation as execution while on to continued as we tenacity

primarily our consistent of Our brand two is diversified to strong due performance and factors: our of portfolio. power sustainability the achieved the

the delivered Specialty PVG QX. less-than-expected highest of in as results These in quarter and the ever. the number inception in since number as facility’s highest Gainesville, in We for XXXX results Group shocks our persisted, in this improvement the even facility. fourth QX, our be Besides company’s but challenges what to more level, at and entered for made nimble highest bottom the the and we and top inflationary quarter history. delivered agile, was our execute ability the macroeconomic best quarterly the the both As we gratifying seasonality of well shocks impressive our supported line performance continued in Georgia the late team’s Sports

increase quarter to million, sales year. of XX.X% to Consequently, last an same of the $XXX.X I report am fourth pleased compared period

the versus fourth in $X.XX an quarter, share increase diluted XX.X% same in of the $X.XX we per of reported For quarter-over-quarter. period XXXX, earnings

the increase diluted prior of We XX.X% also $X.XX reported versus non-GAAP year. an adjusted earnings of share over per $X.XX,

year-on-year revenue team of sights billion strength set our XXXX long-term through I $X revenue these us give revenue vision XX% proud us turbulent more ambitious more we and in by economic our to of on growth that to $X.X collective the annual as continue the even These of to resilience am continue year able with now in times. our delivering carry prove are and We beginning to confidence goals. finished over results therefore, billion. than we are for

band high-performance As offerings diversifies a accessories, this LLC. tires race method marketing This definitive base. week, will create upfitted an SUV across announced outside for acquisition our synergistic for Wheel Wheel sports and integration to Custom customer agreement Custom especially high-performance ecosystem and and space and and we House enthusiast performance This to lift significant power truck, earlier and truck branded premier us our the acquisition including broadens of integrated enable our and signed provide acquire vertical product House, the designing, our known kit, businesses. is our opportunities, to performance-offered for wheels. continue products distributing wheels,

Custom together brands products to Our of take Wheel to we and I team robust amongst platform step building is group aftermarket competition. ability build in to the the a applications weave the in the am excited these iconic House next to Fox business. best our welcome unique product

closer lines. us look at the take product a Let

revenue of Specialty our of last as decline we with did XXXX. for in year. to most I substantially we of X.X% million, decline had Group, X delivered Starting compared we Sports business time the run than last peers. same our proud and bike to The $XXX.X am say over a quarterly QX revenue We’ve industry had of a better was quarter a years incredible quarter-over-quarter an

the mentioned had business. expecting As previous return were seasonality our call, of the in we in I

more everyone’s mind bike QX seasonality the business up hold questions However, performance expect anticipated than on to how is top which XXXX. impact was we of in had in know of QX the stronger the one be I will the significant. we moves

the by me saying seasonality believe is end Clearly, bloat finally be chain our of the the performance and of of supply and similar protected a flow our within has of strength positive from demand, and us to returned, the sheet the our balance confidence partners. start demand. sentiment and function even corresponding likely Let and volatility volatility the largest challenges team customer challenges. has that within than industry aftermarket in even greater cash generally continues the I though challenges are OEM

In bikes to issues these our a out there path shake get necessary will for between strong excess of a second and the Having equilibrium persistent and be is world semi-finished supply in provide lot of quarters back said few crucial. to of the couple bike a the inventory, next and next and opinion, half. the that, demand how quarters time unpredictability will currently paving

since as the Specialty to team to high Our lastly, is a could down surprise growth And market. we presents to today, return the in Merchant we with Best that believe anywhere between COVID. digits Group incredible Taiwan It government is to and and keeping teens team the chance it the our just long-term before done Taiwan pulse to be in full it has is I years what of Award. year plus high single a sit had on the And finally Sports finger X no the Golden the expectations. returns Taiwan Place last title team Work

We quarterly our to quarter versus record $XXX.X Vehicles a growth year, led Powered by revenue performance last for our lines. Group. OE quarter another in and channel same sales the revenue product remarkable Shifting QX revenue a marked million, of delivered driven outfitted Powered Vehicles quarter in fourth by strong XX.X% our Group, consecutive

with provided XXXX our of outfitting the into heading are the continued facility Gainesville by product momentum, and our great thanks foundation to lines. resilience We

in of As a flows chassis on pressure production with stabilize, drive enable prepaid plan OE stockpiling cash production plans will well less automotive it our balance. primarily updating, as predictable more as alleviate which

in our to to a In expect addition, see inventory easing with times as supply of lead more environment. chain, signs reduction some in a normal positive we return

the or of and strong with of in growth XX% And our and our chain well-diversified the and our given XXXX industry confident portfolio our to power the by has Group be we supply deliver I expectation an another to challenges, revenue performed that strong believe pleased XXXX the Powered XXXX. tailwinds, drivers above-mentioned I Vehicle strength teams. results of am macroeconomic execution brand, year will feel highlight Considering see reflect the how our more. expansionary performance

with on we ongoing growth focus conservative investing generates choosing in and above we we likely returns steadfastly and believe top well As to customer-focused into well hiring, we’re stronger but the the economic will capital. XXXX, Thus, Therefore, persist XXXX line stability. remain cost is and intensify. plan our sustainable a will are challenges profitable Fox bottom return for business while opportunities of that long-term growth that head spending we to the eventual position in experienced of in committed critical to macroeconomic could

be that We to all people, drive our and incredible invest and and retention the of technology customer will innovation team. cannot in done without continue this loyalty

of our member impossible I and help thank challenge day. family each single the every us every So Fox that

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

Scott Humphrey

Mike. financial results over afternoon, review quarter XXXX fourth million begin fourth year in by our XXXX. and quarter an I of the sales full everyone. increase the million, Sales were then Good of quarter our in Thanks guidance. $XXX.X versus XX.X% of will $XXX.X going and fourth of

product a increase performance due OEM our sales quarter compared to lines primarily last in fourth in Our Powered strong year, XX.X% upfitting Vehicles Group, our increased channels. PVG the quarter in to delivered same in and demand the

in demand basis, bike a sales delivered year same upfitting our in in SSG is XX.X%. quarter to return business, business. sales our driven fourth period decrease increased the to the of by from a SSG’s in in strong last primarily PVG XXXX, due Group, were year, $X.XXX.X OEM a increased performance increase of to lines seasonality billion OEM Moving This full $X.XXX.X and our channels. compared On full Specialty billion X.X% the product in year sales an jump demand, Sports primarily versus to

quarter was of year. in from the the a XX% Fox in the basis in gross increase same Factory’s XX.X% period point fourth prior XX margin XXXX,

margin basis, to inflation. margin the increased adjusted points both overhead strong efficiencies For gross non-GAAP our XX XX.X% XXXX, gross QX in XXXX. decrease lines. points to increased and increases XX% On and and non-GAAP an of gross primarily also by margin basis fourth Gainesville adjusted The in and and driven factory XX.X% product margin costs, were primarily gross in decreased were XXXX and annual by facility increase versus basis gross in were each performance The margin of margins materials due driven which gross the XX our higher respectively. non-GAAP in of margin QX in our by adjusted quarter non-GAAP to adjusted upfitting gross

primarily of of XXXX. planned transition our due year. in in or million the higher sales shutdown first the quarter Watsonville, fourth and expenses year dollar of half compared of quarter benefits, XX.X% facility-related resulted the operating higher the facility of in California operating $XX.X fiscal costs. Total the of and was head to of to completion expenses were and in in in $XX.X XX.X% fourth those XXXX production costs insurance million increase last or higher of employee terms lines sales QX and Additionally, in XXXX count The inefficiencies commission

at to of XXXX prior expenses expenses operating points Looking a non-GAAP year. of fourth to operating the the XX.X% quarter same in percentage sales, by in period basis XX our in as non-GAAP decreased compared the XX.X%

Focusing XXXX expenses of quarter on the $X.X increased and operating of fourth quarter approximately marketing sales million expenses more higher primarily commissions. fourth in compared due detail, to to XXXX, in the

of approximately costs XXXX fourth primarily Research product future million. the support to higher quarter innovation. due of fourth quarter expenses fourth General fourth XXXX, administrative the of to of to and by costs and $X.X to count to due $X.X increased compared and head million increased investments and million compared $X.X the development benefit-related personnel growth XXXX the in quarter quarter employee of approximately XXXX in

or the of full On of basis, XX.X% million $XXX.X sales million points. decrease of basis in a to year, compared or operating were a year sales XX.X% $XXX.X XX expenses prior

year XXXX. non-GAAP $XXX.X as of $XXX.X in expenses from million sales of XX% sales of and in prior million Our sales percent XX% versus operating flat and were XXXX going to the a period,

benefit-related costs $X On year due million, compared of of count increased million. to a and head primarily by the $X.X basis, full to of million commissions costs marketing-related and $X.X prior sales higher million year, approximately higher $XX.X spend and employee marketing

revenue, of percent a year. and prior by increased marketing of points versus in the As full XX the sales spend year basis XXXX the

by investments support innovation. head due increased for spend dollar product year full and as count year growth development and compared to prior million the $X.X XXXX the to to approximately future Research

prior revenue, year. of spend decreased in development percent research the XXXX points a and basis XX As versus by however,

is prior Lastly, general in as by by the year. percent XXXX $XX.X and in the facility-related compensation. million. of insurance by offset costs administrative year was and increase dollars of and The lower and spend partially costs basis year, million to prior year XXXX increases These compared lower due spend million XX higher as benefit-related dollar fiscal versus increased but primarily of full in were points $XX.X employee a to head higher revenue count $XX.X acquisition-related

the estimated full in year company’s tax effective decrease was For early approximately full in was and previously rate of XX.X% than fourth guidance The which our tax to tax respectively. foreign adopted, rate our of XXXX, ability was XX%. rate This company X.X% year to November resulted the effective quarter regulations the and due that lower proposed primarily in tax credits. U.S. XXXX use certain the XXXX

per share On diluted share the $X.XX share million tax per a diluted to $X.XX the to XXXX diluted basis, prior a by compared was in share or earnings $X.XX were fourth $XX million diluted in basis, income or period. positively $XXX.X per a net $XXX.X $X.XX of to income GAAP same in quarter QX lower-than-expected $XX.X year or net the share prior due million was On rate. or year compared per diluted approximately year. impacted full $X.XX million per

Full $XX.X adjusted fourth to quarter non-GAAP of share approximately million earnings per $XX adjusted in or fourth net XX.X% of the $X.XX quarter per year. in We of quarter quarter diluted XXXX same due year of income fourth million Non-GAAP had tax the positive $XX.X of to XXXX. to share last the impact in approximately lower-than-expected increase diluted in million fourth the delivered rate. an earnings the compared XXXX, of compared $X.XX was

net $XXX.X year million, or was $XX.X adjusted million compared period. in increase million non-GAAP basis, $XXX.X income an to year approximately full a of the On XX.X% prior

law in period. These $X.XX tax prior in include realized earnings delivered also tax We due per XXXX year the for of diluted non-GAAP $X.XX $X.XX compared full in adjusted results to share year to benefits approximately XXXX changes. nonrecurring

XXX compared of in Adjusted EBITDA increased million XXXX quarter quarter margin On to for in quarter adjusted increase fourth efficiency cost to primarily the The XX.X% XX.X% due in in by of basis offset EBITDA $XX.X quarter the increased $XXX.X in our inflationary million versus to fourth to $XX.X XXXX. year. by compared Gainesville XX.X% pressures. of to same XXXX a by the margin increased by the Adjusted fourth million adjusted the to XXXX increased the full plant, basis, in of points fourth year. last EBITDA quarter is prior EBITDA year XX.X%

decreased year by period. basis However, prior XX.X% the the points adjusted EBITDA to margin XX versus

Now focusing our on sheet. balance

ended other For which hand to to fourth XXXX, compared receivable million. compared ended assets, on $XXX.X million Prepaid compared million quarter, the $XXX.X December Accounts which XX, million accounts million December XXXX, was of $XXX on $XXX.X ended million. $XXX.X $XXX.X compared compared our payable million. to to Inventory compared to cash on XXXX million million we year, $XXX.X XX, $XXX.X with to was and current $XXX was million. $XXX.X and was full

to in delayed of growth payable we to the uncertainty. a as long including the of the meet timing in of and levels receivable stock as primarily time had and that to of payments. at growth natural been items safety of end business in increase of lower and in year-end demand as we half stock changes as vendor safety secured the assets higher factors, The chain lead anticipated reflect decrease is worked to chassis prepaid year the The mitigate due other supply XXXX. primarily inventory of accounts The several due is through supply accounts well receipt first

the reflecting of year million compared as of expenditures capital for to increased Our the of and XXXX, XX, equipment million net XXXX, to $XXX $XXX.X December year. at property, fiscal $XX.X end plant million

million, that tax by primarily $XX.X regulations increased assets development require finalized research capitalization tax recently the to due of expenses. deferred and Our

Now turning to guidance.

non-GAAP of quarter diluted first the range $X.XX expect million to of and For adjusted the $XXX range XXXX, the to earnings $XXX of we sales share per in in million $X.XX.

$X.X of billion the $X.XX Custom $X.XX. Wheel of year fiscal of range the the share in the for billion account expects doesn’t sales adjusted current $X.XX the the in guidance non-GAAP note XXXX, range earnings House impact Please and per to to For the transaction. diluted company

We expect XXXX our takes guidance updated to account this into provide earnings call. QX that in

tax in tax be rate our For year to XX% the full guidance, to XXXX range expect XX%. our of we

actually CapEx efforts reconciliation. expect the line of outlook the due for difficulty necessary on in we’re be X% cannot our XXXX as sales. provide to predicting to without of to of also I’d to long-term guidance guidance also We note unreasonable elements provided that with providing X% and GAAP EPS like be to such not it

possibility XXXX recession to as The of global Finally, begin a the uncertainty. our as year. all pressures looks be we and inflationary another of attention know, year macro we lingering has

expansion the we being bike said, us business, team I inventory focused turns to initiatives some full That faith journey goals. we agility our as margin to deliver have in continue our higher our For key towards XXXX. in the XXXX help are results solid stability on in of to

be we as continue quality like join the family. to Fox more and acquisitive our acquisition House look names addition, multiples stabilize, Wheel to In will for Custom

percentage about along as Powered we in in remain first half momentum Specialty the the into our mix feel of sales. positive the driven our with As throughout in Vehicles anticipated the our going XXXX, outlook Sports normalization may year, our mix of Group revenue we for year, cautious OEM by Group higher

incremental our quarter we each As evolves, plan our the for updates regarding of expectations environment to understanding global provide XXXX. business

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

Mike Dennison

Scott. Thanks,

team of sheer perseverance, incredibly execution. XXXX and commitment has in proud their our through are the way results We delivered stellar

focus on that we model the I resilient As us, of with product products portfolio, will and base world-class best-in-class delivering Fox’s and our team, head delivering our We same of challenges us into continue time, expectations. we discipline support strong momentum confident relentless enable strong believe XXXX, enthusiasts will to continue our customer financial at but in on operating performance-driven multidimensional of capitalize to ahead balance our sheet. and diversified we shareholder am acknowledge our the ever-growing to

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

Operator

Instructions] sir. And from you, Swartz Thank with first Michael come [Operator Securities. will question Truist our

Your line open. is

Michael Swartz

guys. guidance, flat down Hey, doing start EBITDA you’re it math slightly just the right, you’re Good to the to margins looks if maybe year-over-year. evening. like to I think guiding with Maybe

facility out think about of XXXX and discussed savings and lot for the a I Georgia before talked year had come synergies we the through. being of a to

So channel mix that’s Is is? Is the maybe of customer kind the it mix offset walk it or what investment? through negatives?

Scott Humphrey

Mike, Yes. channel biggest our we’re mix the obstacle of PVG, in come majority to our XX% kind slower is his talk that growth, weakness Hi, from remarks, thank Yes, quarters vast or any is of about talking you. about as automotive side. on in the SSG Mike mentioned expected we OEM of all plus prepared And customers.

even we’re offset of having getting base we’re that be from seeing efficiencies going is just we so though the our shift customer And overcome it’s tough the there, by and that makeup shift are XXXX. mix mix a that to benefit for Gainesville to and being

Michael Swartz

maybe over that’s months just at little? walk teens for talking high to, the your a X business. singles temporary you’re to that I then growth you the past XXXX, or about maybe least guess, change what’s down us November, X guys for Maybe changed down through business outlook longer-term backed back in around off And SSG for Okay, helpful. algorithm the of kind now

Mike Dennison

Mike, Yes, is Mike. this

than things. was. it QX. of comments I One, couple so that in mentioned be that more And without really expected a think seasonality QX, QX in actually we my I seasonal into earlier, pushed So the to

our inventory witnessed they to half early – went gave bigger are some were seasonality a in in and of at more customers the really like QX. And least. there that and tilt QX think the you’re challenges And and now play the with bikes stuck So kind seeing in QX channel. having with us I Taiwan over of I year, concern in

I over unfolding of put it what be done. – think to we in almost we our as And guide, real-time a So that again, basis, and want we’ve which happening, we’re quarters, together three tunnel. the kind and what’s a couple we’re we’re near very back that we about thoughtful into – see be see is I light pretty half the or will of But we until below take better. two conservative think itself that to care expecting also

Michael Swartz

Okay.

capital chain? Just glut not clarify, is to the the completed about talking retail supply have inventory and you’re It’s that inventory. throughout working just

Mike Dennison

Exactly. Yes, you correct.

Michael Swartz

you. thank Okay,

Operator

you. Thank

CJS Our come question Larry will from with Securities. Solow next

Your is line open.

Larry Solow

Thanks, Great. guys, the question. taking

to think to kind in just or on for Just assume even year, said Mike, drop you worse trying building Just not out much the of the of stand are there? are that back-end occur? that that the year digit clarify the – than high QX even back you figure I the QX to teens will and single Does hopefully, that recovery loaded. in we but half where high

Mike Dennison

question. good Larry, Yes,

think I QX that QX. see the majority reduction in of you and

Larry Solow

Okay.

too. that’s to So lot drive going inefficiencies a of

getting powered improvement whatever mid-shift So the high from margin on a probably lose going you’re in to the then and vehicle that level, you’re side?

Mike Dennison

much into workforce a structured to read action you Larry, they quickly. variable already taken too adjust Yes, that were to would but is a Taiwan very of some very I because earlier. extent, and that We’ve caution to certain

headwinds issue about. but So because talked not we a a some have mix as of the Scott it’s reduced will revenue,

Larry Solow

holding years are know just last in that – I How start the the in you some so mentioned, is market, several driver growth. OEM that looking up? to for guys for has – obviously, particular, acquisition of Most market at coming that people on that. which plus – And is growth concerned How that side. that is PBG, and just of for upfitting market, from the FCA Powered outlook that a is helped market for your XX% and like Vehicles that real Is the will you the Right. XXXX slow? itself growth, that been

Mike Dennison

well. gone It’s pretty up

last seen bit inventories have longer. a We little

structures that a in growing been change of business actually business up But XXXX and supply We as add little more has has well. days gone bit. dealers. as dealership that see and so nimble a So adjust to

is taking the we there more gas method warehouse foot with space. can up that not we’re customer as our we acquisition our there do the in even So

that about business. applications excited super and entire we’re aftermarket So XXXX

Larry Solow

closer, Okay. of And XXXX I thing, time contract barring shouldn’t that but it as the not too you’re know obviously. recession feels And if getting cover, it like you mentioned, give is SSG point it recovers, type a sounds multiyear like, – pretty hopefully, revenue you’re side on been target. your the side comfortable still certainly of couple and of you’ve the to like is sounds which sort that on a Is years within margin of back fair? targets a that XX% or target, getting

Mike Dennison

Yes.

You said it well.

I and but QX $X think and XXX significant objectives to in year. on team line still we’re a us XXXX. confident XXXX and there offset Obviously, that Scott I kind are improvement affect plans change, And in kind of very still think very going actions top the in EBITDA and short-term of XXX in have we to XXXX, the some in that we billion in there, realize we’re of is the mix confident yes, and to by that were issues mix the basis Gainesville the expectation even place basis the point the XX%. helping improvement to in so us get

Larry Solow

color. Okay, great. Thanks, I appreciate guys. all the

Operator

you. Thank

Our Duffy from question Stifel. come next with Jim will

open. line Your is

Jim Duffy

some of OEMs. that dimension and Maybe you. mix might contributing Good Vehicle play from quarter? how Few you. by that perhaps on out contribution you’re questions to factors the how just how plays expecting I us across the flows assumptions Group and to to that strong influence guys. strength wanted and start get afternoon, the the in the speak to for OEM guidance Thank Power year, help

Scott Humphrey

question, great Jim. It’s Yes.

So coming deemed product guess, in use capacity the OEM supply OEM launches, years, term. up, launches, around the I couple we’re technical last and pretty That’s of chain, now.

see the continued see that a where the the from in and linear stronger, fairly are was strength the we I demand OEMs that QX going starting And entire OEMs you think automotive year. throughout pull QX. to So in into

that like up it the the problem from the issues chain in on a supply But little bit from bulk are I a they get necessarily not standpoint you think or the can see half, or resolved. back pick other issue. demand

out pushing As the even to those we be support resolved, demand. OEMs get other to product will more for

year, to So the strong if results. other better I fairly get back all think going some of could half, can issues in be get the it’s linear they

Jim Duffy

maybe for from with aftermarket business, And great. then spoke expectations Sport business Powersports you and then Truck continued on updating the touch including you’re Okay, to strength seeing what USA? the

Mike Dennison

be strong. continues Powersports to Yes.

in backlog. still We’re

expect of to be We backlog. out

a was very players in what that caught in curve, what’s customers so we It in XXXX you’re little QX but current year. still that were reports back a more for but so Jim. There growing with kind demand a DRP, obviously, with up those will feel strong in leading off as will growth with at comfortable we QX. We and fast sometime think know well, bit. strong. to our lot of that I Powersports looking normal very kind We of It of by space. is those products you’re level happening the we that’s expect throughout for to seeing come

acquisition. truck I and our Truck think a not Sport warehouse and for sport great advantage the year fitting taking be this is going to business custom outside between of vans

therapy, have ways go shock anywhere combined from the market to more new going to acquisitions will a product, warehouse on customs benefit our We’re to recent transaction. even

is to call business applications that So aftermarket we I or a think year. for be all this deal about will of that, and lot kind businesses those talking a we going this be good what

Jim Duffy

Great.

ask I the you business. on wanted Wheel House. get Custom about I don’t to recognize Lastly,

and product for ability how of that scale is different I’m it press lot saw your a reliable suggest you their to supplier to to of yourself. business avenues seems can a don’t a probably aspects in you to level? business. number ahead get just curious want far that release, for the higher quickly of demand. method too But channels, your ramp It them about a You seemed distribution there wheels get to of different the

Mike Dennison

question. great Yes,

So think actually that transacted we mentioned after we something of date this will there do that earlier and get that for lot integration, the opportunity think gets is a we closed. is as of deal I and

talking we starting My be earnings They perspective that mainly chain, places. manufacturer. They to use in the it’s the on a going to some are supply so about And lot the business as we’re China, their next did manufacturers, integrated. pretty call contract other and use Thailand not scalable. in in

rest. to the business So do will call we place van absolutely and and truck end But our that work going and wheels provide on by, more truck in outside we go it, the extra we’re the business those of put sport to this year, some that. through capacity think

our it will rest impact business. So have an on of this the year

we the how can sure transaction Just exactly closed. get until make that we not defined yet

Jim Duffy

Understood. Thank so much. you

Mike Dennison

Jim. Thanks,

Operator

Thank you.

Our Anna Jefferies. next question Glaessgen come with will from

Your open. line is

Anna Glaessgen

afternoon. question. Good Thanks taking my Great. for

I to year. evolution any touch a of brought First, year, start-up are the margins in in costs? ramp in margin you’re on when I for new specked trends, you the on listing subsequent mean want each example, first auto considerations

to you the in So layering this trends past next for model example, have lot a year of there? anything consider over and year, new the

Mike Dennison

people the a of getting new That’s ramped good of kind to the What you automotive that’s question, product you the build inefficiency Anna. willing see up line of launch is and in product. a see the

levels. some have quality usually guys You lower

probably very we coming launches, it’s going X the feel after like product you’re rework on mature product months off as product X doing it. line. we’re to So the we the Really, on launched in

helping we the And bring with we efficiencies XXXX made. we Gainesville launched in the that in core in get products maturity of and So production as a mode now lines, kind those that’s also of the improvement are in us lot ‘XX. that

Anna Glaessgen

X escalator the any any, that, on is that? building step there built any within years? Raptor with are OEMs, into then there And the going of sort is for change the contract Is there

Mike Dennison

of have cost – any reduction don’t OEMs Well, typically with kind requirements expectation contracts in. our and most

So a general into of those one any contract. we as ours of specifics is about efficiency note, to general don’t it, That that a get gains way get from. thinking we benefit are

Anna Glaessgen

spending was bit Great. that to you feel guys one being conservative and and you of good That’s then about a that it in you that have especially COVID? at into read particularly your super hiring. where the said And helpful. tight, and comments, labor Gainesville, current fair it pretty more Is say over little

Mike Dennison

Yes.

as is where finding just the seeing throughout a people we story, Gainesville in we that be two. that of the Taiwan year to pretty we’re think comments people to that kind of workforce this kind quarter in is for reflection us. to first work going in fairly the continue side going force grow adding pretty, labor our and and adjusting And come good having In right seasonality of luck I We’re consistently mentioned or we’re what and other my to of significantly. the

Anna Glaessgen

Thanks. great. Okay,

Operator

Thank you.

Alex with America. Our Bank next will question come from of Perry

is line Your open.

Alex Perry

It’s range wide to Hi, a follow-up just of terms pretty SSG the I in more. a bit guidance. wanted on

better imply bloat on could gets chain maybe range just on SSG us sort seeing color market Does just of the supply some the the you the end give high end range? upside the what of color So that downside some assuming could better it or of or is demand? in the to guide? drive you’re Maybe sort

Mike Dennison

up. growth of Yes. kind Good which clean question. current itself speed It’s in really the inventory the about

happens much that better see it range. in if majority So the and QX in you

it in range. see in QX, it’s the much be you going worse to If happen

got I really as actually it’s than give about we’ve clunky a through systems just demand. partners, that are So again, as out think comments, in to big the lot current And levels that companies for. inventory trying much chains. It’s there demand a much it’s in credit their supply big said people is of inventory some not positive I chew of, more not and

Alex Perry

improvement, the So then takes business, margin, OEM That’s channel to can mix us you increased the you right about to just freight the like Is that on seems in, from can that? way puts headwinds all are gross down to be year-over-year the really a remind like it presumably there? circling gross helpful. back basis. just going tailwinds. margins And think and you But Gainesville have still, some

Scott Humphrey

think have a But work I mitigate the against. to the to going Alex, that going efficiencies will in and is shift Gainesville. be Yes, to to us do so, for our shift part absolutely mix big that mix in of best we’re we’re it

see new offset we’re can especially on to as with some of do, so around things said, and And gates, doing guide that. the conservative aftermarket Mike acquisition new going our kind the as to what out in we of our offerings come we

Alex Perry

helpful. forward. going Perfect. Best That’s luck of really

Scott Humphrey

Thanks, Alex.

Operator

will come Craig next from our And Instructions] [Operator Baird. Kennison with question

Your line is open.

Craig Kennison

question. good Thanks afternoon. taking for Hey, my

I but already, about lot to M&A a addressed wanted the You’ve ask environment.

your trying I for valuations of this disciplined a Custom think and to some that normalize at stay dormant deal patient deals we sign valuation. of way as waiting to conversations? and you’ve rekindle come look on kind Should to those been begun Wheel have could you maybe

Mike Dennison

are space, our line more should Good and be. the and we Craig. historical some expectations absolutely. opportunities powered they what see Yes, question, in with multiples vehicle good the In

supply gotten good. we of in So acquisitions could that in as some some just importantly, for but have the world the as even valuations don’t to been that challenges opportunity those be evaluation And with have do with the really last space, more have think SSG good chain SSG an take they very and as wanting the we’ve year. that’s that grow year rich in crazy this us companies we to would maybe some

think great sheet. and got we So opportunities, it actually a we’ve creates some balance

to going use go we’re it. So

Craig Kennison

just, then maybe source of a on you or capital maybe And comment going a working of year, guess, might you CapEx helpful. That’s forward as that help cash maybe fund on drain of some and these I follow-up, cash a deals? maybe as next less could

Mike Dennison

Yes.

range. we’re CapEx, think in X% expecting the I to X% something

well On XXXX we spent will have time the place us through revenue which this take in year, there. probably energy have our pretty what and high on really lot we a expectations of investing for and end, now,

of specifically. about. the at course, can future, speak in some regions looking a are you ran that’s additional but And not lower-cost then, in going We working Scott, capital, to manufacturing for CapEx XXXX, be

Scott Humphrey

Yes.

that quarters capital I some pay seen flow reduction. on chassis made working think lot and with two generation the we’ve off good strides you’ve of over a reducing out inventory last cash of

I off go even inventory think a for accumulated of down little potentially that or keep us that and grow be inventory little the of and trying as we this a continuation then to flat going some a of we’ve work maybe year, it’s to bit bit.

And that first over last the of continue so hoping this we’ve quarters through and got some good to the half of working year. stories couple capital

Craig Kennison

Thank Great. you.

Operator

queue. time, the Thank And Instructions] no at in have you. [Operator questions this further we

like to any remarks. call additional closing the or Mike would for over I back to So turn Dennison

Mike Dennison

the have, I I Q&A should that bike One period taking And that the the time comment really a by the incredibly Chelsea. one for things when in prior and is the we’ve the call. business lot biking I appreciate remains in over e-bike in demand, That about change e-bikes. about probably Thanks, innovations think and the business, caused happening demographic the talked we didn’t which today’s – the make the strong. bike strength of in of quarters

inventory they well, business in that’s are we very think through a bullish this us would and going come we as be So on still back as e-bike that. as of to to growth. of we side the help big challenge e-bike the get factor kind

news that is about there bike how good some the the well So commentary innovation think they in as space. on around and I’d the say and that’s e-bike all around

Thank With the that, evening. you. forward a call talking we will to have soon. good and Look everybody to end

Operator

fourth the Fox call. this does year Factory and XXXX earnings Holding Corporation’s conclude quarter gentlemen, and Ladies full

day. You have disconnect may line, your a great and

Fox Factory Holding (FOXF) 23 Feb 232022 Q4 Earnings call transcript