Earnings call transcript Q2 2023

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Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Fox Factory Holding Corporation’s Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded.

turn Director over Business of to Vivek your Development. like Senior Bhakuni, Investor now the to conference host, I’d Relations and Thank you, sir.

begin. may You

Vivek Bhakuni

second Chief call. Thank XXXX Chief by Executive Good afternoon, Dennis welcome and our Fox you. Schemm, Treasurer. and our and Mike Dennison, earnings Officer am I Factory’s conference Officer; joined Financial today to quarter

Dennis outlook, First, Mike Mike. then quarterly the followed financial closing the will provide will business results review updates, from by then remarks and

up for call questions. will the We then your open

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

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

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

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

margin, company’s financial believe and has adjusted earnings in net today’s performance GAAP to gross as to that adjusted trends. measures our remarks on gross press of measures operating to diluted In useful been evaluate non-GAAP the certain Reconciliations included earnings share, expenses, financial EBITDA allow release, per addition, margin, profit, income, operating also within business, adjusted core website. comparable our adjusted we adjusted these adjusted evaluate adjusted will refer including most where our and EBITDA appropriate financial are and which measures are and today’s investors in directly their non-GAAP release, we posted metrics to better understand these prepared

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

Mike Dennison

you, Dennis highlights, V. in up will questions. call. joining Thank XXXX prepared and will will afternoon, our After activity. results, our earnings us call the I Good second balance remarks, and we discuss for Today, business then additional you outlook. operating open sheet strategy, our and quarter everyone, financial details thank for for discuss our

in values. more M&A with financial our help growth strategic I financial opportunity It as organizational Dennis’ introduce a experience wealth Perhaps well our operational will new Dennis Financial discuss Schemm us importantly, operating a journey. Officer. and has transformation strategy leadership FOX’S align planning, highlights, Chief this and Dennis discipline driving traits core excellence. take accelerate of Before to to I’d and in through track like key strong our record and

FOX communication spirit Having fits I His our have excited time facilities, how culture to can operating and winning already him last Dennis of many organization. are two leadership our his yet warm spent months, on competitive we including over visiting with and see energized team. the the has at the

softness in sales exceed margin adjusted net adjusted quarter display the in Vehicles us and our deliver Sports despite growth EBITDA sales North The our Group, organic Group on our or EBITDA our on is Powered expectations growth gains to coupled Aftermarket and second Strong Group. strength efficiency results. Applications PVG and continued in enabled of strategy with ongoing and facilities inorganic diversification on and to the the American Specialty full AAG

XX% Sales their demand PVG in inventory. SSG. in XX% offsetting PVG is The effectively for to to soft increase in respectively, SSG OEM decline through generation and continues due and the up and solutions. as our XX% we AAG strong the work continue channel dealers were introduce products next distributors for as to be

on on addition, Custom In of strength development focus drive Group realigned from as Aftermarket product PVG performance and Wheel into strong and further Applications grew our development. and AAG House end also operating customer from drive in our Vehicles the customers recently Group business the acquisition. vehicle and align our company’s Powered innovation strong we to diversification product lines to additional demand The our continued strategy, capitalize with

pace This address development. the of better product innovation customer realignment strategies, will and optimize accelerate accelerate needs, go-to-market

as off-road capabilities. this For leader to sports, customers, solutions enhances engagement focus AAG and realignment to on in to PVG’s and example, and market innovation deliver suspension packages our innovates around a power performance customer market superior speed while

year’s alone, products of races, the Australia. total and in last in quarter overall Felipe XXX, three off-road this achieved in Baja launched San annual the and field wins XXX, XX bank new toughest tax podium we surpassing In the including the out the

Turning earnings. our to

not gross company-wide the adjusted the strong in margins are SSG sales. exceeding absorbing We while XX% decrease

particular, our our In Our leverage and drive to AAG the footprint Gainesville American driven PVG. through continues success manufacturing initiatives. North is of improvement primarily our by operating Facility continuous significant optimization across

PVG double-digit supply AAG in constraints improvements seeing year. of the XX% the material on were absorbing eradicated. potential half trends in across the decline which remain strong SSG, achieved chain while are We second both earnings Overall, the positive and customers business. PVG strong EBITDA as of of margins the demonstrates the in We also and AAG our

channel SSG, inventory. to works through we see as continue In softness the

we expect rate softness As a near of as more trends that normal strength growth said return abate eventually product prior the e-bike growth calls, have the as in well we into future. to in expansion our to

with recovering in second the Based New before we market SSG fourth expect quarter slightly on begin OEMs our models. latest the customer down from quarter Year be as orders, seeding the to the

be AAG our of our in to in we’re groups, billion reaffirming the lower end strength elongation to expect but at billion the SSG the year PVG and range the recovery. of full we guide $X.XX of Given given revenue, the $X.X

We continue end strategy expand developing markets. by leveraging advance will brands organic and to products to into new our new growth our

remain In steadfast commitment in addition, our we efficiencies. supply our initiatives to will continuous improvement and operations advancing chain by

importantly, we targets strategy. and as flows Just the diversification of cash and acquisition evaluate our various balance our sheet will growth will leverage to further strong our that strength

conclude, the brands, and our To our Thanks customer performance. diversification, and of of challenges us, front same pleased bottom the the power at product loyalty. our with line the in top acknowledge but very time are temporary we to

new new history no As has markets a the challenges, manufacturing optimization. Fox our be matter or products, always has found grow, proven, the at amazing to it through way team

that, the turn with to And over Dennis. call I'll

Dennis Schemm

Since on and Thanks, you call the helping spend facilities CFO. Mike. Good afternoon, maximum to and first team as I'm forward state-of-the-art and part extremely and work lead our performance be to defining continue the performance. It many products experience Fox teammates. firsthand Fox's today our pursuit my never of to the in impossible look alongside excited everyone. earnings walk of had June, the joining be is talented ending time I've company Fox at joining great through to of challenge to opportunity Fox

in in a sell in where were sports shocks results of and consolidated year. quarter sales in in we net is of financial our sales channels. then and primarily our I'll power off-road of quarter sales to a second businesses now $XXX.X last guidance. second comprised dealers million demand to X.X% million, compared review $XXX.X the Total manufacturers is aftermarket and the to OEM PVG, OE the our second which sales This of review delivered quarter quarter the growth our strong XXXX versus quarter decrease to XXXX. of and distributors XX.X% increase due same directly second

upfitted lines. of applications aftermarket XX.X% in to the This comprised the businesses, second delivered a is which sales in by net trucks and and in strong upfitting last AAG, performance was driven House quarter which of March sales same kits, quarter Wheel growth acquisition, product year. our the completed XXXX, wheels was lift Custom in compared continued increase including the from our

of sales mix same channel the amortization in Fox by The gross the quarter was of in American margin to from of inventory. due the XX.X% second by in XXXX, our decreased second product Net from the to North point facilities. a efficiencies offset Custom XXX primarily in period in year. increased valuation shift primarily SSG prior is compared acquisition quarter decrease margin XX.X% in a higher of by QX level the gross and decrease driven inventory Wheel House Factory’s at the acquired XXXX XX% XXXX, basis

second versus decreased improvement shift. partially XXXX of XXXX, QX $XX.X product of amortization strong $XX.X the Adjusted basis gross quarter margin, in our operating which points XX.X% the XX.X% million quarter compared inventory by initiatives, were sales second up, the or year. XX excludes XX.X% to to of Total the showcasing million of continuous mix expenses step last or offset which the sales of of in

acquisition future Adjusted facility to due growth. operating second Wheel in from House and in investments. XXXX inclusion compared expenses XXX expenses operating to to increase period obtained expansion in the was The the Wheel House by of of the facility of XX.X% House, Custom points in XXXX basis as percentage QX same increased our the a of to Wheel year expenses support due primarily to prior investments Custom in amortization sales and our XX.X% quarter the Custom intangibles

of intangible U.S. to in effective rate to to finalized foreign resulted the income. tax second quarter XX.X% related derived the use the change offset second XXXX credits. fiscal foreign in the was rate was tax effective fiscal of to XX.X% by XXXX. benefit The due which the company's decreased recently a compared This partially certain ability in was tax tax in The quarter regulations,

$X.X or diluted was We prior per last On in delivered million a to share of decrease second or second quarter million earnings of compared compared quarter quarter diluted the $X.XX in or the net second a $XX.X $XX.X share second XX.X% to $X.XX in quarter the GAAP to in share in XXXX XXXX period. same second was XXXX. $XX.X million a XXXX, of compared the Adjusted of million the the approximately million of per $XX.X basis, adjusted $X.XX of of diluted $X.XX in quarter year. income per net income

XXXX by to the X.X% XX.X% for $XX.X to quarter adjusted quarter with support Wheel Custom second margin House product The the primarily decrease to quarter second of mix XXX year. to by in Adjusted the expansions in in in due increases $XX.X quarter EBITDA decreased margin the EBITDA basis same change compared XXXX quarter and of to the to in XXXX. last million associated in second continued is the XXXX EBITDA the the compared the Adjusted points of cost million XX.X% of second growth. and our facilities decreased

the the connection to Moving obtained primarily sheet, due with that Wheel Custom recent balance inventory of is our in to House. increase acquisition we inventory in

impact the increase Custom House reflect down our the in of acquisition. the House Custom Excluding The inventory inventory, Wheel intangibles and goodwill million. Wheel $XX.X was

at balance million million Our $XXX $XXX is revolver XX, December versus at XXXX.

first paid strong have operating cash we debt House down support quarter acquisition $XXX June, since additional of $XX million balance. revolver Wheel the incurred $XX Because end leaving and million, we XXXX, working flows, Custom revolver the below we have to down of our During million. of paid balance capital. of fiscal another our And the the of

select like share would guidance. some to I Now,

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

SSG We inventory. the as QX channel recalibrate to be from to down sequentially expect continues

at billion For channel. $X.X be $X.XX we to sales year low as the of new billion as the XXXX, of OEMs into fiscal the range introduce to the SSG end models recovers expect

We share per at to range also be of expect low $X to end of the adjusted earnings diluted the $X.XX.

assumes an the of to income to in XX%. be guidance rate XX% year tax full Our range

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

Mike Dennison

you, Dennis. Thank

a united This As a our with spirit reflection operational not results. but of of individual vision. we shared our XXXX, just close out the success half I'm to our and pleased is financial testament very first and talents,

in our of to and future forward with to our lie cognizant these celebrate remain ahead. Armed proactively We the embrace vision we we navigate and uncertainty. challenges continue achievements, mindset, value prepared the thinking market we're and of agility stakeholders. foundation, understand importance times strategic confidence, to with dynamics While solid deliver our change, evolving and of that the our adaptability

call questions like would I operator. now to open for the

Operator

Solow sir. Instructions] our question Yes, will And from Securities. [Operator first come with Larry CJS

Larry Solow

is feels feel guess thank the – like afternoon. Great, of things specialty group. Mike, there that fair like to Is of visibility power equation, as better but but kind you. know you kind vehicles, in weakness just good, say? with aftermarket good it things trends? to of sports the perfect I that pretty kind question, sort were kind in way probably Dennis Is are there. – Because well. I of the of was application filled Good had like back a where some Welcome aftermarket, just I the first that revenue not summarize it feels a good a that

Mike Dennison

Yes. expect I up as you soft We the would and Larry, to you. SSG knew two imagine. sure, softness. for can quite AAG didn't One to things, offset getting the soft. to talk to SSG good stepped this deliver We really be was say, helped it is,

Secondly, aftermarket is PVG in year-on-year. significantly up actually

backlog a the PVG. time Gainesville, really we've we've the years, several in that last in up keeping to efficiencies growth. the aftermarket unlock for recall you been getting with had By If hard able

stepped well. as in aftermarket really nicely So

say, us to didn't I'd drivers OEM your major that SSG So was be. we that are that point, about. as know the two To those expected as it helped strong we

Larry Solow

just question their we directionally, have think kind with to surprise OEMs you XXXX to, probably I of it's kind And delaying a lot Can question downturn. speak you what your that kind rebound were few it that a of and And support part quarters? I guess, you that speak been gives models. kind is for next that on Can dynamic? probably elongated of down can the guess, sort And I of just Right. that's of know think I concerned, SSG, people not does I as the at you get confidence sales of the of that And even potentially next growth some you skew for one. look year?

Mike Dennison

models, things our are of a couple range. One pretty all happening launching it's a who on of there. year is, and the There's partners of customers wide spectrum next

of where gives And folks those they possible. of we've can have so QX. that, as not quarter, to years and course fast are do some gas some cases, the still foot or quickly get elongation In which a the and this who customers clean through in position on they got new us clean this putting model want fairly last as their they're pretty into been

So get diversity pretty QX. now the spectrum with outcome you're of the you're to diversification, that the and getting those answers having to suggesting and a wide weed to through we're QX

We e-commerce we been to have stay problem, strong, XXX%. We're and through see this, demand, near the demand our actually significantly. about know, have as actually seen demand talked you our demand is the hasn't channel, up continue and we on like

we're buildup we this leave then get us. flushed through get just QX strength going to to but bikes customer an there, QX just that in to end We're seeing for modest that's big take continue to And So of do improvements us XXXX. seeing see lead not us through.

Larry Solow

Thanks Great. Excellent. again.

Operator

you. Thank

Our next question Jim with Stifel. from Duffy comes

Jim Duffy

I fourth – some Can of that well. want doing ask guide the to fourth Good guidance. sharp you with you that and a shape acceleration quarter question you. want the a confidence on low current quarter ask you the a I to acceleration. question help to that into of visibility revenue I the us The hope fourth Thank afternoon. implies the are gives quarter? maintain end into embed guys

Mike Dennison

talked just Larry's about couple of one question. things SSG A going and we Jim. on Sure, for

seeing improves SSG on in So we're based now. QX what

the year is, it we of is thing actually XX are for the U.S. to to you online. truck second range QX. launches into can happening new The build product forward drive now model you've continue The model as that going speak, new got Raptor,

we're that's aftermarket that. be sell quarter in increase to not seeing to for for business the forecast launches of mentioned the about. lots. pretty that trucks upfitting seeing actually the excited We're got et relative a I new our in that cetera, fourth updated through that trucks product significant, bringing Jeeps year. and market to a vehicles that actually of and strengthen to we're we through earlier, we're on couple We've to the So continues slowdown balance going think of any relative and

So the there's of the we're comfort is downturn with QX our SSG still in that of a one why not whole which gives of overall It's kind expectations that just in with that QX timeframe, things. number us comfortable year. even

Dennis Schemm

is on we add saw applications to outside unlocks you House poised is plan charge growth aftermarket when then in as Mike, with And and vans talked to enabling especially. their the double group, continuing to the well. aftermarket get about that's some that, growth business really to Custom Yes, its and also Wheel pickup significant PVG, in efficiencies, that and Mike earlier the

So a to of pull to levers of end that we low lot the feel hit like we've got guide.

Jim Duffy

Okay. from Mike, chassis glad market seen strong. growth availability the what demand support and And you. we've in year? half Can is to dealer you you Very helpful, back brought speak of I'm end business, thank to the the that upfitting up the seeing demand you're

Mike Dennison

still the demand availability is spotty. strong, the Jim, and is Yes, chassis

OEMs better want than that Some others. delivering at are the we chassis

As you to get need. chassis where pretty know, we we pivoted well

get other not One one some content on things the is things the of up. only volume to we're we'll but is numbers this, seeing strong, and is of but

for vehicles the selling more actually past. we're in we the than have So

is people on the trucks our that have the buy buying we're community, elasticity the want to a are what high And lot finding end. of

of Jim, for like that to and I year, going launch price XXX,XXX, mentioned vehicle. seeing is this that we're the truck strong So point we're demand in earlier, truck QX above that

lift volume us putting constant. to about the where that really high the going that the revenue when and end that attracting we're buyer these and things increase So stays we're components vehicles like content, is help engineering even can in increase

Jim Duffy

the secured the you Have give brought Can quick one, in House? of Custom last Wheel you you the an update putting because capacity it up. of us maybe support up line? House on And utilization Custom to growth and integration Great. Wheel Dennis,

Dennis Schemm

Yes.

nicely year-to-date House is accretive basis So really on as Custom along a Wheel remains come well.

So we well then we're and really additional up had strong good growth. unleash some centers some as to a QX opening distribution

those far. So been really House. on really so – pleased Jim synergies And synergies Custom Wheel end talked with acquisition this you front about the

upside just those new kits. As into some unlocking is the but distribution, we our really we're mentioned, getting

So well our with which kits trucks, as done we're them and upfitted on shocks those as we haven't selling yet. getting

is better. acquisition even unlock of So the be to the, as that that value accretion going

Jim Duffy

Excellent. Thanks else in. so much. I'll let someone jump

Operator

you. Thank

Our Riley. with from next B. come will Anna Glaessgen question

Anna Glaessgen

be my SSG, for extent to been afternoon. should the to confidence turning Hi, inventory modeling first pretty channel products questions. is I good are taking that corrections. to Thanks guess, segment what when little in I at normalize the back channel has going that guess, inventories ready have you expecting to OEMs dynamic obviously point? bit selling XQ? as or be more To are normal launching a demand back the given

Mike Dennison

Yes.

the this better, bumping So you in bumpiness right? balance more I they really is is to not we're some that normal hit. see But year. to the environment, actually product XXXX continue where QX great the a start see through just still back you see this finally come channels The why miracle cure think you think really expecting new reason year. I is of launches any

Anna Glaessgen

it. Got

implied, improvement. to on XQ, from So – I I guess, XQ based sequential is there mean, an

in channel the a to least XQ. it's new should recover accept product point launches those So that at to able

Mike Dennison

a to of are with their the lot into to Yes, XXXX improvement have year that's really of less gotten about the and aftermarket bikes. challenges around – get building product existing some model new OEMs inventory as ready or back improvement. new inventory getting OEMs. the clean really cycle, That's That's around

of sold know, in you they market we one product the year, year. As but they're through not really this customer getting band, last Anna, challenges still is our –

pickup the continues, to are three headwind OEMs in QX, on that about. you starts be As get new from that bikes. it'll cleaner in but the abate we're bumpy And and OEM the talking depending that's build QX the really

Anna Glaessgen

quarter possible much how Mike. disclose on it. House the revenue? it would And Thanks, to added be to Custom Got Wheel

Mike Dennison

was, it It $XX million. was

Anna Glaessgen

That you. me. Thank it. Got helps

Operator

Thank you.

Swartz Our Michael Truist come next question with will Securities. from

Michael Swartz

pertains to just Wheel Maybe similar guys. Custom guidance to question Anna's Did last on afternoon follow-up what or for in maybe good before? hey provided as outlook guidance. your it you change House it is Hey, to

Mike Dennison

be might it's up, pretty similar. but similar. It's pretty It immaterial

Michael Swartz

you maybe versus but the to you that business then just or up SSG on to And think I’m wanted the just Okay. just quarter expect the the year-over-year just out, this bike sequentially fourth up trying is said up, flesh clarify, third to out. to in quarter? I be figure

Mike Dennison

it as and QX sequentially from will sequentially well. up from be up be It’ll QX

above it’ll So that a modest recovery. be did – It’ll be did. QX we XXX the above it’s what

Michael Swartz

Okay.

in it I down outlook, XX%, you said I terms of time guidance XX% So maybe full spoke, Mike, it sound like, right? be down year like think XX%. be your at now plus, it’d sounds the mean, year-over-year last Does SSG that we the would seems

Mike Dennison

we’re what QX larger right. than about With we Yes. in in the and expected softness originally seeing QX that’s

Michael Swartz

components, for in as to, what certain supply batteries issues pertains us some in bike of of inventory I of supply And looks detail we know the of here I through but it channel are channel, more like little today. of some Okay. give having chain just sit the just or a the that OEMs know e-bikes. were one we’re Maybe a working the the as those sense

Mike Dennison

are those issues of I think gone, Mike. most

just I through think now bikes. pushing about the it’s really

OEM We’re so or parts assembling build of it bikes the the parts want a level our is the and as side, you not this assembler to seeing individually issues any on at whether function really sell the supply level just deciding the chain were. or

issues all corrected I chain for most really the themselves. So think have part, the supply

Michael Swartz

Okay. Great. Thank you.

Operator

comes Bank [Operator our Perry from next question you. Thank of Alex with Instructions] America. And

Unidentified Analyst

Hi, this Thanks is [ph] for our Perry. Maddie questions. on taking for Alex

down the think will you balance the should Should margins to And of about gross they year? secondly, thinking adjusted the this how think be first, be talk peak of we you declines? then is SSG we Just whether continue can about Thank year-over-year? for you.

Mike Dennison

margin gross first Hi question, take let I’ll Maddie. Dennis the but one the first. I’ll tackle

the trough not should word I’m of decline QX right yes, is use, would you’re peak the correct. QX is I sure the be peak or worst. of I but the the the valley. think

Dennis Schemm

I – a outlook margin for we’re bike don’t normally only bikes. year-on-year, down business last do And the down XX%. continue. the year for most I a that, while margin basis gross part, points delivered a XX think That see to margins perspective, we strong gross was gross from EBITDA XX% was going XX% high right, but We margin too watermark

pretty So significant delivery FOX. year-to-date on basis, this for delivered only And performing basis EBITDA a is margin points XX with margin bike a down XX% we as it is.

So this big speaks the out of message I at bike the team the with the It think down. coming results and business of these diversification is FOX built delivery has to here. of look being the really that power

Mike Dennison

to we which to – XXX more American Dennis’ that double The too, improvement we basically before talked about optimization of other were basis by driven factories. of thing, another basis about with room to fact we by in the run points then have caused points that Maddie is, the And was the talked optimization XXX that the great again. regard point, North

point, for first to the a the confidence next half in And at and there’s the the And in get back continuing of that’s think in optimization that being the half upside this of least. half we plenty is of function year I back Dennis’ done. year of work

Unidentified Analyst

helpful. very That’s Thanks. Great.

Operator

Thank you.

Stember Scott from Roth question Our next comes MKM. with

Scott Stember

for my Good afternoon, and questions. thanks taking

Mike Dennison

Hey, Scott.

Scott Stember

was of what of of and is lot the parts with OEMs of so were a unfinished leading itself the it clean also Has away? Can up, their which bikes we Coming quarter, going dealers, first about you just supply talk starting talking happening to was you them SSG to competing it? guess guys. part had some with the that I with wasn’t that it was and but sell out about aftermarket chain inventory,

Mike Dennison

end, over I of OEMs dealers. out on majority end high They’re bikes that’s asking the the to through have actually that more dealers low these It’s even still lot we are Scott the bikes movement getting a they The we’re in the to is high still offset moving end you assemblers they’re the okay and discounted Yes. the for as more completing with their now, channel and to supply. that. it’s end end to probably the don’t, the dealers. lineup. which mean demand, it’s and looking of try is inventory in through the know, the high get, And high what’s though still getting trying

the really at assembly we system. at discounting wanted big the think beginning sales happen, It’s question, get to bikes our point, was was because the about your just getting point. sitting and were about margins. it doesn’t really But affect At this bikes everybody really see to stuck through point to we’d those the like your or at inventory OEM at that level year their the through I much for pushed that was how see at not surprise this was the that level,

Scott Stember

had less is much bad at to are much time there us point, to And stand right how better how get get out just there. or least and last much of quarter, the you just if versus for improvement left frame that, this now, gauge to a you to following-up on is as there how trying things

Mike Dennison

trying we’re all why action direction taken at biggest of gauge it mean, the time in QX how to the too I through, and get kind we thing takes Really OEM this to get to seeing is seeing and the based is that’s comfort of. clarity we’re QX. that much get we’re care happening Yes. on of in what level

the and issue, they’re discounting dealing the to heavy they’re recognized sign with is with issue, the now deal they’ve willing that you’re out seeing a there it. So

So of it back than comfortable just the Again, with serious discounting other about sold we that all as more from our are revenue, getting because know catch of problem. closer doesn’t dealing they’re people feedback see we’re stuff customers. really happen and get we sales, get we our more see affect to this year. But getting good taken aggressive, our they’re because it that last care we them getting major selling means we us on as pretty

seeing they’re a and trends have and with things transparent are that. in very insight like We of that giving couple us what us to lot markets a and as

give to some starts well. that confidence as So us

Scott Stember

right. All

question, are the strong Just retail from demand is seeing is you when you just are maybe the down just from are things the frame slightly still seeing it up, can and end, what how what broader bike dealers the the and is at high weak for you’re market seeing, just there? dealers out overall last what say it

Mike Dennison

over this at looked over is, it we’ve last Well, down couple slightly our and quarters XXXX. of Yes. assumption was the

really we’re a about take, talking That’s – Swartz talk But had XX% demand. in I’d XX% think this of chain industry’s end you not say the supply and it’s versus Mike say difference. was I about issues So answer, question, call give out, prior or that. the of to to the up Dennison’s being chain down a make probably XX% prior when Mike opinion. the customer the supply we bit about issues rest a I’d more down is if asking

Scott Stember

air you that In the guys operate or that the is sense, XX% everything in?

Mike Dennison

people bikes. not lot Yes. really because are who in the those And the people everything those not not nothing and A they’re went low cetera. maybe bought out kind low bikes, COVID or It’s bikes really people That’s bikes, end. went know they’re replacing have just because are end of really riding end. else world just our biker and it’s do out of and versus to split enthusiast, et out high down to we period they hard

in industry talking I’m more So general. the about

Scott Stember

again, Thanks Appreciate enough. guys. it. Okay. Good

Operator

you. Thank

Our comes Baird. Wycklendt next Alice question with from

Alice Wycklendt

Yes. Thanks guys. Good afternoon.

of SSG coming are the model XXXX changes big pricing versus year new bikes? you’re any out, and there through thinking XXXX Just model model year in terms on

Mike Dennison

retail you’re get are to back seeing model What get pricing. who XXXX is to you’re can trying out year what – trying companies

question, Alice. great – challenges the of One

of we think within a One this doesn’t they’re how discussion margin challenges our affect really against through. FOX isn’t the us facing or about about sell

a OEM’s having buy less bike by XX% launching different XXXX, changes might enough, against XXXX, you challenge at changes bike year The know is, discounted can model person, year XXXX. be bike the end OEM. they’re user though I’m might I very buying in on aren’t say, for significant model that they not the the or innovation isn’t and is year a get that the that buyer a what? interested platform might want XXXX model model and enough the $XX,XXX a so year maybe I who’s If if

the thinking in is, model complexity then QX and do back through. they to we to the and how do year they have work that’s our have of launch XXXX some or discounting So And bikes that about happening to that’s how customers versus QX. these retail get

early QX So products when next but we starts hit imagine, think QX, QX, can year. in until it’s to improve probably sell as going of we not dealer the to QX, in you that

got of and they’ve trying front better that. out So runway just get to they’re a in

Alice Wycklendt

Okay. helpful. another Great. That’s revolver quarter, here? that is capital – quarter, think million your a the when should took on reduction further debt $XX $XX after And this million allocation? allocation, then down by a how just investors from priority you is about Or capital

Dennis Schemm

sheet priority, And and is and company. a gives paying acquisitions. we what it’s and much deals interest. the do is that’s all that more to and priority balance and the out firepower clearly balance are this strength as a priority XXX% for go as us ability because Well, we’re sheet on It

yes, So be forward. it’ll a going focus

Alice Wycklendt

guys. Thanks, Great.

Mike Dennison

Thank you.

Operator

time, turn Thank back this Mike questions, so for the you. to At over floor any no closing to remarks. Dennison like I’d there further are

Mike Dennison

through on look talking to evening. for to forward we taking earnings soon. QX thank and everyone to to Just our the Have for good you want with time go the a us

Operator

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

Ends Abruptly] now [Call may line You and disconnect your

Fox Factory Holding (FOXF) 3 Aug 232023 Q2 Earnings call transcript