Fox reports sales up 16 percent in Q3
Scotts Valley, California-based Fox Factory Holding Corp. reported financial results for the third quarter and nine months ended Sept. 29, 2017.
“We are pleased to report another quarter of record sales and earnings results which exceeded our expectations. Our third quarter results reflect continued broad success across both our powered vehicle and bike businesses,” said Larry L. Enterline, FOX’s CEO. “Looking ahead, our team remains committed to further building the FOX brand presence in our existing product categories and consistently pursuing new market opportunities.”
Sales for the third quarter of fiscal 2017 were $127.4 million, an increase of 16.9 percent as compared to sales of $109 million in the third quarter of fiscal 2016. This increase reflects a 27.3 percent increase in sales of powered vehicle products and an 8.8 percent increase in sales of bike products. The increase in sales of powered vehicle products was primarily due to continued high demand for on and off-road suspension products including increased OEM sales. The increase in sales of bike products primarily reflects new product introductions, favorable spec positions, and strong sell through with certain higher growth OEMs.
Gross margin was 33.4 percent for the third quarter of fiscal 2017, a 140 basis point improvement from gross margin of 32 percent in the third quarter of fiscal 2016. The improvement in gross margin was primarily due to favorable product and customer mix and improved manufacturing efficiencies. On a non-GAAP basis, adjusted gross margin increased 130 basis points, excluding the effects of acquisition related costs in the third quarter of last year. A reconciliation of gross profit to non-GAAP adjusted gross profit and the resulting non-GAAP adjusted gross margin is provided at the end of this press release.
Total operating expenses were $22.2 million for the third quarter of fiscal 2017 compared to $19.8 million in the third quarter of the prior fiscal year. The increase in operating expenses is primarily a result of strategic investments to support future business growth, increased incentive and stock-based compensation expense, and higher ongoing patent litigation-related expenses, partially offset by the conclusion of the Company’s acquisition-related compensation arrangements. Non-GAAP operating expenses were $19.8 million, or 15.5 percent of sales in the third quarter of fiscal 2017 compared to $17.1 million, or 15.7 percent of sales in the third quarter of the prior fiscal year. Reconciliations of operating expense to non-GAAP operating expense are provided at the end of this press release.
The effective tax rate was 19.5 percent in the third quarter of 2017, compared to 9 percent in the third quarter of 2016. The increase in the effective tax rate was primarily due to an increase in pre-tax income and resulting tax expense while benefits from various credits and deductions remain relatively constant, and an increase in non-creditable foreign withholding tax.
Net income in the third quarter of fiscal 2017 was $16.1 million, compared to $13.7 million in the third quarter of the prior fiscal year. Earnings per diluted share for the third quarter of fiscal 2017 were $0.41, compared to $0.36 in the third quarter of fiscal 2016.
Adjusted EBITDA in the third quarter of fiscal 2017 was $27.0 million, compared to $20.9 million in the third quarter of fiscal 2016. Adjusted EBITDA margin in the third quarter of fiscal 2017 was 21.2 percent, compared to 19.2 percent in the third quarter of fiscal 2016. Reconciliations of net income to adjusted EBITDA and the calculation of adjusted EBITDA margin are provided at the end of this press release.
Non-GAAP adjusted net income was $18.0 million, or $0.46 adjusted earnings per diluted share, compared to $16.6 million, or $0.44 adjusted earnings per diluted share in the same period last fiscal year. Reconciliations of net income to non-GAAP adjusted net income and the calculation of non-GAAP adjusted earnings per share are provided at the end of this press release.
First Nine Months Fiscal Year 2017 Results
Sales for the nine months ended September 29, 2017, were $354.5 million, an increase of 21.6 percent compared to the same period in 2016. Sales of powered vehicle and bike products increased 39.9 percent and 8.5 percent, respectively, for the first nine months of 2017 compared to the prior year period.
Gross margin was 32.5 percent in the first nine months of fiscal 2017, an 80 basis point increase, compared to gross margin of 31.7 percent in the first nine months of fiscal 2016. The year-to-date gross margin improved primarily due to product and customer mix and manufacturing efficiencies.
Net income in the first nine months of fiscal 2017 was $40.3 million, compared to $25.9 million in the first nine months of fiscal 2016. Earnings per diluted share for the first nine months of fiscal 2017 was $1.04, compared to $0.69 in the same period of fiscal 2016.
