Financial Performance - Fox Factory Holding Corp. reported a significant increase in revenue, achieving $500 million for the fiscal year ended January 3, 2025, representing a 15% growth compared to the previous year[7]. - Approximately 33%, 36%, and 27% of net sales in the years ended January 3, 2025, December 29, 2023, and December 30, 2022, respectively, were attributable to powered vehicle-related products[48]. - In 2024, approximately 44% of net sales resulted from OEM customers, 49% from dealers and distributors in the aftermarket channel, and 7% from direct-to-consumer channels[60]. - Net sales attributable to the company's 10 largest customers accounted for approximately 36% of total net sales in fiscal years 2024, 2023, and 2022[61]. - North American net sales totaled $1,097.3 million, $1,127.6 million, and $1,009.2 million, representing 79%, 77%, and 63% of total net sales in 2024, 2023, and 2022, respectively[63]. - International net sales were $296.6 million, $336.6 million, and $593.3 million, accounting for 21%, 23%, and 37% of total net sales in fiscal years 2024, 2023, and 2022, respectively[63]. - Net sales from the five largest customers accounted for approximately 28%, 27%, and 23% of total net sales in fiscal years 2024, 2023, and 2022 respectively[146]. Product Development and Innovation - The company has expanded its product offerings, introducing over 20 new products in the last year, including the award-winning Grip X2 damper, which was recognized as the 2024 suspension product of the year[26]. - Fox Factory's innovative technologies, such as the Live Valve suspension system, are now utilized in multiple vehicle categories, contributing to a 25% increase in sales in the powered vehicles segment[26]. - The company maintains a strong commitment to research and development, with a dedicated team of engineers contributing to product innovation and enhancements[24]. - Research and development efforts are central to the company's strategy, involving collaboration with OEM customers and feedback from professional athletes to innovate products[56]. - The company must continuously enhance existing products and develop new ones to maintain market competitiveness and customer satisfaction[112]. Market Expansion and Strategy - Fox Factory's strategic focus on high-end segments has positioned it well for growth, with premium-priced products driving an increase in average retail sales prices by 10%[18]. - The company has established strong relationships with leading OEMs, including Ford and Toyota, which has enhanced its market presence and brand recognition[16]. - Fox Factory's international market expansion has resulted in a 30% increase in sales from overseas markets, particularly in Europe and Asia[23]. - International expansion is seen as a significant opportunity, with rising consumer discretionary income in developing markets expected to drive demand for premium performance products[35]. - The company plans to increase its aftermarket penetration by adding dealers and distributors and expanding aftermarket-specific products and services[34]. Acquisitions and Growth - Recent acquisitions include SCA Performance Holdings in March 2020, Manifest Joy LLC in May 2021, and CWH Blocker Corp. in March 2023, which are expected to expand the company's product offerings and geographic manufacturing footprint[33]. - The acquisition of Marucci in 2023 expanded the company's manufacturing footprint to include baseball and softball gear, supported by domestic production facilities and timber mills[77]. - The company completed several acquisitions, including Marucci Sports, LLC in November 2023, and plans to evaluate additional acquisitions in the future[177]. Operational Challenges and Risks - The company relies on a limited number of suppliers, which poses risks of increased material costs and supply chain disruptions[107]. - The company’s financial condition may be adversely affected by geopolitical conflicts, such as tensions between Taiwan and China, impacting supply chains and costs[106]. - The company faces intense competition from manufacturers with greater financial and marketing resources, which could negatively impact its business and operating results[115]. - Economic conditions significantly impact consumer spending on discretionary products, which could adversely affect sales[118]. - The company faces challenges in accurately forecasting product demand, which could lead to manufacturing excess or shortages, adversely impacting gross margins and cost of sales[158]. Compliance and Regulatory Issues - The company is subject to extensive regulations that may require additional expenses or modifications to product offerings to maintain compliance[193]. - The company is committed to complying with the Uyghur Forced Labor Prevention Act, which may present challenges in achieving full traceability in its supply chain[210]. - The company is subject to evolving privacy laws, including the GDPR and CCPA, which impose substantial compliance costs and penalties for violations[174]. - Environmental laws impose strict liabilities on the company, and non-compliance could lead to significant fines and operational restrictions[201]. Economic and Market Conditions - The ongoing effects of the COVID-19 pandemic have created volatility in the global economy, impacting the company's financial condition and results of operations[120]. - Changes in customer preferences and market dynamics could lead to fluctuations in profitability and demand for the company's products[133]. - Currency fluctuations, particularly between the U.S. Dollar and foreign currencies, could adversely affect gross margins and overall financial performance[147]. - Economic uncertainties in the U.S., Europe, and other international markets complicate demand forecasting, potentially leading to increased material and freight costs[158]. Employee and Labor Relations - The company employs approximately 4,100 employees across various regions, with a focus on maintaining a safe and healthy work environment[82]. - Increased employee costs due to government-mandated wage laws and evolving labor market conditions could impact the company's financial condition[166]. - The company relies on a skilled workforce, particularly in engineering and research and development, to maintain product quality and innovation[131]. Financial Management - The company has $705.1 million in indebtedness and $496.8 million in revolving credit available under the 2022 Credit Facility as of January 3, 2025[186]. - The Federal Reserve increased benchmark interest rates multiple times in 2022 and 2023, which may increase the company's interest expense and reduce available cash for operations[188]. - A hypothetical 100 basis point increase in interest rates would result in an approximately $2.1 million increase in interest expense for the year ended January 3, 2025[190].

Financial Performance - Net sales for Q4 fiscal 2024 were $353 million, a $20 million increase from the prior year, reflecting a 6.1% growth[4] - Gross margin for Q4 fiscal 2024 was 28.9%, up 120 basis points from 27.7% in Q4 fiscal 2023[6] - Adjusted earnings per diluted share for Q4 fiscal 2024 was $0.31, compared to $0.48 in the same period of the prior fiscal year[9] - Fiscal year 2024 net sales were $1,393.9 million, a decrease of 4.8% compared to fiscal 2023[11] - Adjusted EBITDA for Q4 fiscal 2024 was $40.4 million, with an adjusted EBITDA margin of 11.5%[10] - For the three months ended January 3, 2025, net sales increased to $352.8 million, up from $332.5 million for the same period last year, representing a growth of 6.8%[32] - Adjusted net income attributable to FOX stockholders for the year ended January 3, 2025, was $6.6 million, a decrease from $120.8 million in the previous year[32] - The company reported a net loss of $179,000 for the three months ended January 3, 2025, compared to a net income of $4.1 million in the same period last year[32] - The net loss attributable to FOX stockholders for the three months ended January 3, 2025, was $(141) million, compared to a net income of $4.1 million for the same period last year[38] - Adjusted net income for the year ended January 3, 2025, was $55.4 million, down from $167.5 million for the previous year, reflecting a decrease of 66.9%[38] Operating Expenses - Total operating expenses for Q4 fiscal 2024 were $90.6 million, or 25.7% of net sales, compared to $81.0 million, or 24.4% of net sales in Q4 fiscal 2023[7] - Operating expenses for the year ended January 3, 2025, totaled $365.9 million, up from $304.7 million in the previous year, marking an increase of 19.9%[32] - The adjusted operating expense margin for the year ended January 3, 2025, was 22.3%, compared to 18.3% for the previous year, reflecting improved operational efficiency[49] Debt and Assets - Total debt as of January 3, 2025, was $705.1 million, a reduction of $63 million from the previous quarter[18] - Total current assets decreased to $727.7 million as of January 3, 2025, from $768.1 million as of December 29, 2023, a decline of 5.2%[30] - Total liabilities increased to $1.03 billion as of January 3, 2025, compared to $1.02 billion as of December 29, 2023, indicating a slight rise of 0.6%[30] - Cash and cash equivalents decreased to $71.7 million as of January 3, 2025, down from $83.6 million at the end of the previous year, a decline of 14.3%[34] - The company reported an interest expense of $54.9 million for the year ended January 3, 2025, significantly higher than $19.3 million in the prior year[32] Future Outlook - The company expects Q1 fiscal 2025 net sales in the range of $320 million to $350 million and adjusted earnings per diluted share between $0.12 and $0.32[19] - The company intends to acquire Marucci, with expectations of future performance improvements from this acquisition[51] - The company anticipates demand for its products to increase, contributing to future sales growth[51] - Future sales and adjusted earnings per diluted share are projected to grow, although specific figures were not disclosed[51] Strategic Initiatives - The company is targeting $25 million in operational improvements and cost management initiatives[3] - The company is focused on improving operating efficiencies and expects to enhance its operating results and growth prospects[51] - The company aims to develop new and innovative products to expand into new categories and end-markets[51] Market and Economic Conditions - The company is facing potential risks related to supply chain disruptions and the ability to maintain supplier relationships[51] - The company is monitoring the impact of geopolitical tensions, such as the Russia-Ukraine conflict, on its operations and supply chain[51] - The company acknowledges the potential impact of inflation and interest rate increases on future economic conditions[51] - The company emphasizes the importance of adapting to changes in consumer preferences and market demand[51] Miscellaneous - Specialty Sports Group (SSG) net sales increased by $31.1 million or 33.3% to $124.5 million, driven by the Marucci acquisition[5] - The company reported organizational restructuring expenses of $2.0 million for the three months ended January 3, 2025, compared to $2.2 million for the same period last year[38] - The weighted average diluted shares used to compute adjusted EPS for the year ended January 3, 2025, was 41.7 million, compared to 42.4 million for the previous year[38] - The net income margin for the three months ended January 3, 2025, was (0.1)%, down from 1.2% for the same period last year[41] - The company incurred acquisition-related costs of $1.96 million for the three months ended January 3, 2025, compared to $4.39 million for the same period last year[42] - The gross profit for the three months ended January 3, 2025, was $102.0 million, up from $92.3 million for the same period last year, resulting in a gross margin of 28.9%[46] - The adjusted EBITDA for the three months ended January 3, 2025, was $40.4 million, compared to $38.8 million for the same period last year, indicating an increase of 4.2%[41]

Core Viewpoint - Fox Factory Holding Corp. reported financial results for the fourth fiscal quarter ended January 3, 2025, highlighting a mixed performance across its segments amid challenging market conditions [1][3]. Financial Performance - Net sales for Q4 fiscal 2024 were $352.8 million, a 6.1% increase from $332.5 million in Q4 fiscal 2023, driven by a 33.3% increase in Specialty Sports Group (SSG) sales [4][6]. - The SSG segment's sales rose from $93.4 million to $124.5 million, largely due to the acquisition of Marucci, which contributed $41.5 million in sales for the full quarter [4][11]. - Aftermarket Applications Group (AAG) sales decreased by 7.1% to $112.2 million, while Powered Vehicles Group (PVG) sales fell by 1.8% to $116.2 million due to lower industry demand [4][11]. Margins and Earnings - Gross margin for Q4 fiscal 2024 was 28.9%, up 120 basis points from 27.7% in Q4 fiscal 2023, primarily due to the amortization of acquired inventory valuation markup from the Marucci acquisition [5][6]. - Adjusted gross margin increased by 20 basis points to 29.2% compared to the prior year [5][6]. - The company reported a net loss of $0.1 million for Q4 fiscal 2024, compared to a net income of $4.1 million in the same period last year, with adjusted earnings per diluted share at $0.31 [9][14]. Operating Expenses - Total operating expenses for Q4 fiscal 2024 were $90.6 million, or 25.7% of net sales, compared to $81.0 million, or 24.4% of net sales in Q4 fiscal 2023 [7][13]. - Adjusted operating expenses were $76.4 million, or 21.7% of net sales, up from $68.5 million, or 20.6% of net sales in the prior year [7][13]. Yearly Overview - For the fiscal year ended January 3, 2025, net sales were $1,393.9 million, a decrease of 4.8% compared to fiscal 2023, with significant declines in AAG and PVG sales [11][14]. - Gross margin for fiscal 2024 was 30.4%, down 130 basis points from 31.7% in fiscal 2023, attributed to shifts in product line mix and operating leverage on lower volume [12][14]. - Adjusted EBITDA for fiscal 2024 decreased to $167.0 million, with an adjusted EBITDA margin of 12.0%, down from 17.8% in fiscal 2023 [15][15]. Balance Sheet and Cash Flow - As of January 3, 2025, the company had cash and cash equivalents of $71.7 million, down from $83.6 million at the end of the previous quarter, with total debt reduced to $705.1 million [17][17]. - Working capital improvements allowed the company to pay down $63 million in debt during Q4 fiscal 2024 [3][17]. Guidance - For Q1 fiscal 2025, the company expects net sales between $320 million and $350 million, with adjusted earnings per diluted share ranging from $0.12 to $0.32 [18][19]. - For the full fiscal year 2025, net sales are projected to be between $1.385 billion and $1.485 billion, with adjusted earnings per diluted share expected to range from $1.60 to $2.60 [18][19].

Core Viewpoint - Fox Factory Holding Corp. will announce its fourth-quarter results for the period ending January 3, 2025, on February 27, 2025, after market close [1] Company Overview - Fox Factory Holding Corp. is a global leader in the design, engineering, and manufacturing of premium products for specialty sports and on and off-road vehicles [3] - The company offers a portfolio of brands, including FOX, Marucci, and Method Race Wheels, known for their championship-level performance and innovation [3] - Fox Factory is a direct supplier of shocks, suspension, and components to leading powered vehicle and bicycle original equipment manufacturers, as well as premium baseball and softball gear [3] - The company diversifies its product offerings by acquiring complementary businesses, enhancing its engineering and manufacturing capabilities [3] - Fox Factory also provides products in the aftermarket through a global network of retailers, distributors, and direct-to-consumer channels [3] Conference Call Details - A conference call will be held on February 27, 2025, at 4:30 p.m. ET to discuss the fourth-quarter results, which will be available live on the company's website and archived for one year [2]

Core Insights - Fox Factory Holding (FOXF) reported revenue of $359.12 million for Q3 2024, an 8.5% year-over-year increase, but fell short of the Zacks Consensus Estimate of $366.51 million by -2.02% [1] - The company's EPS for the quarter was $0.35, down from $1.05 a year ago, and also missed the consensus estimate of $0.42 by -16.67% [1] Revenue Performance - Net Sales for the Aftermarket Applications Group were $100.28 million, below the average estimate of $115.80 million [3] - Net Sales for the Powered Vehicles Group were $109.34 million, compared to the estimated $113.95 million, reflecting a year-over-year decline of -11.2% [3] - Net Sales for the Specialty Sports Group reached $149.50 million, exceeding the average estimate of $140.80 million, with a significant year-over-year increase of +107.6% [3] Stock Performance - Over the past month, shares of Fox Factory Holding have declined by -8.5%, while the Zacks S&P 500 composite decreased by -1% [4] - The stock currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [4]

Financial Data and Key Metrics Changes - Total consolidated net sales for Q3 2024 were $359.1 million, an increase of 8.5% compared to $331.1 million in Q3 2023, driven by the Marucci acquisition and strength in the bike business [44] - Gross margin decreased to 29.9% in Q3 2024 from 32.4% in the same quarter last year, attributed to shifts in product line mix and reduced operating leverage on lower volumes [45] - Net income for Q3 2024 was $4.8 million or $0.11 per diluted share, down from $35.3 million or $0.83 per diluted share in Q3 2023 [47] Business Line Data and Key Metrics Changes - In the Powered Vehicle Group (PVG), net sales were $109 million, down from $123 million in the prior year quarter, reflecting reduced demand from OEM partners [20] - The Aftermarket Applications Group (AAG) reported net sales of $100 million, compared to $136 million in the prior year quarter, impacted by a leadership transition and inventory optimization efforts [27] - The Specialty Sports Group (SSG) saw net sales of $150 million, up from $72 million last year, primarily due to the inclusion of Marucci and growth in the bike business [33] Market Data and Key Metrics Changes - The automotive sector experienced a significant de-commitment from top OEM customers, resulting in a 19.5% drop in overall product sector within the quarter [22] - The power sports market faced challenges as OEM partners managed production below retail demand, consistent with previous quarters [23] - The European market showed relative strength due to better inventory positioning, while the U.S. market is progressing towards stabilization [36] Company Strategy and Development Direction - The company is focusing on four key initiatives: simplifying and consolidating its footprint, reducing non-performing products, reducing inventory, and cutting costs to improve margins [16] - Strategic expansion into the entry premium bike segment and continued growth in the e-bike category are seen as transformative opportunities [35] - The company aims to build and diversify AAG through new partnerships and expanding product offerings to enhance brand accessibility [30] Management's Comments on Operating Environment and Future Outlook - Management noted that ongoing quality issues and model year changeovers at automotive OEM partners have impacted chassis mix and availability, but these issues are beginning to abate [10][12] - The outlook for Q4 is tempered due to ongoing challenges in the retail environment, with expectations for flat performance in both bike and Marucci segments [52][54] - Management emphasized the importance of controlling costs and investing in innovation to drive future growth despite current market challenges [42][58] Other Important Information - The company executed three interest rate swaps to fix interest expenses for $400 million of its debt, reducing interest expense by $102,000 in Q3 [50] - The company is prioritizing debt paydown, having paid down an additional $25 million since the end of the quarter [51] Q&A Session Summary Question: Main obstacles for the company - Management clarified that quality issues are primarily with automotive OEMs, not within the company, and emphasized that demand remains the greater concern moving into 2025 [62] Question: Outlook for the bike segment - Management indicated that while Q3 showed good sequential growth, Q4 is expected to be softer due to seasonality and ongoing inventory issues [64] Question: SSG margin performance - Management explained that increased spending in preparation for MLB launches impacted SSG margins, despite year-over-year sales growth [66] Question: Marucci growth expectations - Management expressed confidence in Marucci's potential for double-digit growth in 2025, driven by product launches and new partnerships [79] Question: Upfitting business and channel inventories - Management noted that dealer inventories vary by brand, with some brands performing well while others, like Jeep, require more work to clear inventory [82] Question: Pricing environment with OEMs - Management stated that while there are requests for better pricing terms, overall pricing power remains stable, with a focus on driving innovation to maintain margins [84]

Core Viewpoint - Fox Factory Holding (FOXF) reported quarterly earnings of $0.35 per share, missing the Zacks Consensus Estimate of $0.42 per share, and down from $1.05 per share a year ago, indicating a significant earnings surprise of -16.67% [1][2] Financial Performance - The company posted revenues of $359.12 million for the quarter ended September 2024, which was 2.02% below the Zacks Consensus Estimate, compared to $331.12 million in the same quarter last year [2] - Over the last four quarters, Fox Factory has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance - Fox Factory Holding shares have declined approximately 45.1% since the beginning of the year, contrasting with the S&P 500's gain of 21.9% [3] - The current Zacks Rank for the stock is 4 (Sell), indicating expectations of underperformance in the near future [6] Earnings Outlook - The consensus EPS estimate for the upcoming quarter is $0.49 on revenues of $383.5 million, and for the current fiscal year, it is $1.56 on revenues of $1.43 billion [7] - The trend for estimate revisions ahead of the earnings release has been unfavorable, which may impact future stock movements [6] Industry Context - The Automotive - Domestic industry, to which Fox Factory belongs, is currently ranked in the bottom 31% of over 250 Zacks industries, suggesting potential challenges ahead [8]

Sales Performance - For the three months ended September 27, 2024, net sales increased by $28.0 million, or 8.5%, to $359.1 million compared to $331.1 million for the same period in 2023[98]. - The increase in net sales was primarily due to $49.6 million in net sales from Marucci, acquired in November 2023, and a $27.9 million increase in bike sales[98]. - Specialty Sports Group net sales increased by $77.5 million, or 107.6%, primarily due to the inclusion of $49.6 million in net sales from Marucci, acquired in November 2023[113]. - Aftermarket Applications Group net sales decreased by $35.8 million, or 26.3%, due to lower upfitting sales and higher inventory levels at dealerships[112]. - Powered Vehicles Group net sales decreased by $60.3 million, or 14.9%, due to lower industry demand attributed to higher interest rates[128]. - Aftermarket Applications Group net sales decreased by $121.1 million, or 28.1%, driven by lower upfitting sales and higher inventory levels at dealerships[129]. - Specialty Sports Group net sales increased by $90.8 million, or 30.7%, primarily due to the inclusion of $150.8 million in net sales from Marucci[130]. - Consolidated net sales for the nine months ended September 27, 2024 were $1,041.1 million, a decrease of $90.6 million or 8.0% compared to $1,131.7 million for the same period in 2023[127]. Financial Performance - Cost of sales for the three months ended September 27, 2024, increased by $27.7 million, or 12.4%, to $251.6 million compared to $223.9 million for the same period in 2023[99]. - Gross margin decreased by 250 basis points to 29.9% for the three months ended September 27, 2024, compared to the same prior fiscal year period[99]. - Operating expenses for the three months ended September 27, 2024, totaled $65.9 million, compared to $65.0 million for the same period in 2023[96]. - Total operating expenses for the three months ended September 27, 2024 were $88.7 million, an increase of $22.8 million or 34.6% compared to $65.9 million for the three months ended September 29, 2023[100]. - Income from operations for the three months ended September 27, 2024, was $41.4 million, compared to $41.0 million for the same period in 2023[96]. - Income from operations decreased by $22.6 million, or 54.6%, to $18.8 million for the three months ended September 27, 2024, compared to $41.4 million for the same period in 2023[102]. - Net income for the three months ended September 27, 2024, was $35.3 million, compared to $35.0 million for the same period in 2023[96]. - Net income for the three months ended September 27, 2024 was $4.8 million, a decrease of $30.5 million or 86.4% from $35.3 million for the three months ended September 29, 2023[107]. - Total operating expenses for the nine months ended September 27, 2024 were $275.3 million, an increase of $51.6 million or 23.1% compared to $223.7 million for the nine months ended September 29, 2023[119]. - Net income for the nine months ended September 27, 2024 decreased by $110.1 million, or 94.3%, to $6.7 million from $116.8 million for the same period in 2023[125]. Research and Development - Research and development expenses increased to $8.9 million for the three months ended September 27, 2024, compared to $7.4 million for the same period in 2023[96]. - Research and development expenses for the three months ended September 27, 2024 increased by $7.2 million, or 80.9%, primarily due to personnel investments and a state research and development tax credit[100]. Debt and Interest - Interest expense increased by $10.7 million, or 305.7%, due to additional debt and higher interest rates for the three months ended September 27, 2024[103]. - Interest and other expense, net for the nine months ended September 27, 2024 increased by $29.8 million to $40.9 million, compared to $11.1 million for the same period in 2023, with interest expense rising by $30.0 million to $41.4 million due to additional debt and higher interest rates[122]. - As of September 27, 2024, the weighted-average interest rate on outstanding borrowing was 6.30%[140]. - The Company entered into a new credit agreement on April 5, 2022, providing for revolving loans and letters of credit up to $650.0 million[140]. - On November 14, 2023, the Company amended the 2022 Credit Facility, securing an Incremental Term A Loan of $400.0 million and a Delayed Draw Term Loan of $200.0 million[140]. - The Incremental Term Loans are subject to quarterly amortization payments of principal at a rate of 5.00% per annum[140]. - The Company paid $10.1 million in debt issuance costs related to the Incremental Term Loans[140]. - On July 31, 2024, the Company entered into the Third Amendment to the Credit Facility to improve its covenant profile for greater flexibility[141]. - The 2022 Credit Facility is secured by substantially all of the Company's assets and requires compliance with customary financial ratios[141]. - The Company was in compliance with the covenants as of September 27, 2024[141]. Economic Factors - The company continues to face headwinds from ongoing channel inventory recalibration and lower end consumer demand despite improved bike sales[98]. - Future growth may be impacted by macroeconomic factors, including inflation and interest rates, as well as supply chain dependencies[91]. - Significant increases in inflation could adversely impact the Company's business and financial condition[143]. - There have been no material changes to the Company's cash requirements or market risk disclosures since the last Annual Report[142][144]. Cash Flow - Net cash provided by operating activities for the nine months ended September 27, 2024 was $50.1 million, a decrease from $126.7 million for the same period in 2023[135]. - Net cash used in investing activities for the nine months ended September 27, 2024 was $42.5 million, significantly lower than $165.4 million for the same period in 2023[138]. - Net cash used in financing activities for the nine months ended September 27, 2024 was $1.7 million, compared to net cash provided of $16.2 million for the same period in 2023[139].

Financial Performance - Net sales for Q3 fiscal 2024 were $359.1 million, an 8.5% increase from $331.1 million in Q3 fiscal 2023[4] - Net income for Q3 fiscal 2024 was $4.8 million, a significant decline from $35.3 million in Q3 fiscal 2023, with diluted earnings per share dropping to $0.11 from $0.83[7] - Adjusted EBITDA for Q3 fiscal 2024 was $42.0 million, down from $63.7 million in Q3 fiscal 2023, with an adjusted EBITDA margin of 11.7%[7] - Net income for the three months ended September 27, 2024, was $4,780 million, down from $35,293 million in the same period last year, a decline of about 86.5%[27] - Adjusted net income for the nine months ended September 27, 2024, was $42,585,000, compared to $147,184,000 for the nine months ended September 29, 2023[31] - Adjusted EBITDA for the nine months ended September 27, 2024, was $126,577,000, down from $222,260,000 for the same period in 2023[36] - Adjusted earnings per share (EPS) for the nine months ended September 27, 2024, was $1.02, down from $3.46 for the same period in 2023[32] Revenue and Sales Growth - Bike revenues grew 21.9% sequentially and 38.7% year-over-year, contributing to a $77.5 million increase in Specialty Sports Group (SSG) sales[2] - AAG segment net sales decreased by 26.3% to $100.3 million due to lower upfitting sales and higher inventory levels[4] - Net sales for the three months ended September 27, 2024, were $359,121 million, an increase from $331,117 million for the same period in 2023, representing a growth of approximately 8.4%[27] Expenses and Margins - Gross margin decreased to 29.9%, down 250 basis points from 32.4% in Q3 fiscal 2023, primarily due to product mix shifts[5] - Total operating expenses increased to $88.7 million, or 24.7% of net sales, compared to $65.9 million, or 19.9% of net sales in the prior year[5] - Research and development expenses increased to $16,103 million for the three months ended September 27, 2024, compared to $8,904 million in the same period last year, reflecting a growth of approximately 80.5%[27] - Operating expenses for the three months ended September 27, 2024, increased to $88,677 from $65,862 in the prior year, leading to an operating expense as a percentage of net sales of 24.7% compared to 19.9%[42] Assets and Liabilities - Total current assets increased to $811,169 million as of September 27, 2024, compared to $768,055 million as of December 29, 2023, reflecting a growth of about 5.6%[25] - Total liabilities rose to $1,091,201 million as of September 27, 2024, from $1,020,537 million as of December 29, 2023, marking an increase of approximately 6.9%[25] - Total assets as of September 27, 2024, were $2,288,259 million, up from $2,242,298 million as of December 29, 2023, indicating an increase of about 2.0%[25] Strategic Actions and Future Outlook - The company executed $400 million in interest rate swap hedges to reduce interest expenses and enhance predictability[2] - The company initiated strategic actions in the AAG segment aimed at improving inventory position and expects over $25 million in annualized cost reductions[2] - The company anticipates future growth driven by the acquisition of Marucci and expects to improve operating efficiencies[45] - The company is focused on developing new and innovative products to expand into new categories and end-markets[45] Risks and Challenges - The company faces risks related to supply chain disruptions and the ability to maintain relationships with key suppliers and customers[45] - The company is committed to maintaining its premium brand image and high-performance products while navigating market uncertainties[45]

Financial Data and Key Metrics Changes - Total consolidated net sales for Q2 2024 were $348.5 million, a decrease of 13% compared to $400.7 million in Q2 2023 [28] - Adjusted net income was $15.9 million or $0.38 per diluted share, down from $51.4 million or $1.21 per diluted share in the same quarter last year [30] - Adjusted EBITDA was $44.1 million for Q2 2024, compared to $79.4 million in the same quarter last year, with an adjusted EBITDA margin of 12.7% [31] Business Line Data and Key Metrics Changes - In the Powered Vehicle Group (PVG), net sales were $118 million, down from $140 million in the prior year, primarily due to lower OEM demand [12] - In the Automotive sector, demand from major OEMs was mixed, with premium trucks remaining robust while broader OEM automotive space showed signs of excess inventory [13] - In the Aftermarket and Accessories Group (AAG), net sales were $107 million compared to $156 million in the prior year quarter, with growth in the component aftermarket portion [15] - In the Specialty Sports Group (SSG), net sales were $124 million, reflecting a $19 million increase driven by the inclusion of Marucci, despite a $23 million reduction in bike sales [17] Market Data and Key Metrics Changes - The bike segment saw a 52% sequential revenue increase, indicating stabilization as the channel destocking phase nears conclusion [9][17] - The European market continues to improve relative to the U.S. market, which remains in a state of transition towards stabilization [18] Company Strategy and Development Direction - Diversification across business segments, products, markets, and geographies is a key component of the company's long-term strategy to mitigate risk and enhance growth opportunities [8] - The company is focused on innovation and product development, particularly in the bike and aftermarket segments, to drive future growth [9][25] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macroeconomic challenges but remains optimistic about sequential growth in the second half of the year, driven by new product launches and improving market conditions [24][36] - The company is adjusting its full-year guidance to reflect a more tempered sequential revenue lift in the second half, influenced by industry demand and quality challenges [23][34] Other Important Information - Leadership transitions were announced, with Dennis Schemm taking over as President of the AAG segment [10] - The company has secured an improved covenant profile on its capital structure to provide more flexibility amid uncertain macro conditions [33] Q&A Session Summary Question: Revised outlook and confidence in recovery - Management indicated that the revised outlook is primarily influenced by AAG and PVG, with SSG on track for the year [36] Question: Impact of quality issues and supply chain on automotive OEMs - Management clarified that demand is not the issue for premium products, but quality issues and supply chain challenges are significant factors [39] Question: Cost management initiatives - Management highlighted significant reductions in corporate operating expenses and actions taken to improve cost of goods sold [41] Question: Growth expectations for Marucci - Management expects strong double-digit growth for Marucci, projecting it to exceed $200 million for the year [49] Question: Future product launches and market conditions - Management confirmed that product launches are on track and that the company is optimistic about the trajectory of the bike segment [22][46]