Financial Performance Overview Fox Factory reported Q2 2025 net sales of $375M, with sequential and year-over-year growth across all segments, while adjusted EBITDA and its margin improved despite a decline in net income Second Quarter Fiscal 2025 Highlights Key financial metrics for Q2 2025 show sales growth and improved adjusted EBITDA, alongside a decrease in net income Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | Change | Sequential Change (vs Q1 2025) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $374.9M | $348.5M | +7.6% | +5.6% | | Net Income | $2.7M | $5.4M | -50.0% | N/A | | EPS (diluted) | $0.07 | $0.13 | -46.2% | N/A | | Adjusted EBITDA | $49.3M | $44.1M | +11.8% | +$9.7M | | Adjusted EBITDA Margin | 13.1% | 12.7% | +40 bps | +190 bps | | Adjusted EPS (diluted) | $0.40 | $0.38 | +5.3% | N/A | | Net Leverage | 3.8x | N/A | N/A | Improved from 4.1x | - Cost reduction initiatives are progressing as expected, mitigating the financial impacts of tariffs5 Management Commentary Management attributes growth to product innovation and operational improvements, actively managing tariff impacts to restore profitability - CEO Mike Dennison highlighted that growth was driven by product innovation, while operational improvements and cost management initiatives are improving profitability3 - The company is proactively managing an evolving tariff landscape through several initiatives4 - Footprint optimization across three continents - Shifting production from higher-cost regions - Strategic sourcing - Customer pricing discussions - Management expects the combination of operational excellence and innovation to restore industry-leading profitability as the consumer discretionary environment stabilizes4 Detailed Financial Results Q2 net sales increased by 7.6% year-over-year across all segments, but gross margin contracted due to product mix and tariffs, while the first six months saw a significant net loss primarily from a goodwill impairment charge Second Quarter 2025 Results Q2 2025 net sales grew across all segments, but gross margin declined due to product mix and tariffs, while operating expenses increased from restructuring and R&D Q2 2025 Net Sales by Segment (in millions) | Segment | Q2 2025 Sales | Q2 2024 Sales | YoY Growth | Growth Driver | | :--- | :--- | :--- | :--- | :--- | | Specialty Sports Group (SSG) | $137.2 | $123.6 | +11.0% | Stabilization in bike sales | | Aftermarket Applications Group (AAG) | $114.1 | $107.1 | +6.5% | Increased demand for aftermarket products | | Powered Vehicles Group (PVG) | $123.5 | $117.8 | +4.9% | Expansion of the motorcycle business | | Total Net Sales | $374.9 | $348.5 | +7.6% | | - Gross margin decreased to 31.2% from 31.8% in the prior year period, primarily driven by shifts in product line mix and the impact of tariffs7 - Total operating expenses increased by $6.1M to $98.5M, driven by organizational restructuring, R&D, and sales & marketing initiatives8 - The effective tax rate was 50.9%, significantly higher than the 21% federal statutory rate, due to the unfavorable impact of discrete items in proportion to pre-tax income9 First Six Months Fiscal 2025 Results For the first six months of fiscal 2025, net sales increased by 7.0%, but the company reported a significant net loss of $257.0M primarily due to a goodwill impairment charge First Six Months 2025 Key Financials | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $729.9M | $682.0M | +7.0% | | Gross Margin | 31.1% | 31.4% | -30 bps | | Net (Loss) Income | ($257.0M) | $1.9M | N/A | | Net (Loss) per Share | ($6.15) | $0.05 | N/A | | Adjusted Net Income | $26.4M | $27.8M | -5.0% | | Adjusted EPS | $0.63 | $0.67 | -6.0% | | Adjusted EBITDA | $88.9M | $84.6M | +5.1% | - Operating expenses for the first six months increased significantly to $458.7M from $186.7M year-over-year, primarily due to a goodwill impairment charge of $262.1M recorded in Q1 20251432 Financial Position and Outlook The company's balance sheet shows increased cash and reduced debt, with a significant goodwill impairment in Q1 2025, leading to updated fiscal 2025 guidance reflecting higher tariff expenses Balance Sheet Summary As of July 4, 2025, the balance sheet reflects increased cash and decreased total debt compared to the beginning of the year, with a notable reduction in goodwill due to an impairment charge Balance Sheet Highlights (as of July 4, 2025 vs Jan 3, 2025) | Account | July 4, 2025 | January 3, 2025 | | :--- | :--- | :--- | | Cash and cash equivalents | $81.5M | $71.7M | | Inventory | $412.8M | $404.7M | | Goodwill | $377.4M | $639.5M | | Total debt | $698.8M | $705.1M | - Goodwill decreased significantly due to a non-cash impairment charge taken in Q1 2025, triggered by adverse changes in U.S. tariff policies and a sustained decline in the company's stock price18 Third Quarter and Fiscal 2025 Guidance The company updated its fiscal 2025 guidance, expecting net sales between $1.45B and $1.51B and adjusted EPS between $1.60 and $2.00, factoring in increased tariff expenses Fiscal 2025 Guidance | Metric | Q3 2025 Guidance | Full Year 2025 Guidance | | :--- | :--- | :--- | | Net Sales | $370M - $390M | $1.45B - $1.51B | | Adjusted EPS | $0.45 - $0.65 | $1.60 - $2.00 | | Full Year Adj. Tax Rate | N/A | 15% - 18% | - The company's expected pre-mitigated tariff expense for 2025 has increased from approximately $38M to upwards of $50M, which management believes it can absorb within its updated guidance through countermeasures21 Financial Statements and Reconciliations This section presents unaudited consolidated financial statements, including balance sheets, income statements, and cash flow statements, along with detailed reconciliations of GAAP to non-GAAP measures for adjusted net income, EBITDA, gross profit, and operating expenses Condensed Consolidated Financial Statements The condensed consolidated financial statements show total assets of $1.965B and total liabilities of $1.006B as of July 4, 2025, with a net loss of $257.0M for the six months ended July 4, 2025, primarily due to a goodwill impairment charge - The Condensed Consolidated Balance Sheet as of July 4, 2025, shows total assets of $1.965B and total liabilities of $1.006B30 - The Condensed Consolidated Statement of Income (Loss) for the six months ended July 4, 2025, reports a net loss of $257.0M, heavily impacted by a $262.1M goodwill impairment charge32 - The Condensed Consolidated Statement of Cash Flows for the first six months of 2025 shows net cash provided by operating activities was $37.5M35 Reconciliation of GAAP to Non-GAAP Measures This section reconciles GAAP net income to adjusted net income and adjusted EBITDA for Q2 2025, detailing adjustments for amortization, restructuring, and other expenses, and provides segment-level adjusted EBITDA - For Q2 2025, GAAP Net Income of $2.7M was reconciled to Adjusted Net Income of $16.6M, with key adjustments including $10.4M for amortization of purchased intangibles and $3.6M for organizational restructuring expenses37 - For Q2 2025, GAAP Net Income of $2.7M was reconciled to Adjusted EBITDA of $49.3M, with major reconciling items including depreciation and amortization ($21.4M) and interest/other expense ($12.6M)40 Q2 2025 Segment Adjusted EBITDA (in millions) | Segment | Q2 2025 Adj. EBITDA | | :--- | :--- | | Powered Vehicles Group | $16.4 | | Aftermarket Applications Group | $16.0 | | Specialty Sports Group | $30.4 | | Unallocated corporate expenses | ($13.5) | | Total Adjusted EBITDA | $49.3 | - Q2 2025 Gross Margin of 31.2% was reconciled to an Adjusted Gross Margin of 31.3% after accounting for amortization of acquired inventory valuation markup44
Fox(FOXF) - 2025 Q2 - Quarterly Results