Fox(US:FOXF)2020-05-10 13:37Financial Data and Key Metrics Changes - In Q1 2020, the company generated sales of $184.4 million, a 14% increase compared to $161.7 million in Q1 2019 [21][36] - Gross margin was 30.7%, a decrease of 90 basis points from 31.6% in the prior year [37] - Non-GAAP adjusted net income was $20.5 million, a decrease of approximately $1.1 million compared to $21.6 million in Q1 2019 [44] - The effective tax rate for Q1 2020 was 9.5%, lower than the expected mid- to long-term rate due to a reduction of foreign tax [42] Business Line Data and Key Metrics Changes - Powered Vehicles Group product sales increased by 24.6% compared to Q1 2019, driven by strong OEM channel performance prior to the pandemic [21] - Specialty Sports Group sales decreased by 1.8% compared to the prior year, reflecting a shift in timing of OEM orders [22] - The Specialty Sports Group's model year 2021 introductions have been well received, indicating potential for future growth despite a slight decline in Q1 [23] Market Data and Key Metrics Changes - The company experienced a temporary slowdown in the Powered Vehicles Group due to OEM customer closures, while aftermarket sales remained strong [19][60] - In April, OEMs were shut down in the U.S., impacting Powered Vehicles Group results, but the Specialty Sports Group functioned in a more normalized production environment [24][60] Company Strategy and Development Direction - The company is focused on expanding its powered vehicles manufacturing footprint in Georgia, with the first phase of the new facility set to be operational soon [20][29] - The acquisition of SCA is expected to enhance the company's North American manufacturing footprint and diversify its brand and product portfolio [30][31] - The company remains optimistic about growth opportunities as North America and Europe begin to reopen their economies [29] Management's Comments on Operating Environment and Future Outlook - Management emphasized the importance of employee health and safety while navigating the challenges posed by the COVID-19 pandemic [9][52] - The company believes that the issues faced are transitory and not indicative of a long-term demand problem [27] - There is an expectation of pent-up demand for powered vehicles as the economy reopens, although the exact timing remains uncertain [101] Other Important Information - The company incurred approximately $1.8 million in COVID-19-related costs in Q1, which impacted gross profit results [11][37] - The company has taken measures to manage costs, including reducing nonessential operating expenses and furloughing employees [48][49] - The company has a $250 million revolving credit facility, providing financial flexibility moving forward [50] Q&A Session Summary Question: Impact of COVID-19 on Powered Vehicle Sales - Management noted that while end-customer demand remained strong, factory shutdowns significantly impacted sales in April [58][60] Question: Resilience of Customers During Economic Slowdown - Management indicated that the current situation is a pandemic response rather than a recessionary one, and end-customer demand has remained strong [64][66] Question: Annualized Benefit from Cost-Cutting Measures - Management stated that it is difficult to specify the annualized benefit from cost-cutting measures due to the variability in furlough durations and production ramp-up [70][74] Question: Retail Demand and Lead Times - Management confirmed that the order book was strong going into Q2, reflecting good visibility into demand for model year 2021 products [101] Question: Aftermarket Trends - Management reported that aftermarket demand for bikes remained strong, while powered vehicle aftermarket sales were impacted by installer availability [90][91]