Fox Factory Holding Corp. (NASDAQ:FOXF) Q3 2022 Earnings Conference Call November 3, 2022 4:30 PM ET

Company Participants

Mike Dennison - Chief Executive Officer

Scott Humphrey - Chief Financial Officer and Treasurer

Conference Call Participants

Larry Solow - CJS Securities

Mike Swartz - Truist Securities

Anna Glaessgen - Jefferies

Jim Duffy - Stifel

Craig Kennison - Baird

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….and as always, remain agile and nimble. On a long-term basis, and as these headwinds abate, we remain committed to our expectations of mid to high single-digit growth.

We will continue to strengthen our core competencies and be relentless in extending our competitive differentiation. We also believe the continued optimization of our Gainesville plant will drive margin improvement, as I discussed earlier. The dynamic operating environment has only become more complex as the year has progressed. And still, the team has delivered another record revenue quarter. This, along with raising our revenue guidance to close out the year, deserves to be celebrated and I cannot thank each and every single member of our Fox family enough for helping us challenge the impossible everyday.

And with that, I will turn the call over to Scott.

Scott Humphrey

Thanks Mike. Good afternoon, everyone. I will begin by going into our third quarter financial results and then review our guidance. Sales in the third quarter of 2022 were $409.3 million, an increase of 17.8% versus sales of $347.4 million in the third quarter of 2021. Our Powered Vehicles Group, PVG, delivered a 25.1% decrease in sales in the third quarter compared to the same quarter last year, primarily due to strong performance in our upfitting product lines and increased demand in our OEM channel.

Moving to Specialty Sports Group, SSG, delivered a 9.1% increase in sales compared to the third quarter of 2021, primarily due to increased demand in our OEM channel. On a year-to-date basis, sales were $1,193.9 million versus $956.7 million over the same period last year, an increase of 24.7%. This jump in sales is driven by increased demand, primarily in SSG OEM business and strong performance from our upfitting products.

Fox Factory’s gross margin of 33.5% in the third quarter of 2022 a 10 basis point increase from 33.4% in the same period in the prior year. For the third quarter of 2022, non-GAAP adjusted gross margin also increased by 10 basis points to 33.9% versus Q3 2021. The increase in gross margin and non-GAAP adjusted gross margin were primarily driven by favorable product mix compared to Q3 2021, led by higher volume sales in our Specialty Sports Group and strong performance in our upfitting product lines. Our results were also positively impacted by improved factory efficiencies. The increases in gross margin and non-GAAP adjusted gross margin were offset by higher inflationary pressures and we are starting to see [indiscernible] our global cost pressure.