Fox Factory Holding Corp. Price & Performance (FOXF)

Before we begin, I would like to remind everyone that the prepared remarks contain forward looking statements within the meaning of federal securities laws and management may make additional forward looking statements in response to your questions. Such statements involve a number of known and unknown risks uncertainties many of which are outside the company's control and can cause future results, performance or achievements to differ materially from the results, performance or achievements [indiscernible] or implied by such forward looking statements. Important factors and risks that could cause or contribute to such differences are detailed in the company's quarterly reports on Form 10 Q and in the company's latest annual report on Form 10 ks each filed with the Securities and Exchange Commission. Investors should not place undue reliance on the company's forward looking statements and except as required by law, the company undertakes no obligation to update any forward looking statement or other statements herein whether as a result of new information, future events or otherwise. In addition, where appropriate in today's prepared remarks and within our earnings release, we will refer to certain non GAAP financial measures to evaluate our business including adjusted gross profit adjusted gross margin, adjusted operating expenses, adjusted net income adjusted earnings per diluted share, adjusted EBITDA and adjusted EBITDA margin.

As we believe these are useful metrics that allow investors to better understand and evaluate the company's core operating performance and trends. Reconciliations of these non GAAP financial measures to their most directly comparable GAAP financial measure, are included in today's earnings release, which has also been posted to our website. And with that, it is my pleasure to turn the call over to our CEO, [indiscernible] Thanks, Toby, and thanks everyone for joining today's call. In the fourth quarter, we delivered on our financial commitments, with sales and adjusted earnings per share in line with our guidance. We also demonstrated progress on our $25,000,000 cost reduction initiative and drove improvements in our working capital resulting in $63,000,000 of debt pay down during the fourth quarter. While we experienced unevenness in demand across our OEM customers during the quarter, we remained focused on executing against the strategic initiatives we outlined last quarter, continuing to exert control where we can in a challenging market environment. More importantly, we remain committed to our long term success through our ongoing focus on product development initiatives which are creating new customer engagements and opportunities. And while delivering our long term strategy, we drove near term actions to improve As an example, both AAG and PVG demonstrated sequential adjusted EBITDA margin improvement two fifty basis points and three ten basis points respectively.

Through better inventory controls, strategic chassis mix management and facility and resource rationalization.

Our working capital improved by $55,000,000 year over year as we balanced strategic priorities. In AEG, working on chassis mix resulted in a $60,000,000 improvement in prepaids. [indiscernible] partially offset by additional necessary inventory ahead of the holiday season.

In SSG, year end component sales drove an improvement in inventory and in PVG stronger sales in our aftermarket business enabled further inventory optimization.

As you may recall from last quarter's earnings, we are taking action across four key initiatives. One, simplifying and consolidating our our footprint. Two, fixing or eliminating non performing products in our portfolio. Three, improving working capital and four, reducing overhead costs.

Here's a quick update. We completed the closure of our Colorado facility in the fourth quarter and initiated additional footprint consolidation in PVG and AEG operations driving benefits starting in the second quarter of twenty twenty five.

We recently traveled to Taiwan to work with our bike team as they consolidate and optimize our footprint on the island.

We've made progress on our cost optimization plan.

Having identified $25,000,000 in savings across COGS and SG and A. We've executed on multiple initiatives across the organization. From footprint optimization and operational consolidation two strategic sourcing improvements. Some of these actions are complete, with benefits beginning to materialize in our results.

While others are in various stages of implementation.

The benefits from these collective actions will continue to build as we move through 2025. With full realization expected to be visible in 2026. And the early success gives us confidence in our ability to identify and execute on additional opportunities as we advance our optimization initiatives. Importantly, not just focused on cost reduction. We're strategically repositioning our business to operate more efficiently. As I've said in prior calls, we are focused on continuing to diversify across segments products markets and geographies.

Enabled by a world class organization, which has responded to volatile customer demand and industry cyclicality.

We believe these efforts put us on a path to restore our best in class EBITDA margin as market conditions normalize while driving higher rates of free cash flow to improve our balance sheet. Now turning to our segment performance. In the Powered Vehicle Group, net sales were $116,000,000 slightly down from $118,000,000 in the prior year quarter but up $6,000,000 or 5% sequentially from the third quarter. [indiscernible] Adjusted EBITDA margin also improved sequentially by three ten basis points. Revenue was largely in line with expectations as we continue to navigate challenging market conditions affecting both our powersports and In the automotive sector, we continue to face headwinds from ongoing OEM production issues affecting forecast and timing of orders. While the premium truck category continues to show resilience, growth is more subdued as consumers remain conservative in purchasing behaviors. In the powersports sector, conditions remain consistent with what we discussed Last quarter, OEMs are aggressively managing production levels to address dealer inventory and sell through. This aligns with what we're seeing across the industry where OEMs are expecting flat to down low single digit retail sales in 2025. With any potential recovery skewed toward the second half of the year.

What differentiates us from everyone else is that our product development teams continue to win new customers such as CFMOTO and Buuel in 2024. And additional new OEM customers to our portfolio in 2025 include BMW, Ducati and Triumph. [indiscernible] By expanding our focus to suspension for motorized two wheeled vehicles and complete [indiscernible] our products to new customers thereby helping to offset declines in other areas of powersports. The FOX brand remains the standard in performance continuing to be sought after by enthusiasts want to partner with a leader in on and off road performance. The enduring nature and value of our partnerships was recently highlighted in an article by Ford touting the value of our technology to their high performance off road truck segment. The strength of the FOX brand is also evident in PPG's aftermarket business, where we see resilience in both domestic and international channels. This resilience reinforces a trend during this post pandemic cycle where customers are choosing to service and upgrade their current vehicles they're not in a position to make new vehicle purchases. Looking ahead, while we expect continued market pressures in 2025, we're maintaining our focus on operational efficiency and cost management to protect margins.

We're also continuing to win new partnerships and expand our presence as evidenced by our new products and OEM relationships.

In our aftermarket applications group, net sales were $112,000,000 down from 120 but up $12,000,000 or 11% sequentially. Adjusted EBITDA margin was 12%, a sequential improvement of two fifty basis as cost reduction actions were implemented. This performance was in line with our expectations for the quarter and reflects the progress we're making on our operating initiatives. This improvement reflects chassis inventory optimization completed in the third quarter and improving chassis mix from our OEM partners. In fact, we're seeing some of the best mix of chassis We remain cautiously optimistic about the pace of broader market recovery our partners work through their delivery challenges and our dealers work through their higher inventory. We're also working with our dealers to drive the appropriate vehicle mix that meet the needs of their end customers rather than simply chasing volume. We continue to strengthen our relationships with key partners, recently hosting OEM executive teams at our testing facility in Southern California. Engagements along with our expanding partnership with RTR and our long term relationship with Shelby.

Demonstrates the strength and opportunity in this business. In our aftermarket components business, we are experiencing sustained growth in wheels and lift kits. Addition, we continue to make strides on optimizing strategic inventory of high demand units to ensure availability when customers are ready to buy. This was particularly evident during the holidays where our decision to increase select inventory levels enabled record sales several product lines. Additionally, we're expanding into new categories, including the launch of what we have termed [indiscernible] The AgWagon represents an exciting expansion into a new market. Offering performance built vehicles designed for farmers, ranchers and anyone else who uses their vehicle to not only get to work, but to do their work. Available across all major super duty and heavy duty truck platforms, this product combines rugged performance, with practical features tailored for the unique demands of these customers. We also launched a suspension package with Grand Design RV, This product recently debuted at the Tampa RV Show and showcased better driving experience using adjustable suspension settings. From highway cruising to off road exploration. This system includes remote reservoir Fox Shocks at each corner as well as BDS control and custom radius arms. Delivering unprecedented performance.

Looking ahead, our optimized inventory position strengthening dealer relationships, and operational improvement [indiscernible] provide a solid foundation for long term growth. And combined with our expanded product portfolio, and successful facility consolidation efforts. Believe we are well positioned to capture opportunities as market conditions normalize. In SSG, net sales were $125,000,000 compared to $93,000,000 last year. Primarily reflecting a $41,500,000 increase from a full quarter of Maruti a $6,700,000 increase in the bike category. Consistent with our expectations. Adjusted EBITDA margin of 22.4% was down sequentially by 190 basis points due to inventory optimization efforts in the fourth quarter. As well as incremental investments we are making at Merci ahead of the upcoming MLB baseball season. As with the previous quarter, we're seeing varied recovery rates in our bike business across different geographies, channels and customers. With this uneven pattern likely to continue through 2025. Similar to the chassis inventory optimization work we completed in AEG in the third quarter, we took action in our bike business to better align inventory While the inventory rebalancing significantly impacted our SSG segment margins in the fourth quarter, our working capital will benefit from a healthier inventory position and better alignment between production and demand as we enter 2025.

Additionally, the consolidation of our Taiwan operations that I mentioned earlier combined with strategic sourcing, projects and cost saving opportunities, we'll provide additional levers for margin improvement beginning this quarter and getting strength as we move forward. Our expansion in the entry premium bike segment continues to progress. With growing strength among our top OEM customers helping to offset softness with smaller OEMs. While the European market demonstrated strength in early twenty twenty four, a reluctance to end the year with inventory weighed on purchasing habits in Q4. Throughout the last year, have implemented enhanced forecasting and planning processes with our strategic OEM partners to ensure better alignment between our production capabilities which continues to improve our visibility. In product development, we have been hard at work developing several new products we will announce and launch in 2025. [indiscernible] of these, we believe, are going to revolutionize the way people think about suspension and bikes. We are excited to get these products out on the trails and in our enthusiast hands.

In our Marucci business, we're excited to have officially begun our role as MLB's official BAT partner as of January 1. We have expanded our BAT manufacturing capacity as well as designed new products to drive incremental sales and in the MLB with Merge and Victus. Incidentally, both of these brands had record market share in the MLB for 2024. Additionally, we have made growth investments in our softball business to further capitalize on the fastest growing team sport in America. We have aligned and coordinated our Fox and Marucci engineers to accelerate new product advancements that we we can drive additional growth. These near term investments weighed on our Q4 margins as we focused on long term success. We look forward to sharing more details about several of these exciting initiatives in the coming months as we ramp up Current order book and latest forecast from OEM partners across all segments the framework for 2025 remains in line with what we shared in our third quarter update. While we see several opportunities for year over year growth, our base case expectation for the OEM customer environment to remain challenged. I'd emphasize that amid the tempered industry growth expectations for 2025, we are committed to driving margin improvement and enhanced free cash flow generation through our comprehensive cost optimization and operational excellence initiatives.

Which are already yielding results. And finally, with the new administration, multiple changes have begun to surface in regulatory policy as well. Including tariffs. Our teams have spent considerable time analyzing these potential and planned tariffs as you can imagine it's a complex and fluid environment. Our current manufacturing footprint is well positioned relative to these policy shifts. With no significant presence in Mexico, Canada or China, and all of our aluminum baseball bats, are manufactured in China. In both of these categories, we are executing plans mitigate the potential impacts through cost reductions and pricing adjustments. Our bike business operates out of Taiwan, and therefore the majority of aluminum tariffs would be felt by our customers as they import our products or completed bikes into The U. S. The impact of The U. S. Bike industry is yet to be fully understood. By our OEM customers. As you know, the core of our powered vehicle manufacturer Although we use aluminum and steel in our products, much of the supply chain originates in The U. S. With no impact. For the portion of our supply chain, which is imported, our customer agreements have pass through provisions related specific indexes on materials scenarios, such as this.

However, while Fox is not disadvantaged relative to our competitors, we share our customers' concerns as many of these OEMs face meaningful direct exposure across their global manufacturing footprints. This added complexity during a period of rightsizing pressure and ongoing macro challenges may create additional inflationary pressure Fox consumers, and present another headwind for the industry to overcome as it works through the cycle. We plan to provide a more comprehensive update during our next earnings call. And with that, I'll turn the call over to Dennis. Thanks, Mike, and good afternoon, everyone. I'll begin by discussing our Fourth quarter financial results briefly summarize [indiscernible] full year results and then move to our discussion on the balance sheet cash flow and capital allocation strategy before concluding with a review of our guidance. Total consolidated net sales in the fourth quarter of fiscal twenty twenty four were 352,800,000.0 an increase of 6.1% versus sales of 332,500,000.0 in the same quarter last year. Primarily reflecting the impact of the Marucci acquisition and year over year growth Sequentially, as anticipated and consistent with our prior communications, we realized growth in AAG and to a lesser extent in PPG. Which helped to offset the anticipated step down in our SSG business this quarter due to the timing of OE order patterns, which is typical for this time of year.

Our gross margin increased 120 basis points to 28.9% in the fourth quarter of fiscal twenty twenty four compared to 27.7% The increase primarily reflects margin benefits from the absence of acquisition related inventory costs for Marucci that impacted the prior year period, following the closing of this transaction in November of twenty twenty three. Our adjusted gross margin increased 20 basis points to 29.2% versus the prior year quarter.

Sequentially, our gross margin is down 100 basis points primarily because of our strategic growth investments in Marucci and bike inventory actions that Mike commented on Total operating expenses were $90,600,000 or 25.7% of net sales in the fourth quarter of fiscal twenty twenty four. Compared to 81,000,000 or 24.4% of net sales in the same quarter last year. The increase in operating expenses was attributed primarily to the inclusion of $18,700,000 of operating expenses from our Marucci acquisition. Adjusted operating expenses as a percentage of sales increased to 21.7% in the fourth quarter of twenty twenty four compared to 20.6% in the same period last year.

The company's tax benefit was $4,100,000 in the fourth quarter of fiscal twenty twenty four compared to a tax benefit of 3,100,000.0 in the same period last year. Net loss in the fourth quarter of fiscal twenty twenty four was 100,000.0 or zero per diluted share compared to net income of $4,100,000 or $0.1 per diluted share in the same quarter last year. And adjusted net income was $12,800,000 or $0.31 per diluted share compared to $20,300,000 or $0.48 per diluted share in the fourth quarter last year. Net loss is primarily driven by the increase in interest expense. Adjusted EBITDA increased to $40,400,000 for the fourth quarter of fiscal twenty twenty four compared to $38,800,000 in the same quarter last year. Adjusted EBITDA margin was 11.5% in the fourth quarter of fiscal twenty twenty four compared to 11.7% in the fourth quarter of fiscal twenty twenty three. The decrease in our adjusted EBITDA margin continues to reflect the temporary and unique challenges that our customers across various industries are facing which is impacting volumes and fixed cost absorption at our facilities. Other drivers of our adjusted EBITDA margin performance include shifts in our portfolio mix and the inventory optimization actions we took in bike partially offset by control measures Continuous improvement initiatives and the results of the inventory optimization work we completed in AAG.

Sequentially, adjusted EBITDA margin of 11.5% was down slightly given the decisive inventory actions we executed in bike, partially offset by improvements in adjusted EBITDA margin in both AAG and PVG, where cost improvement actions are being executed. I'll briefly touch on our full year results for fiscal twenty twenty four. Net sales for the year were $1,390,000,000 compared to net sales of $1,460,000,000 in the prior year. This decrease reflects a 23.5% contraction in AAG net sales and a 12% decrease in PBG net sales. Partially offset by a 31.3% increase in net sales for our SSG segment. Which reflects the inclusion Net income for fiscal twenty twenty four was $6,600,000 or $0.16 per diluted share. This compares to net income for fiscal twenty twenty three of 120,800,000.0 or $2.85 per diluted share. Adjusted net income for the fiscal twenty twenty four year was $55,400,000 dollars or $1.33 of adjusted earnings per diluted share. Which compares to 167.5 of adjusted net income or $3.95 in the fiscal year 2023. Lastly, adjusted EBITDA was $167,000,000 for the full year 2024 compared to $261,000,000 in the prior year. Moving to the balance sheet and cash flows.

Our focus on the balance sheet resulted in a $55,000,000 improvement in working capital driven primarily by AAG, where our decisive chassis inventory optimization actions taken in Q3 resulted in a $62,000,000 improvement in prepaids and in PBG, decreased [indiscernible] by $17,000,000 through improved ordering controls in the fourth quarter. In SSG, bike inventory increased slightly offset by action on end of year inventory that it converted into finished goods for sale into the aftermarket. In the full year ended 01/03/2025, inventory rose by $32,900,000 or 8.8% compared to year end 2023 driven by the imbalance in expected versus fulfilled orders and because of planned seasonal inventory builds primarily in AAG to ensure high moving stocking units were available during the holidays. I'd like to stress that working capital will continue to be an area of focus for us as these turbulent times, Our revolver balance as of 01/03/2025 was $153,000,000 versus $370,000,000 as of December 29, 2023. Our term loan balance was approximately $552,000,000 net of loan fees. During the third quarter, we implemented a $400,000,000 interest rate swap Improving predictability and together with the $100,000,000 existing swap saving approximately 1,800,000.0 interest expense for the fourth quarter. And we paid down $63,000,000 in debt.

We will continue to prioritize R and D and sales and marketing but to be very clear, debt pay down remains the number one priority for capital allocation. Now moving to our outlook for 2025. For the fiscal year twenty twenty five, the company expects net sales in the range of $1,385,000,000 to $1,485,000,000 dollars adjusted earnings per diluted share in the range of $1.6 to $2.6 and a full year adjusted tax rate in the range of 15% eighteen percent Underpinning our full year guidance are several key assumptions, including continued growth in AAG as we move past specific, OE concerns such as quality issues, and disruption from model year changeovers. Continued momentum in Marucci benefiting from our new Major League Baseball partnership, taking effect exciting new bat launches, both in softball a gradually stabilizing environment in PVG and bike. With performance consistent with 2024 levels in terms of absolute dollars. Revenue and margin improvement weighted towards the second half of 2025 where we believe we will progressively realize benefits from our $25,000,000 cost reduction plan, The cost reduction is being conducted across the entire company. Where we have identified approximately 15% to 20% of the savings coming from expense reductions and the remainder in cost of goods.

Roughly 10% is coming from corporate with the remainder coming ratably across the three segments. In addition, we expect 30% to 35% of the savings to impact our first half earnings and the remainder coming in Shifting to the first quarter of fiscal twenty twenty five, the company expects net sales in the range of $320,000,000 to $350,000,000 and adjusted earnings per diluted share in the range of $0.12 to $0.32 To be clear, our guidance excludes the impacts of tariffs. Importantly, while we remain in a cautious near term outlook, given the [indiscernible] [indiscernible] we continue to invest in strategic growth initiatives that position us to capture opportunities as market conditions normalize. Mike, back to you for closing remarks. Thanks, Dennis.

In closing, we entered 2025 poised with a clear focus on operational excellence and strategic positioning across our segment While near term market conditions remain challenging, we believe the decisive actions we've taken to optimize our operations and strengthen our foundation we'll strengthen our business. Our comprehensive cost reduction program combined with our enhanced inventory management and strengthened partnerships with OEM customers and dealers positions us well to drive margin improvement even in a tempered growth environment.

Diversity of our portfolio from our expanding presence in agriculture and motorsports markets to our new role as MLB's official BAT partner, demonstrates our ability to find opportunities for strategic growth while maintaining our commitment to developing premium performance enhancing products. As we look ahead, we remain focused on what we can control. Operational efficiency, innovation and strategic growth initiatives that will drive long term value for our shareholders. With that, Operator, take our first question from Jim Duffy With Stifel, Please go ahead. Your line is open. Thank you. Good afternoon. It's good to hear from you guys. It's been a while. I wanted to start just by asking about the Taiwan facilities consolidation. Where capacity sits relative to pre COVID levels at the adjustments you've made and the expectations and where capacity sits relative to the expectations for normalization of that business. Can you give us a little more flavor there, please?

Sure.

Jim, the capacity is about in line with pre COVID, but keep in mind, from a footprint perspective, from an efficiency and lean perspective. We've increased our capacity even within that same footprint. So we've got room to run for this year in Taiwan relative to what we expect that business to do. As we think about long term capacity expansion, think about that probably not on the island, think about that in probably Southeast Asia, Thailand, Vietnam, etcetera. So we're really solidifying kind of the foot future growth projections would take us probably off the island.

Okay. Thank you. And then one more if I may. Dennis, just can you give us an update on your on the upfitting business, the dealership dialogue and you're thinking about for expectation of number of dealerships as you look across 2025? Is there opportunity Go ahead. Yes. Thanks for that question. There is a lot of hard work going on right now across that PVD team, We've done a recent meeting that we had in Baton Rouge with our sales managers and we invited deal feedback from them And I can tell you that they were really appreciative of taking the move that we did on reducing some of the older chassis out there, getting our inventory well repositioned. At the same time, we are cultivating really strong relationships and cultivating innovation with them to make sure that we're delivering the right products to the customer. So we are in full realization that in order to continue to grow we've got to grow our dealers as well. And we're doing a great job of diversifying those dealers across The U. S. Thank you. We'll take our next question from Mike Schwartz with Truist.

Please go ahead. Your line is open.

Hey guys, good morning or sorry, good afternoon.

Just on the bike business, I think your commentary suggested flat revenue year over year in that business for '25 Help us understand the puts and takes there. I guess I had assumed given the lack of new model year product last year that would create somewhat of a a tailwind on a year over year basis this year. But it sounds like you're also bringing inventory in line. So just help us understand again the puts and takes there.

We think there could be upside in the bike business year, but keep in mind, we've had a couple of years of really challenged forecast From what we see in Q4, what we've seen so far in Q1, are pretty positive signals. We think inventory is better in control. That's a great sign. We think our product launches and our product diversification in that space is good. Right now, we're going to be conservative and just kind of wait and see how the cards fall relative to the OEMs. Obviously, there's a lot of lot of noise out there in the system that we want to understand. But we believe obviously we believe we hit the base in 2024 or hit kind of the ground in that business. And with our new product launches, we think there's some upside. So we'll wait and see that actually materialize, but we feel pretty good about it.

Okay, that's helpful. And maybe just the new MLB partnership. Is there any way to frame what that actually means just in terms of size and maybe timing of when that would impact you?

Well, timing is easier because timing, you know, them the Major League Baseball season really kicks off at the end of this quarter and into Q2 where it really grows and then into the summer and finally October. So we see a lot of the growth coming in kind of Q2, Q3. Relative to that relationship, but there's a lot of hard work being done now to get prepared for that obviously, capacity planning, things like that. In terms of putting a number to it, I think we're a little premature for that. We don't want to get ahead of our skis. We're really changing the way MLB thinks about that partnership.

And they're excited about the changes that we're bringing to them and they're bringing to us. So it's kind of a whole new day. And I think both MLB and Fox slash Marucci are really trying to figure out how big it can be and It's It's positive signs, let me tell you, but I think there's a lot of work to do. So before we release start to put a number to it, actually grow into that relationship and deliver BATs and get it going and then we'll come back to you with [indiscernible] Understood. Thanks Mike. We'll take our next question from Anna Glascon with B. Riley. Please go ahead. Your line is open.

Hi, good afternoon. Thanks for taking my question. I'd like to start on the auto business, particularly on the OEM Now clearly understanding that the tariff situation is fairly fluid, but would love if you could expand on how your conversations with key partners are going in light of [indiscernible] planned [indiscernible] how they plan to adjust potential production in the face of escalating tariffs and how you guys are contemplating this within your go forward plans?

Yes. The interesting thing and you've heard all the reports coming out from the different OEMs but the interesting thing about our business, Anna, that you have to remember is that when we talk when we're talking Ford, we're talking to a very select set of on PVG OEM, we're talking to a very select set of chassis mainly produced in The U. S. That are their high end premium product. So Ford has a lot of things to contemplate and think about relative to tariffs but relative to the space we play, little bit less affected. And we think that that product set has a bit more resilience to these tariff issues than maybe the rest of Ford. So we feel pretty good about that. When it comes to Toyota, when it comes to Stellantis are the two big partners.

Stellantis was significantly down in '24 relative to dealer inventory and some of the challenges they had. So we're already seeing an upside on Stellantis over '24. I don't expect that the tariff issue is going to change dramatically what we have in the current forecast. Because it's in line with what we did in 2024. And like I said, we're seeing some upside. So little too early to tell you. We need to hear more from Stellantis and what they think about that relative to the Mojave product and even the G product. And then Toyota, we're on their higher end vehicles. We're on their TRD Pro Class. Vehicles. So again, being in the premium space helps us in automotive. I don't want to sit here and tell you that there isn't going to be a lot of teeth gnashing and challenging conversations around consumer demand relative to what could be a very inflationary event I think that's what we need to think about is what's the inflationary impact to a consumer. Their willingness to buy these vehicles relative to our product, how we price it, etcetera, we've got that indexing in our pricing model with these OEMs. So it doesn't have a direct implication necessarily to what we sell to them it has an implication to what it means in their demand side.

Relative to end customers. Again, Ford and our products more protected, less protected in Solentis TRD Pro probably more protected as well.

Does that help?

Great. Yes. Thanks, Mike. That was super helpful. Turning to Marucci, you guys commented on continued momentum, I believe, is how you put it for 2025. I believe when they were acquired, we thought about growth in the low double digit range. It's that way to benchmark that business.

That is. You're thinking about it right. When you look back at 2024 and you'll do the math, we had three record quarters out of four with Marucci. They had a record year.

A lot to celebrate, a lot a lot of really good learning by the way, learning in some mistakes, that were made in 2024 that we learned from. So when I look back I like to think that it didn't quite hit the number I had four, but again, three record quarters out of four isn't too bad. In the market that we all had in 2024. In 2025, think it's a double digit growth business. I think the MLB helps that even further. And the set of products that we're coming out with in softball, and some of these other spaces are really, really good. So I'm I'm pretty excited.

I'm very bullish. Maruti is one of our growers this year for sure.

Even in light of kind of the macro dysfunction.

Great. Thanks, guys.

We'll take our next question from Larry Salow with CJS Securities. Please go ahead. Your line is open.

Great. Thanks and good afternoon guys. I guess just from a high level summary, so it looks like the guidance sales guidance about flat to mid single digit, I think minus 1% to 7%. So sort of low and mid single digit, that 3% growth number. So it sounds like getting a little growth out of Marucci, a lot of growth, but it's a relatively smaller piece.

And then the sort of rest of that will be mostly in AAG? Is that kind of a good broad brush of just what's going for and it's a little more back end loaded?

Yes, Larry. The way I think about it, it's flatter than it was in the guide last year in terms of quarter to quarter. It's really a function of by the way, product launches not macro improvement. So we think about in twenty twenty five's view when do our products launch, when do they come out, which quarter they come out in, what's the implication of that. That's more of the driver. We don't have any any goodness baked in relative to a macro. So no upside from that.

You think about the businesses, think about AAG and Marucci as up in 2025.

PVG is a function of powersports, which has not only the the inventory issues, but also the tariff issues, which will could have a significant impact on Polaris and VRP. That we think is flattish to down It's improved by some new OEM customers. When I mentioned in the prepared remarks, BMW, Ducati, Triumph, those are all good wins for us. That are going to help us in 2025 including CFMoto and Buell.

But all those just offset well, they take some time, but they also just offset the downside of what I just mentioned, which is kind of the macro and inventory issues. So PPG, we think about as kind of flattish to maybe slightly down. And then bike, as I said to Mike earlier, I think bike is is pretty flat. We could see some upside from bike that would be one ones that we'd call out in future earnings calls is probably helping us in the year. Just because it's coming from such a low base.

But for now, we're going to call bike and PPG fairly flat and the other two up.

Got it. Okay. And then just on bikes, just cycling a little bit more. I know 2024 was a much better year, good recovery. And then I think it was led by initially some of the smaller more nimble OEMs [indiscernible] I mean again, we're not hopefully not going contracted going backwards, but sounds like there's still some inventory in the channels. Is there any like particular more stress areas coming out of there. I think you had mentioned Europe got a little slower too as an end market, I guess, last year there was some rain, but anything on that? Is it e bikes driving any of this sort of still unevenness in the channel?

Yes. Ebikes are actually a little softer than we expected, especially in the lower end e bikes where we really don't play as much, but e bikes as a segment in that industry are a little bit soft right now.

The thing that we're seeing is that The bike dealers, distributors and OEMs are all very resistant to inventory positions. So whereas they would have inventoried more coming out of 2024, they have not, which is actually in a weird way kind of affected our Q4 numbers a little bit. But it's a good thing. So even though it might look on paper like it's bad, Larry, we actually appreciate it. We'd rather have them run much thinner inventory levels and be much more reactive to market demand signals than building a building a big inventory pile. So I think in general, the bike industry is significantly healthier coming out of 'twenty four than coming out of 'twenty three.

That's pretty easy say. And I think there's going to be a good build this year as new product really start to get launched. Remember, industry really hasn't seen a lot of new product in the last several years.

Because people were trying to burn through inventory that could have been two, three years old. So this is the first chance to bring some real fresh new innovative product to the market. So we're pretty excited about that. Again, we're not baking in growth because we think that could be offset by macro.

But that's the upside. And I guess the one macro, maybe not a macro benefit, but a little bit of this year, end market benefit [indiscernible] Too is the chassis Fox improvement. I think you said it's the best it's been in quite some time. So hopefully at least you have yes, it sounds like at least you have product to sell. Hopefully there's still some demand there.

Well, that's just it. Chassis mix is making sure we have the chassis that have demand And what's interesting about the AEG business and Dennis can speak to it better than than I can in a later time, but in AEG, we're finding OEMs really approaching us for really creative new product development programs where we're actually working hand in hand with them versus more historically, we would do it on our own.

The Fox Factory truck was completely the innovation of Fox. Now we're seeing is OEM is really looking for new fresh product to put in their dealer lots and coming to us to partner with them upfront in that vehicle development roadmap. And that is a big change. I mean, it doesn't sound like a lot when I say it, but that's actually a big change in how OEMs think about FOX.

And we're pretty excited by that because that means they're going to help us market, that means they're going to help us us develop and deliver these trucks versus doing it on our own. And that's that's a good change.

Just last week, we just hosted few of our OEM partners and strategic partners out in Ocateo, one of our proving grounds. We had PVG engineers next to PVD engineers. We had our Upfit UTV folks out there as well and we test drove some of our best technology. And it was amazing to see the light bulbs go off and see how differentiated we are. So Mike is right, it's that We were able to bring delight all that Fox is able to offer OEs and strategic partners. And we'll take our next question from Alex Perry with Bank of America. Please go ahead. Your line is open.

Hey, thanks for taking my questions here. I guess just first higher level on the guidance. It seems like sort of the range of outcomes and guidance seems pretty wide this year. I think EPS guide sort of straddles like $1 bottom to top. Can you talk about what sort of informing that what would need to go right to the high end of the range and similarly on the bottom end of the range, what does that sort of assume? Thanks.

Yes. I think Mike has done a great job just lining out the expectations there. Really, in our opinion, 'twenty five looks a lot like 2024. Except Fox we really believe these [indiscernible] license and partnership there, That's going to help us in the back half of the year The work that we've done getting those chassis in place in our dealership expansion efforts in AAG, is going to help us as well in the second half combined with the product innovation roadmap and the launches that we have planned really beginning now, are going to really start paving the way in the second half for stronger growth. And so really to get to that high end it's really seeing really strong execution, delivery and acceptance of that product roadmap. So we're just trying to be as realistic as we can taking into And these high interest rates still that are weighing us down?

Yes. I'll Alex, I'd just add to that. I think that's right, Dennis. I'd add to that.

The high end of that EPS range is a function of what we have in control relative to cost management in the business. So our ability to take out the 25,000,000 gets us to that high end of the EPS range. That is those are the things that we have to do internally while we're doing product development, which Dennis I think described very well. Have to take care of what's in our backyard and that is our own costs, our own systems, our own footprint, And if we deliver on those things, which we are well in line to do, we will be at the higher end of that range. So keep us on task with that as we go through the year.

Really helpful. Any help on a little bit more for the color on tariffs. So understanding it's sort of not in the guide, but Is it sort of you feel like you have enough [indiscernible] mitigate any impact. Sounds like maybe the aluminum bats coming from China is maybe the most direct impact, like any help in sort of sizing that? Is that a relatively small part of the business? Any more color there would be helpful.

Yes. I mean to make a statement like we don't have any concern over tariffs or we think we've got it all mitigated would assume that we actually know what the tariffs will be in any great detail relative to either timing or size. There's a lot of that that's fluid. Every day you wake up and read the paper and it's something different. So we're looking at it from every angle that we can and we're mitigating it in every place we can. But keep in mind, there's really two core elements of tariffs. One, will we control our own supply chain and negotiating costs and resourcing or vertically integrating where we can. That's kind of what we can control and I think we feel pretty good about that piece. That's within the domain of these four walls. As we start to get out of that and we start to think about things like aluminum bats, which we source out of China there are things that we can do in cost negotiations with that manufacturer market and even around the design of those baths. So there's some things that we can do, maybe not as there's more of a lag time in some of those activities, but there's things that we can do there.

Can also do some sourcing changes relative to that business but it's a longer term process. The thing that probably makes us the most nervous is really what this does to the economy, what this does to the end consumer and what it does to our largest OEM customers. That is really hard for us to contemplate or to quantify for you and we don't want to stand here and tell you we've got that under control because it's not ours to control. We've offered help in the couple of our OEMs that have that that could use our help relative to manufacturing footprint where we could step in and help them in finished goods assembly So we're trying to do what we can to help them. But they I think are trying to build their own structure, their own ability to go defend and attack that issue. And as they develop those plans, we'll we'll be there to help them out. But again, it comes down to what does that do to their end markets. And how does that flow back to us and to early to tell, we're not going to get too down about it right now.

We just need to see how it plays out and then we'll go do what we can do. We'll take our next question from Scott Stember with ROTH MK MKM. Please go ahead. Your line is open.

Good evening, guys. Hey, Scott.

Maybe if you could just dial in a little closer to PBG and AAG the automotive side, the truck upfitting side, I heard a comment in there about even on the higher end, it sounds like demand could be waning a little bit. Just trying to get a sense of what the overall demand trends look like there. Whether it's worsened throughout the quarter and where things are right now? Yes. On the high end, so let's talk PPG first.

On the high end of our vehicle where we're supplying shocks into the high end products that Ford sells or Toyota sells. When it comes to actually end user demand, that's remained intact. It's fluctuates a little bit up and down, but for the most part, that was a growth business for us in 2024. So for the most part, Ford specifically was a growth business for us. So that is positive. I don't see that changing that dramatic But I think other areas of those of the automotive business can be a bit softer. We're seeing Stellantis actually rebound a bit in '25 or early days of 2025 versus what happened in 2024.

So that was really more of just cleaning up inventory issues at the dealer level. So again, we're not really calling out growth in a business like ours Stellantis relationship.

For $25,000,000 we're assuming it's flat potentially some upside there as again with that inventory getting mitigated. And then on AEG, really, it's such a mixed bag because in 2024, we had Chad delivery issues relative to quality at the OEM level. So we were missing chassis chassis we needed. What we found when we get the appropriate chassis do the appropriate upfit, whether it's a Shelby or a Fox Fox truck or a Harley Davidson truck, these really iconic enthusiast driven brands We're fine.

When we get down into products that are not as iconic or kind of middle market, is more of a challenge. And I'd add to that in In the dealer world, of selling trucks interest rates matter no matter what.

And we have found out in the last couple of years that as interest rates have climbed or stayed high, that has a headwind [indiscernible] truck sales. So As Dennis said, on the dealer lots that attract those customers that want want these vehicles no matter what. Yes. I remember when joining, Mike talked about the way to win is contenting up these vehicles the right content on the right vehicles, the right design, and that's what we're focused on and doing. So he's right, that demand that demand will be there at that very high end. And what we have to do is we have to make sure that we're diversifying in that space and creating vehicles that people need and want. When you think about I mentioned agriculture, which is interesting for us to talk about agriculture at a company like Fox, but when you think about ranchers and ag guys, they're changing trucks every couple of years. And they take these trucks that are basically stock of a dealer lot, then they have to modify the the heck out of them to make them useful in their environment and their lifestyle. Doing that form now with really, really cool enhancements to these vehicles.

And when we can do it through our ag dealership relationships that are very unique and specific to that, product set we're very compelling to a use case and to a buyer that we really haven't touched in the past. So we got to continue to think about how do we get expanded broader relationships with different dealers on products that are sellable kind of regardless of the macro.

Got it. And just one last question on the the expense savings that you're expecting. The $25,000,000 for '25 Or is that all in stuff that you've done in the 3Q and 4Q as well. Yes. So this is going to be a really tremendous lift for this company. It is a really difficult exercise and we are making progress against that goal of $25,000,000 tangible progress. So as we talked about earlier, we closed the Colorado plant in AAG. In Taiwan, we're in the process of closing a facility there. Mike and I just visited there in February and the progress is going extremely well. In our 25% of the headcount there. And when we look at one of our key metrics there, revenue per employee, it's up 25 These are no small matters. This is really work that's being done week in and week out making a difference to really drive out costs continuing to take decisions on footprint consolidations, putting in CapEx where we can get the make versus buy favorable Lots of work going on. We expect to hit that 25 and that would be mainly in the back half of the year. As many of these projects get ramped up.

And we will take our next question from Craig Kennison with Baird. Please go ahead. Your line is open. Hey, good afternoon. Appreciate all the color so far. Dennis, any comment on EBITDA margin by Well, yes, that's a great question. I mean, you think about it early on, from an SSG standpoint, Yes, we're going to be seeing some margin in Q1, for instance, We're still investing in in the MLB relationship, in our engineering there. So I think things will start out a little soft and then they'll start to recover in the second half as volumes start to recover in Marucci as well. Bike will kind of follow suit in the sense that we'll start off light just like last year in the first half and then it will start to build and those margins will improve as well. They will also be bolstered by the cost out actions that we're taking. You'll see a very similar progression in AAG as we start to move through the year the cost savings initiatives will start to ramp as well as some of our volumes will start to ramp commensurate with some product releases Relative to PVG, I'd say [indiscernible] start to grow sequentially here in Q1 and Q2.

And then it will start to pick up a little more as their cost savings initiatives start to run through the P and L. And we'll take our next question from Brett Jordan with Jefferies.

Please go ahead. Your line is open.

Hey, good afternoon, guys. Hey, Brad. You mentioned I think in the base discussion sort of I think you said positive signals that you'd seen in Q4 and Q1. Are you seeing anything anecdotal that's says the consumer is feeling better in Q1, it seems like some of the consumer sentiment data recent has not said that.

Yes. Keep in mind when you look at the data, it tends to get a little bit messy relative to high end versus low end and bikes. So it's always kind of the disclaimer is the bike industry operates very differently depending on what side of the sector you're on. We're seeing some positive signs again. We're not enough to make us feel like being very bold about 2025, which is what's reflected in our guide, as you know. So And we saw the inventory takedown really help us or help our OEM customers in the back half of the year. So we feel like the business is a cleaner business in 2025. Your question is really around more of the end consumer buying bikes. If the bikes are new and exciting, they are. And that's a matter of what model years come out this year and how much different they are versus '24 '25 model bikes that were sold in '24. So that's going to be the real test. When we get to the spring and we've got model year '26, hitting the showrooms, are the consumers incented? Are they motivated to go buy high end mountain bikes, I think the answer is going to be yes, but it's a little bit too early to tell.

Yes. The one thing that keeps showing up over and over again is number one bike, number one brand, Fox just continues to win those awards and all the early feedback is they're really excited about the new product innovation coming out. Yes.

That's what we can control.

Product innovation.

And in the guide range, do you assume that there's no rate change, no interest rate change this year?

Year? Pretty much. We haven't reflected anything from an extraneous Mac macro benefit or a rate change benefit. Obviously, with the guide kind of being flat to single digit up at the enterprise level, We're not expecting much help from anybody outside of Fox.

Great. Thank you. Thanks.

And there are no further questions on the line at this time. I'll turn the program back to management for any final remarks. Thanks, David, and thank you Fox joining us on today's call. Appreciate the time and we'll talk to you guys soon. Good evening. This does conclude the Fox Factory Holdings Corporation's Fourth Quarter and full year twenty twenty four earnings call. You may now disconnect your line and have