Earnings call transcript: Fox Factory Q2 2025 results show strong revenue growth

Fox Factory Holding Corp (FOXF) released its Q2 2025 earnings, revealing a mixed performance with a revenue beat but an earnings per share (EPS) miss. The company reported actual EPS of $0.40, falling short of the $0.43 forecast, while revenue surged to $374.9 million, surpassing the expected $349.05 million. Following the announcement, Fox Factory’s stock rose 3.01% in aftermarket trading. According to InvestingPro analysis, the company appears undervalued based on its Fair Value calculation, with an overall Financial Health score of "FAIR."

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Key Takeaways

• Fox Factory reported a 7.6% year-over-year increase in net sales.
• The company missed EPS expectations by 6.98%.
• Gross margin slightly decreased to 31.2% from 31.8% last year.
• Stock price increased by 3.01% in aftermarket trading.
• Full-year sales guidance has been raised to $1,450-$1,510 million.

Company Performance

Fox Factory demonstrated robust revenue growth in Q2 2025, with net sales climbing by 7.6% compared to the same period last year. The company has managed to maintain its market leadership in the bike and baseball bat markets, which has contributed to its strong performance. With a strong current ratio of 3.18 and revenue growing at a 13% CAGR over the past five years, Fox Factory has demonstrated solid financial fundamentals. Despite challenges in the consumer discretionary environment, Fox Factory has capitalized on its diversified product offerings and strategic expansions into new markets, such as the motorcycle and two-wheel business.

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Financial Highlights

• Revenue: $374.9 million (+7.6% YoY)
• Gross margin: 31.2% (down from 31.8% last year)
• Adjusted EBITDA: $49.3 million (+11.8% YoY)
• Adjusted net income: $16.6 million ($0.40 per diluted share)

Earnings vs. Forecast

Fox Factory’s actual EPS of $0.40 was below the forecast of $0.43, resulting in a negative surprise of 6.98%. However, the company exceeded revenue expectations with a 7.39% positive surprise, reporting $374.9 million against the projected $349.05 million. This performance indicates strong sales momentum, although the EPS miss highlights potential cost pressures or operational challenges.

Market Reaction

Following the earnings release, Fox Factory’s stock price experienced a 3.01% increase in aftermarket trading, reaching a last close value of $30.1. This movement suggests investor optimism driven by the company’s strong revenue performance and revised full-year sales guidance. With a beta of 1.51 and what InvestingPro analysts describe as "quite volatile" price movements, the stock remains within its 52-week range, with a high of $44.27 and a low of $17.95, indicating potential room for growth. The stock has shown strong momentum with a 16.67% return over the past six months.

Outlook & Guidance

Fox Factory has raised its full-year sales guidance to $1,450-$1,510 million and narrowed its EPS guidance to $1.60-$2.00. The company anticipates $80 million in free cash flow for the year and aims to reduce net leverage to below 3x by year-end. These projections reflect confidence in continued growth and operational efficiency improvements.

Executive Commentary

CEO Mike Dennison highlighted the company’s focus on long-term value creation, stating, "We are making meaningful progress on the initiatives that drive long-term value creation." He emphasized the importance of product innovation in driving growth, saying, "It’s all about product for me." Dennison also expressed optimism about the bike market, noting, "We’re not only going to kind of reset that foundation... but it’s actually going to be a growth year as well."

Risks and Challenges

• Tariff impacts have increased from $38 million to $50 million, posing a potential risk to profitability.
• The consumer discretionary environment remains challenging, which could affect demand for certain product lines.
• Supply chain disruptions or cost pressures could impact margins and operational efficiency.
• Market saturation in core segments may limit growth opportunities.
• Macroeconomic factors, such as interest rate changes, could influence consumer spending and market conditions.

Q&A

During the earnings call, analysts inquired about the tariff impact, which has increased from $38 million to $50 million. The company noted that its motorized two-wheel business is helping offset a decline in the powersports segment. Additionally, Fox Factory’s Marucci brand is expected to have a record year, and the bike market is stabilizing with conservative inventory management.

Full transcript - Fox Factory Holding Corp (FOXF) Q2 2025:

Conference Operator: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Fox Factory Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded.

I would now like to turn the conference over to Toby Merchant, Chief Legal Officer at Fox Factory.

Toby Merchant, Chief Legal Officer, Fox Factory: Thank you. Good afternoon, and welcome to Fox Factory’s second quarter twenty twenty five earnings conference call. I’m joined today by Mike Dennison, Chief Executive Officer and Dennis Schemm, Chief Financial Officer and President of the Aftermarket Applications Group. First, Mike will provide business updates and then Dennis will review the quarterly results and outlook. Mike will then provide some closing remarks before we open up the call for your questions.

By now, everyone should have access to the earnings release, which went out earlier this afternoon. If you have not had the chance to review the release, it’s available on the Investor Relations portion of our website at investor.ridefox.com. Please note that throughout this call, we will refer to Fox Factory as Fox or the company. 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 of the company’s control and can cause future results, performance or achievements to differ materially from results, performance or achievements expressed 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 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 measures are included in today’s earnings release, which has also been posted on our website.

And with that, it is my pleasure to turn the call over to our CEO, Mike Dennison.

Mike Dennison, Chief Executive Officer, Fox Factory: Thanks, Toby, and thanks to everyone for joining our Q2 call. We delivered solid progress in the second quarter with $375,000,000 in net sales, representing growth across all three segments. Further, consolidated adjusted EBITDA margin continued to improve this quarter to 13.1%, which is the highest level for Fox Factory in nearly two years. We achieved growth through the first half of the year in a turbulent market as a result of our relentless pursuit of innovation, which is illustrated by our product launches and commitment to the road map. Our focus on R and D and product innovation during these macro challenges is allowing us to not only deliver results today, but position ourselves for continued market share gains and wins over the long term as we emerge from these industry cycles.

Let me begin by providing a status update on the four key initiatives we’ve been communicating throughout the year. First, our footprint consolidation efforts continue to advance. In SSG, the benefits from our Taiwan consolidation are now flowing through the P and L. In AAG, we recently took the action to further consolidate manufacturing operations into our primary facility in Indiana, allowing us to leverage our existing operations and R and D teams, which we expect to deliver cost savings going forward. We are also consolidating smaller operations in Arizona to drive profitability as our businesses there grow.

Second, our portfolio optimization work is gaining momentum as we make targeted improvements to our product mix, focusing resources on our highest performing SKUs and strategic growth categories. This action is being taken across all of our product lines as we focus on simplicity and customer impact. Third, our working capital management initiatives are showing results in strong practices and inventory optimization, particularly in PVG and SSG, which is paving the way for enhanced cash flow generation and balance sheet improvement. We are on track to achieve our expectations in debt reduction, which is a clear focus for us in 2025. And fourth, our $25,000,000 cost reduction program is delivering on schedule with approximately 30% of the benefits realized so far and those benefits beginning to impact results and accelerating in the back half of the year.

While these efforts are being offset by tariffs currently, we are better positioned than peers and competitors to retain and improve growth and profitability even in the current macro, which has the additional benefit of positioning us ahead of competition when the extraneous noise subsides and business returns to a more normal environment. All of the actions we’re taking are focused on exerting control, whether that be on growth opportunities with our product road map or mitigating costs through footprint consolidation and supply chain adjustments. I’m pleased with the progress we’ve achieved through working closely with our suppliers and customers to navigate this environment. We have a great deal of hard work ahead of us, but we’re executing on the plan we laid out and the continued sequential and year over year improvement in our results clearly reflect our militant focus. We remain a growth company at our core.

And as the consumer discretionary environment stabilizes, we expect this combination of operational excellence and innovation led growth, particularly in our higher margin product lines to support the enhanced profitability we’ve been methodically building toward. And now turning to our segment performance. In our Powered Vehicles group, second quarter net sales were $123,500,000 representing an increase of 4,900,000.0 This growth was primarily driven by the expansion of our motorized two wheel business, which more than offset continued softness in the powersports OE business. Notably, we delivered sequential PBG adjusted EBITDA margin improvement of 150 basis points to 13.3%, which is the third quarter in a row of improvement and demonstrates the impact of our ongoing cost reduction initiatives and operational improvements, while we invest heavily in product road map and new technologies, which will further distance us from competition. Building on the momentum we discussed last quarter, our return to motorcycles has resulted in a deepening relationship with our marquee customers, and we’re actively expanding these relationships while pursuing new opportunities, including EV and hybrid vehicles.

This strategic expansion represents the enduring strength of the FOX brand across performance categories and represents the halo effect that we often mention. On the operational front, we’re making meaningful progress on our supply chain optimization initiatives. We’ve implemented successful cost sharing arrangements with our OEM partners and have price increases in place that are helping to partially offset the tariff generated inflationary pressures. We are also working closely with our OEM partners and supply chain initiatives to align our collective interests, whether that be relocating supply to more favorable regions or insourcing elements of our manufacturing processes. In fact, we have increased our in sourced parts by 20% over last year to help improve utilization and reduce external costs, which helps mitigate tariff exposure, while also strengthening our ability to serve customers with greater agility.

Our customers are obviously highly motivated to partner on these efforts given the long term benefits. And importantly, this work represents one of our biggest cost out opportunities in the second half of the year. While tariffs are a significant issue for PPG’s customers and a challenge that we’re spending considerable time to mitigate, we believe we are well positioned against our competition given our predominantly U. S. Manufacturing footprint and the operational agility that we have delivered in this business.

Looking ahead, while consumer softness is expected to persist in the near term, we remain confident in our ability to drive growth in PEG through our product road map. In our aftermarket applications group, we delivered strong top line growth with net sales increasing 6.5% to $114,100,000 from $107,100,000 in the prior year period. This growth was driven by increased demand for aftermarket products such as wheels, lift kits and components, where we are gaining market share and improved outfitting sales, demonstrating the underlying strength of our diversified platform. As I have stated in prior calls, we strive for equilibrium between vehicle and a more affordable entry points in our aftermarket components business. This represents a strong value proposition for a broader range of consumers who are reacting to high interest rates, high vehicle costs and macroeconomic conditions.

AAG segment adjusted EBITDA margin experienced some compression sequentially due primarily to an increase in tariff rates on imported wheels and tires from Asian suppliers, which has impacted our margins to a greater degree as tariff conditions worsen. Excluding these tariff headwinds, margins would have been consistent with Q1 levels. We also elected to delay certain consolidation actions that pushed our savings to later in the year and created an additional margin headwind in Q2. In our upfitting business, our chassis mix is better aligned with the needs of our dealer partners and their customers, which is enabling a wider assortment of products in the market. Although we continue to face specific chassis availability challenges in certain models, our broader diversification and optimization efforts show signs of future strength, and we expect this to translate to continued tangible improvements in our results during the second half of the year and into 2026.

Our aftermarket components business continues to show strong performance with sustained growth in wheels and suspension kits. The one plus one equals three strategy continues to enable AAG to deliver best in class products to enthusiast customers across a growing number of vehicle platforms, as demonstrated by our RideTech lowering kit solutions, which support the growing consumer demand for lowered high performance on road trucks. This is a great example of how our team is leveraging our core strengths to expand our opportunity set across both the aftermarket and our outfitted vehicles. Looking ahead in A and G, we are focused on continued improvement in our outfitting business across product, chassis management and sales, as well as further improvements in footprint optimization and tariff mitigation and market share growth in our aftermarket business with lift kits, lowering kits and wheels. In short, we will deliver on our internal objectives while the external markets stabilize and improve eventually.

In our Specialty Sports Group, we delivered solid top line growth with net sales increasing 11% to $137,200,000 from $123,600,000 in the prior year period. SSG segment adjusted EBITDA margin improved two eighty basis points sequentially to 22.1%, driven by strength in our bike business and realization of cost savings from our Taiwan facility consolidation. Our bike performance through the first half of the year has been a bright spot with the overall industry stabilizing. Our year to date growth is largely due to accelerated model year timing, which should moderate in the second half of the year. However, the net effect of this dynamic is positive, and we now expect to drive modest growth for the full year.

All of these factors give us added confidence in a more normal industry outlook. Our product roadmap continues to underpin our strategy with new product launches resonating well with customers and our market share remaining best in class. In addition, our performance defining technology continues to expand our addressable market with our solutions in the entry premium segment and ongoing product innovation developed for e bikes. In our Marucci business, it’s all about product launches and where they land within the calendar year. We faced a difficult comparison in the first half due to last year’s CAT X2 launch in the 2024.

Consequently, the flow of revenue this year is inverted from last year and aligned to product launches occurring in Q3. These launches include Victus aluminum batts at an accessible midrange price point and our high end Marucci Reckless line launching direct to consumer now with retail coming later in the fall. The early response to our new launches in the DTC channel, followed with our retail launches in the second half, support our forecasted growth expectations for this business. I am proud of the work the team has done to become a top notch product development organization, mirroring what we do in broader Fox. The addition of world class talent has allowed us to reenter fast pitch and slow pitch softball in a meaningful way with market leading products.

Reentering this space with the right product enables us to build a growth trajectory over the next couple of years supporting our long term revenue expectations. Our MLB partnership continues to gain momentum. It has been a year of learning, adjusting and building. Along the way, we’re enjoying increased visibility through major sporting events like the recent All Star Game, which we dominated. You might even say it was a walk off home run.

Our Marucci Invictus brands continue to dominate with the pros and have expanded beyond bats. For instance, we now have approximately 40 MLB players using our footwear, which is helping us leverage the halo effect we create from Bats. This is a strategy we’ve successfully employed elsewhere across our businesses, as you know. We’re working with the MLB to grow and evolve the game of baseball, and we love the long term potential as this partnership matures each year. On the tariff front, our costs have increased relative to our initial expectations due to changes in exemption status for baseball, which is impacting our FSG segment margins in the short term.

We’re continuing to work on developing and implementing mitigation strategies where we can, including moving our batt finishing and paint to The U. S. But our largest offset to combat tariff costs will be top line growth. And fundamentally, that’s where we remain focused. Further, I also want to call out that the significant investments we have made in the business are nearing completion across softball, apparel and people.

While these investments combined with the incremental tariffs are creating near term margin pressure, our business remains well positioned with leading market share in Bats and growing market share in adjacent products and categories such as softball. This business has a very attractive financial profile, and we believe that we are well positioned for our growth in both top and bottom line. Finally, I’ll share some high level views of the second half, which Dennis will provide more detail on momentarily. Absent any sustained change to macro trends, the base case underpinning our second half forecast is predicated on our current improved order book, product launches and ongoing sales strategies, which support an acceleration in consolidated top and bottom line performance as we progress through the year. Consequently, we are taking this opportunity to raise our full year sales expectations to incorporate our outperformance through the first half.

However, in alignment with our commentary on the increasing volatility and growth of tariff rates, we are updating our EPS guidance to reflect the ongoing incremental headwinds by tightening our expectations on EPS within the original guidance range. Our team continues to demonstrate resilience and adaptability, and I’m confident in our ability to control the controllable. We continue to have confidence in our product launches and innovation pipeline, which will not only drive second half results, but will enable us to win in any market going forward. And with that, I’ll turn the call over to Dennis.

Toby Merchant, Chief Legal Officer, Fox Factory: Thanks, Mike. I’ll begin by discussing our second quarter financial results, followed by our balance sheet, cash flow and capital allocation strategy before concluding with a review of our guidance for the third quarter and full year. Total consolidated net sales in the 2025 were $374,900,000 an increase of 7.6% versus the same quarter last year, reflecting solid growth in all three segments. Our gross margin was 31.2 in the 2025 compared to 31.8% in the second quarter last year, primarily due to shifts in our product mix. Adjusted gross margin, which excludes the effects of amortization of acquired inventory valuation markup, was 31.3 compared to 31.9% in the prior year period.

Sequentially, gross margin and adjusted gross margin increased 30 basis points and 40 basis points, respectively, supported by the progressive realization of our cost reduction initiatives. Total operating expenses were $98,500,000 or 26.3% of net sales in the 2025 compared to 95% of sales in the same quarter last year. The increase in operating expense on a dollar basis was mainly due to higher R and D and sales and marketing expenses associated with investments to support future growth in product innovation. Additionally, costs related to our organizational restructuring initiatives drove an increase in general and admin expense. Adjusted operating expenses, which exclude the restructuring and other discrete expenses as well as the amortization of purchased intangibles, decreased 20 basis points year over year to 22.3% in the 2025.

The company’s tax expense was $2,800,000 in the 2025 compared to a slight tax benefit of $400,000 in the same period last year. The tax effect associated with the unfavorable impact of stock based compensation exercises during the second quarter caused our effective tax rate to grow to nearly 51% as compared to the 21% federal statutory rate. Net income for the 2025 was $2,700,000 or $07 per diluted share compared to net income of $5,400,000 or $0.13 per diluted share in the same period last year. Adjusted net income was $16,600,000 or $0.40 per diluted share compared to $15,900,000 or $0.38 per diluted share in the second quarter last year, with the primary adjustment being the add back of expenses associated with our various cost reduction and restructuring initiatives. The tax effect associated with the unfavorable impact of stock based compensation exercises resulted in almost impact to the adjusted earnings per share.

Adjusted EBITDA increased 11.8% year over year to $49,300,000 for the 2025. Adjusted EBITDA margin was 13.1% in the 2025, an increase of 40 basis points versus the prior year period and a sequential increase of 190 basis points compared to the 2025. The increase in the adjusted EBITDA margin was primarily driven by higher sales as well as a realization of our cost reduction initiatives. Moving to the balance sheet and cash flows. Working capital as a percentage of the last twelve months sales improved sequentially by 80 basis points from 31.5 of sales in Q1 to 30.7% in Q2.

This improvement is driven in part by lower inventory as a percentage of sales as our strong execution of continuous improvement efforts to optimize inventory levels across the organization, particularly within PDG, were partially offset by planned inventory builds to support anticipated demand, the impact from higher tariffs and foreign exchange. Managing working capital continues to be an area of focus providing us flexibility to continue paying down debt. As of 07/03/2025, our revolver balance was $157,000,000 and our term loan balance was $517,500,000 net of loan fees. Paying down debt remains our top priority for capital allocation. We are pleased to have reduced net leverage to 3.8 times this quarter, and we continue to see a clear path to reducing our net leverage to below three times by year end.

The key component driving this deleveraging will be the anticipated acceleration of cash flow generation in the second half of the year, which will be positively impacted by improved earnings as well as working capital gains in areas such as inventory reductions in our AAG and PDG segments. We currently expect to generate approximately $80,000,000 in free cash flow for the full year. Now moving on to our outlook for the third quarter and the full year 2025. For the third quarter, we expect net sales in the range of $370,000,000 to $390,000,000 and adjusted earnings per diluted share in the range of $0.45 to $0.65 For the full year, we are increasing our sales guidance from the original range of 1,385,000,000 to $1,485,000,000 to an updated range that brackets the high end at $1,450,000,000 to $1,510,000,000 given the strength of our products and innovation pipeline. However, we are adjusting earnings per diluted share to $1.6 to $2 which narrows the original range of $1.6 to $2.6 towards the lower end, reflecting the incremental unmitigated tariff pressure we have discussed.

While we have proactively engaged with our customers on pricing actions, supply chain optimization and selective manufacturing relocations to mitigate these headwinds, the fluidity of the tariff rate negotiations has created incremental costs beyond what was considered in our initial 2025 estimate of approximately $38,000,000 of pre mitigated tariff impact, which we provided in early May. Given the latest visibility to tariff rates, our updated guidance now contemplates a pre mitigated tariff impact of upwards of $50,000,000 for the full year 2025. While we expect to offset approximately 50% of our full year tariff costs through various countermeasures, we have not yet been able to fully offset the remaining margin pressure through pricing increases or other actions. As a result, our updated adjusted EPS guidance considers the tariff associated margin headwind. Our strategic focus remains on growth while improving margins and enhancing free cash flow generation through operational excellence initiatives.

These initiatives position us well to create long term value for our shareholders. Mike, back to you for closing remarks.

Mike Dennison, Chief Executive Officer, Fox Factory: Thanks, Dennis. In closing, our positive second quarter results reflect the execution and conviction of a team focused on the strategies and objectives we have outlined over quarters and years. We are making meaningful progress on the initiatives that drive long term value creation. While we continue to navigate a challenging external environment, the sequential improvements we delivered across adjusted gross margin, adjusted EBITDA margin and balance sheet leverage are the direct result of our strategic execution. I remain confident in our team’s ability to control what we can, all while maintaining our commitment to our world class brands and our product innovation that has made Fox a leader for decades.

With that, Katie, please open the call for questions.

Conference Operator: Thank Our first question comes from Larry Solow with CJS Securities. Line is open.

Larry Solow, Analyst, CJS Securities: Good afternoon, guys. Thanks for taking the question. I guess just on the guidance and the outlook, obviously, you’re raising sales a little bit. Just curious, is that driven by anything in particular? To me, looks like Specialty Sports was a lot I know you don’t guide to the segments, but it looks like Specialty Sports and maybe bike sounds like it had a better than you expected performance this quarter.

And maybe I think you mentioned kind of going forward, we could hopefully get back to some more normalized order patterns and growth rates. So just kind of trying to parse out where you see some of the better pieces of the business going this quarter and going forward?

Mike Dennison, Chief Executive Officer, Fox Factory: Yes. Thanks, Larry. From my standpoint, we delivered a really solid first half, really delivering to our plan and our commitments. And as we did that, we gained confidence in what we think the back half will be. Keep in mind, the back half is just is on plan.

So when we talk about the full year, we’re right on track with where we expected to be and where we wanted to go. It shifted quarter to quarter is a little bit different. But fundamentally, this is really about just gaining confidence and conviction in the work that the team is doing and how that’s delivering to the results. So really no significant segment or business. Really the entire enterprise delivering on our commitments.

Toby Merchant, Chief Legal Officer, Fox Factory: Larry, another way to just think about it because whatever Mike said it perfectly, but another way to just look at it is we outperformed by about $50,000,000 in the first half. We effectively just Yes, added exactly. That So we just added that on to the full year.

Larry Solow, Analyst, CJS Securities: And as you look out over the next few quarters, obviously, you have a lot of company specific initiatives, especially on bottom line. How about top line initiatives to really invigorate growth considerably more? Or is it going to take the macro and just lower interest rates and an approving consumer to really get things back in gear?

Mike Dennison, Chief Executive Officer, Fox Factory: Larry, we love to talk about product. I mean, to me, the reason why we’re bucking the trend and actually beating year on year comps and sequential growth is a clear function of focus on that top line and product. We know it’s all about new product convincing a consumer to spend money today and how laser focused we are on developing that product roadmap across every product line is a clear driver of that continued growth. We haven’t lost focus with that at all. In fact, we probably doubled down on that and we’re expanding into new OEMs, new customers, new relationships and frankly new industries.

So we’re going to keep the foot on the gas there. And I think that’s not only going to set us up for delivering this year, but as the market does return to your point, we’re just like a coiled spring. We’ve now expanded our relationships and our ability to drive incremental growth as the markets return. So know me, it’s all about product for me. And I think the team has done a fantastic job of staying focused on that even with this extraneous crazy world we live in.

Larry Solow, Analyst, CJS Securities: Got you.

Alex Perry, Analyst, Bank of America: Great. Thanks, Mike. Appreciate the color.

Conference Operator: Thank you. Our next question will come from Bret Jordan with Jefferies. Your line is open.

Bret Jordan, Analyst, Jefferies: Hey, guys. Just looking at the higher tariff impact that had been expected going from 38 to 50, is that mostly within the Marucci mix, or is this by product coming out of Taiwan that you’re seeing that impact?

Toby Merchant, Chief Legal Officer, Fox Factory: Yes. Brett, great question. This is Dennis. Pre mitigation back in May, we had it at $38,000,000 I think we were talking about $9,000,000 AAG, 9,000,000 Maruchi, 20,000,000 PVG. Now when we’re looking at it, we’re up at 50,000,000 And so I put AAG rate at 10,000,000 Maruchi at 15,000,000 and PVG at $25,000,000 So in effect, yes, we’re seeing higher rates coming out affecting Maruchi and a little bit more affecting PBG as well.

Bret Jordan, Analyst, Jefferies: Okay. And then within the PBG, you’ve talked about motorcycle new ad, new business ad offsetting some of the weakness in powersports. Are you seeing any directional improvement in powersports? Are we pretty close to the bottom there? Or I guess how does the second half look for that category?

Mike Dennison, Chief Executive Officer, Fox Factory: That’s a crystal ball, Brett. But I’ll tell you, there is more stability in powersports now than there was probably six months ago, nine months ago. And we see inventories balancing. All those things I think are constructive. Really what powersports needs to see to take a leg up is going to be interest rate based.

So yes, I see it I see the market getting better. I see the market having a hard time reacting to that improvement without some rate help.

Bret Jordan, Analyst, Jefferies: Okay. This is sort of the same question. This is the third question. But within that PVG group, I think are there new opportunities for more within powersports or motorcycle or OE light vehicle to expand incremental businesses?

Mike Dennison, Chief Executive Officer, Fox Factory: Absolutely. I think we’ve added, I’m going off the cuff here, probably four or five brands to our business in the last year. And as we look at powersports going forward, I think that trend continues. You also see the price points change. The technology that’s going in these vehicles today over two or three years ago is significantly different.

It’s a lot more connected. We’re getting a lot more data from the actual vehicles back to Fox to understand how to even improve those technologies further. As we increase the technology content in a product, we’re also increasing the price point. So you’re going to get the benefit of both brand extension to new partners and customers and price improvement as those technologies get deployed into product releases.

Bret Jordan, Analyst, Jefferies: Great. Thank you.

Conference Operator: Thank you. Our next question will come from Scott Stember with Roth. Your line is open.

Bret Jordan, Analyst, Jefferies: Hey guys. Thanks for taking my questions. On PBG, you guys didn’t really talk about the on road truck side or the OE side, auto side. Can you just talk about how that performed in the quarter and just give us an idea on that?

Mike Dennison, Chief Executive Officer, Fox Factory: Yes. To be clear, when we talked about on road in the prepared remarks, were talking about aftermarket products. I think you knew that, Scott. But just to be clear, that’s an aftermarket component that actually makes that truck fit differently on the road. In terms of automotive in general, which I think the basis of your question, we’re seeing pretty good consistency.

There’s a lot of stability in that business for us because we’re on the premium SKUs. We’re benefiting from OEMs desire to make sure they’re driving those premium SKUs through production into the market. That’s been a very stable business for us and we expect that to remain quite stable through the balance of this year. So that stability matters a lot when you’re kind of in a world of volatility and it’s performed exactly as we expected it to.

Bret Jordan, Analyst, Jefferies: Got it. And then lastly on Maruchi, previously, I guess we were looking for I know you guys don’t guide by segment, but the narrative I believe was that Maruchi would be And I know that we’ve had some difficult comparisons, but it sounds like the back half of the year, there’s some good stuff going on. Are we still looking for year over year growth for Marucci?

Mike Dennison, Chief Executive Officer, Fox Factory: Yes, will be up Yes. Murchi, Brett will be or Scott, Murchi will be up this year and it’ll actually be a record year.

Bret Jordan, Analyst, Jefferies: Got it. All right. Thank you.

Conference Operator: Thank you. Our next question comes from Peter MacGeldrick with Stifel. Your line is open.

Peter MacGeldrick, Analyst, Stifel: Hey, guys. Thanks for taking my question. I was curious on the bike business. You mentioned year to date growth. I was hoping you could size the rate of growth and year to date within SSG for the bike business.

And then I’m interested in the timing of model year sequencing and the inversion that you referenced in the prepared remarks. Could you just set the backdrop for the comparisons and how visibility to orders are developing?

Mike Dennison, Chief Executive Officer, Fox Factory: Yes, Peter, it’s a good question. And it’s one that’s a bit nuanced. So I’ll walk you through it. And then if you have questions, come back and hit me again. When you think about the first half of the year, the significant growth came because of the Marucci product launch schedule, I talked about in the prepared remarks.

A lot of that growth in SSG in the first half of the year did come from our bike business, which getting to your bigger point was a function of bike OEMs eliminating the prior year product inventory successes and really focusing on new product for new product launches to really bring that consumer into bike shops to buy bikes. That was a great signal for us to see that these bike companies were getting healthier and stabilizing and getting back on the gas relative or the pedal relative to growing their businesses. So that drove a lot of that growth in the first half. When I talk about the back half moderating, it’s actually a positive. The reason why I say it’s a positive is because keep in mind, these OEMs have lived a life of excess inventory that’s been incredibly painful over the last two years.

So as they think about ending ’twenty five on solid footing and being prepared for ’twenty six, new growth with new models, they really want to make sure they don’t repeat past mistakes and have excessive inventory in the back half. What does that do in terms of product or book of business or to how they think about forecasting? They’re going to only buy what they really need to make sure they can deliver to their consumer. So they’re going to be much more conservative in their buying practices, which we actually attribute to a good thing. We actually think that’s a positive because that will ensure we don’t get back to prior days of excess inventory.

So when you see that slight moderation in the back half, it’s really then gauging how much inventory they want to end the year with and then start next year clean and ready to go again. So that’s how it’s kind of playing out. I think we’ll see great quarters in Q3 and Q4, but there’ll be a slight moderation as they pulled so much of that demand into Q1 and Q2 to really be prepared for those product launches for model year ’twenty six and ’twenty five, and you know how that cycle works. So that’s kind of the story. If that doesn’t make sense, I can clarify further.

Peter MacGeldrick, Analyst, Stifel: Yes. I guess I would like to just clarify on that on the overall bike return to growth or return to normalization. I’m curious on what they have sort of model year 2025 and then the ordering visibility to model year 2026 as they end the year in a more solid inventory position. How should we be thinking of that maybe on like a twelve month basis?

Mike Dennison, Chief Executive Officer, Fox Factory: Yes. So the way I would think about it is this is a growth year for bike for us. This is also a stability year for bike for us. So we’re not only going to kind of reset that foundation so all of you guys can model it correctly on a go forward basis, but it’s actually going be a growth year as well. So that’s positive.

And then as we think about ’twenty six, I think it’s too early to start calling the ball on what the revenue growth will look like, but I think it will be up from ’twenty five. And I think we’ll continue to see historical growth rate in bike going forward like we used to see kind of pre COVID and post COVID. Does that help? It does. Thank you.

Conference Operator: Thank you. Our next question will come from Craig Kennison with Baird. Your line is open.

Craig Kennison, Analyst, Baird: Yes. Thanks for taking my question. Maybe to follow-up on the last line of thinking, are there end markets where you are lapping a big destock in 2026? In other words, like if you just shift one to one instead of something far less than that, you would see growth? Or have you kind of proceeded beyond in any of that easy comp environment in all of your end markets?

Mike Dennison, Chief Executive Officer, Fox Factory: I haven’t looked at it, Craig, as an easy comp environment. So yes, I don’t see any of that happening. There’s no layups in this world. I think our growth is coming from solid execution on product and diversification. So we’re going to continue to play those cards and I think that will help us win.

But thinking that we’ll get an easy path to growth, Yes, I don’t Dennis, you can jump in I don’t see that.

Toby Merchant, Chief Legal Officer, Fox Factory: I’m thinking segment by segment, business by business. And no, there’s not been any excessive destocking and easy comp period that I can think of

Mike Dennison, Chief Executive Officer, Fox Factory: Craig, the question earlier from Scott was around, do we think powersports is normalized? I think in powersports, if we got some market rate well, we got market rate improvement, that’s a whole another story across across a lot of our business. But if we got interest rate improvement, that might help support a thesis that says powersports could get back to growth. And that’s for sure in that product line, that’s an easier comp, no doubt about it. And you know that?

Yes, that’s what meant

Craig Kennison, Analyst, Baird: to say. Mean, you went through the bike industry, there was a massive destock. The year after that, you can grow if you’re not destocking anymore, even if there’s not end market growth. The same happened in powersports. I’m not kind of yes,

Mike Dennison, Chief Executive Officer, Fox Factory: it’s been very easy comps. I’m just

Craig Kennison, Analyst, Baird: saying you’re lapping a period of destocking.

Mike Dennison, Chief Executive Officer, Fox Factory: Yes. I think that would be true in powersports.

Craig Kennison, Analyst, Baird: Yes. All right. On Marucci, just maybe give us an update on some of the growth vectors. I know when you acquired that business, you were excited about a number of growth vectors, including shoes. You mentioned that today, but just give us an update on some of the top few vectors where you see your ability to create additional value through investment in growth.

Mike Dennison, Chief Executive Officer, Fox Factory: Yes, that’s a good question, probably a longer answer. So when we think about growth in Maruchi, it had several different vectors that we kind of launched when we acquired the business. One of them was global growth. And if you look at Japan, I think Japan is up. I’m going to give you a number that I don’t have in front of me, so I’m going to go from my memory.

I think it’s up about 140% or 50% year on year. We think Japan is a significant growth engine for us. So that’s really coming through and proving to be true. You got that geographical growth, not just Japan but other locations. You’ve got kind of the growth of diversification in the product lines.

Businesses like Lizard Skin are growing quickly. They’re also fairly impacted by tariffs just to be clear, but those businesses are growing as well. So you’re going to see things that are not a bat that are going to benefit from our bat halo brand status continue to grow. I mentioned shoes and getting shoes in the MLB now on the field. That halo effect transitioning from bats or reflecting from bats to shoes is a real positive sign for us.

I can’t talk enough about things like softball, both fast pitch and slow pitch. Mean, we just weren’t existent in that market and we have competitors whose businesses in softball are bigger than our entire business in baseball. So softball for us can’t go overstated relative to what it could be and how it could help us grow this business. So we have a number of them. Frankly, it’s a great question because it also kind of reminds us of you can’t do all things at all times.

And so we have to really focus and prioritize where we’re going to put that investment dollar and that people bandwidth to ensure that we’re growing in the right areas. And Marucci of all of our businesses has probably more levers to growth than most. And it’s up to us to make sure we stay focused on the right ones. But there’s a number of them that I just mentioned that I think are significant beyond how we expand our aluminum and composite bats and how we continue to grow with the MLB, again is an important part.

Craig Kennison, Analyst, Baird: Great. Thanks, Mike.

Conference Operator: Thank you. Our next question will come from Alex Perry with Bank of America. Your line is open.

Alex Perry, Analyst, Bank of America: Hi. Thanks for taking my questions here. I just wanted to talk about the EPS guide a little bit. With it going down, is it purely just flowing through the sort of $25,000,000 of unmitigated tariff impact to the gross margin line? Is there anything else going on there in terms of margins or tax that we should be thinking of?

Thanks.

Toby Merchant, Chief Legal Officer, Fox Factory: Yes, that’s a great question, Alex, and thanks for that. And again, just reiterating out as expected right now, given the tariff implication, we went from 38 to 50. And when we gave guidance back in May, consensus adjusted down to around 180. So basically, what we’re just doing now is being a little more specific about that tariff impact. And so we’re taking that range to 1.6 to $2 And I will tell you, we are really running after this tariff from a mitigation perspective, all the segments are really doubling down on trying to mitigate that impact from supply chain optimization.

I look right back in custom wheelhouse and how they’re starting to move from like three warehouses to two warehouses, right, to really get more efficient in delivery of the product line to end customers. They looked at moving molds to Mexico to start avoiding gating or avoiding the tariffs there as well. So making really good progress there. You’ve got inside PBG, tremendous work going on there of insourcing raw materials now to get after a better cost position as well. And so all across the board, this company is trying to control what it can control.

And that has been that story all along with us is delevering, getting after working capital, taking cost out, mitigating these tariffs as much as we can. So sorry, long answer to a short question.

Alex Perry, Analyst, Bank of America: No, really helpful. Thanks for that. It makes a lot of sense. And I just wanted to ask about the motorized two wheel business. How much sort of incremental dollars is that business driving?

Is it pretty significant year on year? And then what sort of margin profile is attached to that? Does that vary versus core PPG margins? Thanks.

Mike Dennison, Chief Executive Officer, Fox Factory: It’s generally in line or around the same margin profile as our powersports business. We don’t specifically call those out in detail, but think about it as very consistent with the powersports business. And that business has been a significant growth for us. The way I would frame the growth of that business year on year is it’s more than offset the decline in powersports. So by diversifying back into motorcycle and really leveraging our fifty years of history in that space, we were able to capture revenue very quickly and new relationships very quickly, which more than offset the decline in what would be traditionally the side by side business.

So that’s how I think about it. On a long term basis, that business is going to grow in line with the PPG business in general, and we’re glad to be back in it, Alex.

Alex Perry, Analyst, Bank of America: Really helpful. Best of luck going forward. Thanks.

Conference Operator: Thank you. It appears we have no further questions at this time. I would now like to turn the program back over to Mike Dennison for closing remarks.

Mike Dennison, Chief Executive Officer, Fox Factory: Thanks, Katie. We appreciate everybody joining the call today and their continued interest in Fox. We hope you all have a good evening, we’ll talk soon. Thanks.

Conference Operator: This does conclude the Fox Factory second quarter twenty twenty five earnings call. You may now disconnect your line, and have a great day.

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