SCOTTS VALLEY, CA (BRAIN) — Fox Factory Holding Corp. reported that sales for the third quarter increased by $9.4 million, or 12.9 percent, to $82.3 million, compared with the same period last year. The growth was largely driven by mountain bike and powered-vehicle suspension products.
Mountain bike sales were up 10.8 percent for the quarter, which ended Sept. 30, and 14.4 percent for the first nine months of the year.
The quarterly $9.4 million overall sales growth was attributed to OE business, which increased $8.4 million to $68.6 million. The remaining $1 million increase was sales in the aftermarket.
Sales through the first nine months of the year reached $207.5 million, up 15.7 percent or $28.2 million, with most of the increase also due to OE business. About 67 percent of Fox’s sales through Sept. 30 were mountain bike suspension, with the remaining 33 percent coming from powered vehicles.
Net income through the first nine months was also up 54.5 percent to $19.2 million, from 2012’s $12.4 million.
Taiwan production steaming ahead
CEO Larry Enterline told investors during an earnings call Wednesday that Fox continues to make progress in moving production of bike suspension to its Taiwan factory, and he anticipates it to be complete by the end of 2015. Nearly 700,000 subassemblies were manufactured out of Fox’s Taichung factory in 2013, he said.
“We just got our first complete full fork off initial pre-production that we’ll be testing and we’ll be making first production deliveries at the end of this quarter,” he said. “As we get into next year, probably through midpoint of the year, in August, we will be in full fork production with 80 to 85 percent of forks produced in the Taichung plant.”
And the company is showcasing the new factory to various partners during tours in conjunction with Taichung Bike Week. “Once completed, the move will enable us to reduce lead time to Taiwan-based manufacturers building mountain bikes,” he said.
Gross margins, operating income up; debt down
The Scotts Valley, California, suspension company also saw an improvement in gross margins, which were 30.8 percent, compared with 27.6 percent for the third quarter of last year. This was due to operating efficiencies and reduction in warranty costs.
Operating income was up 34.6 percent to $14.8 million for the quarter. Net income was $9.9 million, a whopping 81.5 percent increase compared with 2012’s $5.5 million.
“Our team continued to execute on our long-term strategy to improve our operating efficiencies across our global infrastructure with solid gross and operating margin improvement in the third quarter,” Enterline said. “We remain optimistic about our future growth prospects given our established, premium brand and strong OEM relationships along with our track record of successful innovation.”
Fox reported a decrease in total debt from $59.3 million to $24.3 million since the end of 2012. Its IPO, which was completed during the quarter, generated net proceeds of $142.4 million for its majority interest holder, Compass Diversified Holdings, with approximately 5.8 million shares of common stock generating $80.9 million and an additional $61.5 million from Fox, which repaid debt under a credit facility with Compass.
Fox received net proceeds of $36.1 million from the IPO and used it to pay down debt under its prior credit facility with Compass. It entered into a new credit facility, borrowing $28.5 million, of which $21.6 million went to pay off Compass.
The company expects fourth-quarter sales between $58 million and $62 million and full-year sales to hit $266 million to $270 million.
Fox Factory Holding Corp. is traded on the Nasdaq stock exchange under the ticker FOXF. Its performance is tracked on the BRAIN stock chart.