Fox Factory Holding Corp.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Fox Factory Holding Corp's fourth quarter and full year fiscal 2024 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 that this conference is being recorded. I'd now like to turn the conference over to Toby Merchant, Chief Legal and Compliance Officer at Fox Factory Holding Corp. Sir, you may begin.

Thank you. Good afternoon and welcome to Fox Factory's fourth quarter and full year 2024 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 a chance to review the release, it's available on the investor relations portion of our website at .ridevox.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 and uncertainties, many of which are outside the company's control and can cause future results, performance, or achievements to defer materially from the 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 10Q and in the company's latest annual report on Form 10K, 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 marks 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. Reconciliation measures 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, Mike Dennison.

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 in our $25 million cost reduction initiative and drove improvements in our working capital, resulting in $63 million 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 remained 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 profitability. As an example, both AAG and PVG demonstrated sequential adjusted EBITDA margin improvement of 250 basis points and 310 basis points respectively through better inventory controls, strategic chassis mix management, and facility and resource rationalization. Our working capital improved by $55 million year over year as we balanced strategic priorities. In AAG, working on chassis mix resulted in a $60 million improvement in prepaid, 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 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 AAG operations, driving benefits starting in the second quarter of 2025. 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 in our cost optimization plan, having identified $25 million in savings across COGS and SG&A. We've executed on multiple initiatives across the organization, from footprint optimization and operational consolidation to 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, we're 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 -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 million, slightly down from 118 million in the prior year quarter, but up 6 million or 5% sequentially from the third quarter. Adjusted EBITDA margin also improved sequentially by 310 basis points. Revenue is largely in line with expectations as we continue to navigate challenging market conditions, affecting both our power sports and automotive OEM partners. 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 power sports 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 Buol in 2024. And additional new OEM customers to our portfolio in 2025 include BMW, Ducati, and Triumph. By expanding our focus to suspension for motorized two-wheel vehicles and completing the purchase of the assets of Marzocchi, we are delivering our products to new customers, thereby helping to offset declines in other areas of power sports. The Fox brand remains the standard in performance, continuing to be sought after by enthusiasts who 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 PVG'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 when they are not in a position to make new vehicle purchases. Looking ahead, while we expect continued market pressures in 2025, we are maintaining our focus on operational efficiency and cost management to protect margins. We are also continuing to win new partnerships and expand our presence in the market as evidenced by our new products and relationships. In our aftermarket applications group, net sales were $112 million down from $121 million in the prior year quarter, but up $12 million or 11% sequentially. Adjusted even a margin was 12%, a sequential improvement of 250 basis points as cost reduction actions were implemented. This performance was in line with our expectations for the quarter and reflects the progress we are 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 are seeing some of the best mix of chassis that we have received in years. We remain cautiously optimistic about the pace of broader market recovery as our partners work through their delivery challenges and our dealers work through their higher inventory. We are also working with our dealers to drive the appropriate 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. These engagements, along with our expanding partnership with RTR and our long-term relationship with Shelby, demonstrates a strength and opportunity in this business. In our aftermarket components business, we are experiencing sustained growth in wheels and lift kits. In 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 in several product lines. Additionally, we are expanding into new categories, including the launch of what we have termed the AgWagon. 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 for vehicles based on a Ford chassis. This product recently debuted at the Tampa RV Show and showcased a 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 improvements provide a solid foundation for long-term growth. And combined with our expanded product portfolio and successful facility consolidation efforts, we believe we are well positioned to capture opportunities as market conditions normalize. In SSG, net sales were $125 million compared to $93 million last year, primarily reflecting a $41.5 million increase from a full quarter of Marucci and a $6.7 million increase in the bike category, consistent with our expectations. Adjusted EBITDA margin of .4% was down sequentially by 190 basis points due to inventory optimization efforts in the fourth quarter, as well as 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 with current demand levels. 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, will 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 2024, a reluctance to end the year with inventory weighed on purchasing habits in Q4. Throughout the last year, we have implemented enhanced forecasting and planning processes with our strategic OEM partners to ensure better alignment between our production capabilities and their demand patterns, 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. Some of these, we believe, are going to revolutionize the way people think about suspension in bikes. We are excited to get these products out on the trails and in our enthusiast's hands. In our Marucci business, we're excited to have officially begun our role as MLB's official BAT partner as of January 1st. We have expanded our BAT manufacturing capacity as well as designed new products to drive incremental sales and reinforce our market-leading position in the MLB with Marucci 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 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 for the 2025 MLB season. In closing, I'll share some high-level comments on our outlook, which Dennis will review in more detail. Based on our recent performance, our current order book, and latest forecasts 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 -over-year growth, our base case expectation is 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, with the exception of some of our wheels and all of our aluminum baseball bats, which are manufactured in China. In both of these categories, we are executing plans to 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 to the U.S. bike industry is yet to be fully understood by our OEM customers. As you know, the core of our powered vehicle manufacturing resides here in the U.S. 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 passed through provisions related to the specific indexes on materials for 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 right-sizing production and ongoing macro challenges may create additional inflationary pressure for 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 our 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 2024 were $352.8 million, an increase of .1% versus sales of $332.5 million in the same quarter last year, primarily reflecting the impact of the Marucci acquisition and -over-year growth in our bike business. Sequentially, as anticipated and consistent with our prior communications, we realized growth in AAG and to a lesser extent in PVG, 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 .9% in the fourth quarter of fiscal 2024 compared to .7% in the same quarter last year. 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 2023. Our adjusted gross margin increased 20 basis points to .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 earlier. Total operating expenses were $90.6 million or .7% of net sales in the fourth quarter of fiscal 2024 compared to 81 million or .4% of net sales in the same quarter last year. The increase in operating expenses was attributed primarily to the inclusion of 18.7 million of operating expenses from our Marucci acquisition. Adjusted operating expenses as a percentage of sales increased to .7% in the fourth quarter of 2024 compared to .6% in the same period last year. The company's tax benefit was $4.1 million in the fourth quarter of fiscal 2024 compared to a tax benefit of $3.1 million in the same period last year. Net loss in the fourth quarter of fiscal 2024 was $0.1 million or zero per diluted share compared to net income of $4.1 million or $0.10 per diluted share in the same quarter last year. And adjusted net income was $12.8 million or 31 cents per diluted share compared to $20.3 million or 48 cents per diluted share in the fourth quarter last year. Net loss is primarily driven by the increase in interest expense. Adjusted EBITDA increased to $40.4 million for the fourth quarter of fiscal 2024 compared to $38.8 million in the same quarter last year. Adjusted EBITDA margin was .5% in the fourth quarter of fiscal 2024 compared to .7% in the fourth quarter of fiscal 2023. 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 .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 PBG, where cost improvement actions are being executed. Now I'll briefly touch on our full year results for fiscal 2024. Net sales for the year were $1.39 billion compared to net sales of $1.46 billion in the prior year. This decrease reflects a .5% contraction in AAG net sales and a 12% decrease in PBG net sales, partially offset by a .3% increase in net sales for our SSG segment, which reflects the inclusion of Marucci. Net income for fiscal 2024 was $6.6 million, or $0.16 per diluted share. This compares to net income for fiscal 2023 of $120.8 million, or $2.85 per diluted share. Adjusted net income for the fiscal 2024 year was $55.4 million, or $1.33 of adjusted earnings per diluted share, which compares to $167.5 of adjusted net income, or $3.95 of adjusted earnings per diluted share in the fiscal year 2023. Lastly, adjusted EBITDA was $167 million for the full year 2024, compared to $261 million in the prior year. Moving to the balance sheet and cash flows, our focus on the balance sheet resulted in a $55 million improvement in working capital, driven primarily by AAG, where our decisive chassis inventory optimization actions, taken in Q3, resulted in a $62 million improvement in prepaid, and in PBG, where we decreased inventory by $17 million through improved ordering controls in the fourth quarter. In SSG, bike inventory increased slightly, offset by action on -of-year inventory that it converted into finished goods for sale into the aftermarket. In the full year ended January 3, 2025, inventory rose by 32.9 million, or 8.8 percent, 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 we navigate through these turbulent times. Our revolver balance as of January 3, 2025, was $153 million versus $370 million as of December 29, 2023. Our term loan balance was approximately $552 million, net of loan fees. During the third quarter, we implemented a $400 million interest rate swap, improving predictability, and together with the $100 million existing swap, saving approximately $1.8 million in interest expense for the fourth quarter, and we paid down $63 million in debt. We will continue to prioritize R&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 2025, the company expects net sales in the range of $1.385 billion to $1.485 billion, adjusted earnings per diluted share in the range of $1.60 to $2.60, and a full-year adjusted tax rate in the range of 15 percent to 18 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 in our upcoming schedule of exciting new bat launches, both in softball and in baseball, 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 million cost reduction plan. The cost reduction is being conducted across the entire company, where we have identified approximately 15 to 20 percent of the savings coming from expense reductions and the remainder in cost of goods. Roughly 10 percent is coming from corporate, with the remainder coming rateably across the three segments. In addition, we expect 30 to 35 percent of the savings to impact our first half earnings and the remainder coming in the second half. Shifting to the first quarter of fiscal 2025, the company expects net sales in the range of $320 million to $350 million 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 current demand environment, 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 enter 2025 poised with a clear focus on operational excellence and strategic positioning across our segments. While near-term market conditions remain challenging, we believe the decisive actions we've taken to optimize our operations and strengthen our foundation will 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. The 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 and 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, please open the call for questions.

At this time, if you'd like to ask a question, please press the star and one keys on your telephone keypad. Keep in mind, you may remove yourself from the question queue at any time by pressing star and two. In the interest of time, we ask that you limit yourself to one question and one follow-up. We'll take our first question from Jim Duffy with Stiefel. Please go ahead. Your line is open.

Jim Duffy Oh, thank you. Good afternoon. It's good to hear from you guys. It feels like it's been a while. Jim Duffy It's been a

while.

Jim Duffy It's been a while. Jim Duffy I wanted to start just by asking about the Taiwan facilities consolidation. Where capacity sits relative to pre-COVID levels after 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?

Jim Duffy Sure. Jim, the capacity is about in line with pre-COVID, but keep in mind, that's from a footprint perspective. From an efficiency and lean perspective, we've increased our capacity even within that same footprint. 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, et cetera. We're really solidifying the footprint we need in Taiwan, and our future growth projections would take us probably off the island.

Jim Duffy Okay. Thank you. And then one more, if I may, Dennis, can you give us an update on the upfitting business, the dealership dialogue, and what you're thinking about for expectation of number of dealerships as you look across 2025? Is there opportunity to go ahead?

Dennis Duffy Yeah, 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 dealers there as well, getting a lot of 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 customers. 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 US.

Jim Duffy Thank you.

Coordinator We'll take our next question from Mike Schwartz with Truist. Please go ahead. Your line is open.

Mike Schwartz Hey guys, good morning. Sorry, good afternoon. Dennis Duffy Mike. Mike Schwartz Just on the bike business, I think in your commentary suggested your flat revenue year over year in that business for 25. Maybe 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 tailwind on the 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.

Dennis Duffy We think there could be upside in the bike business this year, but keep in mind we've had a couple of years of really challenged forecasting in that business, so we're being pretty conservative, Mike, right now. 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. So 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 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.

Mike A We'll be, maybe just switching over to Marucci, 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?

Dennis Duffy Well, timing's easier because timing, you know, the Major League Baseball season really, you know, kicks off at the end of this quarter and into Q2 where it really grows and then into, you know, the summer and finally October. So you know, 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 positive signs, let me tell you, but I think there's a lot of work to do. So before we really start to put a number to it, let us actually grow into that relationship and deliver bats and get it going and then we'll come back to you with what that means in an upside.

We'll take our next question from Anna Gleisgen 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 side. 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 any plans or 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.

Yeah. You know the interesting thing, and you've heard all the reports come out from the different OEMs, but the interesting thing about our business, Anna, that you have to remember is that when we're talking to Ford, we're talking to a very select set of, on the other hand, the premium products that are being 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, a 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. You know, when it comes to Toyota, when it comes to Stellantis, our other 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 24. And like I said, we're seeing some upside. So a 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 Jeep 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. So I think that's what we need to think about is what's the inflationary impact to a consumer and their willingness to buy these vehicles. Relative to our product, how we price it, et cetera, 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 on their end side relative to end customers. Again, Ford in our products, more protected, less protected in Stellantis. TRD Pro probably more protected as well. Does that help?

Great. Yeah, thanks, Mike. That was super helpful. Turning to Maruti, you guys commented on continued momentum, I believe is how you put it, for 2025. I believe when they were talking about the budget range, is that still the right way to benchmark that business?

That is. You're thinking about it right. When you look back at 24 and you'll do the math, we had three record quarters out of four with Maruti. They had a record year. A lot to celebrate. A lot of really good learning, by the way. Learning in some mistakes that were made in 24 that we learned from. When I look back, I like to think that it didn't quite hit the number I had expected for in 24. But again, three record quarters out of four isn't too bad in the market that we all had in 24. In 25, I think it's a double-digit growth business. I think MLB helps that even further. The products that we're coming out with in softball and some of these other spaces are really, really good. So I'm pretty excited. I'm very bullish. Maruti is one of our growers this year, for sure, even in light of the macro dysfunction.

Great. Thanks, guys.

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

Great. Thanks. Good afternoon, guys. Just from a high-level summary, it looks like the sales guidance, about flat to mid-single digits, I think minus one to seven percent. So sort of low and mid-single digits, that three percent growth number. So it sounds like you're getting a little growth out of Maruti, 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 to look for, and it's a little more back-end loaded?

Yeah, 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 launch is not macro improvement. So we think about, in 2025'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 the driver. We don't have any goodness baked in relative to a macro. So no upsides from that. When you think about the businesses, think about AAG and Maruti as up in 2025. PVG is a function of PowerSports, which has not only the inventory issues, but also the tariff issues, which could have a significant impact on Polaris and BRP. 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 Buol. But all those 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 PVG we think about as kind of flattish to maybe slightly down. And then bike, as I said to Mike earlier, I think bike is pretty flat. We could see some upside from bike. That would be one of the ones that we'd call out in future earnings calls is probably helping us in the air, just because it's coming from such a low base. But for now, we're going to call bike and PVG fairly flat and the other two up.

Got it. Okay. And just on bikes, just I cite a little bit more. I know 24 was a much better year, good recovery. And I think it was led by initially some of the smaller, more nimble OEMs. What, you know, the slower down, I mean, again, we're not hopefully not going contract and going backwards, but sounds like there's still some inventory in the channels. Is there any like particular, you know, 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 you know, anything on that? Is it e-bikes driving any of this sort of still unevenness on the channel?

Yeah, e-bikes 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. You know, 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 24, they have not, which is actually in a weird way kind of affected our acute four 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 big inventory pile. So I think in general, the bike industry is significantly healthier coming out of 24 than coming out of 23. That's pretty easy to say. And I think there's going to be a good build this year as new products really start to get launched. Remember, the 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 an end market benefit within AAG too is the chastity, mix improvement. I think you said it's the best it's been in quite some time. So hopefully at least you have product to sell. Hopefully there's still some demand there. Well,

that's just it. Chastity mix is making sure we have the chastity to have demand. And you know what's interesting about the AAG business, and Dennis can speak to it better than I can in a later time, but in AAG, 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. And the Fox factory truck was completely the innovation of Fox. Now what we're seeing is OEMs really looking for new fresh product to put on their dealer lots and coming to us to partner with them up front in that vehicle development roadmap. And that's 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 develop and deliver these trucks versus doing it on our own. And that's a good change.

Just last week we just hosted a few of our OEM partners and strategic partners out in Ocoteo. It's 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 to light 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. Jeff, 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 the EPS guide sort of straddles like a dollar bottom to top. Can you talk about what's sort of informing that, what would need to go right to hit the high end of the range and similarly on the bottom end of the range, what does that sort of assume? Thanks.

Yeah, I think Mike has done a great job just lining out the expectations there. Really, in our opinion, 2025 looks a lot like 2024, except for we really believe these investments that we've been making in Marucci on the engineering side and with the MLB 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 consideration the macro and these high interest rates still that are weighing us down.

Yeah, 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 million gets us to that high end of the EPS range. Those are the things that we have to do internally. While we're doing product development, which Dennis I think described very well, we 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. And then just any help on a little bit more for the color on tariffs, so understanding that it's sort of not in the guide. But is it sort of you feel like you have enough mitigating factors where you're able to mitigate any impact? Sounds like maybe the aluminum bats coming from China is maybe the most direct impact. Any help in sort of sizing that? Is that a relatively small part of the business? Just any more color there would be helpful. Thanks.

Yeah, I mean, to make a statement like we don't have any concern over tariffs or we think we've got it all mitigated, we'd 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, what we control in our own supply chain and negotiating costs and resourcing or vertically integrating where we can. That is 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 and with pricing elasticity in the market and even around the design of those bats. 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. We 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, what it does to our largest OEM customers. That is really hard for us to contemplate or to quantify for you. 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 a couple of our OEMs that could use our help relative to manufacturing footprint, where we could step in and help them and finish 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. As they develop those plans, 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 too early to tell. You know, we're not going to get too down about it right now. You know, 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 MKM. Please go ahead. Your line is open.

Good evening, guys. Hey, Scott. Hey, Scott. Maybe you could just dial in a little closer to PBG and AAG on 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, you know, where things are right now.

Yeah, on the high end, so let's talk PBG first. On the high end of our vehicle where we're supplying shocks into the high end products, the Ford cells or Toyota cells, when it comes to actually end user demand, that's remained intact. You know, it fluctuates a little bit up and down. But for the most part, you know, that was a growth business force in 24. So for the most part, you know, Ford specifically was a growth business force. So that is positive. I don't see that changing that dramatically as we look into 2025. But I think other areas of those, of the automotive business, you know, can be a bit softer. We're seeing Stellantis actually rebound a bit in 25 or early days of 25 versus what happened in 24. 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 our Stellantis relationship for 25. We're assuming it's flat, potentially some upside there as, again, with that inventory getting mitigated. And then on AEG, really, you know, it's such a mixed bag because in 24 we had chassis delivery issues relative to quality at the OEM level, so we were missing chassis we needed. What we found when we get the appropriate chassis and do the appropriate outfit, whether it's a Shelby or a Fox Factory 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, it's more of a challenge. And, you know, I'd add to that, in the dealer world of selling trucks, interest rates matter no matter what. And we have found that in the last couple of years that as interest rates have climbed or stayed high, you know, that has a headwind to truck sales. So, you know, we're hoping probably not so much in 25, but as we look forward in 26 and 27, that that interest rate environment starts to improve. Right now we're just going to go build the best trucks we can and make sure it's the right mix, as Dennis said, on the dealer lots that attract those customers that want

these

vehicles no matter what.

You know, 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 in doing. So he's right, that demand will be there at that very high end.

And what we have to do, you know, 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 years. And they take these trucks that are basically stock off of the dealer lot, then they have to modify the heck out of them to make them useful in their environment, in their lifestyle. We're doing that for them 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've 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.

Guy, and just one last question on the expense savings that you're expecting. Is 25 million 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 million, tangible progress. So as we talked about earlier, we closed the Colorado plant in A.G. 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 PVG business, we've conducted several rifts. We're down about 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 Kinison 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 segment as we think about the year and how it unfolds?

Well, yeah, that's a great question. And I mean, as you think about early on, from an SSG standpoint, we're going to be seeing some margin. In Q1, for instance, we're still investing 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, you know, flattish. Well, they'll 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&L.

Great.

Thank you.

And we'll take our next question from Brett Jordan with Jefferies. Please go ahead. Your line is open.

Hey, good afternoon, guys. Did Brett mention, I think, in the bike discussion, sort of, I think you said positive signals that you'd seen in Q4 and Q1? Are you seeing anything anecdotal that says the consumer is feeling better in Q1? It seems like some of the consumer sentiment data recently has not said that.

Yeah, keep in mind when you look at the data, it tends to get a little bit messy relative to high end versus, you know, low end in bikes. So it's always kind of the disclaimer is, you know, the bike industry operates very differently depending on what side of the sector you're on. You know, 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 while we've seen positivity, you know, clearly we were slightly better in Q4 than we expected. And we saw the inventory take down really help us or help our OEM customers in the back half of the year. So, you know, we feel like the business is a cleaner business in 2025. Your question is really around more is the end consumer buying bikes. If the bikes are new and exciting, they are, you know, and that's a matter of what model years come out this year and how much different they are versus 25 model bikes that were sold in 2024. So that's going to be the real test. You know, when we get to this spring and we've got model year 26 hitting the showrooms, you know, 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.

Yeah, the one thing that keeps showing up over and over again is number one bike, you know, 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.

Yeah, that's what we can control.

Product

innovation.

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

Pretty much, you know, we haven't reflected anything from an extraneous macro benefit or a rate change benefit. Obviously with the guide kind of being flat to, you know, 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 for joining us on today's call. Appreciate the time and we'll talk to you guys soon. Good evening.

This does include the Fox Factory Holdings Corporation's fourth quarter and full year 2024 earnings call. You may now disconnect your.