Fox Factory updates Q4 2025 outlook with net sales guidance of $340M–$370M amid ongoing macro headwinds

Earnings Call Insights: Fox Factory Holding Corp. (FOXF) Q3 2025

MANAGEMENT VIEW

* CEO Michael Dennison reported net sales of $376.4 million for the quarter, reflecting 5% year-over-year growth and highlighted "growth in both AAG and PVG." He stated, "Our SSG segment underperformed expectations during the quarter, particularly within Marucci," attributing this to a softening consumer environment and significant inventory reductions by channel partners.
* Dennison emphasized, "We remain focused on delivering innovation our customers demand while executing the operational improvements that will restore industry-leading profitability." He outlined four key initiatives: footprint consolidation, portfolio optimization, working capital management, and a $25 million cost reduction program. "Those consolidations have since been completed early in the fourth quarter with anticipated benefits to follow. Despite these timing impacts, our $25 million cost reduction target remains on track for the fiscal year."
* Dennison explained that PVG delivered net sales of $125.9 million, growing 15% year-over-year, with AAG net sales at $117.8 million, up 17.4% year-over-year. SSG net sales reached $132.7 million, down 11% year-over-year.
* The CEO noted a significant new performance truck program with an OEM partner, stating, "This was an immediate success with early units selling out immediately and our backlog growing for 2026."
* CFO Dennis Schemm stated, "Total consolidated net sales in the third quarter of fiscal 2025 were $376.4 million, an increase of 4.8% versus the same quarter last year, reflecting growth in AAG and PVG, partially offset by a decline in SSG."
* Schemm noted, "Net loss for the third quarter of fiscal 2025 was $0.6 million or $0.02 loss per diluted share compared to net income of $4.8 million or $0.11 per diluted share in the same period last year. Adjusted net income was $9.9 million or $0.23 per diluted share compared to $14.8 million or $0.35 per diluted share in the third quarter last year."
* Schemm reiterated, "Our $25 million cost reduction program remains on track as we expect to deliver that target in full this fiscal year."

OUTLOOK

* Fox Factory updated its Q4 2025 net sales guidance to a range of $340 million to $370 million, citing "a revision to the bottom half of the implied guidance we provided last quarter."
* Adjusted earnings per diluted share for Q4 are now guided between $0.05 and $0.25.
* For fiscal year 2025, net sales guidance was updated to $1.445 billion to $1.475 billion, and adjusted EPS was revised to $0.92 to $1.12, down from previous guidance of $1.60 to $2.
* CFO Schemm stated, "The primary thrust of these revisions is the lower-than-expected performance within our SSG segment, where our OEMs, distributors, dealers and retailers are actively managing toward leaner inventories ahead of year-end."
* Management reported a continued focus on "margin enhancement and prudent capital spending through concentrating on our core products and businesses as the primary means of driving free cash flow towards our goal of reducing our balance sheet leverage."

FINANCIAL RESULTS

* Net sales for Q3 2025 were $376.4 million, compared to $374.9 million in the previous quarter.
* Gross margin for Q3 was 30.4%. Operating expenses were $99.4 million or 26.4% of net sales, up from $88.7 million or 24.7% of sales in the same quarter last year.
* Adjusted EBITDA was $44.4 million, with an adjusted EBITDA margin of 11.8%.
* Total debt declined to $687.7 million, down $17.4 million from fiscal year-end.
* Fox Factory reported a tax expense of $2.3 million for the quarter.

Q&A

* Peter McGoldrick, Stifel: Asked about year-over-year revenue progression in SSG bike and inventory positioning. CEO Dennison emphasized, "'24, '25 looking very much the same from a stability perspective, which sets us up for kind of the new baseline into '26... it's really a retail story."
* McGoldrick inquired about cost realignment for free cash flow in 2026. CFO Schemm responded, "When you think about investments in CapEx, think about '25 was kind of a 3%-ish of revenue story. We're built for what we need. So when you think about CapEx in '26, think about something kind of sub-1."
* Lee Jagoda, CJS Securities: Asked about quantifying the aluminum supplier fire impact. CEO Dennison described it as "for sure, a significant issue across Q4" and affecting both PVG and AAG.
* Jagoda inquired about 2026 growth expectations. Dennison stated, "What we can control is ensuring as we did in Q3 and as we'll continue to do to make sure we deliver that premium performance product... But job 1.1 is ensuring that we optimize this business to get to the profitability regardless of that top line in 2026."
* Anna Glaessgen, B. Riley: Sought clarification on labor issues in SSG. Dennison said, "The labor issues continue to be a challenge for our OEM customers... We assume it's not going to be insignificant in Q4."
* Glaessgen inquired about premium truck upfitting. Dennison affirmed, "If you deliver the right product... you'll win. And so the growth was a direct reflection of delivering the right product at the right price points, which are more premium than the average truck on a lot."

SENTIMENT ANALYSIS

* Analysts displayed a slightly negative to neutral tone, probing on inventory challenges, macro headwinds, and the impact of supply chain disruptions, with questions focused on risk mitigation and forward guidance adjustments.
* Management maintained a neutral to slightly defensive tone, emphasizing operational control and strategic investments: "Let me remind you of the 4 key initiatives that are driving our performance and positioning us for sustainable growth." During Q&A, responses often stressed what can be controlled and the need for cost discipline, using phrases such as "hope is not a plan" and "too early to guide."
* Compared to the previous quarter, both analysts and management exhibited increased caution, with management shifting from a tone of resilient growth to a greater focus on cost control and margin recovery.

QUARTER-OVER-QUARTER COMPARISON

* Guidance was revised downward for both Q4 and full year 2025, whereas the previous quarter's outlook had raised full-year sales expectations.
* Strategic priorities shifted toward margin recovery, cost control, and working capital efficiency rather than top-line growth.
* Analysts in both quarters concentrated on macro risks, inventory, and segment growth, but the current quarter featured more questions about the consequences of external disruptions and specific cost-saving measures.
* Management's tone moved from highlighting sequential improvement and stabilization to addressing near-term headwinds and prioritizing optimization.
* Key metrics such as net sales and adjusted EBITDA showed less sequential improvement compared to earlier in the year.

RISKS AND CONCERNS

* Management cited macroeconomic headwinds, including elevated interest rates, a softening labor market, and conservative inventory strategies by OEMs and retailers.
* The fire at a major aluminum supplier is expected to impact PVG and AAG volumes through Q4 and into Q1.
* Labor issues and an import ban affecting key OEMs in SSG continue to pose challenges.
* Management is pursuing mitigation through cost reduction, footprint consolidation, and working capital improvements, aiming to offset tariff and supply chain impacts.

FINAL TAKEAWAY

Fox Factory's third quarter 2025 results reflect a challenging environment, with management emphasizing operational discipline, cost reduction, and strategic investments in innovation to bolster future growth. While guidance for Q4 and the full year has been revised down due to persistent macro headwinds and supply chain disruptions, the company remains focused on margin recovery and balance sheet improvement, supported by ongoing optimization efforts and core product launches targeting long-term value creation.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/foxf/earnings/transcripts]

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