Fox Factory’s Mixed Q2 2025 Earnings Call Insights

Fox Factory Holding ((FOXF)) has held its Q2 earnings call. Read on for the main highlights of the call.

Fox Factory’s recent earnings call revealed a mixed sentiment, showcasing significant achievements in revenue growth and operational improvements, particularly in the Specialty Sports Group and Powered Vehicles Group. However, these positive developments were tempered by challenges such as increased tariffs impacting margins, a decline in net income, and ongoing softness in the powersports OE business.

Increase in Net Sales

Fox Factory reported net sales of $374.9 million for Q2 2025, marking a 7.6% growth compared to the same quarter last year. This growth was driven by solid performance across all three segments, indicating a robust demand for the company’s products.

Improvement in Adjusted EBITDA Margin

The company achieved a consolidated adjusted EBITDA margin of 13.1%, the highest level in nearly two years. This represents a 40 basis points increase year-over-year, reflecting Fox Factory’s focus on operational efficiency.

Specialty Sports Group Growth

The Specialty Sports Group (SSG) segment experienced a solid top-line growth, with net sales increasing by 11% to $137.2 million. This growth was primarily driven by the strength in the bike business, highlighting the segment’s strong market position.

Powered Vehicles Group Performance

Net sales for the Powered Vehicles Group (PVG) rose by 4.9% to $123.5 million, mainly due to the expansion of the motorized 2-wheel business. This growth helped offset the softness in the powersports OE business, demonstrating resilience in the segment.

Aftermarket Applications Group Growth

The Aftermarket Applications Group (AAG) delivered strong growth with net sales increasing by 6.5% to $114.1 million. This was driven by heightened demand for aftermarket products, showcasing the group’s ability to capitalize on market opportunities.

Debt Reduction Focus

Fox Factory has reduced its net leverage to 3.8x this quarter and is on track to bring it below 3x by the end of 2025. This focus on debt reduction underscores the company’s commitment to maintaining a healthy balance sheet.

Impact of Tariffs

Significant increases in tariff rates are expected to have a pre-mitigated impact of upwards of $50 million for the full year 2025. This has affected margins across segments, posing a challenge to the company’s profitability.

Higher Effective Tax Rate

The effective tax rate for the company rose to nearly 51%, influenced by the unfavorable impact of stock-based compensation exercises. This is notably higher than the 21% federal statutory rate, affecting net income.

Net Income Decline

Fox Factory’s net income for Q2 2025 was $2.7 million, or $0.07 per diluted share, a decline from $5.4 million or $0.13 per diluted share in the same period last year. This decrease highlights the financial pressures faced by the company.

Challenges in Powersports OE Business

The powersports OE business continued to experience softness, although there are signs of improving stability. This ongoing challenge reflects the segment’s struggle to regain momentum.

Forward-Looking Guidance

Fox Factory’s guidance for the full year reflects strong performance across its segments, with updated sales guidance of $1.45 billion to $1.51 billion. Earnings per share expectations have been adjusted to $1.60 to $2, considering ongoing tariff pressures. Despite these challenges, the company remains focused on operational excellence, innovation-led growth, and maintaining a strong balance sheet.

In summary, Fox Factory’s earnings call presented a mixed picture. While there were notable achievements in revenue growth and operational improvements, challenges such as increased tariffs and a decline in net income posed significant hurdles. The company remains optimistic about its future, focusing on innovation and operational excellence to navigate the challenging landscape.