Why Are Automobile Components Maker Fox Factory's Shares Tumbling Today?

Fox Factory Holding Corp FOXF shares are dipping by 20% today after it reported Q3 FY23 results.

Net sales declined 19.1% Y/Y to $331.1 million, missing the consensus of $398.3 million owing to a decrease of 58.6% in Specialty Sports Group, partially offset by an increase of 12.4% in Powered Vehicles Group and 8.2% in Aftermarket Applications Group.

Gross margin contracted 110 bps Y/Y to 32.4% due to a shift in product line mix and costs related to keeping the skilled workforce as production slowed due to the UAW strike.

Adjusted EBITDA fell to $63.7 million from $85.1 million the prior year, with a margin of 19.2% vs. 20.8% the prior year.

Adjusted EPS of $1.05 missed the consensus of $1.10.

As of September 29, 2023, cash and cash equivalents of $90.6 million.

Repurchase: The Board of Directors authorized a share repurchase plan for up to $300 million common shares.

FY23 Outlook: For Q4, FOXF expects net sales of $300 million-$340 million (vs. consensus: $454.66 million) and adjusted EPS of $0.75 to $1.00 (vs. $1.43 street view). 

For FY23, the company expects net sales at the low end of $1.43 billion-$1.47 billion (vs. $1.65 billion) and adjusted EPS at the low end of the range of $4.20-$4.45 (vs. $4.95 estimate).

Acquisition: FOXF disclosed the purchase of Marucci Sports, LLC from Compass Diversified Holdings CODI for $572 million.

The company projects Marucci to be accretive to both growth and EBITDA margins, driving to achieve the 2025 target of $2.0 billion in sales and 25% adjusted EBITDA margin. 

The transaction is expected to close in November 2023, subject to customary closing conditions.

Price Action: FOXF shares are down 17% at $69.00 premarket on the last check Friday.