berenberg west coast consumer & e-commerce conference...
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Berenberg West Coast Consumer & E-Commerce Conference
November 2018
SAFE HARBOR STATEMENT
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This presentation contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “might,” “will,” “would,” “should,” “expect,” “plan,” “anticipate,”“could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,”“predict,” “likely,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions.
These forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by the Company and its management, are inherently uncertain. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, those factors identified in the Company’s prospectus in the sections titled “Risk factors,” “Special note regarding forward-looking statements” and “Management’s discussion and analysis of financial condition and results of operations.”
Nothing in this presentation should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results of such forward-looking statements will be achieved. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Company undertakes no duty to update these forward-looking statements.
MANAGEMENT PRESENTERS
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Dan RobbinsSr. Director, Corporate Marketing & IR
Over 20 years of marketing, brand building, technology, and product experience - 9 years with FOX
Larry EnterlineCEO
Over 40 years in technology businesses - 7 years with FOX
Zvi GlasmanCFO
Over 30 years of experience; 17 years as a CFO - 10 years with FOX
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We develop purpose-built,
vehicle-specific, performance
defining solutions that enable
our customers’vehicles to:
• Go Faster
• Go Farther
• Ride Safer
• Last Longer
• Have Better Control
OUR BUSINESSFOX IS FOCUSED ON MAKING ITS CUSTOMERS’ VEHICLES PERFORM BETTER
ASPIRATIONAL BRAND
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Professional Athletes Demand the best product for a competitive edge
Weekend Warriors & EnthusiastsLook for the same performance as the professional athletes they admire
Diehard Brand Evangelists
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PERFORMANCE DEFINING PRODUCTSTHROUGH INNOVATIVE TECHNOLOGIES
Rusty ButcherHarley Ambassador/Flat Tracker
Live Valve Electronic Suspension Featured on 2019 Ford F-150 Raptor and Polaris RZR XP1000
Aaron Gwin2011, 2012, 2015, 2016 & 2017 Downhill World Cup Series Champion
Rob MacCachren2014, 2015, & 2016 BAJA 1000 Champion. 2017 Mint 400 Champion.2018 Baja 500 Champion.
DIVERSITY OF APPLICATIONS AND MARKETSBROADENS OUR PORTFOLIO OF PRODUCTS, CUSTOMERS, AND GLOBAL REACH
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FOX’S CORE CONSUMERS
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Opportunity to capture
a greater share of the
Performance Enthusiast
and General Consumer
markets
MARQUEE CUSTOMER RELATIONSHIPS
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10
A COMPANY OF PASSIONATE ENTHUSIASTS
TECHNICAL MARKETING SPECIALIST
El CAJON PRODUCTION
DESIGN ENGINEER
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GROWTH OPPORTUNITIESCONTINUE PENETRATION IN EXISTING VEHICLE CATEGORIES
Round out our participation across customer
product portfolios
Continue to focus on growing categories
Innovative new product introductions
Capitalize on expanding aftermarket opportunity
GROWTH OPPORTUNITIESEXPAND BRAND INTO RELEVANT PERFORMANCE DEFINING ADJACENCIES
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Tuscany Acquisition Closed: 12/01/2017
Race Face/Easton Acquisition Closed: 12/12/2014
Sport Truck USA Acquisition Closed: 3/31/2014
• LIFT KITS
• BRAKES
• WHEELS
• OTHERS
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GROWTH OPPORTUNITIESNEW VEHICLES • NEW CUSTOMERS • EXPANDED GEOGRAPHIES
WHITE SPACE
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FOX FACTORY DELIVERED STRONG 2017 RESULTS
Sales Adjusted Net Income Adjusted EBITDA
Full Year 2017 Financial Highlights
$476M+18%
$62M+32%
$94M+32%
$307
$367
$403
$476
$355
$462
2014 2015 2016 2017 Q3'17 YTD Q3'18 YTD
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STRONG SALES GROWTH FUELED BY PRODUCT LEADERSHIP AND NEW MARKETS $ in millions
Sales Growth – Consolidated
3 Year CAGR of 16%
2017 YoY Growth of 18%Sales Growth – By Major Market
3 Year CAGR (2014-2017)
Bike 3-year CAGR of 11%
Powered Vehicles 3-year CAGR of 22%
Strong sales growth has often exceeded our long term targets.
2018 YTD
+30%
$128
$155
$176
$230
$171
$249
2014 2015 2016 2017 Q3'17 YTD Q3'18 YTD
$179
$212 $227
$246
$184
$213
2014 2015 2016 2017 Q3'17 YTD Q3'18 YTD
SALES BREAKDOWN BY MAJOR MARKET$ in millions
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Solid growth in existing premium mountain bike
product lines coupled with product line
expansion has enabled FOX to exceed our mid to
high single digit long term growth target
Sales Growth – Bike
3 Year CAGR of 11%
2017 YoY Growth of 8%
Sales Growth –Powered Vehicles
3 Year CAGR of 22%
2017 YoY Growth of 31%
Strong growth in Off-Road capable On-Road
markets further strengthened by Off-Road sport /
recreational markets and acquisitions has
enabled FOX to exceed our low double digit long
term growth target
2018 YTD
+16%
2018 YTD
+46%
LEVERGING STRENGTH IN THE AFTERMARKET TO DRIVE OEM SPEC GROWTH AND EXPAND CUSTOMER BASE
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• FOX typically enters new markets in the
aftermarket channel to drive end-consumer
adoption and brand value which often leads
to OEM spec wins
• Recent acquisitions have been targeted more
towards the aftermarket channel as we
expand into, and build up new markets to
broaden our customer base
• Focused on maintaining a healthy balance
between the two channels to sustain long
term growth and competitive advantage
• Fluctuations between quarters and years
based on seasonality and timing of product
introductions are typical
YTD 2018
58%
42%
OEM AM
IMPROVING PROFITABILITY THROUGH STRATEGIC INITIATIVES$ in millions
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Opportunity exists to achieve a 20+%
Adjusted EBITDA margin over next few
years through continued improvement
initiatives
Adjusted EBITDA (1)
Initiatives Include:
• Further optimizing bike production in Taichung,
Taiwan facility
• Powered vehicle production and supply chain
optimization in North America
• Other process related efficiency initiatives
including a new ERP system
Adjusted EBITDA Growth
3 Year CAGR of 19%
2017 YoY Growth of 32%
2017 Adjusted EBITDA Margin of 19.7%
2018 YTD
Growth
35%
(1) See appendix for definition.
$56
$64 $71
$94
$70
$95
2014 2015 2016 2017 Q3'17 YTD Q3'18 YTD
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SOLID LIQUIDITY AND CASH GENERATION
Low liquidity ratios provide
flexibility on capital allocation
Positive cash flow provides
additional flexibility
(1) 2018-19 annual capex range is expected to run between 5 - 6% of sales; higher than targeted
3.0% to 4.0% of sales due to near term capacity expansion and strategic initiatives.
0.9 0.8
0.9 1.1
0.7
0.5
-
0.2
0.4
0.6
0.8
1.0
1.2
2014 2015 2016 2017 Q3'17YTD
Q3'18YTD
Leverage Ratio (ending)
20
PROFITABLE BUSINESS MODEL PROVIDES FURTHER GROWTH OPPORTUNITIES OR LEVERAGE REDUCTION
Invest for Growth
Solid Cash Generation
Other Uses
• Organic market growth, technology and brand
• Ongoing Operational and Strategic initiatives
• M&A screen for possible future acquisitions
• Positive cash flow enables capital allocation
opportunities
• Debt paydown as appropriate
• Potential share repurchases depending on
market conditions
WRAP UP
Aspirational Brand
Performance Defining Products
Innovative Technologies
Diversity of Applications and Markets
A Company of Passionate Enthusiasts
Organic and Adjacent Growth
Opportunities
Proven Track Record of Financial Success
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SUSTAINABLE
COMPETITIVE ADVANTAGE
TO ENABLE FUTURE GROWTH
Q&A
APPENDIX
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ADJUSTED EBITDA RECONCILIATION
ADJUSTED EBITDA RECONCILIATION
($ in Millions) 2014 2015 2016 2017 Q3'17 Q3'18
Net Income $27.7 $25.0 $35.7 $43.2 $40.3 $65.0
Provision for Income Taxes 6.6 9.3 7.4 21.1 8.7 3.9
Depreciation & Amortization 9.7 13.1 8.8 9.9 7.1 10.5
Stock-Based Compensation 4.0 4.9 6.2 8.7 6.6 5.6
2.9 6.9 5.9 1.4 1.4 -
Patent Litigation Related Expenses - - 2.7 4.7 3.2 5.9
Tax reform implementation costs (2) - - - - - 0.3
Other Acquisition and Integration Related Expenses (3) 3.6 3.0 1.0 1.9 0.8 0.8
Offering Expense (4) 0.5 0.2 0.6 0.1 0.1 -
Costs Associated with tax Benefit 0.2 - - - - -
Other Expense, Net 0.3 1.1 2.5 2.8 2.0 2.8
Adjusted EBITDA $55.5 $63.5 $70.8 $93.8 $70.2 $94.8
Divided by Sales $307.0 $366.8 $403.1 $475.6 $354.5 $462.4
Adjusted EBITDA margin 18.1% 17.3% 17.6% 19.7% 19.8% 20.5%
(4) Represents costs and expenses related to the secondary offerings of common stock completed in FY 17.
Fiscal Year Year to Date
Fair Value Adjustment of Contingent Consideration and
Acquisition Related Compensation (1)
(1) Represents $1.6M of the acquisitions’ purchase price classified as compensation expense for Q3 FY 17 offset by $0.2M related to the periodic revaluation of the Company’s contingent
consideration associated with the acquisition of Sport Truck based on actual and project performance.
(2) Represents costs and expenses of $0.3M incurred in connection with the Company’s implementation of tax reform legislation and related tax restructuring initiative in Q3 FY 18.
(3) Represents $0.8M for Q3 FY 17 and Q3 FY 18, respectively, of other acquisition related costs and expenses incurred to integrate acquired entities into the Company’s operations.