Fox Factory Debt Falls $270.3 Million as Q3 Sales Decline 10.1%

By Sophie Lindqvist

Fox Factory reported third-quarter net sales of $338.4 million, down 10.1% year over year. Supply disruptions, higher costs and operational weaknesses offset healthy powersports demand.

Interim Chief Executive Officer Doug Grimm said it missed the expectations management set in August. He called demand in powersports and aftermarket brands healthy, yet said Fox Factory needed better factory execution, supply-chain planning and upfit performance. On the earnings call, Grimm said: “These challenges are real, but they are fixable, and we are working on each of them.”

Why did sales fall while adjusted earnings rose?

Sales included approximately $33 million from Marucci through its Sept. 25 sale, versus roughly $49 million in the prior-year quarter; management had assumed $46 million for the full quarter. Adjusted net income (profit excluding company-specified items) rose to $22.7 million, or $0.54 per diluted share, from $9.9 million, or $0.23 a year earlier.

Gross margin (gross profit as a share of sales) rose to 31.5% from 30.4%, mainly on International Emergency Economic Powers Act (IEEPA) tariff refunds; product mix and higher freight, commodity and fuel costs partly offset the benefit. Excluding those refunds, adjusted EBITDA (adjusted earnings before interest, taxes, depreciation and amortization) was about $38 million, with an 11.3% margin.

Chief Financial Officer Dennis Schemm said the result sat at the low end of the preliminary range provided in October because cost savings arrived later than expected. Fox Factory captured approximately $41 million in gross savings during the first nine months against its $50 million goal, and management plans further cost savings and price recovery to offset inflation.

Where did operating performance weaken?

Powered Vehicles Group sales rose 4.1% to $131 million, helped by 28.8% powersports growth, but segment adjusted EBITDA fell to $15 million from $18.9 million. Management attributed the decline to a spring supplier disruption, higher operating costs and unfavorable mix.

Grimm said Fox Factory used expedited freight and overtime to protect customers when a supplier could not meet demand. The company shifted volume to other qualified suppliers and is adding capacity, although its outlook assumes the disruption continues through the fourth quarter.

Aftermarket Applications Group sales fell 20.4% to $93.8 million, and segment adjusted EBITDA dropped to $8.5 million from $12.4 million. Schemm cited limited chassis availability for upfit (specialist vehicle modification) operations, pressure on dealers and consumers, and revenue lost from divested businesses.

Management identified productivity, inventory management and chassis planning as upfit priorities. Schemm said some Ford F-150 chassis arrived later than expected, while partnerships with Ford and Stellantis provided steadier plant volumes.

Specialty Sports Group sales fell 14.4% to $113.6 million, largely because of retail softness at Marucci and its reduced contribution. Segment adjusted EBITDA rose to $39.6 million from $27.5 million, primarily on tariff refunds. Bike sales ran modestly below expectations because OEMs (original equipment manufacturers) and distributors cut inventories, while order timing shifted.

How did the Marucci sale change the balance sheet?

Fox Factory sold Marucci for an enterprise value (business value including debt and cash adjustments) of $225 million and applied the $200 million received at closing to debt. Quarter-end debt was $397.4 million, down $270.3 million from the second quarter; net leverage (net debt relative to earnings) fell to about 2.4 times from 3.7 times in the second quarter.

The debt cut lowered annualized interest expense by about $16 million, and management expects the annual saving to reach $17 million after applying the remaining $25 million payment due by Dec. 31, 2026. About $250 million remained under the share-repurchase authorization (approved buyback capacity) through November 2028, supporting options for buybacks, high-return capital investments and further debt reduction.

What does management expect next?

For the fourth quarter, management maintained sales guidance of $287 million to $313 million and adjusted EBITDA guidance of $25 million to $30 million. Both forecasts exclude Marucci and any additional tariff refunds.

For full-year 2026, Fox Factory maintained sales guidance of $1.35 billion to $1.38 billion and narrowed adjusted EBITDA guidance to $143 million to $148 million, excluding approximately $14 million of refunds received in the second and third quarters. The full-year outlook includes Marucci results through the sale closing.

Including those refunds, management expects adjusted EBITDA of $157 million to $162 million. The arithmetic improved; the operating plan did not.

Fox Factory provided no 2027 guidance and plans to discuss its operating plan on the fourth-quarter call in February. Grimm named operational improvements, supply-chain optimization and recovery of inflation-related costs through customer discussions as priorities.

Who will lead Fox Factory?

Grimm said Fox Factory hired Heidrick & Struggles to search for a permanent chief executive officer and is considering internal and external candidates. The company has not set a timetable, although Grimm considered four to six months reasonable based on his experience.

The board also plans to ask shareholders at the 2027 annual meeting to approve a phased declassification of the board, Grimm said. The company will provide details in its proxy statement.

What does Fox Factory make?

Fox Factory Holding Corp. designs, engineers, manufactures and markets performance products for cycling, powered vehicles and other recreational applications. The company is best known for suspension systems, including forks, shocks and related technologies used on mountain bikes, motorcycles, snowmobiles, trucks and side-by-side vehicles.

The portfolio includes FOX, Race Face, Easton Cycling, Marzocchi, Ride Concepts, Bell, Giro and CamelBak. It covers bicycle components, wheels, drivetrain and cockpit products, cycling shoes, helmets, protective equipment, hydration products and apparel.