PowerSports Business

November 27, 2017

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FINANCE 12 • November 27, 2017 • Powersports Business www.PowersportsBusiness.com Scotts Valley, California-based Fox Factory Holding Corp. reported financial results for the third quarter and nine months ended Sept. 29, 2017. "We are pleased to report another quarter of record sales and earnings results which exceeded our expectations. Our third quarter results reflect continued broad success across both our powered vehicle and bike businesses," said Larry L. Enterline, FOX's CEO. "Looking ahead, our team remains committed to further building the FOX brand presence in our exist- ing product categories and consistently pursu- ing new market opportunities." Sales for the third quarter of fiscal 2017 were $127.4 million, an increase of 16.9 percent as compared to sales of $109 million in the third quarter of fiscal 2016. This increase reflects a 27.3 percent increase in sales of powered vehicle products and an 8.8 percent increase in sales of bike products. The increase in sales of powered vehicle products was primarily due to continued high demand for on and off- road suspension products including increased OEM sales. The increase in sales of bike prod- ucts primarily reflects new product introduc- tions, favorable spec positions, and strong sell through with certain higher growth OEMs. Gross margin was 33.4 percent for the third quarter of fiscal 2017, a 140 basis point improvement from gross margin of 32 per- cent in the third quarter of fiscal 2016. The improvement in gross margin was primar- ily due to favorable product and customer mix and improved manufacturing efficiencies. On a non-GAAP basis, adjusted gross mar- gin increased 130 basis points, excluding the effects of acquisition related costs in the third quarter of last year. A reconciliation of gross profit to non-GAAP adjusted gross profit and the resulting non-GAAP adjusted gross margin is provided at the end of this press release. Total operating expenses were $22.2 mil- lion for the third quarter of fiscal 2017 com- pared to $19.8 million in the third quarter of the prior fiscal year. The increase in operat- ing expenses is primarily a result of strategic investments to support future business growth, increased incentive and stock-based compen- sation expense, and higher ongoing patent litigation-related expenses, partially offset by the conclusion of the Company's acquisition- related compensation arrangements. Non- GAAP operating expenses were $19.8 million, or 15.5 percent of sales in the third quarter of fiscal 2017 compared to $17.1 million, or 15.7 percent of sales in the third quarter of the prior fiscal year. Reconciliations of operating expense to non-GAAP operating expense are provided at the end of this press release. The effective tax rate was 19.5 percent in the third quarter of 2017, compared to 9 percent in the third quarter of 2016. The increase in the effective tax rate was primarily due to an increase in pre-tax income and resulting tax expense while benefits from various credits and deduc- tions remain relatively constant, and an increase in non-creditable foreign withholding tax. Net income in the third quarter of fiscal 2017 was $16.1 million, compared to $13.7 million in the third quarter of the prior fiscal year. Earnings per diluted share for the third quarter of fiscal 2017 were $0.41, compared to $0.36 in the third quarter of fiscal 2016. Adjusted EBITDA in the third quarter of fiscal 2017 was $27.0 million, compared to $20.9 million in the third quarter of fiscal 2016. Adjusted EBITDA margin in the third quarter of fiscal 2017 was 21.2 percent, com- pared to 19.2 percent in the third quarter of fiscal 2016. Reconciliations of net income to adjusted EBITDA and the calculation of adjusted EBITDA margin are provided at the end of this press release. Non-GAAP adjusted net income was $18.0 million, or $0.46 adjusted earnings per diluted share, compared to $16.6 million, or $0.44 adjusted earnings per diluted share in the same period last fiscal year. Reconcilia- tions of net income to non-GAAP adjusted net income and the calculation of non-GAAP adjusted earnings per share are provided at the end of this press release. FIRST NINE MONTHS FISCAL YEAR 2017 RESULTS Sales for the nine months ended September 29, 2017, were $354.5 million, an increase of 21.6 percent compared to the same period in 2016. Sales of powered vehicle and bike prod- ucts increased 39.9 percent and 8.5 percent, respectively, for the first nine months of 2017 compared to the prior year period. Gross margin was 32.5 percent in the first nine months of fiscal 2017, an 80 basis point increase, compared to gross margin of 31.7 per- cent in the first nine months of fiscal 2016. The year-to-date gross margin improved primarily due to product and customer mix and manu- facturing efficiencies. Net income in the first nine months of fiscal 2017 was $40.3 million, compared to $25.9 million in the first nine months of fiscal 2016. Earnings per diluted share for the first nine months of fiscal 2017 was $1.04, compared to $0.69 in the same period of fiscal 2016. PSB Fox reports sales up 16 percent in Q3 Yamaha Motor Co., Ltd. announced con- solidated business results for the first nine months. Net sales for Yamaha Motor Co., Ltd.'s consolidated accounting period for the first nine months of the fiscal year end- ing December 31, 2017 were 1,250.7 billion yen, (an increase of 117.9 billion yen or 10.4 percent compared with the same period the previous fiscal year), and operating income was 120.8 billion yen (an increase of 31.9 bil- lion yen or 35.9 percent). In the emerging markets motorcycle busi- ness segment, net sales increased thanks to higher unit sales in the Philippines, Vietnam, and Thailand, and operating income increased thanks to the effects of product mix improve- ments and cost reductions such as promotion of the platform transition. In developed mar- kets, all businesses apart from power products saw increased sales and income. Ordinary income was 124.1 billion yen (an increase of 46.5 billion yen or 59.8 per- cent against the same period the previous fiscal year), and net income for the period attributable to parent company shareholders was 89.2 billion yen (an increase of 40.9 bil- lion yen or 84.9 percent ). For the first nine months consolidated accounting period, the U.S. dollar traded at 112 yen (a depreciation of 3 yen from the same period the previous fiscal year), and the euro at 125 yen (a depreciation of 4 yen). RESULTS BY BUSINESS SEGMENT — MOTORCYCLES: Net sales of motorcycle products overall were 782.0 billion yen (an increase of 82.8 billion yen or 11.8 percent compared with the same period the previous fiscal year), and operating income was 54.5 billion yen (an increase of 25.8 billion yen or 90.3 percent). Unit sales in emerging markets such as the Philippines, Vietnam, and Thailand increased, and despite decreasing in Indonesia due to the market slump there, unit sales and net sales of motorcycle products increased overall. Operating income increased in emerging markets — principally the ASEAN region — thanks to the effects of product mix improve- ments and cost reductions such as promotion of the platform transition, and increased in developed markets as well thanks to the effects of yen depreciation, leading to increased income overall. MARINE: Net sales in the marine business segment were 250.8 billion yen (an increase of 20.3 billion yen or 8.8 percent compared with the same period the previous fiscal year), and operating income was 48.7 billion yen (an increase of 2.7 billion yen or 5.9 percent). Net sales increased thanks to healthy unit sales in North America, and model mix improvements continued thanks to increased sales of large outboard motors, leading to increased operating income. POWER PRODUCTS: Net sales for the entire power products segment were 106.5 billion yen (a decrease of 4.8 billion yen or 4.3 percent compared with the same period the previous fiscal year), and operating income was 1.3 billion yen (a decrease of 3.7 billion yen or 74.7 percent). Sales and income decreased due to the impact of inventory adjustment in recreational off-highway vehicle (ROV) products. INDUSTRIAL MACHINERY & ROBOT PRODUCTS: Net sales for the entire industrial machinery and robots business segment were 49.5 billion yen (an increase of 15.3 billion yen or 44.6 percent compared with the same period in the previous fiscal year), and operating income was 11.5 billion yen (an increase of 5.9 billion yen or 106 percent). Increases in sales and income were achieved thanks to a significant increase in both surface mounter and industrial robot unit sales. PSB Yamaha Motor posts net sales growth of 10 percent in Q3 Fox Facotry prominently displays its logo in the lobby of its Scotts Valley, Calif. headquarters. Photo courtesy of Liz Keener/Powersports Business The 2018 Yamaha Wolverine X4 was introduced in early September, and it began arriving in dealerships in early October. Photo courtesy of Yamaha

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