JEFFERIES GLOBAL AUTO AFTERMARKET INVESTOR CONFERENCE - MAY 2019
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JEFFERIES GLOBAL AUTO AFTERMARKET
INVESTOR CONFERENCE – MAY 2019
SAFE HARBOR STATEMENT This presentation does not constitute an offer or invitation for the sale or purchase of securities and has been prepared solely for informational purposes. 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, future economic or market conditions and the other risks and uncertainties described in “Risk Factors” contained in the Company’s Annual Report on Form 10-K or Quarterly Reports on Form 10-Q or otherwise described in the Company’s other filings with the Securities and Exchange Commission. New risks and uncertainties emerge from time to time and it is not possible for the Company to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this presentation. 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. This presentation contains certain non-GAAP financial measures determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). We use non-GAAP financial measures, including “Adjusted EBITDA,” as useful measures of the Company’s core operating performance and trends and period-to-period comparisons of the Company’s core business. These non-GAAP financial measures have limitations as analytical tools and should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the appendix to this presentation.
MANAGEMENT PRESENTERS
Mike Dennison / President, Powered Vehicles Group / Incoming CEO
Over 25 years of manufacturing and technology experience – Joined FOX in August 2018
Zvi Glasman / CFO
Over 30 years of experience, 18 years as a CFO – 11 years with FOX
3
OUR PURPOSE
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
4
RACE PROVEN PRODUCTS
THROUGH PERFORMANCE DEFINING TECHNOLOGIES
KRISTEN MATLOCK
Naturally Aspirated UTV Winner at
2019 San Felipe 250
AARON GWIN CAMERON STEELE BRETT RHEEDER
2011, 2012, 2015, 2016 & 2017 2018 Baja 1000 Overall Champion 2018 Red Bull Rampage Champion
Downhill World Cup Series Champion 2018 Red Bull Joyride Champion
2016 Crankworx Slopestyle Champion
2013 X-Games Slopestyle Gold Medal
WAYNE MATLOCK
Forced Induction UTV Winner at
2019 San Felipe 250
5
ASPIRATIONAL BRAND
DIEHARD BRAND EVANGELISTS
WEEKEND WARRIORS &
ENTHUSIASTS
Look for the same performance as
the professional athletes they admire
PROFESSIONAL ATHLETES
Demand the best product for a
competitive edge
6
FOX’S CORE CONSUMERS
Continue to capture a greater
share of the Performance
Enthusiast and General
Consumer Markets
7
A COMPANY OF PASSIONATE ENTHUSIASTS
ENGINEERING TECHNICIAN TECHNICAL MARKETING
SPECIALIST
DESIGN ENGINEER
8
DIVERSITY OF APPLICATIONS AND MARKETS
9
FINANCIAL HIGHLIGHTS
2017 2017
$476M $94M
2018 2018
$619M $125M
+30% +33%
Sales Adjusted EBITDA*
*FOX defines adjusted EBITDA as net income adjusted for interest expense, net other expense, income taxes, amortization of purchased intangibles, depreciation, stock-based compensation, offering expense, strategic
transformation costs, contingent consideration valuation adjustments, acquisition-related compensation expense, litigation-related costs, and certain other acquisition-related costs that are more fully described in the appendix.
10SPECIALTY SPORTS GROUP (SSG)
CUSTOMER LANDSCAPE
AFTERMARKET
ORIGINAL EQUIPMENT
12PORTFOLIO OF PERFORMANCE DEFINING PRODUCTS
13GROWTH OPPORTUNITIES IN EXISTING CATEGORIES
RHYTHM SERIES E-BIKE LIVE VALVE WHEELS
14GROWTH OPPORTUNITIES – WHITE SPACE
EXPAND BRAND INTO RELEVANT PERFORMANCE DEFINING ADJACENCIES
15SSG SALES GROWTH
$ IN MILLIONS
2018 Growth of 15%
2019 YTD Growth of 13%
3 Year CAGR of 10%
$282
$246
$227
$212
$65
$58
2015 2016 2017 2018 Q1'18 YTD Q1'19 YTD
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
16POWERED VEHICLES GROUP (PVG)
POWERED VEHICLES MARKETS
MOTORCYCLE ATV SNOW UTV MARINE
TRUCK & SUV UPFITTING OFF-ROAD DEFENSE COMMERCIAL
STREET PERFORMANCE
18CUSTOMER LANDSCAPE
AFTERMARKET
ORIGINAL EQUIPMENT
19GROWTH OPPORTUNITIES
2018 ROW ~16%
20PENETRATING NEW MARKETS
21PVG SALES GROWTH
$ IN MILLIONS
2018 Growth of 47%
2019 YTD Growth of 34%
3 Year CAGR of 30%
$337
$230
$176
$155
$97
$72
2015 2016 2017 2018 Q1'18 YTD Q1'19 YTD
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
22FINANCIALS FINANCIALS
CONSISTENT SALES GROWTH FUELED BY
PRODUCT LEADERSHIP AND NEW MARKETS
$ IN MILLIONS
Sales Growth – Consolidated SALES GROWTH – MAJOR MARKETS
2018 Growth of 30% PVG 3-year CAGR of 30%
3 Year CAGR of 19%
2019 YTD Growth of 25% SSG 3-year CAGR of 10%
$619 2018 TOTAL COMPANY SALES
$476
$403
$367
PVG SSG
54% 46%
$162
$130
2015 2016 2017 2018 Q1'18 YTD Q1'19 YTD
24LEVERAGING STRENGTH IN THE AFTERMARKET TO DRIVE
OEM SPEC GROWTH AND EXPAND CUSTOMER BASE
2018
• FOX typically enters new markets in the
aftermarket channel to drive end-consumer
adoption and brand value, which often leads
to OEM spec wins
• Focused on maintaining a healthy balance
between the two channels to sustain long-
term growth and competitive advantage
25IMPROVING PROFITABILITY THROUGH
STRATEGIC INITIATIVES
$ IN MILLIONS
2018 Adjusted EBITDA Growth of 33%
Opportunity exists to sustain a 20+% Adjusted
3 Year CAGR of 25%
EBITDA Margin over the next few years through
2019 Adjusted EBITDA YTD Growth of 35% continued improvement initiatives
2018 Adjusted EBITDA Margin of 20.1%
$125
Initiatives Include:
$94
• Powered Vehicle manufacturing and R&D
$71 platform expansion and supply chain
$64
optimization in North America
• Other process-related efficiency initiatives
$31
$23 including a new ERP system
• Further optimizing bike production in
2015 2016 2017 2018 Q1'18 YTD Q1'19 YTD
Taichung, Taiwan facility
NOTE: See appendix for reconciliation of Adjusted EBITDA to its most comparable GAAP measure.
26SOLID LIQUIDITY AND CASH GENERATION
1.2 Leverage Ratio (ending)
1.0
1.1
0.8 0.9
LOW LIQUIDITY RATIOS PROVIDE 0.8
0.9
0.6
FLEXIBILITY ON CAPITAL ALLOCATION 0.4 0.5 0.5
0.2
-
2015 2016 2017 2018 Q1'18 Q1'19
YTD YTD
POSITIVE CASH FLOW PROVIDES
ADDITIONAL FLEXIBILITY
(1) 2019 annual capex range is expected to run between 5.5% – 6.5% of sales;
higher than our long term target of 3.0% – 4.0% of sales due to near term capacity
expansion and strategic initiatives.
27PROFITABLE BUSINESS MODEL PROVIDES FURTHER
GROWTH OPPORTUNITIES OR LEVERAGE REDUCTION
SOLID CASH GENERATION • Positive cash flow enables capital allocation opportunities
• Organic market growth, technology and brand
INVEST FOR GROWTH • Ongoing operational and strategic initiatives
• M&A screen for possible future acquisitions
• Debt paydown as appropriate
OTHER USES • Potential share repurchases depending on market conditions
28WRAP UP
Aspirational Brand
Performance Defining Products
Innovative Technologies
SUSTAINABLE
Diversity of Applications and Markets
COMPETITIVE ADVANTAGE
A Company of Passionate Enthusiasts TO ENABLE FUTURE GROWTH
Organic and Adjacent Growth
Opportunities
Proven Track Record of Financial Success
29Q&A
30APPENDIX
31ADJUSTED EBITDA RECONCILIATION
ADJUSTED EBITDA RECONCILIATION
Fiscal Year Year to Date
($ in Millions) 2015 2016 2017 2018 Q1'18 Q1'19
Net Income $25.0 $35.7 $43.2 $85.4 $21.5 $18.4
Provision for Income Taxes 9.3 7.4 21.1 5.5 (6.6) 2.6
Depreciation & Amortization 13.1 8.8 9.9 14.2 3.3 4.0
Stock-Based Compensation 4.9 6.2 8.7 7.3 2.0 1.7
Fair Value Adjustment of Contingent Consideration and Acquisition 6.9 5.9 1.4 - - -
Related Compensation
Patent Litigation Related Expenses - 2.7 4.7 7.2 1.3 2.1
Strategic Transformation Costs (1) - - - - - 0.2
Tax reform implementation costs (2) - - - 0.5 0.1 0.1
Other Acquisition and Integration Related Expenses (3) 3.0 1.0 1.9 0.9 0.3 0.1
Offering Expense 0.2 0.6 0.1 - - -
Other Expense, Net 1.1 2.5 2.8 3.6 1.1 0.9
Adjusted EBITDA $63.5 $70.8 $93.8 $124.6 $23.0 $30.1
Divided by Sales $366.8 $403.1 $475.6 $619.2 $129.8 $161.7
Adjusted EBITDA margin 17.3% 17.6% 19.7% 20.1% 17.7% 18.6%
(1) Costs incurred to relocate the Specialty Sports Group’s U.S. aftermarket b ike products distrib ution, sales and service operations and expand the Powered Vehicles Group’s manufacturing
operations.
(2) Represents costs and expenses of $132 and $125 incurred during the three month periods ended March 29, 2019 and March 30, 2018, respectively, in connection with the Company’s
implementation of tax reform legislation and related tax restructuring initiatives.
(3) Represents various other acquisition-related costs and expenses incurred to integrate acquired entities into the Company’s operations.
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