Teleconferência de resultados do 3T26 da Fox Factory (FOXF): vendas caem, guidance de EBITDA se estreita

Principais Destaques

• As vendas líquidas no terceiro trimestre de 2026 caíram 10,1% na comparação anual, para US$ 338,4 milhões, refletindo a menor receita da Marucci, desafios operacionais no negócio de upfit, uma interrupção de fornecedor na divisão Powered Vehicles e vendas mais fracas na divisão Bike.
• O EBITDA ajustado foi de US$ 50,4 milhões, com margem de 14,9%. Excluindo cerca de US$ 12 milhões em reembolsos de tarifas da IEEPA, o EBITDA ajustado foi de aproximadamente US$ 38 milhões, com margem de cerca de 11,3%.
• A Fox Factory concluiu a venda da Marucci em 25 de setembro por um valor de empresa (enterprise value) de US$ 225 milhões e utilizou US$ 200 milhões dos recursos em caixa para abater dívidas. A alavancagem líquida caiu de 3,7x no final do segundo trimestre para aproximadamente 2,4x.
• As vendas da divisão Powered Vehicles aumentaram 4,1%, para US$ 131,0 milhões, impulsionadas pelo crescimento de 28,8% em powersports. No entanto, custos com interrupção de fornecedores, frete expresso, horas extras e um mix desfavorável reduziram a rentabilidade do segmento.
• A administração manteve o guidance de vendas líquidas para o quarto trimestre entre US$ 287 milhões e US$ 313 milhões e o guidance de EBITDA ajustado entre US$ 25 milhões e US$ 30 milhões, excluindo a Marucci e reembolsos adicionais de tarifas da IEEPA.
• O guidance de EBITDA ajustado para o ano de 2026 foi ajustado para a faixa de US$ 143 milhões a US$ 148 milhões excluindo reembolsos de tarifas, ou de US$ 157 milhões a US$ 162 milhões incluindo cerca de US$ 14 milhões em reembolsos.

Principais Resultados Financeiros

Desempenho Comercial e Operacional

Powered Vehicles Group

As vendas do segmento cresceram 4,1% na comparação anual, para US$ 131,0 milhões. As vendas de powersports aumentaram 28,8%, marcando o terceiro trimestre consecutivo de alta, enquanto os clientes OEM reduziam o estoque nos canais.

O EBITDA ajustado do segmento caiu de US$ 18,9 milhões para US$ 15,0 milhões. Um fornecedor de molas não conseguiu acompanhar a demanda, obrigando a Fox Factory a recorrer a frete expresso e horas extras nas fábricas. A administração afirmou ter transferido volume para outros fornecedores qualificados e estar adicionando capacidade, mas suas projeções assumem que a interrupção continuará ao longo do quarto trimestre.

Aftermarket Applications Group

As vendas caíram 20,4%, para US$ 93,8 milhões, enquanto o EBITDA ajustado recuou de US$ 12,4 milhões para US$ 8,5 milhões. As principais pressões decorreram da disponibilidade limitada de chassis, condições mais fracas entre concessionárias e consumidores, perdas de receita relacionadas a desinvestimentos e problemas operacionais no negócio de upfit.

A administração está focando na produtividade fabril, mix de chassis, gestão de estoques, engajamento com concessionárias e execução da cadeia de suprimentos. Custom Wheelhouse, RideTech e Sport Truck continuaram a se beneficiar de lançamentos de produtos e do investimento dos consumidores em seus veículos existentes, enquanto os programas de customização da Ford e da Stellantis proporcionaram volumes mais estáveis.

Specialty Sports Group

As vendas recuaram 14,4%, para US$ 113,6 milhões, em grande parte porque a Marucci contribuiu com aproximadamente US$ 33 milhões antes de sua venda, frente a US$ 49 milhões no mesmo trimestre do ano anterior. O EBITDA ajustado do segmento subiu de US$ 27,5 milhões para US$ 39,6 milhões, impulsionado principalmente por reembolsos de tarifas da IEEPA.

As vendas da divisão Bike ficaram um pouco abaixo das expectativas da administração em razão do cronograma de pedidos e da desestocagem nos canais. A empresa descreveu o segmento Bike como estável e ressaltou sua liderança em suspensões premium, parcerias no mercado de e-bikes e os avanços na plataforma emergente de cross-country de 32 polegadas.

Estratégia Operacional e de Portfólio

Após os desinvestimentos da Outside Van e da Marucci, a Fox Factory está concentrando seus esforços em dinâmica veicular e de pilotagem nos produtos para Bike, powersports, automotivos e de pós-venda. A administração afirmou que avaliará os negócios com base no alinhamento de marca, sinergias de engenharia e na capacidade de gerar margens agregadoras de valor e fluxo de caixa sustentável.

O CEO interino, Douglas Grimm, está implementando o modelo operacional "One Fox", focado em padrões compartilhados, prestação de contas (accountability), compras, logística e produtividade fabril. A empresa também promoveu Troy Henige a Chief Technology Officer para coordenar a estratégia de tecnologia de produtos e o roadmap corporativo.

Guidance da Administração

A administração informou que cerca de US$ 63 milhões da redução nas perspectivas de vendas para o ano inteiro divulgadas em agosto foram atribuíveis à Marucci, incluindo aproximadamente US$ 50 milhões previstos anteriormente para o quarto trimestre. Para as operações continuadas, o guidance de vendas do quarto trimestre permanece consistente com a perspectiva subjacente anterior.

A empresa espera que a margem EBITDA ajustada combinada das divisões Powered Vehicles e Aftermarket Applications fique praticamente estável na comparação anual no quarto trimestre. A companhia planeja apresentar suas perspectivas para 2027 juntamente com os resultados do quarto trimestre, em fevereiro.

Riscos e Pontos de Atenção

• A expectativa é de que a interrupção no fornecedor de molas da divisão Powered Vehicles continue no quarto trimestre, gerando custos temporários com frete expresso e horas extras.
• Os custos com frete, alumínio e aço permanecem elevados. O guidance atual pressupõe que os custos dos insumos fiquem nos patamares atuais, sem novos aumentos.
• O negócio de upfit continua enfrentando problemas de produtividade fabril, restrições de chassis e demanda enfraquecida por veículos com preços entre US$ 70.000 e mais de US$ 100.000.
• Juros mais altos, custos de combustíveis e pressões macroeconômicas mais amplas continuam afetando concessionárias e consumidores.
• Fabricantes (OEMs) e distribuidores de bicicletas continuam administrando os estoques nos canais e o momento dos pedidos.
• A administração não prevê reembolsos adicionais relevantes de tarifas da IEEPA no quarto trimestre ou após esse período.

Destaques da Sessão de Perguntas e Respostas com Analistas

• Base de resultados para 2027: A administração optou por não quantificar uma base normalizada de EBITDA ajustado para 2027 enquanto o orçamento está sendo elaborado. As prioridades incluem economias estruturais adicionais de custos, recuperação comercial por meio de repasse de preços e a eliminação de custos temporários na divisão Powered Vehicles.
• Alocação de capital: Com a alavancagem líquida em cerca de 2,4x, a administração afirmou que a Fox Factory pode considerar toda a sua estrutura de alocação de capital, incluindo redução de dívida, investimentos de capital de alto retorno e recompras oportunistas de ações. Restam aproximadamente US$ 250 milhões autorizados para recompra até novembro de 2028.
• Recuperação do negócio de upfit: A administração destacou a padronização operacional, em vez de grandes investimentos em produtos, como a principal solução no curto prazo. A empresa também está avaliando parcerias mais amplas com montadoras (OEMs) e atuação direta com grandes grupos de concessionárias.
• Busca por CEO: A Heidrick & Struggles está liderando a seleção, que abrange candidatos internos e externos. A Fox Factory busca um líder com visão comercial e experiência operacional; a administração indicou que um processo de quatro a seis meses pode ser razoável, mas nenhum cronograma foi definido.
• Disponibilidade de chassis: As remessas de chassis da F-150 estão chegando no quarto trimestre, embora mais tarde do que o esperado. A administração expressou confiança de que os veículos prontos poderão ser rapidamente comercializados no varejo assim que os chassis forem recebidos.

Transcrição Completa da Teleconferência de Resultados

Transcrição completa da teleconferência de resultados

Comentários da administração

Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Fox Factory Holding Corp.'s third quarter 2026 earnings conference call. [Operator Instructions] Please note this conference call is being recorded. I'd like to turn the conference over to Mr. Toby Merchant, Chief Legal Officer at Fox Factory Holding Corp. Please go ahead, sir.

Toby D. Merchant,

Thank you. Good afternoon and welcome to Fox Factory's third quarter 2026 earnings conference call. I'm joined today by Doug Grimm, Interim Chief Executive Officer, and Dennis Schemm, Chief Financial Officer. First, Doug will provide business updates, and then Dennis will review the quarterly results and outlook. Doug will then make some closing remarks before we open up the call for your questions.

By now, everyone should have access to the earnings release, which went out earlier this afternoon. If you have not had a chance to review the release, it's available on the Investor Relations portion of our website at investor.ridefox.com. Please note that throughout this call, we will refer to Fox Factory as Fox or the company.

Before we begin, I would like to remind everyone that the prepared remarks contain forward-looking statements within the meaning of federal securities laws, and management may make additional forward-looking statements in response to your questions. Such statements involve a number of known and unknown risks and uncertainties, many of which are outside of the company's control and can cause future results, performance, or achievements to differ materially from the results, performance, or achievements expressed or implied by such forward-looking statements. Important factors and risks that could cause or contribute to such differences are detailed in the company's quarterly reports on Form 10-Q and in the company's latest annual report on Form 10-K, each filed with the Securities and Exchange Commission. Investors should not place undue reliance on the company's forward-looking statements and except as required by law, the company undertakes no obligation to update any forward-looking or other statements herein, whether as a result of new information, future events, or otherwise.

In addition, where appropriate in today's prepared remarks and within our earnings release, we will refer to certain non-GAAP financial measures to evaluate our business, including adjusted operating expenses, adjusted net income, adjusted earnings per diluted share, adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA excluding IEEPA tariff refunds, and net debt. We believe these are useful metrics that allow investors to better understand and evaluate the company's core operating performance and trends. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are included in today's earnings release, which has also been posted on our website.

And with that, it is my pleasure to turn the call over to our interim CEO, Doug Grimm.

Douglas Grimm

Thanks, Toby, and good afternoon, everyone. Thank you for joining us. A great deal has happened at Fox since we last spoke in August. In the span of a few weeks, we completed the sale of Marucci, announced a change in leadership, and updated our outlook for the year. I recognize that is a lot for our shareholders to absorb, and I appreciate the time many of you have already spent with Dennis and our team working through it. Our goal today is to give you a clear, complete picture of where the business stands, what is driving our results, and how we are approaching the months ahead.

Since this is my first time speaking with many of you, I'd like to start with a brief introduction. I've spent more than 40 years in operating and leadership roles across the automotive and industrial sectors, running global manufacturing businesses and leading a number of transformations and integrations along the way. Much of that career has been spent on plant floors and building relationships with OEM customers. I joined the Fox board in March and have served on the transformation committee since then, which has given me a close view of the profit optimization work that Dennis and the team have been driving, including where it has delivered and where I believe there is opportunity to do more.

I want to acknowledge at the outset that our third quarter results fell short of the expectations we set in August. And the outlook we provided in October was a disappointment for our shareholders after the momentum we reported through the first half of the year. Dennis will take you through the results, the segment drivers, and our outlook in detail. I'd like to use my time today to cover 3 things: what has changed in the business since our last call, how I see Fox today and the strengths we are building from, and the priorities that will guide us, including the cultural shift we are driving across the entire organization.

Starting with 2 business developments since our last call. The first is the divestiture of Marucci, which we completed on September 25 for an enterprise value of $225 million. We applied the $200 million of cash proceeds to debt reduction, which together with the proceeds from the sale of Outside Van and the cash flow we generated in the quarter lowered our net leverage from 3.7x to approximately 2.4x. We firmly believe the transaction was the right decision for the company, leaving us with a simpler portfolio and a meaningfully stronger balance sheet.

The second is the performance of our core business during the quarter, where our supply disruption in powered vehicles, incremental inflation and freight costs, and operational challenges in our upfit business all weighed on our results. I want to be clear about how we view those issues. Demand across powersports and our aftermarket brands remains healthy. Our relationships with our OEM partners are strong, and the supply disruption is temporary and being resolved. These challenges are real, but they are fixable, and we are working on each of them. And with net leverage at its lowest level in nearly 3 years, approximately $400 million of availability on our revolver, and a credit facility that runs to 2030, we have the financial flexibility to work through this period while continuing to invest.

With Outside Van and Marucci now divested, Fox is a more focused company centered on ride dynamics—the suspension, shocks, wheels, and related systems we provide across bike, powersports, automotive, and the aftermarket. Although a great deal of effort by our entire team has gone into refocusing our business, we recognize that the work is not done. We will continuously evaluate each of our businesses against the same 3 criteria that guided those decisions: alignment with the Fox brand, synergy with our engineering capabilities, and the ability to deliver accretive margins and durable cash flow.

And with that, I want to spend time on the future. I believe the foundation of this company is strong. We have great brands, great products, and a great team. Our brands are leaders in their categories. We are a trusted innovation partner to the leading OEMs in bike, powersports, and automotive, and our more than 300 engineers and more than 4% of revenue we invest in R&D continue to produce compelling product roadmaps. All to say, when we look outward at our products, our technology, and our brands, Fox is first class.

Fox has an established history of generating attractive adjusted EBITDA margins over a number of years. We believe there is significant opportunity to restore that profitability through stronger execution, which is my top priority. Getting there will take more than a change in leadership. It requires a change in how we operate, and I see this moment as a cultural transition for the entire organization.

Internally, we've been talking about this as One Fox. For too long, Fox has been managed as a collection of businesses, each working towards its own priorities. One Fox means operating as a single company with shared standards, shared accountability, and a shared commitment to delivering on what we tell our customers and our shareholders. It means using the scale of the whole company in areas such as purchasing and logistics. In practical terms, that means leaving no stone unturned.

I'm going business by business and plant by plant to find where disconnects are and to put in place processes that are more streamlined, more efficient, and more accountable. I've joined the monthly operating reviews that our teams hold with each of our businesses, and since stepping in, have spent most of my time on the ground, in our plants, and with the people who run them. Establishing a more formal operating cadence with clear ownership of results at every level will be central to how we run Fox going forward. I've been encouraged by what I've seen so far. The people at Fox care deeply about the products they design, engineer, and build, our customers, and the results. They are ready for this. Let me give you a couple examples.

In powered vehicles, I sat down with the innovation team and went through the new business pipeline and the broader slate of engineering programs underway, which reinforced my view that our product-led strategy is the right one. I also walked our Gainesville plant with the team to look at how we can improve machine utilization.

As a first step toward operating more as One Fox, I'm pleased to share that we have promoted Troy Henige to the newly established role of Chief Technology Officer, reporting directly to me. Troy has been with Fox for more than a decade, as Vice President of Engineering for Powered Vehicles, and has worked across a broad range of product categories. He will lead our enterprise technology vision, strategy, and product roadmap and chair our Technology Council, working closely with business and engineering leaders across Fox. Our products are what set us apart, and this role will help us connect the engineering strengths of our individual businesses and share what we learn across the company.

So, near-term work starts with the issues within our control. In powered vehicles, a spring supplier was not able to keep up with demand this quarter. We chose to protect our customers, which meant expediting freight and running overtime, and that cost us in the quarter. We are working closely with the company to restore supply. In the meantime, we have shifted volume to our other qualified suppliers and are adding capacity. More broadly, we are bringing our purchasing and engineering teams closer together on commodity and supplier strategy with a global view of our key suppliers and a qualified secondary source where it matters.

In our upfit business, the issues are operational and we own them. I'm taking a fresh look at how we run this business from sales and dealer engagement to operations, supply chain, and chassis planning. We are focused on plant productivity, chassis mix, and inventory management. We believe there is substantial opportunity here, but it will take time to show up in our results. At the same time, we continue to advance our profit optimization program to offset persistent inflation. And we are improving our operating rhythm so more of those savings reach the bottom line.

We are also taking a more deliberate approach to commercial recovery. Fox makes premium, high-precision products, and our brands help elevate our customers' vehicles and create demand for them. I need to make sure we are being paid appropriately for that value, including the inflation and freight costs we have absorbed. I have worked through several periods of cost inflation in my career, and this works best when it's done thoughtfully, in partnership with customers, and consistently across the company. It is still early, but our teams have started those conversations and we will say more when we provide our 2027 outlook in February.

We will also remain focused on cash generation and debt reduction. Free cash flow will continue to go towards paying down debt, supported by a sharper focus on working capital, including inventory, chassis prepaids, and receivables, and continued discipline on capital spending while we protect our investment in R&D. And across all of this, every business, product line, and R&D project will be measured against clear return thresholds, consistent with executive incentives, tied to return on invested capital and free cash flow. This framework is what will shape our 2027 plan, which the team is developing now, and we expect to share more detail on our fourth quarter call in February.

Our goal for this period is straightforward: to execute with purpose, to deliver on the outlook we've set, and to put Fox in a position where the next CEO can build on a stronger operating foundation from day 1. I want to see that work show up in our numbers.

With that, I'll turn the call over to Dennis.

Toby D. Merchant,

Before I get into the numbers, a word on the transition. I worked alongside Doug on the Transformation Committee since he joined the Board, and I'm energized to be working with him in this role. We are like-minded about what this business needs: operating rigor, financial discipline, and accountability. And he brings a pace to that work that I welcome. In a short time, he has already sharpened how our businesses approach pricing and plant productivity.

I will begin by discussing our third quarter financial results and a brief overview of our segments, followed by our balance sheet, cash flow, and capital allocation, before concluding with a review of our outlook.

Starting with our results, as we outlined on October 16, third quarter results were below our expectations, primarily due to lower sales and margin at Marucci ahead of the closing, lower-than-expected sales and margins in powered vehicles driven by a supplier disruption and the associated higher operating costs along with unfavorable mix, operating challenges in our upfit business within aftermarket applications, and to a lesser extent, softer-than-expected bike sales. These came against a more difficult backdrop as higher interest rates and broader macroeconomic conditions continue to weigh on dealers and consumers.

Total consolidated net sales in the third quarter were $338.4 million, a decrease of 10.1% compared to the prior year period. That includes approximately $33 million from Marucci through the September 25 closing, compared to approximately $49 million in the prior year period, and approximately $46 million we had assumed for the full quarter.

The gross margin was 31.5% compared to 30.4% in the third quarter last year. The increase was primarily driven by IEEPA tariff refunds, partially offset by shifts in our product line mix and higher external input costs, including freight, commodities, and fuel. On our August call, we said incremental input cost inflation was running nearly $20 million above the assumptions in our full-year plan, with approximately $15 million of that in the second half. Since then, external costs have remained elevated, and our outlook reflects input costs at current levels, including aluminum, steel, and freight inflation, and assumes no further increases.

Adjusted operating expenses were $68.7 million or 20.3% of net sales, down from $85.7 million or 22.8% of net sales in the year-ago period. Compared to the second quarter, we drove a sequential reduction of $9.8 million or a 160 basis point improvement as a percentage of sales, which includes the partial quarter impact of the Marucci divestiture. That includes a sequential reduction in unallocated corporate expense of approximately $1.2 million.

Through the first 9 months, we captured approximately $41 million of gross savings against our $50 million stated goal. And as Doug indicated, our profit optimization efforts continue to be a cornerstone of our operating strategy as we look to 2027.

Our effective tax rate was negative 1.4% in the quarter compared to the 21% federal statutory rate, primarily attributable to lower pre-tax earnings for the quarter and the tax effects recognized in conjunction with the divestiture transactions completed during the period.

Adjusted net income was $22.7 million, or $0.54 per diluted share, compared to $9.9 million, or $0.23 per diluted share, in the third quarter last year.

Adjusted EBITDA was $50.4 million and included approximately $12 million of IEEPA tariff refunds. Excluding these refunds, which were not factored into our outlook, adjusted EBITDA was approximately $38 million, at the low end of the preliminary range we provided on October 16. The shortfall versus the midpoint of that range was primarily due to the timing of cost savings, which landed later than we anticipated. The adjusted EBITDA margin was 14.9%, or approximately 11.3% excluding the tariff refunds.

Turning to our segments, Powered Vehicles Group segment net sales were $131 million, up 4.1% year-over-year, driven by strengthening demand in powersports, where net sales increased 28.8%, partially offset by lower net sales in our automotive-related product lines. Segment adjusted EBITDA was $15 million compared to $18.9 million in the prior year period, reflecting the supply disruption and the associated higher operating costs, as well as unfavorable mix. Our outlook assumes the disruption continues through the fourth quarter, and we view the heightened associated costs as temporary. Importantly, the underlying demand picture in powered vehicles is constructive. Powersports grew for a third consecutive quarter as our OEM customers have worked through the channel inventory that weighed on the industry. And we remain well positioned across the major OEMs within the high end of their product assortments.

Aftermarket Applications Group segment net sales were $93.8 million, down 20.4% year-over-year, driven by limited chassis availability for our upfit businesses, macroeconomic conditions affecting dealers and consumers, and the loss of revenue from divested businesses. Segment adjusted EBITDA was $8.5 million compared to $12.4 million in the prior year. The challenges in this segment are primarily concentrated in our upfit business, where we still have much work to do with respect to productivity while we await a normalization of Ford chassis support and consumer sentiment to stabilize.

Our aftermarket applications components brands, including Custom Wheelhouse, RideTech, and Sport Truck, have continued to benefit from product launches and value-seeking consumer behavior as consumers who are holding off on new trucks continue to invest in the vehicles they already own. These brands have also continued to take price where the market allows, even as some competitors have discounted. In upfit, our OEM-partnered customization programs with Ford and Stellantis continue to build. Those programs bring steadier menu-driven volume that flows through our plants, and they are an important part of how we expect to improve plant utilization over time.

The Specialty Sports Group segment net sales were $113.6 million, down 14.4% year-over-year, largely due to retail softness at Marucci, which included approximately $33 million of contribution in Q3 this year compared to $49 million last year. Segment adjusted EBITDA was $39.6 million compared to $27.5 million in the prior year, primarily reflecting IEEPA tariff refunds recorded in the segment.

Bike sales were modestly softer than we expected, reflecting order timing and channel destocking as OEMs and distributors responded to market-wide economic conditions. Bike remains a stable business for us. We continue to hold a leadership position in premium bike suspension, and our relationships with new entrants in e-bike, along with our motor-agnostic integration approach and our work on the emerging 32-inch cross-country platform, continue to position us well as the industry moves past years of elevated inventory.

Moving to the balance sheet and cash flows, cash and cash equivalents were $45.4 million compared to $61.3 million at the end of the second quarter. Total debt was $397.4 million at quarter end, down $270.3 million sequentially from the second quarter and down $276.1 million from year end. Net debt declined by $263.5 million year-to-date. As of October 2, our net leverage ratio is approximately 2.4x. This compares against the 5x covenant and is down from 3.7x at the end of the second quarter.

We applied the $200 million of cash received at the closing of the Marucci sale in full to debt reduction, which shifted us into a more favorable tier of rates at the lower borrowing level and had the effect of reducing our annualized interest expense by approximately $16 million. We expect the total reduction to reach $17 million once the $25 million deferred amount payable on or before December 31, 2026 is received and applied to outstanding borrowings. Days inventory on hand improved to approximately 122 days from approximately 148 days a year ago, reflecting both the divestitures and our continued focus on working capital.

Net cash provided by operating activities was $74.7 million for the first 9 months of the year, compared to $42.8 million in the prior year period. We also maintained our disciplined approach to capital spending with third quarter capital expenditures of approximately $4.7 million or roughly 1.4% of revenues and 9-month capital expenditures of $14.1 million or 1.3% of revenues. Combined with the deferred Marucci proceeds and our continued focus on working capital, we expect further progress on debt reduction in the fourth quarter. Our focus continues to be on creating value for shareholders, and we will balance continued debt reduction, high-return capital investments in the business, and share repurchases as we go. We have approximately $250 million remaining under our share repurchase authorization, which runs through November 2028. The program gives us flexibility to manage dilution from equity grants and to repurchase shares opportunistically.

Now, moving on to our outlook. Today, we are updating our fourth quarter outlook from October 16 and narrowing our fiscal 2026 adjusted EBITDA outlook to reflect year-to-date results. For the fourth quarter, we continue to expect net sales in the range of $287 million to $313 million and adjusted EBITDA in the range of $25 million to $30 million, both excluding Marucci and any additional IEEPA tariff refunds. For fiscal 2026, we continue to expect net sales in the range of $1.35 billion to $1.38 billion and now expect adjusted EBITDA in the range of $143 million to $148 million, excluding approximately $14 million of IEEPA tariff refunds received in the second and third quarters, or $157 million to $162 million, including those refunds. Full-year guidance includes Marucci results through the September 25 closing.

The mechanics of the change from our August outlook are straightforward. Approximately $63 million of the reduction in our full-year net sales outlook reflects Marucci, including approximately $50 million of fourth quarter net sales that were in our prior guidance. The remainder reflects lower third quarter net sales in the businesses we continue to own. For the businesses we continue to own, our fourth quarter net sales outlook is in line with our prior underlying guidance.

On what this does to our margin framework, our fourth quarter outlook reflects the divestiture of Marucci, a continuation of the supply disruption and higher-than-anticipated inflation in freight costs in powered vehicles, and within aftermarket applications, lower chassis availability and continued operational challenges in our upfit business. At the segment level, we expect adjusted EBITDA margin for powered vehicles and aftermarket applications combined to be approximately flat versus the fourth quarter of 2025. We are not providing 2027 guidance today as we work with Doug on the operating plan. We expect to share more on our fourth quarter call in February.

To summarize, our balance sheet is meaningfully stronger following the Marucci sale, and our focus is on execution and delivering the outlook we have provided today.

With that, Doug, back to you for closing remarks.

Douglas Grimm

Thanks, Dennis. Before we take your questions, I'd like to leave you with a few thoughts. With the sale of Marucci complete, Fox is a more focused company with a stronger balance sheet, and we will continue to prioritize debt reduction. Our fourth quarter sales outlook for the businesses we continue to own is unchanged. The issues that affected our margins are operational ones that we are actively addressing. Our focus now is on executing against it and keeping you informed of our progress along the way. Most importantly, we are working to make Fox a company that consistently delivers on its commitments. To reiterate, we have great brands, great products, and a great team. And as One Fox, our job is to match them with the financial results this company is capable of producing once again. I'd like to thank our employees for their hard work and commitment through what has been a challenging period. I'm confident in what we can accomplish together.

Before we open the line for questions, I want to share one governance update. Following its ongoing review of our governance framework, our Board has approved a plan to declassify the Board. At our 2027 Annual Meeting, we will ask stockholders to approve a charter amendment under which the Board will declassify pursuant to a customary phased transition. The Board believes annual elections strengthen its accountability to our stockholders and a phase transition honors the terms our stockholders elected our directors to serve. We'll provide the details in our proxy statement for the 2027 Annual Meeting. Operator, please open the line for questions.

Operator

Certainly. [Operator Instructions] We go first this afternoon to Peter McGoldrick with Stifel.

Perguntas e respostas

Peter McGoldrick

I first wanted to ask about the normalized profit level as we think about a normalized EBITDA base heading into 2027. Based on the $143 million to $148 million outlook for '26 ex-tariff refunds, how much of that is in the go-forward base so as we build our 2027 EBITDA, we're using the right framework?

Toby D. Merchant,

It's a great question, Peter. Right now, we are in that process of just building up the budget for 2027. So it's a little early for me to get out in front of this and try to provide you with some perspective. But here's a couple points that we are absolutely committed to. Number 1, we are committed to transformation and delivering more cost savings. That is not going to stop. We're also committed to delivering more commercial recovery. We have been hit with inflation for the last 2 years fairly significantly. We know we need to do more on the commercial recovery side there. And quite frankly, our teams are so used to winning, right? We've got to get back to winning, getting on offense, and getting this pricing recovery into our numbers.

And so we're going to all be about continuing the cost savings. Not going to say it's a Phase 3, but we're going down that path to continue transformation, making it more structural in nature so that we can really drive savings, whether the volumes are there or not. That is something really, really important to us moving forward. And some of these costs that we've talked about here with PVG, I would consider those to be transitory in nature in the sense that we're expediting freight, we're having to pay for temporary overtime in the plants to keep up with that volume to meet that customer demand that we talked about earlier.

Peter McGoldrick

I appreciate that, Dennis. And then as we think about the 4Q '26 revenue outlook, you offered some good qualitative insights backdrop, can you help us with some numbers around how we should be thinking about the relative growth on a year-over-year basis on the go-forward portfolio?

Toby D. Merchant,

Again, that's going to be really tough to get into growth for next year.

Peter McGoldrick

For 4Q '26 is what I was thinking.

Toby D. Merchant,

4Q '26 is based on that. So 4Q '26, we're guiding at $287 million to $313 million. What we're continuing to see, Peter, is stability in bike. It's predictable, durable. This is a lower period for them. Q4 is traditionally the lower period for them, but pretty much right on line with what we've been thinking.

PVG continues to demonstrate growth, and I'm comfortable that they're going to continue to meet their growth commitments here this quarter. Again, that supply chain issue is being remediated, and we feel good about our pathway there. The Aftermarket Applications Group with Sport Truck, RideTech, they continue to deliver predictably. Yes, the market is a little tougher. There's a little more softness there, but they continue to be reliable. And it really comes down to upfit in AAG, and it's a lot on those chassis and the dealer lots and getting those a little more unplugged. So hopefully that's some good context for you.

Peter McGoldrick

Appreciate that. Thank you.

Operator

Thank you. We'll go next now to Scott Stember with Roth Capital.

Scott Stember

Just on powersports, looking at the truck business, if you were to look past this supplier issue, it sounds like demand is still relatively strong. Can you just quantify what the order book looks like and maybe a mix there? And the other part of the question would be, you know, you are seeing a little bit of softness for that same kind of product in upfitting. What's the disconnect between the demand between one and the other? I know the price point's a bit higher, but maybe just talk about that.

Toby D. Merchant,

Yes, so order book does remain strong for PBG going into the fourth quarter. We're continuing to see powersports perform very, very strongly. It's offset by some off-road automotive weakness within PBG, but overall, that order book remains really solid. And I do feel good about that going into next year. Again, we'll be talking about 2027 come the Q4 update. Relative to the aftermarket side of business, in many ways, it's a very different market. Those are two very different price points. Those vehicles are extremely different. We're dealing with $70,000, $80,000 price points on a lot of our Ram products, over $100,000 on the Ford products. And so, just seeing there is inflation, higher fuel costs hitting the market right now, and I think that's just causing some customers to have a pause essentially.

Scott Stember

Got it. And Doug, you made a comment about after taking a look, there's some, I wouldn't say self-inflicted, but there's definitely Fox issues that you need to work on in AAG. Could you maybe talk about some of those so we have an idea of what to look for in AAG improvement in '27?

Douglas Grimm

Yes, no, thank you for the question. First of all, let me emphasize I pretty much work in 90-day increments. That's kind of my operating style. And so a 90-day plan here, there's 3 things I'm looking at. And that's operational excellence and specifically improving the plant productivity in PVG, supply chain optimization where we can do better across the business whether it be in the aftermarket group or the powered vehicle group, and then commercial recovery and working with our customers to recover on the inflation side of the business. So I look at myself as being an accelerator, being the interim CEO, kind of being the interim CEO as the accelerator as we recruit a new CEO. And so I have the opportunity to kind of get some things going here and make decisions where we need to make decisions and drive more of a standardization across the business in what we call One Fox, and then get the benefits of that, whether it be in purchasing, logistics, whatever it may be.

Also, we promoted Troy Henige here yesterday into the Chief Technology Officer position. Troy is a great guy, a great engineer, and a really bright individual and executive. And with Troy in that position, we're going to be, you know, we are a product-led company. I wanted that position to be in the C-suite and really drive technology. This isn't about information technology; it's about product technology. I'm really focused on being the accelerator. We have great brands, great people, great products. The front office part of the business is terrific. We've got to work on the back office and get our operations in shape and do a better job on the supply chain management side.

Scott Stember

Got you. That's all I have. Thanks.

Operator

Thank you. We'll go next now to Larry Solow with CJS Securities.

Unknown Speaker

Hey, it's Luigi Gota for Larry this evening. Dennis, just 1 for you and a couple for Doug, if I could. Just on the, you know, assuming no additional asset sales going forward, how should we think about the ability to delever the balance sheet? And is there a target for leverage before you can, I think in your words, go play some offense, and whether that means share repurchases or potentially wading into some M&A?

Toby D. Merchant,

It's a really great question. Thanks for taking the time to get that out. In many ways, Q3 was a decisive quarter. And look, not overlooking, it was a pretty big guide down for the back half. But one of the things that occurred that has been fantastic is we've taken our leverage down below 3x. And so now we're sitting at 2.4x leverage. And essentially, that opens up that full capital allocation playbook from share repurchasing, investing more in high-return CapEx, continuing to pay down debt, et cetera. So we're going to be looking across all 3 of those and trying to find the best way to create value for shareowners.

For 18 months, we have not had the ability to do that. And so this really, in my mind, is a significant achievement for this organization who has worked so hard to... We've been working so tirelessly on those cost savings, and we continue to drive those. I mean, we're driving to $41 million this year so far. We're going to get $50 million. It was $25 million last year, and we're not seeing those hit the bottom line. It's all this inflation, it's the tariff costs, et cetera. So we have now gotten ourselves into a place where we can execute on that entire playbook.

Significantly simplified business: Shock Therapy is out, Upfit UTV is out, Geyser is out, and most recently Outside Van and Marucci. And so it really allows us to focus on ride dynamics, and that feels like a really good place to be. So the final part what you're going to start to see is the free cash flow wheel that will generate, right? So already we're so much further improved over last year. I think we're around $65 million free cash flow year-to-date. That is the free cash flow wheel that's generating now from what we've done here. So hopefully that helps a little bit on how we're thinking about it moving forward.

Unknown Speaker

No, it does for sure. We've gone through these various strategic alternatives processes. It clearly led to the sale of a bunch of assets, including Marucci. In the release, you continue to mention the evaluation of alternatives and looking for things to make sure that they meet the current strategic objectives. I guess, have we come to a point where we've looked at all the businesses and we've identified that there are still things that don't meet those objectives, or are there still businesses that you haven't reviewed thoroughly to make that determination?

Douglas Grimm

No, we're here to run the business and to transform the business with the assets we got. We want to focus. We got down to the core. We're focusing on the core. We got some hiccups, and we're dealing with those hiccups. And we're going to get better, and we're going to fix the issues at PVG with the spring supplier and then at AAG with some of the operational issues in the supply chain. So we're focused on transforming and, once again, being an interim in the position of accelerating the business. And we'll bring in a new CEO, and I'll go back to my board position, and we'll look at all avenues as we continue to run the business and transform it. And my job is to set it up for the new CEO.

Unknown Speaker

And along those lines, can you give us an update on the CEO search process, maybe the characteristics that you as the interim and a board member are looking for in a new CEO? And I guess specifically, does the search include both internal and external candidates?

Douglas Grimm

Yes. Yes, great question. So, yes, Heidrick & Struggles has been contracted to do the search. Yes, we're looking internal and external. And we think we're going to get a lot of great candidates to take a look at this. You know, we have amazing brands and products and people and a great team and a great history. And so we think this is going to be a real exciting job and people are really going to be attracted to it. So I'm excited to meet some people. I actually started talking to people last week and interviewing, and we're moving forward and we'll be thoughtful, but be expeditious in our approach. And we're looking for somebody who's probably commercially savvy, but has that operational effectiveness. And so we think we're going to be able to attract the right candidate, and looking forward to working with the new CEO when they get on board.

Unknown Speaker

And is there a timeline you're looking at?

Douglas Grimm

You know, no timeline. We want to get to the right person. So my experience, I've done a couple of these over the past few years for middle-market businesses, 4 to 6 months is probably a reasonable time frame, but we have set no timetable.

Unknown Speaker

Okay, so I guess we've got you for at least two 90-day periods. Thanks very much, you guys.

Douglas Grimm

Sounds good. Thank you.

Operator

Thank you. We'll go next now to Craig Kennison with Baird.

Craig Kennison

I wanted to ask, and you had mentioned reviewing the upfitting business, I know it's early, but what is your take on the right strategy for that business going forward?

Douglas Grimm

Well, we're a leader in that market, and so I think we can continue that. We just launched the Chip Foose edition of the Dodge Ram here at SEMA this week, and we're excited about that. So, you know, it has been a great business in the past, and so we know we can do it. And, you know, we've got to establish the correct chassis supply with our OEM customers. We've got some great products coming out, including also a Jeep Commando for the veterans. So we have a lot of great creativity going on, and we just got to get the execution down and make sure we're doing what we do best and utilizing our vertical integration within the company that makes Fox a great company.

Toby D. Merchant,

And I think just to add on to what Doug said, because I think he did a good job summarizing that, with Ford Custom Garage, the Ram DC650, that Ram partnership, they continue to provide the steady, consistent volumes that are really, really healthy for the upfit division. So we've got a lot of work to do, no doubt, but we've got a lot of things that are going well for us as well.

Craig Kennison

You mentioned chassis supply, which has been hard for you to predict and certainly something that seems beyond your control. What can you do to have better insight into that, better visibility into chassis supply so that the business can operate on a more consistent basis?

Douglas Grimm

Yes, I mean, when you look at like the F-150, they had some supply chain issues. You know, that's something we can't control. You know, it's uncontrollable. But I look at those, and coming out of the industry after 40 years, you know, that's a 1-timer in my mind. So that should get back on track, and that should be fixed. And we can continue to work with Ford and get our appropriate allocation, if you will, on the chassis supply. So I think it's establishing those relationships. I have OEM relationships, and I think we should be talking to more OEMs. We got Audi building a $4 billion plant about 2 hours south of us in Macon, Georgia, that got announced. So we don't do any business with Volkswagen. So there's a lot of OEMs here in the South as well, whether it be Hyundai or... And so we just need to, I think, broaden our approach a little bit on the PVG side.

The other thing we could be doing is talking to the mega dealers. There's been a lot of dealer consolidation over the past 10 years, a lot of large mega dealers out there, and we should start selling at, call it, that level and get higher volumes. So I'm going to sit down with the business. We're doing our 5-year strategy plans here over the next 2 weeks, and we're going to start going through that, like I said, business by business. I've been more focused on getting out to the plants. I'll be out on the West Coast next week, and so I want to get that done, meet the people, see the people, see the products, see the plants, see what's going on in the operations, and come back and work on strategy.

Craig Kennison

As it relates to the F-150 chassis, do you expect to get shipments in Q4?

Toby D. Merchant,

We are getting some, and they are coming in a little late, a little later than what we expected. This is exactly what Doug is talking about, that transition period to model year '27. We've got '26s coming in late, model year '27s are coming in. So, look, the retail community has been starved for F-150s, and so it's good to see them coming back into our portfolio as well. And so as quickly as we get them in, we feel very confident we're going to get them out the door and sold into retail.

Craig Kennison

Great. Thank you.

Operator

And we'll go next now to Anna Glaessgen with B. Riley.

Anna Glaessgen

Going to be circling back to the common theme here on the upfitting business. I wanted to ask a different way. On the one hand, there's been a really close focus on cutting costs in that business in the face of cost inflation, while we've also seen top-line pressure from chassis availability as well as macro pressure. With operational challenges in that business, while on the one hand, supply optimization or things like that could help the margin, it also feels like the business might be requiring increased investments to recatalyze that top line. How do you think about balancing sacrificing near-term margin with re-accelerating that top line? And is there a solution or scenario in which we could see year-over-year margin compression in that business in '27?

Toby D. Merchant,

I think we've got a great R&D team really focused on what the customer is looking for. A lot of this is the demand environment. Dealer lots are pretty full. You've got the high interest rate environment going on. We feel good about the R&D work coming through. Where Doug is really placing his focus is more on the standardization across these different operations, making them more effective and more efficient in how we operate, how we order supplies, et cetera, getting more of a center-led hybrid opportunity across the entire Fox organization, which will help upfit as well. It's a lot more operationally focused versus product focused. Again, we're going to continue to focus on the products, but the fix, if you will, would come into what we're seeing on the operational side and then Doug really focusing on some of these dealers in a different way.

Anna Glaessgen

Great. Thanks, Dennis. And then maybe a little bit more about housekeeping, anyway to break tariff refunds by segment? We have a pretty sizable $40 million adjusted EBITDA for SSG, and just wondering if that margin level is sustainable.

Toby D. Merchant,

Yes, so on the tariff side, the largest amount of tariff refunds that have come in are IEEPA with Marucci, so... And I think we've discussed that, and so we've got about $14 million in refunds in total year-to-date. We are really not expecting much in the way of any material refund amounts in Q4 or beyond. We're going to continue to push for them where we can, but they are more hard to come by at this point. Thank you.

Operator

Thank you. And gentlemen, it appears we have no further questions this afternoon. Mr. Grimm, I'd like to turn things back to you, sir, for any closing comments.

Douglas Grimm

Yes, first of all, I'd like to let you know that I'm really excited to be here at Fox. As I'm going around to the plants and talking to our employees and teammates, great enthusiasm, great attitude, great capabilities. It's really exciting, and I'm really pumped to be in this position and try to help the company move in the right direction and set it up for a permanent leader coming into the business. So I'm really excited about it. Like I said, I want to be that accelerator. I spend a lot of time in private equity over the past 30 years. And in doing that, PE tends to want to move fast and move quick. And so that's kind of how I cut my teeth, and that's what I'm looking forward to do and maybe help bring that to this organization. So we have great products, and I keep talking about the front of the house and the back of the house. And in the front of the house, it's world class. In the back of the house, we have some areas we've got to focus on, and I'm going to do that, and we're going to move the ship in the right direction. So thank you very much, and I appreciate your support.

Operator

Thank you, Mr. Grimm, and thank you, Mr. Schemm. Again, ladies and gentlemen, this will conclude Fox Factory Holding Corp.'s third quarter 2026 earnings call. Thank you for participating. You may now disconnect.

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