Fox Factory Holding Corp. reported sales of its mountain bike products declined 8.1 percent in the third quarter ended Sept. 30 due to industry supply chain issues, increased competitive environment in certain product categories, and weaker sell through than initially anticipated.
Total net sales, however, increased 9.5 percent to $90.1 million thanks to 50.5 percent growth in sales of powered vehicle products primarily driven by Sport Truck USA, Inc.
Gross margin was 31.7 percent for the third quarter of fiscal 2014, a 90 basis point increase from gross margin of 30.8 percent in the third quarter of fiscal 2013. The improvement in gross margin reflects the company's successful execution of its operational initiatives targeted at improving manufacturing and supply chain efficiencies, as well as continued execution of its product design for manufacturability program.
Total operating expenses were $14.6 million, or 16.2 percent of sales, for the third quarter of fiscal 2014, compared to $10.6 million, or 12.8 percent of sales, in the third quarter of the prior fiscal year. The increase in operating expenses was primarily due to the inclusion of Sport Truck USA, Inc.'s operating expenses in the company's consolidated results, higher stock-based compensation expense, acquisition and integration costs, additional costs to operate as a public company and investments in infrastructure, brand and technology to support future growth.
Operating income was $13.9 million for the third quarter of fiscal 2014, compared to operating income of $14.8 million in the third quarter of fiscal 2013.
Net income in the third quarter of fiscal 2014 was $10.3 million, an increase of 3.7 percent compared to $9.9 million in the third quarter of the prior fiscal year. Earnings per diluted share for the third quarter of fiscal 2014 was $0.27 consistent with the prior fiscal year.
Non-GAAP adjusted net income in the third quarter of fiscal 2014 was $12.2 million, an increase of 1.3 percent compared to $12.1 million in the third quarter of the prior fiscal year. Non-GAAP adjusted earnings per diluted share for the third quarter of fiscal 2014 was $0.32 compared to $0.33 in the third quarter of fiscal 2013 on 1.4 million higher diluted shares outstanding.
Adjusted EBITDA in the third quarter of fiscal 2014 was $18.1 million, compared to $17.3 million in the third quarter of fiscal 2013. Adjusted EBITDA margin in the third quarter of fiscal 2014 was 20.1 percent, compared to 21.0 percent in the third quarter of fiscal 2013.
