Earnings Call Transcript - FOXF Q4 2024

Operator, Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Fox Factory Holding Corp's Fourth Quarter and Full Year Fiscal 2024 Earnings Conference Call. At this time, all participants are in the listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference is being recorded. I'd now like to turn the conference over to Toby Merchant, Chief Legal and Compliance Officer at Fox Factory Holding Corp. Sir, you may begin.

Toby Merchant, Chief Legal and Compliance Officer

Thank you. Good afternoon, and welcome to Fox Factory's fourth quarter and full year 2024 earnings conference call. I'm joined today by Mike Dennison, Chief Executive Officer, and Dennis Schemm, Chief Financial Officer and President of the Aftermarket Applications Group. First, Mike will provide business updates, and then Dennis will review the quarterly results and outlook. Mike will then provide 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 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 statement 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 gross profit, adjusted gross margin, adjusted operating expenses, adjusted net income, adjusted earnings per diluted share, adjusted EBITDA, and adjusted EBITDA margin, as 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 measure are included in today's earnings release, which has also been posted to our website. And with that, it is my pleasure to turn the call over to our CEO, Mike Dennison.

Mike Dennison, CEO

Thanks, Toby, and thanks, everyone, for joining today's call. In the fourth quarter, we delivered on our financial commitments with sales and adjusted earnings per share in line with our guidance. We also demonstrated progress in our $25 million cost reduction initiative and drove improvements in our working capital, resulting in $63 million of debt paydown during the fourth quarter. While we experienced unevenness in demand across our OEM customers during the quarter, we remained focused on executing against the strategic initiatives we outlined last quarter, continuing to exert control where we can in a challenging market environment. More importantly, we remained committed to our long-term success through our ongoing focus on product development initiatives, which are creating new customer engagements and opportunities. And while delivering on our long-term strategy, we drove near-term actions to improve profitability. As an example, both AAG and PVG demonstrated sequential adjusted EBITDA margin improvement of 250 basis points and 310 basis points, respectively, through better inventory controls, strategic chassis mix management, and facility and resource rationalization. Our working capital improved by $55 million year over year as we balanced strategic priorities. In AAG, working on chassis mix resulted in a $60 million improvement in prepaids, partially offset by additional necessary inventory ahead of the holiday season. In SSG, year-end component sales drove an improvement in inventory, and in PVG, stronger sales in our aftermarket business enabled further inventory optimization. As you may recall from last quarter's earnings, we are taking action across four key initiatives: One, simplifying and consolidating our footprint. Two, fixing or eliminating non-performing products in our portfolio. Three, improving working capital. And four, reducing overhead costs. Here's a quick update. We completed the closure of our Colorado facility in the fourth quarter and initiated additional footprint consolidation in PVG and AAG operations, driving benefits starting in the second quarter of 2025. We recently traveled to Taiwan to work with our bike team as they consolidate and optimize our footprint on the island. We've made progress in our cost optimization plan, having identified $25 million in savings across COGS and SG&A. We've executed on multiple initiatives across the organization, from footprint optimization and operational consolidation to strategic sourcing improvements. Some of these actions are complete, with benefits beginning to materialize in our results, while others are in various stages of implementation. The benefits from these collective actions will continue to build as we move through 2025, with full realization expected to be visible in 2026. And the early success gives us confidence in our ability to identify and execute on additional opportunities as we advance our optimization initiatives. Importantly, we're not just focused on cost reduction. We're strategically repositioning our business to operate more efficiently. As I've said in prior calls, we are focused on continuing to diversify across segments, products, markets, and geographies, enabled by a world-class organization which has responded to volatile customer demand and industry cyclicality. We believe these efforts put us on a path to restore our best-in-class EBITDA margin as market conditions normalize, while driving higher rates of free cash flow to improve our balance sheet. Now turning to our segment performance. In the Powered Vehicle Group, net sales were $116 million, slightly down from $118 million in the prior year per quarter, but up $6 million or 5% sequentially from the third quarter. Adjusted EBITDA margin also improved sequentially by 310 basis points. Revenue is largely in line with expectations as we continue to navigate challenging market conditions affecting both our power sports and automotive OEM partners. In the automotive sector, we continue to face headwinds from ongoing OEM production issues. While the premium truck category continues to show resilience, growth is more subdued as consumers remain conservative in purchasing behaviors. In the power sports sector, conditions remain consistent with what we discussed last quarter. OEMs are aggressively managing production levels to address dealer inventory and sell-through. This aligns with what we're seeing across the industry, where OEMs are expecting flat-to-down, low single-digit retail sales in 2025, with any potential recovery skewed toward the second half of the year. What differentiates us from everyone else is that our product development teams continue to win new customers, such as CFMoto and Buell in 2024. And additional new OEM customers to our portfolio in 2025 include BMW, Ducati, and Triumph. By expanding our focus to suspension for motorized two-wheel vehicles and completing the purchase of the assets of Marzocchi, we are delivering our products to new customers, thereby helping to offset declines in other areas of power sports. The Fox brand remains the standard in performance, continuing to be sought after by enthusiasts who want to partner with a leader in on- and off-road performance. The enduring nature and value of our partnerships was recently highlighted in an article by Ford, touting the value of our technology to their high-performance off-road truck segment. The strength of the Fox brand is also evident in PVG's aftermarket business, where we see resilience in both domestic and international channels. This resilience reinforces a trend during this post-pandemic cycle where customers are choosing to service and upgrade their current vehicles when they're not in a position to make new vehicle purchases. Looking ahead, while we expect continued market pressures in 2025, we're maintaining our focus on operational efficiency and cost management to protect margins. We're also continuing to win new partnerships and expand our presence in the market, as evidenced by our new products and OEM relationships. In our aftermarket applications group, net sales were $112 million, down from $121 million in the prior year quarter, but up $12 million, or 11 percent, sequentially. Adjusted EBITDA margin was 12 percent, a sequential improvement of 250 basis points as cost reduction actions were implemented. This performance was in line with our expectations for the quarter and reflects the progress we're making on our operating initiatives. This improvement reflects chassis inventory optimization completed in the third quarter and improving chassis mix from our OEM partners. In fact, we're seeing some of the best mix of chassis that we've received in years. We remain cautiously optimistic about the pace of broader market recovery as our partners work through their delivery challenges and our dealers work through their higher inventory. We're also working with our dealers to drive the appropriate vehicle mix that meets the needs of their end customers, rather than simply chasing volume. We continue to strengthen our relationships with key partners, recently hosting OEM executive teams at our testing facility in Southern California. These engagements, along with our expanding partnership with RTR and our long-term relationship with Shelby, demonstrate the strength and opportunity in this business. In our aftermarket components business, we are experiencing sustained growth in wheels and lift kits. In addition, we continue to make strides in optimizing strategic inventory of high-demand units to ensure availability when customers are ready to buy. This was particularly evident during the holidays, where our decision to increase select inventory levels enabled record sales in several product lines. Additionally, we're expanding into new categories, including the launch of what we have termed the AGwagon. The AGwagon represents an exciting expansion into a new market, offering performance-built vehicles designed for farmers, ranchers, and anyone else who uses their vehicle to not only get to work, but to do their work. Available across all major super-duty and heavy-duty truck platforms, this product combines rugged performance with practical features tailored for the unique demands of these customers. We also launched a suspension package with Grand Design RV for vehicles based on a Ford chassis. This product recently debuted at the Tampa RV Show and showcased a better driving experience using adjustable suspension settings, from highway cruising to off-road exploration. This system includes remote reservoir FOX shocks at each corner, as well as BDS control and custom radius arms, delivering unprecedented performance. Looking ahead, our optimized inventory position, strengthening dealer relationships, and operational improvements provide a solid foundation for long-term growth. And combined with our expanded product portfolio and successful facility consolidation efforts, we believe we're well-positioned to capture opportunities as market conditions normalize. In SSG, net sales were $125 million compared to $93 million last year, primarily reflecting a $41.5 million increase from a full quarter of Marucci, and a $6.7 million increase in the bike category, consistent with our expectations. Adjusted EBITDA margin of 22.4% was down sequentially by 190 basis points due to inventory optimization efforts in the fourth quarter, as well as incremental investments we're making at Marucci ahead of the upcoming MLB baseball season. As with the previous quarter, we're seeing varied recovery rates in our bike business across different geographies, channels, and customers, with this uneven pattern likely to continue through 2025. Similar to the chassis inventory optimization work we completed in the AAG in the third quarter, we took action in our bike business to better align inventory with current demand levels. While the inventory rebalancing significantly impacted our SSG segment margins in the fourth quarter, our working capital will benefit from a healthier inventory position and better alignment between production and demand as we enter 2025. Additionally, the consolidation of our Taiwan operations that I mentioned earlier, combined with strategic sourcing projects and cost-saving opportunities, will provide additional levers for margin improvement beginning this quarter and gaining strength as we move forward. Our expansion in the entry premium bike segment continues to progress, with growing strength among our top OEM customers helping to offset softness with smaller OEMs. While the European market demonstrated strength in early 2024, a reluctance to end the year with inventory weighed on purchasing habits in Q4. Throughout the last year, we have implemented enhanced forecasting and planning processes with our strategic OEM partners to ensure better alignment between our production capabilities and their demand patterns, which continues to improve our visibility. In product development, we have been hard at work developing several new products we will announce and launch in 2025. Some of these we believe are going to revolutionize the way people think about suspension and bikes. We are excited to get these products out on the trails and in our enthusiasts' hands. In our Marucci business, we're excited to have officially begun our role as MLB's official BAT partner as of January 1st. We have expanded our BAT manufacturing capacity as well as designed new products to drive incremental sales and reinforce our market-leading position in the MLB with Marucci and Victus. Incidentally, both of these brands had record market share in the MLB for 2024. Additionally, we have made growth investments in our softball business to further capitalize on the fastest-growing team sport in America. We have aligned and coordinated our FOX and Marucci engineers to accelerate new product advancements that we can drive additional growth. These near-term investments weigh on our Q4 margins as we focus on long-term success. We look forward to sharing more details about several of these exciting initiatives in the coming months as we ramp up for the 2025 MLB season. In closing, I'll share some high-level comments on our outlook, which Dennis will review in more detail. Based on our recent performance, our current order book, and latest forecasts from OEM partners across all segments, the framework for 2025 remains in line with what we shared in our third quarter update. While we see several opportunities for year-over-year growth, our base case expectation is for the OEM customer environment to remain challenged. I'd emphasize that amid the tempered industry growth expectations for 2025, we are committed to driving margin improvement and enhanced free cash flow generation through our comprehensive cost optimization and operational excellence initiatives, which are already yielding results. And finally, with the new administration, multiple changes have begun to surface in regulatory policy as well, including tariffs. Our teams have spent considerable time analyzing these potential and planned tariffs. As you can imagine, it's a complex and fluid environment. Our current manufacturing footprint is well-positioned relative to these policy shifts, with no significant presence in Mexico, Canada, or China, with the exception of some of our wheels and all of our aluminum baseball bats, which are manufactured in China. In both of these categories, we are executing plans to mitigate the potential impacts through cost reductions and pricing adjustments. Our bike business operates out of Taiwan, and therefore the majority of aluminum tariffs would be felt by our customers as they import our products or completed bikes into the U.S. The impact to the U.S. bike industry is yet to be fully understood by our OEM customers. As you know, the core of our powered vehicle manufacturing resides here in the U.S. Although we use aluminum and steel in our products, much of the supply chain originates in the U.S. with no impact. For the portion of our supply chain which is imported, our customer agreements have passed through provisions related to the specific indexes of materials for scenarios such as this. However, while FOX is not disadvantaged relative to our competitors, we share our customers' concerns as many of these OEMs face meaningful direct exposure across their global manufacturing footprints. This added complexity during a period of right-sizing production and ongoing macro challenges may create additional inflationary pressure for consumers and present another headwind for the industry to overcome as it works through this cycle. We plan to provide a more comprehensive update during our next earnings call. And with that, I'll turn the call over to Dennis.

Dennis Schemm, CFO and President of Aftermarket Applications Group

Thanks, Mike, and good afternoon, everyone. I'll begin by discussing our fourth quarter financial results, briefly summarize our full year results, and then move to our discussion on the balance sheet, cash flow, and capital allocation strategy before concluding with a review of our guidance. Total consolidated net sales in the fourth quarter of fiscal 2024 were $352.8 million, an increase of 6.1% versus sales of $332.5 million in the same quarter last year, primarily reflecting the impact of the Marucci acquisition and year-over-year growth in our bike business. Sequentially, as anticipated and consistent with our prior communications, we realized growth in AAG and to a lesser extent in PVG, which helped to offset the NG business this quarter due to the timing of OE order patterns, which is typical for this time of year. Our gross margin increased 120 basis points to 28.9% in the fourth quarter of fiscal 2024, compared to 27.7% in the same quarter last year. The increase primarily reflects margin benefits from the absence of acquisition-related inventory costs for Marucci that impacted the prior year period following the closing of this transaction in November of 2023. Our adjusted gross margin increased 20 basis points to 29.2% versus the prior year quarter. Sequentially, our gross margin is down 100 basis points, primarily because of our strategic growth investments in Marucci and bike inventory actions that Mike commented on earlier. Total operating expenses were $90.6 million, or 25.7% of net sales in the fourth quarter of fiscal 2024, compared to $81 million, or 24.4% of net sales in the same quarter last year. The increase in operating expenses was attributed primarily to the inclusion of $18.7 million of operating expenses from our Marucci acquisition. Adjusted operating expenses as a percentage of sales increased to 21.7% in the fourth quarter of 2024, compared to 20.6% in the same period last year. The company's tax benefit was $4.1 million in the fourth quarter of fiscal 2024, compared to a tax benefit of $3.1 million in the same period last year. Net loss in the fourth quarter of fiscal 2024 was $0.1 million, or zero per diluted share, compared to net income of $4.1 million, or $0.10 per diluted share, in the same quarter last year. Adjusted net income was $12.8 million, or $0.31 per diluted share, compared to $20.3 million, or $0.48 per diluted share, in the fourth quarter last year. Net loss is primarily driven by the increase in interest expense. Adjusted EBITDA increased to $40.4 million for the fourth quarter of fiscal 2024, compared to $38.8 million in the same quarter last year. Adjusted EBITDA margin was 11.5% in the fourth quarter of fiscal 2024, compared to 11.7% in the fourth quarter of fiscal 2023. The decrease in our adjusted EBITDA margin continues to reflect the temporary and unique challenges that our customers across various industries are facing, which is impacting volumes and fixed cost absorption at our facilities. Other drivers of our adjusted EBITDA margin performance include shifts in our portfolio mix and the inventory optimization actions we took in bike, partially offset by control measures, continuous improvement initiatives, and the results of the inventory optimization work we completed in AAG. Sequentially, adjusted EBITDA margin of 11.5% was down slightly, given the decisive inventory actions we executed in bike, partially offset by improvements in adjusted EBITDA margin in both AAG and PVG, where cost improvement actions are being executed. Now I'll briefly touch on our full-year results for fiscal 2024. Net sales for the year were $1.39 billion, compared to net sales of $1.46 billion in the prior year. This decrease reflects a 23.5% contraction in AAG net sales and a 12% decrease in PVG net sales, partially offset by a 31.3% increase in net sales for our SSG segment, which reflects the inclusion of Marucci. Net income for fiscal 2024 was $6.6 million, or $0.16 per diluted share. This compares to net income for fiscal 2023 of $120.8 million, or $2.85 per diluted share. Adjusted net income for the fiscal 2024 year was $55.4 million, or $1.33 of adjusted earnings per diluted share, which compares to $167.5 of adjusted net income, or $3.95 of adjusted earnings per diluted share in the fiscal year 2023. Lastly, adjusted EBITDA was $167 million for the full year 2024, compared to $261 million in the prior year. Moving to the balance sheet and cash flows, our focus on the balance sheet resulted in a $55 million improvement in working capital, driven primarily by AAG, where our decisive chassis inventory optimization actions taken in Q3 resulted in a $62 million improvement in prepaids, and in PVG, where we decreased inventory by $17 million through improved ordering controls in the fourth quarter. In SSG, bike inventory increased slightly, offset by action on end-of-year inventory that it converted into finished goods for sale into the aftermarket. In the full year ended January 3, 2025, inventory rose by $32.9 million, or 8.8%, compared to year-end 2023, driven by the imbalance in expected versus fulfilled orders, and because of planned seasonal inventory builds, primarily in AAG, to ensure high-moving stocking units were available during the holidays. I'd like to stress that working capital will continue to be an area of focus for us as we navigate through these turbulent times. Our revolver balance as of January 3, 2025, was $153 million versus $370 million as of December 29, 2023. Our term loan balance was approximately $552 million, net of loan fees. During the third quarter, we implemented a $400 million interest rate swap, improving predictability, and together with the $100 million existing swap, saving approximately $1.8 million in interest expense for the fourth quarter, and we paid down $63 million in debt. We will continue to prioritize R&D and sales and marketing, but to be very clear, debt pay down remains the number one priority for capital allocation. Now moving to our outlook for 2025. For the fiscal year 2025, the company expects net sales in the range of $1.385 billion to $1.485 billion, adjusted earnings per diluted share in the range of $1.60 to $2.60, and a full-year adjusted tax rate in the range of 15% to 18%. Underpinning our full-year guidance are several key assumptions, including continued growth in AAG as we move past specific OE concerns such as quality issues and disruption from model-year changeovers, continued momentum in Marucci benefiting from our new Major League Baseball partnership taking effect in our upcoming schedule of exciting new bat launches both in softball and in baseball, a gradually stabilizing environment in PVG and bike, with performance consistent with 2024 levels in terms of absolute dollars. Revenue and margin improvement weighted toward the second half of 2025, where we believe we will progressively realize benefits from our $25 million cost reduction plan. The cost reduction is being conducted across the entire company, where we have identified approximately 15% to 20% of the savings coming from expense reductions and the remainder in cost of goods. Roughly 10% is coming from corporate, with the remainder coming rateably across the three segments. In addition, we expect 30% to 35% of the savings to impact our first-half earnings and the remainder coming in the second half. Shifting to the first quarter of fiscal 2025, the company expects net sales in the range of $320 million to $350 million and adjusted earnings per diluted share in the range of $0.12 to $0.32. To be clear, our guidance excludes the impacts of tariffs. Importantly, while we remain in a cautious near-term outlook, given the current demand environment, we continue to invest in strategic growth initiatives that position us to capture opportunities as market conditions normalize.

Mike Dennison, CEO

Thanks, Dennis. In closing, we enter 2025 poised with a clear focus on operational excellence and strategic positioning across our segments. While near-term market conditions remain challenging, we believe the decisive actions we've taken to optimize our operations and strengthen our foundation will enhance our business. Our comprehensive cost reduction program, combined with our enhanced inventory management and strengthened partnerships with OEM customers and dealers, positions us well to drive margin improvement even in a tempered growth environment. The diversity of our portfolio, from our expanding presence in agriculture and motorsports markets to our new role as MLB's official BAT partner, demonstrates our ability to find opportunities for strategic growth while maintaining our commitment to developing premium, performance-enhancing products. As we look ahead, we remain focused on what we can control: operational efficiency, innovation, and strategic growth initiatives that will drive long-term value for our shareholders. With that, operator, please open the call for questions.

Operator, Operator

We'll take our first question from Jim Duffy with Stifel. Please go ahead. Your line is open.

Jim Duffy, Analyst

Thank you. Good afternoon. It's good to hear from you guys. I wanted to start just by asking about the Taiwan facilities consolidation, where capacity sits relative to pre-COVID levels after the adjustments you've made and the expectations and where capacity sits relative to the expectations for normalization of that business. Can you give us a little more flavor there, please?

Mike Dennison, CEO

Sure. Jim, the capacity is about in line with pre-COVID levels. From an efficiency and lean perspective, we've increased our capacity even within that same footprint. So we've got room to run for this year in Taiwan relative to what we expect that business to do. As we think about long-term capacity expansion, think about that probably not on the island, but in probably Southeast Asia, like Thailand or Vietnam. We're really solidifying the footprint we need in Taiwan, and our future growth projections would take us probably off the island.

Jim Duffy, Analyst

Okay. Thank you. And then one more, if I may. Dennis, just can you give us an update on the upfitting business, the dealership dialogue, and what you're thinking about for expectation of number of dealerships as you look across 2025? Is there opportunity? Go ahead.

Dennis Schemm, CFO and President of Aftermarket Applications Group

Yeah. No, thanks for that question. There is a lot of hard work going on right now across that PVD team. We've had a recent meeting in Baton Rouge with our sales managers, and we invited dealers there as well, getting a lot of feedback from them. And I can tell you that they were really appreciative of taking the move that we did on reducing some of the older chassis out there, getting our inventory well repositioned. At the same time, we are cultivating really strong relationships and innovation with them to make sure that we're delivering the right products to the customers. So we are in full realization that in order to continue to grow, we've got to grow our dealers as well, and we're doing a great job of diversifying those dealers across the U.S.

Operator, Operator

We'll take our next question from Mike Swartz with Truist. Please go ahead. Your line is open.

Mike Swartz, Analyst

Hey, guys. Good morning. Sorry, good afternoon. Just on the bike business, I think in your commentary suggested you have flat revenue year over year in that business for 2025. Help us understand the puts and takes there. I guess I had assumed, given the lack of new model year product last year that would create somewhat of a tailwind on a year-over-year basis this year, but it sounds like you're also bringing inventory in line. So just help us understand, again, the puts and takes there.

Mike Dennison, CEO

We think there could be upside in the bike business this year, but keep in mind we've had a couple of years of really challenged forecasting in that business, so we're being pretty conservative, Mike, right now. From what we see in Q4, what we've seen so far in Q1 are pretty positive signals. We think inventory is better in control. That's a great sign. We think our product launches and our product diversification in that space is good. So right now, we're going to be conservative and just kind of wait and see how the cards fall relative to the OEMs. Obviously, there's a lot of noise out there in the system that we want to understand. But we believe, obviously, we believe we hit the base in 2024 or hit kind of the ground in that business. And with our new product launches, we think there's some upside. So we'll wait and see that actually materialize, but we feel pretty good about it.

Mike Swartz, Analyst

Okay, that's helpful. And maybe just switching over to Marucci, the new MLB partnership, is there any way to frame what that actually means just in terms of size and maybe timing of when that would impact you?

Mike Dennison, CEO

Well, timing's easier because timing, you know, the Major League Baseball season really kicks off at the end of this quarter and into Q2 where it really grows and then into the summer and finally October. So we see a lot of the growth coming in kind of Q2, Q3 relative to that relationship, but there's a lot of hard work being done now to get prepared for that. Obviously, capacity planning, things like that. In terms of putting a number to it, I think we're a little premature for that. We don't want to get ahead of our skis. We're really changing the way MLB thinks about that partnership, and they're excited about the changes that we're bringing to them and they're bringing to us. So it's kind of a whole new day, and I think both MLB and FOX slash Marucci are really trying to figure out how big it can be, and it's positive signs, let me tell you, but I think there's a lot of work to do. So before we really start to put a number to it, let us actually grow into that relationship and deliver bats and get it going, and then we'll come back to you with what that means in an upside.

Operator, Operator

We'll take our next question from Anna Glaessgen with B. Riley. Please go ahead. Your line is open.

Anna Glaessgen, Analyst

Hi. Good afternoon. Thanks for taking my question. I'd like to start on the auto business, particularly on the OEM side. Now, clearly understanding that the tariff situation is fairly fluid, but I would love if you could expand on how your conversations with key partners are going in light of any planned or how they plan to adjust potential production in the face of escalating tariffs and how you guys are contemplating this within your go-forward plans.

Mike Dennison, CEO

The interesting thing about our business is that when we're talking to Ford, we are focused on a very select set of chassis primarily produced in the U.S., which are their high-end premium products. Ford has to consider various factors regarding tariffs, but in our segment, we are somewhat less affected. We believe that this product range is more resilient to tariff issues compared to the rest of Ford's offerings, so we feel optimistic about that. Regarding Toyota and Stellantis, Stellantis faced significant challenges in ‘24 concerning dealer inventory, but we are already observing an improvement for them. I do not anticipate that the tariff issue will significantly alter our current forecasts, as they align with what we planned for ‘24. As I mentioned, we are seeing some positive developments. It's still early to determine everything, and we need to get more insights from Stellantis about the Mojave and Jeep products. With Toyota, we focus on their higher-end TRD Pro-class vehicles, which positions us advantageously in the automotive market. I am not suggesting that we won't face tough discussions about consumer demand amid potential inflationary pressures. We need to consider how inflation impacts consumers and their willingness to purchase these vehicles. As for our product pricing, we've factored this into our pricing model with these OEMs. While it doesn't directly affect what we sell, it does impact demand from end customers. Overall, our products with Ford are more protected, while we are a bit less secure with Stellantis. The TRD Pro vehicles also seem to be better protected. I hope this clarifies things for you.

Anna Glaessgen, Analyst

Great. Yeah. Thanks, Mike. That was super helpful. Turning to Marucci, you guys commented on continued momentum, I believe is how you put it for 2025. I believe when they were acquired, we thought about growth in the low double-digit range. Is that still the right way to benchmark that business?

Mike Dennison, CEO

That is. You're thinking about it right. When you look back at ‘24, and you'll do the math, we had three record quarters out of four with Marucci. They had a record year. A lot to celebrate, a lot of really good learning, by the way learning in some mistakes that were made in ‘24 that we learned from. When I look back, I like to think that it didn't quite hit the number I had expected for it in ‘24. But again, three record quarters out of four isn't too bad in the market that we all had in ‘24. In ‘25, I think it's a double-digit growth business. I think the MLB helps that even further. And the products that we're coming out with in softball and some of these other spaces are really, really good. So I'm pretty excited. I'm very bullish. Marucci is one of our growers this year, for sure, even in light of the macro dysfunction.

Operator, Operator

We'll take our next question from Larry Solow with CJS Securities. Please go ahead. Your line is open.

Larry Solow, Analyst

Great. Thanks. And good afternoon, guys. I guess just from a high-level summary, so it looks like the guidance, sales guidance about flat to mid-single digits, I think minus 1% to 7%. So sort of low and mid-single digit, that 3% growth number. So it sounds like you're getting a little growth out of Marucci, a lot of growth, but it's a relatively smaller piece. And then the sort of rest of that will be mostly in AAG. Is that kind of a good broad brush of just what to look for? And it's a little more back-end loaded?

Dennis Schemm, CFO and President of Aftermarket Applications Group

Yeah, Larry, the way I think about it, it's flatter than it was in the guide last year in terms of quarter to quarter. It's really a function of, by the way, product launch is not macro improvement. So we think about, in 2025's view when do our products launch? When do they come out? Which quarter do they come out in? What's the implication of that? That's more the driver. We don't have any goodness baked in relative to a macro. So no upside from that. When you think about the businesses, think about AAG and Marucci as up in 2025. PVG is a function of PowerSports, which has not only the inventory issues, but also the tariff issues, which could have a significant impact on Polaris and BRP. That we think is flattish to down. It's improved by some new OEM customers, when I mentioned in the prepared remarks BMW, Ducati, Triumph. Those are all good wins for us that are going to help us in 2025, including CFMoto and Buell. But all those just offset. Well, they take some time, but they also just offset the downside of what I just mentioned, which is kind of the macro and inventory issues. So PVG, we think about as kind of flattish to maybe slightly down. And then bike as I said to Mike earlier, I think bike is pretty flat. We could see some upside from bike. That would be one of the ones that we'd call out in future earnings calls as probably helping us in the year, just because it's coming from such a low base. But for now, we're going to call bike and PVG fairly flat and the other two up.

Operator, Operator

And we'll take our next question from Bret Jordan with Jeffries. Please go ahead. Your line is open.

Bret Jordan, Analyst

Good afternoon, everyone. In the discussion about bikes, you mentioned seeing some positive signals in Q4 and Q1. Are there any anecdotal indications that suggest consumers are feeling more optimistic in Q1? It seems that recent consumer sentiment data does not support that.

Dennis Schemm, CFO and President of Aftermarket Applications Group

Yeah. Keep in mind, when you look at the data, it tends to get a little bit messy relative to high-end versus low-end in bikes. So, it's always kind of the disclaimer is the bike industry operates very differently depending on what side of the sector you're on. We're seeing some positive signs. Again, we're not enough to make us feel like being very bold about 2025, which is what's reflected in our guide, as you know. So, while we've seen positivity, clearly we were slightly better in Q4 than we expected, and we saw the inventory takedown really help us or help our OEM customers in the back half of the year. So, we feel like the business is a cleaner business in 2025. Your question is really around more of the end consumer buying bikes. If the bikes are new and exciting, they are and that's a matter of what model years come out this year and how much different they are versus ‘24, ‘25 model bikes that were sold in ‘24. So, that's going to be the real test. When we get to this spring and we've got model year ‘26 hitting the showrooms, are the consumers incented? Are they motivated to go buy high-end mountain bikes? I think the answer is going to be yes, but it's a little bit too early to tell.

Mike Dennison, CEO

Yeah. The one thing that keeps showing up over and over again is number one bike, number one brand. FOX just continues to win those awards, and all the early feedback is they're really excited about the new product innovation coming out.

Operator, Operator

And there are no further questions on the line at this time. I'll turn the program back to management for any final remarks.

Mike Dennison, CEO

Thanks, David, and thank you for joining us on today's call. Appreciate the time, and we'll talk to you guys soon. Good evening.

Operator, Operator

This does conclude the Fox Factory Holdings Corporation's fourth quarter and full year 2024 earnings call. You may now disconnect your line and have a great day.