IPO Report: Fox Factory Holding (FOXF)

Francis Gaskins |

Nine other IPOs were scheduled for the week of August 5. The full IPO calendar can be found at IPOpremium

Fox Factory Holding ($FOXF) is based in Scotts Valley, CA.  FOXF  scheduled an $120 million IPO with a market capitalization of $508 million at a price range mid-point of $14, for Thursday, August 8, 2013.

The range was set in the S-1 filed July 29, 2013.  TheManager & Joint Managers are: Baird; William Blair; Piper Jaffray.  The Co-Managers are: Stifel; SunTrust Robinson; BB&T Capital; CJS Securities

Summary

FOXR is a designer, manufacturer and marketer of high-performance suspension products used primarily on higher-priced mountain bikes and off-road vehicles.

Top line revenue has been increasing at a 20% rate, and FOXF has been consistently profitable. The estimate for Q2 '13 is $70 million in revenue and $5.7 million in post-tax profits.

81% of 2012 sales were to OEMs, (original equipment manufacturers), which means there is no end-user branding.

2/3 of IPO proceeds are allocated to selling shareholders.

Valuation

Valuation Ratios

IPO Mrkt

Price /

Price /

Price /

Price /

% offered

annualizing Q2 '13 est

Cap (MM)

Sls

Erngs

BkVlue

TanBV

in IPO

Fox Factory Holding

$508

1.8

22.3

7.5

127.3

24%

Glossary

Conclusion

Buy, relatively low P/E for an established company with good top line revenue growth and has been consistently profitable.

Business

FOXR is a designer, manufacturer and marketer of high-performance suspension products used primarily on mountain bikes, side-by-side vehicles, or Side-by-Sides, on-road vehicles with off-road capabilities, off-road vehicles and trucks, all-terrain vehicles, or ATVs, snowmobiles, specialty vehicles and applications, and motorcycles.

FOXF currently sells to over 150 OEMs and distribute its products to more than 2,300 retail dealers and distributors worldwide. In each of the years ended December 31, 2010, 2011 and 2012, 78%, 80% and 81%, respectively, of sales were attributable to sales made to OEM customers.

The remaining sales were to aftermarket customers.

Products fall into the following two categories:

• mountain bikes;

A significant portion of FOXF;s sales are dependent on the demand for high-end or premium priced mountain bikes and their suspension components. In each of the years ended December 31, 2010, 2011 and 2012, 75%, 69% and 67%, respectively, of sales were attributable to sales of suspension products for mountain bikes.

• powered vehicles, including Side-by-Sides, on-road vehicles with off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, and motorcycles.

25%, 31% and 33%, respectively, of sales were attributable to sales of suspension products for powered vehicles.

Domestic vs International

FOXF's domestic sales totaled $53.5 million, $65.8 million and $84.3 million, or 31%, 33% and 36% of total sales in 2010, 2011 and 2012, respectively.

International sales totaled $117.4 million, $132.0 million and $151.6 million, or 69%, 67% and 64% of total sales in each of the years ended December 31, 2010, 2011 and 2012, respectively. Sales attributable to countries outside the United States are based on shipment location.

Seasonality

The business is somewhat seasonal. In each of the last three fiscal years, quarterly sales have been the lowest in the first quarter and the highest during the third quarter of the year. For example, sales in the first and third quarters of 2012 represented 19% and 31% of total sales for the year, respectively.

FOXF believes this seasonality is due to the delivery of new products containing suspension products related to the new mountain bike season for each year. FOXF also believes that the seasonal nature of the business may have been overshadowed over each of the past few years due to the rapid growth in sales FOXF experienced during the same periods..

Competition

The markets for suspension products are highly competitive.

FOXF competes with other companies that produce suspension products for sale to OEMs, dealers and distributors, as well as with OEMs that produce their own line of suspension products for their own use.

FOXF competes with several large suspension providers and numerous small manufacturers that provide branded and unbranded products across all of FOXF's product lines. These competitors can be divided into the following categories:

Mountain bikes
Within the market for mountain bike suspension products, FOXF competes with several companies that manufacture front and rear suspension products, including RockShox (a subsidiary of SRAM Corporation), X-Fusion Shox (a wholly-owned subsidiary of A-Pro), Manitou (a subsidiary of HB Performance Systems), SR Suntour, DT Swiss (a subsidiary of Vereinigte Drahtwerke AG) and Marzocchi (Tenneco).

Powered vehicles
Within the market for powered vehicle suspension products, FOXF competes with several companies in different submarkets. FOXF believes a significant competitor for suspension products in the snowmobile market is KYB (Kayaba Industry Co., Ltd.).

Other suppliers of suspension products for snowmobiles include Öhlins Racing AB, Walker Evans Racing, Works Performance Products, Inc. and Penske Racing Shocks / Custom Axis, Inc.

In the ATV and Side-by-Side markets, outside of captive OEM suppliers, FOXF competes with ZF Sachs (ZF Friedrichshafen AG) and Walker Evans Racing for OEM business and Elka Suspension Inc., Öhlins Racing AB, Works Performance Products and Penske Racing Shocks / Custom Axis, Inc. for aftermarket business.

In the market for off-road and specialty vehicle suspension products, FOXF believes its two biggest competitors are ThyssenKrupp Bilstein Suspension GmbH (commonly known as Bilstein) and King Shock Technology, Inc. (commonly known as King Shock). Other competitors include Icon Vehicle Dynamics, Sway-A-Way, Pro Comp USA Suspension and Rancho (Tenneco).

Intellectual property

As of March 31, 2013, FOXF had 37 patents and had approximately 82 patents pending on file in the U.S. and European Patent offices

5% shareholders pre-IPO

Compass Group Diversified Holdings LLC, 76%, private equity
About Compass Group

Robert C. Fox, Jr., 14%

Use of proceeds

Common stock offered by FOXF 2,857,143 shares.

Common stock offered by the selling stockholders 5,714,286 shares .

FOXF expects to net $33.8 million from the sale of 2.9 million shares. Shareholders intend to sell 5.7 million shares, or 2/3 of the IPO.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
FOXF Fox Factory Holding Corp. 26.80 0.20 0.75 437,596
EVRZF Evraz Plc Ord 2.06 0.00 0.00 0

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