Fox Factory’s 2026 turnaround is taking shape, but the real proof lies in the back half
Q1 came in at the top of guidance, the Phoenix divestiture closed, and a new OEM upfit channel is adding momentum — yet the stock still trades 88% below its 2021 peak.
FOXF · Earnings Call · 2026-05-07
The plan is landing
Fox Factory’s first-quarter report was a confirmation that the transformation plan laid out in February is on track. Revenue hit $369 million, up 3.9% year over year, and adjusted EBITDA of $35.7 million came in above the high end of guidance. Management didn’t sugarcoat the environment: “We are not counting on end market recovery or tariff relief in 2026.” — Michael Dennison, Chief Executive Officer · 2026-05-07 Instead, the company is leaning into cost cuts, portfolio pruning, and a new channel partnership model. The Phoenix divestiture closed in the quarter, simplifying the portfolio and feeding debt reduction. The $50 million cost-saving plan is progressing — profit optimization delivered mid-single-digit savings in Q1, with the full run rate expected later in the year. The financial flexibility was also enhanced through a credit-agreement amendment, giving extra covenant headroom.A reshaped aftermarket and upfit business
The more interesting development is the new OEM upfit partnerships announced in Q1. These aren’t just incremental orders; they’re a structural shift in how Fox goes to market. As Mike Dennison explained, the OEM automaker relationship is now “an entirely new way to go to market, where we’re leveraging their marketing, their sales channels, their booking systems to order those vehicles.” — Michael Dennison, Chief Executive Officer · 2026-05-07 This lowers SG&A intensity and creates a repeatable, high-margin revenue stream. The early signs are encouraging: new dealers are being added at a rate of more than 60 per month, and dealership expansion has become a core growth driver. On the aftermarket side, the company is benefiting from a frugal consumer. When people can’t afford a new truck, they upgrade the one they own. That dynamic supports brands like Sport Truck, RideTech, and Custom Wheel House. It also creates a natural hedge: if gas prices stay elevated, the aftermarket segment tends to outperform — a point management made explicitly. Gas prices and new players among bike and truck OEMs are two forces currently reshaping the sales mix.Tariff headwinds are becoming tailwinds — slowly
Tariffs remain a major swing factor. The old IEEPA framework is being replaced by Section 232, which applies to the value of the aluminum input rather than the full FOB value of the finished product. That structure is meaningfully smaller for most of Fox’s business. Management now considers the core impact “approximately neutral” for 2026, with the benefit concentrated at Marzocchi, where the rate drops from 22% to 10%. Still, the benefit is being delayed by channel inventory and a shift in product launches. The company is also not booking any refunds from prior IEEPA tariff payments — a source of potential upside that remains on the table but unmodeled. One caution: tariff relief is not free cash flow today. Gross margin fell 200 basis points year over year to 28.9% as tariff costs and product mix weighed on the quarter. The company expects those drags to ease in the back half as Phase 2 cost savings ramp and the anniversary of initial tariff implementation passes. That’s the key to the equity story: the implied exit EBITDA margin is meaningfully higher than Q1’s 9.7%.Back-half math and the stock
The stock has already rallied ~30% over the last 90 days, a sharp move off the ugly drawdown from 2021. But the full price history still shows the stock is down 88% from its peak. The market is pricing in a turnaround, and the first quarter delivered proof points.That mindset is reflected in the guidance: full-year EBITDA of $174–203 million implies a 200bps margin improvement at the midpoint. CFO Dennis Schemm was explicit about the trajectory: “we would expect that to be performing in the mid-teens in the Q3s and Q4s.” — Dennis Schemm, Chief Financial Officer · 2026-05-07 The comparison to prior calls is telling. In February, management said it was going to “scale down the business through thoughtful divestitures and product line rationalization.” — Dennis Schemm, Chief Financial Officer · 2026-02-27 In November, the message was even blunter: “Hope is not a plan.” — Dennis Schemm, Chief Financial Officer and President of the Aftermarket Applications Group · 2025-11-06 Now there is a plan, and it’s producing numbers. The key risk is whether the back-half ramp is too aggressive — and whether the new OEM upfit channel can scale quickly enough to offset lingering weakness in bike and powersports. For now, Fox is executing on its own narrative: cost discipline, portfolio focus, and a clear path to margin recovery. The fundamentals confirm the story — revenue is stable, but margins have compressed, and the balance sheet remains leveraged. The next two quarters will determine whether this is the beginning of a durable reset or just another false dawn.We’re not waiting for the macro to give us anything.