Fox Factory Holding Corp. (FOXF) Q1 2018 Earnings Report, Transcript and Summary

Greetings, and welcome to the Fox Factory Holding Corp. First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow formal presentation [Operator Instructions]. As a reminder, this conference is being recorded. I would like to turn the conference over to your host, David Haugen. Thank you, you may begin

Thank you. Good afternoon, and welcome to Fox Factory's First Quarter Fiscal 2018 Earnings Conference Call. On the call today are Larry Enterline, Chief Executive Officer; Mario Galasso, Executive Vice President and Chief Technology Officer; and Zvi Glasman, Chief Financial Officer and Treasurer. By now, everyone should have access to the earnings release, which went out today at approximately 4:05 p.m. Eastern Time. If you've not had a chance to review the release, it's available on the Investor Relations portion of our website at www.ridefox.com. Please note that throughout this call, we will refer to Fox Factory as FOX or the company. Before we begin, I'd like to remind everyone that the prepared remarks contain forward-looking statements, 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 significantly 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 earnings release issued this afternoon and in the annual report on Form 10-K filed with the Securities and Exchange Commission. 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, within our earnings release and in today's prepared remarks, non-GAAP operating expenses, non-GAAP income tax and related items, non-GAAP adjusted net income, non-GAAP adjusted earnings per diluted share, adjusted EBITDA, and adjusted EBITDA margin are referenced. It is important to note that these are non-GAAP financial measures that we believe better reflect the performance of our business on an ongoing basis. A complete list of non-GAAP financial measures and a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures are included in today's press release, which has also been posted on our website. And with that, it is my pleasure to turn the call over to our CEO, Mr. Larry Enterline.

Thank you, David. Good afternoon, everyone. We appreciate you joining us on today's call. To start, I will discuss our first quarter 2018 business and financial highlights, Mario will then provide a more detailed update on our business and brand development, Zvi will review the first quarter financials and discuss our guidance. After that, we will open the call for your questions. We are very pleased with our start to 2018. Our first quarter results reflect the continued strength of our powered vehicle and bike businesses. Sales of powered vehicle products were up 33% and bike products were up 10%. FOX's diversified product offerings continue to resonate with our customers, demonstrating our commitment to product innovation and growth of the FOX brands in both existing and new categories. We appreciate the strong efforts of our team as we continue to deliver differentiated products to our passionate customer base, reinforcing the value of our brand. First quarter sales and profitability were above our expectations. We generated record Q1 sales of $129.8 million, an increase of 22% compared to last year, and non-GAAP adjusted earnings per diluted share of $0.36. Because of our strong first quarter results and our current view of the markets we serve, we are raising our outlook for the year, which Zvi will outline during his part of the call. Now focusing on our business in more detail, on the powered vehicle side, the category remains an exciting growth area of our business and we are pleased with our results for the first quarter. High growth in side-by-side vehicles, our off-road capable, on-road OEM, and aftermarket truck categories and additionally, our first full quarter of ownership of Tuscany fueled our results. Looking ahead, our team remains committed to further broadening the FOX brand presence in our existing vehicle categories and consistently pursuing potential new markets. In bike, our business continues to perform well. For the first quarter, we had strong OEM channel results led by the continued success of our model year product lineup. E-BIKEs also remain a growing part of our product portfolio in business. I also want to provide our perspective on tariffs. While we currently believe that the direct impact is contained in our guidance, we remain concerned about the possibility of escalating trade disputes, which could have a negative impact on our results, as we progress through the balance of the year. In summary, we are very pleased with our team’s operational execution and our start to the year. We continue to believe FOX's differentiated market position will fuel our expansion in the diverse end markets we serve. And with that, I'll turn the call over to Mario.

Thank you, Larry and good afternoon, everyone. I'll begin with our bike business. Our brand building efforts continued with the successful launch of our model year 2019 products at the Sea Otter Classic in Monterey, California in April. This festival is a time for us to walk dealers, consumers, and the media through our new product line. As a result, our initial US dealer orders are coming in strong with very positive consumer and media reactions. Our updated All-Mountain and Enduro race course platform, the Factory Series 36 FLOAT has been in the media's hands for testing, leading up to the event and continues to garner accolades. We also launched a new lightweight trail fork, the Factory Series 34 Step-Cast, utilizing a variation of the step-cast chassis, we developed when creating our lightweight cross-country fork, the Factory Series 32. The media was allowed to release the reviews just ahead of the event and both products have received very favorable initial reactions by such publications as Singletrack who had this to say about our new Factory Series 34 step-cast. If you have a lightweight XC trail bike and you're looking for a stiffer, plusher and better controlled fork with more than 100 millimeters of travel, the 34 step-cast is a terrific option. There are a lot of lightweight 100 millimeter full suspension bikes out there that can have the versatility of taking 100 to 120 millimeters of travel upfront and the 34 step-cast presents itself as the perfect option to fill that longer travel bracket. We have also launched two new forks for model year 2019 under the Marzocchi brand. In keeping with the essence of a Marzocchi freeride/downhill and bike park routes, we introduced the Bomber 58 Downhill Fork and the Bomber Z1. The production introduction for the Marzocchi brand mirrored the strategy for our FOX products with the media getting them in hand early just ahead of Sea Otter. They have been very well received and Vital MTB gave the Z1 a 4.5 star rating out of 5 and had this to say about it. The Marzocchi Z1 offers great small bump compliance, mid-stroke support and adjustable bottom-out control. The Grip sweep damper glides smoothly from fully open to firm and can be set anywhere in between, optimizing performance and durability over everything else. The rebirth of the Marzocchi Z1 holds true to its heritage and fills the void in mountain bike suspension. With a burly set of uppers and a classic M style lowers, anyone who sees the Z1 will know it's a Marzocchi. At a price of $699, the Marzocchi Z1 is arguably one of the best valued forks on the market." The 2018 Bike race season is underway and to date, FOX supported athletes have won two free ride events, two cross-country events, one enduro event, and nine downhill events worldwide. Now I'll move on to our powered vehicle business. In March, we returned to Daytona International Speedway for Bike Week. At this event, we offered apparel and shocks for sale with complementary installs and setups on site, along with product education. Building on our success at last year's event, we experienced a higher volume of booth traffic and interest in our on-road motorcycle suspension upgrades. The event was also a good time for our team to take the pulse of the market and look for future application opportunities. Also in March, we were out at the Jackson Hole Hill Climb championships in Jackson, Wyoming. The team was there for race support and consumer engagement and while there, introduced our model year 2019 Quick Switch products. Our Quick Switch technology lets you easily change between specifically calibrated preset settings to adapt to varying trail conditions. These products were met with a very positive reception. I'll include with a few of our recent race results in the powered vehicle segment. At the Jackson Hole Hill Climb championships, Justin Thomas won the overall to claim the title King of Kings while also taking the King of Modified Stock title. At The Mint 400, FOX drivers stood atop the podium in 11 different classes. Bryce Menzies earned his second career Mint overall victory, making the sixth consecutive Mint 400 overall win for FOX. Justin Lambert led FOX equipped UTVs to sweep the Turbo Class podium. FOX supported drivers were also the first and third place finishers in both the production and unlimited UTV classes. I would now like to turn the call over to Zvi to review our financial results. Zvi?

Thank you, Mario. Good afternoon, everyone. I'll focus on our first quarter results then review our guidance. Sales in the first quarter of 2018 were a record $129.8 million, an increase of 22.1% versus sales of $106.3 million in the first quarter of 2017. Gross margin was 32.1% for the first quarter of 2017, a 40 basis point increase from 31.7% in the prior year period. The improvement in gross margin was primarily due to improved manufacturing efficiencies and increased volume. Total operating expenses were $25.7 million or 19.8% of sales in the first quarter of 2018 compared to $21.3 million or 20% of sales in the first quarter of last year. The increase in operating expenses is primarily a result of the inclusion of expenses from our Tuscany subsidiary, which was acquired in Q4 of last year as well as investments in sales and marketing, research and development to support future growth and professional service costs associated with patent litigation, tax reforms and higher amortization expense on acquired intangible assets, which were partially offset by a decrease in acquisition-related compensation due to the conclusion of our acquisition-related compensation arrangements. Non-GAAP operating expenses stated as a percentage of sales were 17.3% versus 16.9% in Q1 last year, which was better than our previous guidance due to sales outperformance in the quarter. Focusing on expenses in more detail, sales and marketing was up $2.1 million primarily due to cost incurred at our recently acquired Tuscany subsidiary. R&D was up $1.7 million as we continue to invest in product innovation across all our product categories. As we've consistently stated, the timing of R&D and promotional expenses often change between quarters and years, depending on a number of factors, including product launch cycles. Our general and administrative expenses in the first quarter of 2018 were $9.2 million compared to $8.1 million in the prior year period. The change was primarily due to higher professional fees associated with legal costs related to ongoing litigation, tax reform and integration of acquisitions as well as due to expenses of $0.5 million incurred at Tuscany, partially offset by various other items. For the first quarter of fiscal 2018, we had an income tax benefit of $6.6 million, which equates to an income tax rate of negative 44.2%. Income taxes include the non-recurring favorable impact of $9.8 million or $0.25 per diluted share due to the release of tax-related liabilities for matters resolved in connection with the company's 2015 IRS audit. Excluding this benefit, the company's effective tax rate was 20.9% in the first quarter of fiscal 2018 compared to 6.7% in the prior year period. As a reminder, the Q1 2017 tax rate was lower than normal due to approximately $2.4 million impact from stock-based compensation. Excluding this impact, our Q1 2017 tax rate was approximately 28%. Adjusted EBITDA was $23 million for the first quarter of 2018 compared to $19.3 million in the same quarter last year. Adjusted EBITDA margin was 17.7% compared to 18.1% in the prior year quarter. As a reminder, we expect 2018 EBITDA margins to be slightly lower than the prior year due to a return of non-GAAP operating expenses to historical levels, including the impact of the Tuscany acquisition. On a GAAP basis, net income in the first quarter of 2018 was $21.5 million or $0.55 per diluted share compared to net income of $10.5 million or earnings of $0.27 per diluted share in the prior year period. Non-GAAP adjusted net income was $14.1 million, an increase of $0.5 million compared to $13.6 million in the first quarter of the prior year period. Non-GAAP adjusted earnings per diluted share for the first quarter of 2018 were $0.36 compared to $0.35 in the first quarter of 2017. Now focusing on our balance sheet. As of March 30, 2018, we had cash on hand of $22.2 million. Total debt outstanding was $79.2 million compared to $98.6 million of debt outstanding as of December 29, 2017. Inventory was $91.3 million as of March 30, 2018 compared to $84.8 million as of December 29, 2017. Accounts receivable was $56.8 million as of March 30, 2018 as compared to $61.1 million as of December 29, 2017. Accounts payable was $47 million as of March 30, 2018 as compared to $40.8 million as of December 29, 2017. The changes in accounts receivable, inventory and accounts payable are primarily attributable to the growth of the company's business as well as seasonal factors. Now turning to our outlook. For the second quarter of 2018, we expect sales in the range of $141 million to $149 million, and non-GAAP adjusted earnings per diluted share in the range of $0.43 to $0.49. When thinking about Q2 2018 guidance and comparisons versus Q2 2017 results, we expect Q2 2018 non-GAAP operating expenses, stated as a percentage of sales, to be higher than our rate in Q2 2017, but slightly lower than our stated long-term annual rate of 16.5% to 17% due to the higher seasonality of sales in Q2. For fiscal 2018 -- for fiscal year 2018, we are raising our previous guidance and now expect sales in the range of $555 million to $575 million, and non-GAAP adjusted earnings per diluted share in the range of $1.72 per share to $1.86 per share. As we said in last quarter, we expect a slight improvement in gross margin in 2018 and a slight decline in our adjusted EBITDA margin as our non-GAAP operating expenses are expected to increase both in dollars and stated as percentage of sales and return more towards our longer term operating model target of 16.5% to 17% of sales. I would also like to point out that our guidance includes the impact of tariffs, which we currently expect to have a few cents drag on earnings, based on information available to date. Our guidance does not include or contemplate significant additional tariffs, associated future supply chain cost increases or a full-scale trade war. Our full year 2018 guidance assumes a tax rate of approximately 19% to 21%. I would also like to note that we are not providing guidance on GAAP EPS as it cannot be provided without unreasonable efforts due to the difficulty of accurately predicting elements necessary to provide such guidance and reconciliation. I would now like to turn the call back over to Larry.

Thank you, Zvi. With that, we'd like to open the call for questions. Operator?

[Operator Instructions] Our first question is from Craig Kennison from Robert W. Baird. Please go ahead.

Well, listen, I wanted to focus on Tuscany, which is your recent acquisition. Seems like a lot of growth potential there and I'm trying to understand the various dimensions to it. I guess, first of all, I'd like to understand, how many dealer points, if you will, are there today? And what is your target over time? And then secondly, I believe you do business with Ford, GM and Chrysler today, but I know you have a broader relationship with Toyota. I'm wondering whether you might see other nameplates to that Tuscany franchise?

Well, let me start Craig and then I'll let Mario and Zvi follow-up. But yes, principally, in Tuscany, now we're on Ford and GM chassis. Those are the arrangements we have with the bailment kinds of programs with the OEMs. Obviously, we're looking to do business with more folks in the future. We like that category. We do think it has some legs. I don't think we disclosed the actual number of the orders that were in, but it is a, generally a small part of the overall dealer program. So we do have some room to expand that. As you can imagine, there are dealers in certain parts of the country that are obviously high demand area for these kinds of vehicles and that's clearly where we're focused.

And then just 1 quick follow-up on weather, that's been an issue for a lot of seasonal products. Wondering if weather has been a factor at all in terms of demand for mountain bikes or other power sport products?

So as we've talked in many calls about sort of the breadth of our served markets. Certainly, there is weather that affects -- that might negatively affect some of it, but that same weather can positively affect another category. So overall, we haven't been impacted really materially by any of the weather that's happening.

Our next question is from Larry Solow from CJS Securities. Please go ahead.

Just a couple of quickies here. On the quarter and for the increase in guidance, you certainly narrowed the range upward a good amount, and added a little bit on the top-ended too. Is it strength on both sides of the business? Because to me they both look like they were little bit above at least my expectations? And was there anything in particular within those segments may be as well?

Yes, this is Zvi. I think both businesses are strong. We did exceed our long-term target rate for growth with bike, we've grew approximately 10%. We're not necessarily expecting that we're going to grow at that same rate for the entirety of the year. We do think currently that our growth rate for bike for the year will be in line with our growth, our long-term target of mid-to high single digits. Our powered vehicle business organically grew in line or better than our targeted low double-digit growth rate. Our Tuscany acquisition performed well. If you recall when we acquired it, we said that it had sold approximately $41 million and we expect a similar amount of sales in 2018. We did have a couple of million dollars in sales in Q4 from Tuscany. So I guess the message is the business is running on -- it's performing well on all cylinders.

And isn't it -- correct me if I'm wrong, but most of the -- majority of sales on the bike side in this quarter is sort of just the tail end of the 2018 season. So sort of it's more dependent, at least the upside is more dependent on sort of follow through at the retail level, and then you're starting to get into your, the next season or the '19 season currently. So all the retail follow-through or just what moves the needle? Does the variability may be less early on or it's more dependent on what you've done at the OEM level? Is that an okay way to characterize that or?

Yes. I think you've captured that pretty well, Larry. We're still in model year '18, right. And the Sea Otter, which I spoke a little bit about is kind of the industry's new season coming out party. So 2019 model year starts to contribute a little bit later on. Yes.

And then just lastly on the tariff issue, you mentioned you have some of that in your guidance, a few cents of that is in the guidance. Was that already in there previously? Because like some of that, obviously, got just come more to the surface in the last couple of months even -- since you've given the guidance?

No. When we came out with guidance in the beginning of the year, we hadn't really -- we -- we speculated that some of it was coming, but we haven't really seen any of it. I think we've seen a little bit more of it, we've proactively worked with our supply chain and so it's what we see at this moment currently, like I said it doesn't anticipate further deterioration.

Right, it's anybody's guess, absolutely, yes, I get that. That's fine. Okay, great. Thanks, appreciate it.

The next question is from Scott Stember with CL King. Please go ahead.

Larry, typically you start off making a comment about the bike business inventories, the channel. There was no comment -- is it safe to assume that things are looking pretty good right now as you head into the model year 2019?

Yes. I mean -- I think what we see in our segments through the distribution and the OEMs, we feel pretty good about where we're at. We don't see that as being an issue as we go forward here through the year. And again that's not -- Scott, as we've talked before, it's not a broader statement on all bike inventory, all categories, all price points. That's the segment we serve.

And maybe just getting a little bit more granular on the commentary about tariffs, a few pennies that you talked about, Zvi. With tariffs actually not being enacted as of yet, are you seeing impact just from opportunistic pricing by US metal suppliers or what actually -- what causes that $0.03 as you see it right now or is it just a number that you're putting out there, just as a cushion for the unknown?

No. It's not a cushion. I think whenever there is an event like this, people avail themselves of the opportunity to try to push pricing. I would point out that in our case, we use a lot of aluminum and steel, but in addition to just the raw material, there is a fair bit of processing costs that don't necessarily relate just to the raw cost, but I do think we are in a -- we are seeing upward pressure on input costs, and tariffs makes it easy for people to try to push some of that back on us.

And just one last follow-up. Mario, can you talk about the Rhythm series? I know that you have another offering for 2019. Maybe just talk about how that's going?

Yes. Sure. It's going well. As you know, we started that a couple of model years ago and we spoke about rounding it out and we continue to round that out going into model year '19. And products have been very well received and there is a little bit of Rhythm inside the new Marzocchi products. So by way of that, it's carrying even a little bit further in the product line.

Our next question is from Michael Schwartz from SunTrust Robinson Humphrey. Please go ahead.

Zvi, you called out tariffs and it seems like it's more -- you're more kind of, obviously, talking about the raw material side of things. But are you starting to see any signs of increasing cost on the transport or freight side? We're hearing that quite frequently now from some of the other companies that have been reporting. Just wondering if you're seeing something similar?

A little bit. We've contemplated that in our guidance.

That is okay. That's helpful. And just on -- in terms of the on-road, off-road capable business and then specifically El Cajon, can you talk about how much I guess one way you have there in terms of capacity, just given the growth you've seen over the past couple of years?

Yes. I mean we're going to -- we probably need to continue to expand capacity. We have some runways but the business has been performing pretty well. It has exceeded our own expectations, short-term -- we think long-term, there is...

Yes. I think Mike, we're also -- our guys are looking at the longer-term ride, as we look at capacity and the various locations we're in now. And again, this is principally powered vehicles in North America. We've got several locations now that do give us some optionality and flexibility going forward to, I think, more elegantly expand capacity that we've been able to in the past.

The next question is from Rafe Jadrosich with Bank of America Merrill Lynch. Please go ahead.

Can you talk about how your ASP outlook and your ability to pass through pricing if you start to see a raw material cost go up from the tariff?

Yes. I mean -- you know, I've been here about a decade and we've had other periods during my time here, when we've had pressure on input costs and currencies and so forth. And over time, we have -- because we don't sell a commodity product, we have been successful in passing on some portion of those increases through. We're always cognizant of not passing so much through that it dampens demand for our products by end customers, but we certainly feel like there's an ability to pass the increases on. We -- our first choice is to create more efficiencies to offset that. We've got various efficiency programs in place that you guys know about, talked about. That's our first preference, but if these cost pressures are sticky then we would look at what makes sense to pass through.

And then just on the guidance, you're raising the EPS outlook and the revenue by a little bit more than the beat and that's despite an incremental tariff pressure. What's driving the increased confidence in the guidance for the rest of the year?

Well, we have a pretty good idea what our spec position is on the bike side. Right? We have a pretty good idea and we're into the beginning. In Q1 here, we've actually started seeing some of the -- I am sorry, Q2, right? So the current outlook reflects our spec position and the acceptance of our products with customers.

And then the final question is, I think you called that side by side in the power vehicle side. Have you seen any other change in, I think, I'm not sure if you've been calling that in the prior quarters. Can you just walk us through the trends you're seeing by end market on the power vehicle side?

Yes. We haven't called out side-by-side, specifically. That segment is performing well for us but we don't break out any additional information in terms of this particular contribution or its particular growth, but it is performing well.

Is it sequentially, has it sequentially improved since last quarter?

Yes. I mean, I guess, I do think in our press release, we've actually -- I think we may have said something about side -- yes, we do say, "Look out at Larry. I think Larry had mentioned something of high growth in side-by-side...

Yes. For the quarter, certainly. I think, we saw -- we had a nice quarter in that business. And I think it's consistent with what others have seen in the industry. I think our view of that is probably units across the industry might be mid single-digits and which I think is consistent with what others are kind of forecasting and again, we hope we got more than our fair share of that.

Our next question is from Ryan Sundby from William Blair. Please go ahead.

I will try to squeeze 1 in here for each of you guys. So just to follow up on the tariff pricing question, can you just remind us what your pricing windows are? Do you set a price before you kind of sell the product in or can you take price throughout the year?

So it depends. In the case of bike OEM business, we typically do not change pricing through the course of the year. We have -- I won't say we never do because it has happened in the past, but that would be atypical. For our -- of course for any of our aftermarket programs, we can change pricing at any time right? And we have a fair bit of aftermarket business both in -- in the bike part of our business and in the powered vehicle part of our business. In the case of powered vehicles, sometimes our ability to change pricing is contractual in nature depending on -- for a particular program, right? So program is in place. Sometimes this is contractual in nature and tied to various commodity indexes and so forth. So I guess the answer to your question is, it varies and it depends.

Okay. And then I guess staying on the cost side of things. I always feel like labor supply is pretty tight in Scotts Valley, are you seeing kind of wage inflation there or any concerns around kind of filling spots? Any color there would be great.

Yes. I would tell you that one of the challenges the company has had over the years is growing efficiently and attracting the kind of talent that can continue to make it successful over the next four years like we were over the previous four years. So talent acquisition has always been a challenge to grow in a way that preserves the company's culture and the things that have made it successful. We, as you know, we do a lot of our manufacturing in California. And so with the advent of the minimum wage increases that have been kicking in for the last several years here that creates upward pressure on all wages in factories, right? Because if you're making -- even if you're not making minimum wage, the next tier up or the tier after that, that creates upward pressure on it. So we have absolutely over the last several years, seen continued inflationary wage pressures. I think inflationary wage pressures and hiring has gotten a little bit more challenging this year than say, two or three years ago. I think that's lockstep with what you're seeing throughout the country in various economies. So that is one of our challenges, but I think we do a pretty good job in recruiting and we've got various programs in place to continue to hire to execute our plan.

Okay. And then Mario, it seems like the reviews on the Marzocchi Bomber shocks were really strong. I mean as that kind of brand reestablishes itself; do you kind of see the need to have Rhythm out there too or is there kind of room for both the brands to kind of coexist together?

Yes. There is room for both. That was sort of what we're seeing it all come together now, but that was the intent with Marzocchi from when we first kind of brought it in underneath the FOX family. So Marzocchi in its current and future products will live in an appropriate spot versus any of the FOX families above it and we see that playing out now, so we're pretty excited about it.

And then it also seems like there's a lot of excitement around the Grip 2 damper right? I didn't really kind of hear it in your script there may be I misjudged the fact that...

Yes. That's sort of where there is some FOX inside right? So Grip is part of the Rhythm story for the last several years. Its performance is great, it was part of the design -- designed to profitably hit a price point. The grip damper it was a big part of that. And so that technology is included in the Marzocchi products, which the chassis brings out the attributes of what Marzocchi has been known for in the past.

Then last one here for Larry. It looks like you guys moved pretty quickly to pay down a good chunk of the debt you took on to acquire Tuscany in the quarter. Is that still kind of the main priority of use the cash fee going forward or would you start to look at kind of other options from here?

Well, generally, what we try to do before we pay down debt is we're happy to pay down our revolver, but we're reluctant to pay down over term debt. The theory being that we like to preserve liquidity in order to allow us to do future acquisitions without having to refinance the facility and incur all those costs. So beyond that, that typically you're not going to find us paying debt down beyond our revolver at least for a little while.

Yes, and I think we're -- philosophically, I think, we've had this posture from the last few years as we want to be sure we can take advantages of M&A opportunities that might come along. And we're fairly conscious of keeping adequate liquidity, making sure we don't suffer undue bank costs. So I think Zvi and John and the rest of the crew in finance do a good job of keeping us prepared for an opportunity like Tuscany.

This concludes the question-and-answer session. I'd like to turn the floor back over to management for any closing comments.

Thank you, operator. And thank you all for your questions and your interest in FOX. We look forward to continuing to execute our plans and updating you on our progress as we go forward with these quarterly earnings calls. I'm also thankful for the support of our customers and suppliers and the hard work of our great group of enthusiastic employees, all keys to our continued success. Thank you and have a good day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.