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

Thank you. Good afternoon, and welcome to Fox Factory's third quarter fiscal 2018 earnings conference call. On the call today are Larry Enterline, Chief Executive Officer; Mike Dennison, President of Powered Vehicles Group; Chris Tutton, President of Specialty Sports Group; 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 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 the 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 gross margin; non-GAAP operating expenses; non-GAAP income tax; 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 are useful metrics that better reflect the performance of our business on an ongoing basis. 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 your joining us on today's call. As David mentioned, on the call today, along with Zvi and I, we have Mike Dennison, our Powered Vehicles Group President; and Chris Tutton, our Specialty Sports Group President. Powered Vehicles Group includes our Legacy Fox Powered Vehicles business, Sport Truck in Tuscany. The Specialty Sports Group is comprised of our Legacy Fox Bike business, Race Face/Easton and the Marzocchi brand. We are excited to have both of them join our earnings call to share a little bit more about each business group and their results. But first I would like to mention that Mario Galasso, who has been on our earnings calls since we went public is pursuing a new opportunity outside of Fox in vehicle accessories and we look forward to having a consulting relationship with Mario and his new venture. Mario has been a key member of our team for 15 years and on behalf of management and the board, I'd like to thank him for his hard work and dedication to Fox during his tenure. Now to review our quarterly results. To start, I will discuss our third quarter 2018 business and financial highlights. Mike and Chris will then provide a more detailed update on their respective businesses and brand development. We will then review the third quarter financial financials and discuss our guidance. After that, we will open the call for your questions. Our team helped to deliver record quarterly sales, earnings and adjusted EBITDA. We continue to experience broad-based strength across both our Powered Vehicles Group and our Specialty Sports Group offerings. The underlying fundamentals of our business and end markets remain strong. Fox’s differentiated market position continues to fuel our growth in new and existing categories. We generated record…

Thank you, Larry, and good afternoon everyone. During my remarks today, I'll touch on a few of our recent Powered Vehicle Group business highlights. In our third quarter sales of powered vehicles products were up 56.6%. Our record sales were driven by high growth in side-by-side vehicles, aftermarket truck categories, and our off-road capable, on-road suspension products for OEMs along with the addition of Tuscany's aftermarket upfitted off-road and on-road truck offerings. The Fox team continues to create opportunities and execute on synergies within the Powered Vehicle Group to collectively develop and bring to market compelling product innovation. Industry dynamics continue to favor our premium product categories and we believe the breadth of offerings across our various segments along with consumer preference for high performance more capable vehicles will continue to fuel our long-term growth. In September, we soft launched our new aftermarket Fox racing three-inch internal bypass suspension for the Jeep Wrangler JL at Pomona off-road expo. Initial reactions were very positive and we're excited to bring this kit to market. It takes our off-road capable on-road aftermarket suspension for the jeep wrangler JL to the next level. This month we also launched our long haul suspension for semi-tractors at the California Trucking Show and we were pleased with the amount of interest shown. We are excited about this new product category and its potential to redefine the performance, comfort, safety as well as the lower maintenance costs for independent semi-tractor drivers and commercial fleet companies. Currently, our Fox, Tuscany and Sport Truck sales and marketing teams are all out to SEMA show at Las Vegas, highlighting our breath of aftermarket product offering. The show started yesterday and went through November 2. The teams are working together on brand activation activities, busy meeting with current and potential customers and…

Thank you, Mike. Good afternoon everyone. During my remarks today, I'll touch on a few of our recent Specialty Sports Group business highlights. In the third quarter, sales of bike products were up 21.1% as our Specialty Sports Group business delivered record performance for the period. Our model year 2019 product lineup continues to be well received by our customers as demonstrated by the strength in our OEM and aftermarket sales channel. The team continues to exceed expectations across the Specialty Sports Group brands to collectively develop and bring to market compelling synergistic product innovations as well as demonstrated by our strong third quarter sales. Additionally, we continue to see progress penetrating the next level price down in the premium mountain bike suspension segment with our expanded Rhythm series and Marzocchi product line. In August, we held the media camp to formally launch our semi-active electronic mountain bike suspension system called Live Valve. The system automatically adjusts the fork and shock independently virtually instantaneously as the train changes by using inputs from the sensors that runs through an algorithm and process through the controlled LED unit. This is the same technology we've applied in our side-by-side and the off-road capable on-road truck segment. Richard Cunningham, a Pinkbike [indiscernible]. The bottom line at that Live Valve represents the most useful and important suspension innovation to emerge in a decade of boring improvements. It works great and I don't want to ride without it. Christoph Bayer at ENDURO Mountainbike Magazine had just said unlike an electric drivetrain, the Fox Live Valve system offers a real advantage and takes mountain biking efficiency to a new level. It made the rocky mountain out student even better all-rounder that thanks for the system to find even more efficiency and more efficiently without sacrificing download performance.…

Thank you, Chris. Good afternoon everyone. I'll focus on our third quarter results then review our guidance. Sales in the third quarter of 2018 were a record $175.8 million, an increase of 38% versus sales of $127.4 million in the third quarter of 2017. Gross margin was 34.4% in the third quarter of 2018, a 100 basis point increase from 33.4% in the prior year period. The improvement in gross margin was primarily due to operating leverage on increased volumes and improved manufacturing efficiencies. Total operating expenses were $29.1 million or 16.6% of sales in the third quarter of 2018 compared to $22.2 million or 17.4% in the third 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; higher amortization expenses on acquired intangible assets, higher patent litigation related expenses and investments in research and development to support future growth. Non-GAAP operating expenses aided as a percentage of sales were 14.3% versus 15.5% in Q3 last year, which were slightly better than our guidance due to strong sales. Focusing on expenses in more detailed, sales and marketing was up $2.7 million primarily due to $2.3 million of costs incurred at our recently acquired Tuscany subsidiary. R&D was up approximately $1.3 million primarily due to increased personnel investments to support new product innovation as well as prototyping and equipment costs. As we've consistently stated, the timing of R&D and promotional expenses often changes between quarters and years depending on a number of factors, including product launch cycles. Our general and administrative expenses in the third quarter of 2018 were $11.2 million compared to $9.1 million in the prior year period. The change was primarily due to $0.07 – $7.7 million…

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

[Operator Instructions] Our first question comes from [indiscernible]. Please proceed with your question.

Hi. Thank you very much for taking my question. I wanted to start off by asking a little bit about the long haul semi-tractor suspension that you guys mentioned. I know it's really early, but if you could maybe talk about how you're – just in more detail on how you're positioning that product. Are you orienting that more towards kind of OEMs are aftermarkets and when should we think about maybe you just start realizing some potential revenues there?

Yeah. Thanks, Brendan. This is Mike. Let me talk about that for a second. So the big question, there's a number of them there let me try to pick them apart. We actually see this as growth potential OEM play and an aftermarket play clearly in the early days we’re getting experience and developing some history with the aftermarket side of the business. We have booked orders in that space and we're working with some smaller, more commercial trucking companies. It's early for us tough to really predict where this thing goes over the next couple of years. So we're real positive about it right now. We think it has lots of opportunities, but we're going to wait and see how things go.

This is Zvi. As Mike said, we're pretty excited about the space, but we would like to point out that this initiative along with some of the exciting initiatives we're working on are contained in our long-term low double-digit guidance targets for Powered Vehicles.

Okay, great. That's really helpful. And I also wanted to ask about the bike category continue to be up very nicely I mean stronger than I was certainly expecting. Can you maybe provide a little bit more color on – is that just – is that’s some of the consumer? Is that really – are you seeing kind of more – kind of demand from OEMs? Some more color there would be really helpful.

Yeah. Let me start off, Brendan, and I'll let Chris to chime in. I mean, you know, the first thing I think as I said in my prepared remarks is it is broad based. I think we've been fortunate in picking spec up in the model here. I think we've been then fortunate to be on bikes that have been pretty popular. I think those have contributed. We've had a nice aftermarket effort. And we see that the market is remaining pretty good for us. So, yeah, I would say there is no really one thing. I think it's just a combination of all those small drivers that we talk about, coming together, give us pretty nice quarter. Chris, any?

I think that covers it. We've had wide ranging spec and our aftermarket business continues to be solved globally.

Components, I think, we're happy with what we see.

Components and aftermarket sales have been great in Europe, great in North America.

This is Zvi. It's a similar theme to the entirety of our results. We've got broad based rank across our product lines both within the categories and across the categories, pockets of strength and weakness, but overall we're pretty pleased.

Okay, great. I really appreciate it. I'll jump back into queue. Thank you, guys.

Thanks, Brandon.

Our next question comes from Larry Solow, CJS Securities. Please proceed with your question.

Great, thanks guys. First of all just I wish Mario good luck. I guess he doesn't – he doesn't like peaches too much, so – go to Georgia. [Indiscernible] Just a follow up question just on the bike or I guess what's now known as specialty products. I guess assume most of the incremental growth of the increased guidance is more aftermarket and fall through and I guess brands that you're on or bikes that you're in are doing better than expected. It's the – is the industry itself over the last year-to-date has that done better than you would have thought of even one or two quarters ago or is it particularly just your brands that are doing better?

Yeah, Larry, well, first – yeah, I wouldn’t be necessarily attributed to aftermarket. No, I think again it was broad based across a lot of our products, our legacy Fox products, Race Face/Easton, Marzocchi branded products, I think have all contributed. I would say that that our OEM spec was good as I think we indicated earlier in the year. I think we have been fortunate to be on OEM models as that have had great sell through. I think that's been a good contributor. Now with regards to how we performed the vis-à-vis the industry I think if you follow other bike companies who have – who are public and have announced here over the past little bit, I think clearly our performance is well in excess of what the industry is doing. And I would tell you, I attribute that to the fact that we principally – not exclusively, but principally play on the high-end of mountain. We're getting an increasing e-bike specific offering. I think that's opening it. So I think we happen to be in an industry that is maybe not had the best of time. So I think it's a little bit better than it's been in the last few years. But clearly, we're out performing because I think we happen to be in great segments. And I think our team has come out with some performance defining products that people will value and they're buying them.

Great.

Yeah, one more thing to add…

Absolutely…

You will see in our financial results, we now disclosed the OEM versus aftermarket revenue. And you'll see that both are up very solidly year-over-year. Now I will point out that a fair bit of the aftermarket improvement when you're looking at the year-over-year comparison includes the Tuscany acquisition, but strengthened by channels.

Great. And the name shifted to Specialty Sports, does that sort of imply that you may be looking not intentionally to diversify but maybe just looking for acquisitions that may not be in the bike space or?

Well, I think it's a couple of different things, Larry. Certainly, as I think we indicated with what's contained in the Specialty Sports Group, its multiple brands, multiple product categories. Now I think beyond that, we – and I think we've talked about this. We do see opportunities I think to sell performance defining products that maybe don't go directly on a bite to that same passionate customer base. So I think that's part of the strategy in that business as we go forward. Does that help?

Yes, absolutely. And on the Powered Vehicles side, just the similar question, the growth is so ridiculously great. So I'm just trying to – I know you have said that Tuscany, I know last quarter it seems to be doing a lot better under your umbrella, obviously getting some new – a lot of the new business wins across categories. Is there anything one thing in particular that's really driving this rapid growth?

Thanks, Larry. Again, it's pretty broad. As I mentioned in my prepared remarks that we've seen across our off-road business, powered sports business is also quite strong and Tuscany and sport truck. So it's really been a – maybe that’s really ridiculous, but a pretty clumsy joke, since last quarter we're looking forward to the future.

Absolutely…

And just to add to what Mike said, we point out that organically our growth is well above our long-term low double-digit growth rate as well. Not only as Tuscany doing well, but our legacy Fox businesses and sport truck are also doing well. It's broad based...

Right, absolutely. And just last question, I know you talked about the tractor opportunity, is this sort of the next – obviously investment thesis is getting into new categories on the power vehicle side. Is this potentially the next, whitespace category, or are there other areas out there that you are – all other areas, but are there near-term opportunities, perhaps I know you’ve talked about the commercial 18 wheeler space, any update there?

Yes, we believe the commercial, in fact the business can be a good business for us over a long period of time, we are developing and now we’re starting to slow. We like those whitespaces to diversify our portfolio, we’ll continue to look for them and we’ll a good one we’ll pursue it. And then see what we can make out of those businesses. We want to stay focus on performance, right dynamics and performance to finding products, that’s kind of the key in the whole thing.

I think Larry, to clarify I think long haul that we’ve come out is going on to 18 wheeler tractor.

Okay. We do see other opportunities in other kinds of commercial trucks, but you can’t do everything at once. We are getting a start and again I think as Mike said, we like what we see but it’s early.

Right. Got it, great.

Now if you look at other whitespace, we talked about things that were coming behind commercial trucks, things like recreational vehicles, we do have other whitespace product ideas. But again we’re – I think as we said for five years now, we are trying to be fairly disciplined in our pursuit of those things in order to get the best results for both our customers and our shareholders.

Got it, great. Thanks so much, appreciate it.

Our next question comes from Scott Stember, C.L. King. Please proceed with your question.

Good evening, guys.

Good evening, Scott.

Hey, Scott, how are you?

Good. Maybe just going back to the tractor suspension, this sounds like obviously its more of – less than in performance side and more of I guess paid to save kind of deal for fleet, can you maybe just talk about what a trucking fleet I guess whether its – I guess, its mostly would be from a safety standpoint or from a fuel economy standpoint, maybe just some of the benefits that this thing gives to trucking fleet, if you could just maybe deal with one granular? Thanks.

Yeah, I mean thanks, Scott. It really is starting with kind of comfort and safety, the notion that the trucks are doing long haul transit across the country and elsewhere, it requires us to constantly look at how we can improve the suspension for the driver, passengers and even cargo. So we believe that whole notion of developing a higher level of comfort, high level safety new products, as a benefit to the trucking world and that’s the feedback we get when we go to shows and talk about it. So we are going to continue to pursue that, its not the same as – you’re correct, its not the same as long we are doing off road for racing per se. But we see some of the technology and innovation that we fined in our off-road business and we bought on-road and put it into our commercial trucking business. It’s not the same but we still leverage the technology.

Yes, I would say that you’re referenced spend to save proposition and I do think that’s a very viable here. Maintenance interval of fuel cost, tires, there are other replaces where you can have a very quantifiable savings for a user. And so clearly we want to exploit that I would tell you anecdotally that what come out of some of our testing is they said they were cracking less dashes. So I think there is going to be a lot of different ways to measure that, it’s something we're excited about.

Again, very early though in our pursuit of that market and just following up on that with this, I imagined the, maybe you could just quantify the retrofit opportunity or the aftermarket opportunity versus the OEM opportunity and the timing of it. Clearly, it sounds like the aftermarket would come a lot sooner than an OEM just given the lead times, right?

Yes, really Independent semi tractor trailer, tractor and drivers in that part of the world. These guys are out there and they need to find the best solution for their truck at pretty regular intervals. So they're a great aftermarket opportunity for us in two ways. One, it gets us experience on the road in these trucks, and it gets us working with a group of customers that would otherwise more, more difficult for us to reach. These guys can come to us. We work with them collectively on what's working, what's not working and continue to improve the product. So we really liked that aftermarket space. It works well for us in the early days as we expanded the more commercial truck business.

Yes, I think this is very similar, Scott, to how we enter most markets as we really going through the aftermarket initially, and I think we hope to show the viability and the worth of the product in the aftermarket, then get the OEMs attention and then go to work on it.

All right. And lastly, we were just talking about Live Valve on the bike side, it sounds like it’s going into a bike relatively shortly if it’s not in ready and maybe just talk about, I imagine this would be on the very, very upper end of your bikes the kind of volume that you would expect that of a product like this and that’s all I have. Thank you.

This is an ultra premium product, so you’ve got to keep in mind that this really touches the top 1% of our sales. So, we are shipping Live Valve, it is out in the field, we’re having great performance, great customer feedback, a great sell through at the bicycle dealer level. As far as unit quantities to be determined.

Yes, I think it’s like a lot of products, initially as Chris indicated at the high end, overtime, we’d obviously like to see that expand. But certainly at the beginning, it’s going to be on the premium end of what we do both, I think regular mountain bikes, e-bikes are possibility, again, kind of the same thing, but a very high on the technology, I think Chris, we had some great feedback out of that launch in Asheville, great feedback at the launch and great feedback at the dealers that supported the product in the field. So more to follow, but we’d hoped to sell more of it in the future. Not less, that’s for sure.

Great. That’s all I have. Thank you.

Thank you, Scott.

Our next question comes from Craig Kennison, Baird. Please proceed with your question.

Hey, good afternoon. I’d also like to wish Mario well. I know there are some new voices on the call today. Maybe just frame for us, Larry, whether we should expect continuity in strategy and your specialty and powered vehicles business or other areas where we might see it evolve?

Well, yes, I think you’re going to see a lot of continuity. First, Chris has been with us since we acquired a Race Face/Easton, he’s been an integral part of what we’ve done in the bike business. So, I think the strategy will remain exactly the same. I think we are as we’ve indicated, look we always look out opportunistically for things, but that we can provide our customers and I think in this business, we do think there’s some potential to broaden it beyond things that may go directly on a bicycle, but, things that would get sold kind to that same passionate customer base. So, I think you can look for a lot of continuity and strategy. I think it’s the same on the powered vehicle side. Mike, I convinced him to come from our board and join us in management also. And so he’s been an integral part of how the business is, it’s thought about and how it’s developed. So yes, I think you can look for a lot of continuity. Mario, we all, hey, we’re going to have a long relationship with him, we’re all good friends of his and we obviously want him to do well in the future also. And we will pass along everyone’s good tidings doing.

Thank you. With respect to Georgia, and other investment, how should we think about the addition to capacity that will represent and how quickly would that capacity come online?

Yes, well Craig, a couple of things, clearly, our business, both parts of our business here have done well. We started many years ago and, talked to the investment community about our efforts to go to tight trunk in bike, to get closer to our customers and expand our capacity. I think we did that very successfully. Chris’s team has recently, integrated the Race Face/Easton operations in Taichung, into the Fox building, so they’re together now. So that effort is on that Specialty Sports Group side of our business. I think in powered vehicle, again, as you all have noted, our growth has been pretty good. And so, we’d look to it do a couple of different things in, certainly expanding our capacity it’s one of them. I think we have referenced getting to a platform that we can more elegantly grow in the future. And I think this effort in Georgia is aimed squarely at that. It not only gives us a capacity here now, and that facility on the 23 acres site would come online probably in early 2020, I think, Mike. Yes we are looking for capacity. I mean, every day we don't make announcements, but we're doing a little bit here and a little bit there in the interim, right to serve the needs of our business. But that really is an effort, it's for the long-term and it's designed to allow us to grow more elegantly in the future. We still have a lot of manufacturing base in California. That is going all out to meet customer demand. So we view this right now as a way that we can add capacity, put the platform in a position then to grow over several years, maybe a lot more efficiently than we have over the past five years. Does that help explain it?

Yes, it sure does. And just that maybe Zvi just to finish with that I recognize you are not providing guidance for 2019. But how should we think about the investments in Georgia and the P&L impact on it in the sort of short-term and long-term? Is there any change in your margin outlook in short-term and long-term because of that investment?

Yes, as we've indicated the capital investment from these things, we think that our CapEx for the next two years, i.e. 2018 and 2019 goes from our longer term guidance of 3% to 4% to more like 5% and 6%. So you can do the math about the extra capital we have based on our guidance for this year and our longer term growth targets for revenue. The math is pretty easy math. We don't make – and part of those investments are growth and part of it are maintenance CapEx, right. We obviously don't make big capital investments without believing that we're going to have an ROI come from it. So beyond just meeting our customers' demands part of these investments are trying to become more efficient, right? And Larry, I think, said often, when you're growing rapidly you often make tradeoffs between capacity and efficiency in order to meet customer demand. Well, just like we did in Taiwan and like we did several years back in El Cajon CapEx will sometimes have a step function. So you can try to get a little bit ahead of it so you can grow more elegantly and efficiently. So it's our belief that this is an integral part of our plans to continue to march towards longer term EBITDA margin above 20% and meet our customers’ needs. We think this is part of that equation.

Yes I think there's another element Greg to getting to Georgia and that is diversifying our platform we clearly have a lot of on the West Coast now. And I think this gives us access to a different labor pool, different sub-suppliers, that become viable in this kind of a situation. So I think as we indicated it's – and the way I would think about this whole effort, as it unfolds, it both serves our needs here as we go forward, but I think it allows us to continue to grow again in a much more efficient manner getting access to both parts, human capital and all the things you need to make the business go.

Great. Thank you.

Maybe to add one more thing, we do have – we are initially starting to fund this out of cash. Just due to the extra cash we have on our balance sheet, the low leverage that is the – we believe that's a good use of cash right now. But over the long haul we always have the flexibility to do other sorts of alternative financing which include – could include things like sales, leasebacks, et cetera. So that's something we think about as we look at our capital structure.

And Zvi was getting a commercial info for our truck offering there with the long haul.

That's great. Hey thank you.

Thank you Craig.

As a reminder, we are now conducting a question-and-answer session. [Operator Instructions] Our next question comes from Jim Duffy, Stifel. Please proceed with your question.

Thank you. Hi guys a few questions here.

Hi Jim how are you?

Doing well, thanks. I recognize tariffs and trade issues are contemplated in the guidance. From where you guys sit in the supply chain, is there any evidence that trade legislation, or tariffs are having an impact on timing of shipments? Have you seen any shift in timing of orders or shipments from OEMs trying to circumvent duties?

Yes I would say that we haven't seen evidence of that, but it wouldn't surprise me. I know as we look through our supply chain and are trying to secure parts and materials, we're cognizant of it. We're not cognizant of it from the standpoint of trying to avoid tariffs we’re more cognizant about it from the respect of there is some disruption out there right. Disruption as other people might be trying to do things to avoid tariffs or to secure future supplies, et cetera. I mean, it's certainly it's certainly creating some noise I would say in the supply chain. But I mean, are some of our customers shifting orders to us? We haven't seen it with us. Are they doing it with their own suppliers? Perhaps.

Yes, and Jim, this is Mike. To add to Zvi’s comment, the one thing that we would see in the supply chain is as tariffs kind of have their impact in the supply chain itself more mix may move to on onshore suppliers. As that happens then supply tightens. And when supply tightens, you have some, as Larry mentioned, cost implications and you have some more challenges associated with getting material. It hasn't been a big factor, but it is a factor that we watch pretty close.

Okay. Thanks for that. And Larry you touched on this a bit, but can you talk more about some of the factors behind the selection of Hall County, Georgia and Reno for the new site locations? What's the labor market picture needed to those markets? Is there some sort of kind of SG&A savings opportunity or Zvi is there a tax rate opportunity as you've moved the headquarters?

Yes let me take the first part and I'll let Zvi comment on the financial implications. But I think certainly any new location that we would go into, the number one consideration is the labor pool. For manufacturing clearly we have a lot of direct labor, we need to make sure we have access to the people that want those jobs. I also think particularly with the headquarters obviously in the future, we want to make sure we have access to the white-collar talents that might be involved there. So that's probably both with Reno and the Georgia location. The prime consideration, clearly we look to do things in the longer term that are more efficient, not less efficient. So we'd like to think that we're picking up some economies along the way. But I would tell you that labor availability is probably number one on the list of things we look at. Zvi you want to talk a little bit about?

Look as Larry said the number one consideration for us is talent acquisition – is it the cost of living lower in Georgia than California gas, but that was not our principal consideration. In terms of tax rate, not really a big issue for us in terms of tax rate. As a lot of what we ship out of California, because you don't pay taxes on those because the end destination is outside of the U.S., so that was not a big consideration for us. Again, the big consideration for us is diversifying our manufacturing base as Larry talked about and talent acquisition.

Yes Jim, I think it's important to note that, we will – we have and will have a considerable operations and in our inherent California and multiple locations. So this is something that's kind of additive again mainly focused on future growth.

Understood. I’ll add some more questions on that, but maybe we can do that in a follow-up. Last question from me in 2018 has been a great year. It was only two months last presumably you've got great visibility through year end. Is it more of the same in 2019 or do you see 2018 setting up as a difficult compare? And then I guess specific to the power vehicles business, I guess I'm curious if you foresee any change in mix in 2019? Which are the platforms you think are really going to be driving that business forward? Well, you know, , that I'll lead to be give you the detail, but it, it, it, it strikes me as I think I heard the same question and at the end of 2013,

Jim I’ll let Zvi give you the detail. But it strikes me as, I think, I heard the same question at the end of 2013, and may the end of 2014 and 2015 also. So, I think, we're not going to make a call on 2019. But I think we certainly liked the way our business is shaped up here in 2018 and again the thing that – we've had difficult comparison before, right.

No doubt, yes.

I would tell you that we're going keep our teams focused on developing performance-defining products that passionate customer base that we had once. I think if we do that we got all kinds of macro and noise going on with the tariffs, potential downturns, interest rates going up. We're going to worry about what we can control. We're going to be cognizant of the environment. And we're going to keep trying to satisfy those customers. I think if we do that, we're going to be just fine.

Yes, just to add to what Larry said. I mean, this company has a long record of growing the top line and the bottom line. Just to give you a sense of it, I joined 10 years ago. We were in the $100 million range, right? So the company has executed over the long haul. We do that through innovation. We do that through a passionate customer base and a passionate employee base, right? And the basic DNA of the company has not changed. It's one of the reasons we always tell investors that we're going to continue to reinvest in the business in sales and marketing, and R&D. Those are the engines of growth. There’s much of that I'd like to think myself as an accountant is one of them I'm not. So with that in mind, this is not a new paradigm in terms of our growth algorithm. Our growth algorithm rhythm is low double digits for Powered Vehicles and mid-to-high single digits for bike. Having said that it's always our goal to beat that algorithm. And we're excited as you guys hear Mike, and Chris, and Larry talk about the business. We're excited about the broad based strength. I have had the good fortune of talking to one of our engineers a couple of days ago and the level of excitement from the guys that actually touched the product couldn't be higher. So with that, if we keep doing, sticking to our knitting and producing great products, the future is bright. As for next year’s guidance we’ll tell you guys in 2019.

And we are giving Zvi a reward for every time he works long haul into the conference...

Alright? I understand. I appreciate what you guys do and what you've accomplished. I appreciate what we do in the investment business and what we're trying to understand. The powered vehicle business, any changes in mix, platforms driving things there into 2019? Presumably some visibility is building.

Yes, we're getting some of that visibility. I won't talk about individual vehicles are customers, but we are seeing a continuation of the evolution to intelligent platforms. We talked about a Live Valve in the bike business, we also believe that intelligence platform and ride dynamics system in our vehicles continues to materialize. Really it looks very strong. So I’d say ours probably [ph] continues to look strong in sports. And we talked about Tuscany earlier and we’re just real happy with what we're standing in that business and we continue to see good things in the future on it. So pretty broad, I mentioned that earlier, it's pretty broad growth and a good diversity in our business.

Great guys. Thanks for all your thoughts.

Thanks Jim.

Thanks Jim.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Larry Enterline for closing remarks.

Thank you. 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 conference. You may disconnect your lines at this time. Thank you for your participation.