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.

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 marks 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.

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…

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…

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

Thank you. Good afternoon. It's good to hear from you guys. Feels like it's been a while. 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?

Sure. Jim, the capacity is about in line with preprint perspective. 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. Think about that in probably Southeast Asia, Thailand, Vietnam, et cetera. We're really solidifying the footprint we need in Taiwan, and our future growth projections would take us probably off the island.

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.

Yeah. No, thanks for that question. There is a lot of hard work going on right now across that PVD team. We've done a recent meeting that we had 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 cultivating 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.

Thank you.

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

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.

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.

Okay, that's helpful. And B, 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?

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.

Understood. Thanks, Mike.

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

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.

Yeah, the interesting thing and you've heard all the reports come out from the different OEMs, but the interesting thing about our business, Anna, that you have to remember is that when we're talking to Ford, we're talking to a very select set of -- on PVG OEM, we're talking to a very select set of chassis, mainly produced in the U.S., that are their high-end premium product. So Ford has a lot of things to contemplate and think about relative to tariffs, but relative to the space we play, a little bit less affected. And we think that that product set has a bit more resilience to these tariff issues than maybe the rest of Ford. So we feel pretty good about that. When it comes to Toyota, when it comes to Stellantis, our other two big partners, Stellantis was significantly down in ‘24 relative to dealer inventory and some of the challenges they had. So we're already seeing an upside on Stellantis over ‘24. I don't expect that the tariff issue is going to change dramatically what we have in the current forecast, because it's in line with what we did in ‘24. And like I said, we're seeing some upside. So a little too early to tell you. We need to hear more from Stellantis on what they think about that relative to the Mojave [ph] product and even the Jeep product. And then Toyota, we're on their higher-end vehicles. We're on their TRD Pro-class vehicles. So again, being in the premium space helps us in automotive. I don't want to sit here and tell you that there isn't going to be a lot of teeth-gnashing and challenging conversations around consumer demand relative to what could be a very inflationary event. So I think that's what we need to think about is what's the inflationary impact to a consumer and their willingness to buy these vehicles. Relative to our product, how we price it, et cetera, we've got that indexing in our pricing model with these OEMs. So it doesn't have a direct implication necessarily to what we sell to them. It has an implication to what it means in their demand side relative to end customers. Again, Ford in our products, more protected, less protected in Stellantis. TRD Pro, probably more protected as well. Does that help?

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?

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.

Great. Thanks, guys.

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

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?

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 is 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.

Got it. Okay. And just on bikes, just I typed in a little bit more. I know 2024 was a much better year, good recovery. And I think it was led by initially some of the smaller, more nimble OEMs. What the slower down, I mean again, we're not hopefully not going contrived and going backwards, but it sounds like there's still some inventory in the channels. Is there any like particular more stress areas coming out of there? I think you had mentioned Europe got a little slower too as an end market, I guess last year there was some rain, but anything on that? Is it e-bikes driving any of this sort of still unevenness in the channel?

Yeah. E-bikes are actually a little softer than we expected, especially in the lower end e-bikes where we really don't play as much, but e-bikes as a segment in that industry are a little bit soft right now. The thing that we're seeing is that the bike dealers, distributors, and OEMs are all very resistant to inventory positions. So whereas they would have inventoried more coming out of ‘24, they have not, which is actually in a weird way kind of affected our Q4 numbers a little bit, but it's a good thing. Even though it might look on paper like it's bad, Larry, we actually appreciate it. We'd rather have them run much thinner inventory levels and be much more reactive to market demand signals than building a big inventory pile. So I think in general the bike industry is significantly healthier coming out of 2024 than coming out of 2023. That's pretty easy to say. And I think there's going to be a good build this year as new products really start to get launched. Remember, the industry really hasn't seen a lot of new product in the last several years because people were trying to burn through inventory that could have been two, three years old. So this is the first chance to bring some real fresh, new innovative product to the market. So we're pretty excited about that. Again, we're not baking in growth because we think that could be offset by macro, but that's the upside.

And I guess the one macro, or maybe not a macro benefit, but a little bit of an LSU and market benefit on within AAG, too, is the chassis mix improvement. I think you said it's the best it's been in quite some time. So hopefully at least you'll have product to sell. Hopefully there's still some demand there.

Well, that's just it. Chassis mix is making sure we have the chassis that have demand. And what's interesting about the AAG business, and Dennis can speak to it better than I can in a later time. But in AAG, we're finding OEMs really approaching us for really creative new product development programs where we're actually working hand-in-hand with them versus more historically we would do it on our own. The Fox factory truck was completely the innovation of Fox. Now what we're seeing is OEMs really looking for new fresh product to put on their dealer lots and coming to us to partner with them up front in that vehicle development roadmap. And that's a big change. I mean, it doesn't sound like a lot when I say it, but that's actually a big change in how OEMs think about Fox. And we're pretty excited by that because that means they're going to help us market. That means they're going to help us develop and deliver these trucks versus doing it on our own. And that's a good change.

Just last week, we just hosted a few of our OEM partners and strategic partners out in Ocotillo. It's one of our proving grounds. We had PVG engineers next to PVD engineers. We had our Upfit UTV folks out there as well. And we test drove some of our best technology. And it was amazing to see the light bulbs go off and see how differentiated we are. So Mike is right. It's that we were able to bring to light all that FOX is able to offer OEMs and strategic partners.

And we'll take our next question from Alex Perry with Bank of America. Please go ahead. Your line is open.

Hey, thanks for taking my questions here. I guess just first, higher level on the guidance, it seems like sort of the range of outcomes and guidance seems pretty wide this year. I think the EPS guide sort of straddles like a dollar bottom to top. Can you talk about what's sort of informing that? What would need to go right to hit the high end of the range? And similarly on the bottom end of the range, what does that sort of assume? Thanks.

Yeah, I think Mike has done a great job just lining out the expectations there. Really, in our opinion ‘25 looks a lot like 2024, except for we really believe these investments that we've been making in Marucci on the engineering side and with the MLB license and partnership there, that's going to help us in the back half of the year. The work that we've done getting those chassis in place in our dealership expansion efforts in AAG is going to help us as well in the second half, combined with the product innovation roadmap and the launches that we have planned really beginning now are going to really start paving the way in the second half for stronger growth. And so, really to get to that high end, it's really seeing really strong execution, delivery, and acceptance of that product roadmap. So we're just trying to be as realistic as we can, taking into consideration the macro and these high interest rates still that are weighing us down.

Yeah, Alex, I'd just add to that. I think that's right, Dennis. I'd add to that. The high end of that EPS range is a function of what we have in control relative to cost management in the business. So our ability to take out the $25 million gets us to that high end of the EPS range. That is -- those are the things that we have to do internally. While we're doing product development, which Dennis, I think, described very well. We have to take care of what's in our backyard, and that is our own costs, our own systems, our own footprint. And if we deliver on those things, which we are well in line to do, we will be at the higher end of that range. So keep us on task with that as we go through the year.

Really helpful. And then just any help on a little bit more for the color on tariffs? So understanding it's sort of not in the guide, but is it sort of you feel like you have enough mitigating factors where you're able to mitigate any impact? Sounds like maybe aluminum bats coming from China is maybe the most direct impact. Like any help in sort of sizing that? Is that a relatively small part of the business? Just any more color there would be helpful. Thanks.

Yeah, I mean, to make a statement like we don't have any concern over tariffs or we think we've got it all mitigated would assume that we actually know what the tariffs will be in any great detail relative to either timing or size. There's a lot of that that's fluid. Every day you wake up and read the paper and it's something different. So we're looking at it from every angle that we can and we're mitigating it in every place we can. But keep in mind, there's really two core elements of tariffs. One, what we control in our own supply chain and negotiating costs and resourcing or vertically integrating where we can. That's kind of what we can control. And I think we feel pretty good about that piece. That's within the domain of these four walls. As we start to get out of that and we start to think about things like aluminum bats, which we source out of China, there are things that we can do in cost negotiations with that manufacturer and with pricing elasticity in the market and even around the design of those bats. So there's some things that we can do, maybe not as there's more of a lag time in some of those activities, but there's things that we can do there. We can also do some sourcing changes relative to that business, but it's a longer-term process. The thing that probably makes us the most nervous is really what this does to the economy, what this does to the end consumer, and what it does to our largest OEM customers. That is really hard for us to contemplate or to quantify for you. And we don't want to stand here and tell you we've got that under control because it's not ours to control. We've offered help in a couple of our OEMs that could use our help relative to manufacturing footprint where we could step in and help them and finish goods assembly. So we're trying to do what we can to help them, but they, I think, are trying to build their own structure, their own ability to go defend and attack that issue. And as they develop those plans, we'll be there to help them out. But, again, it comes down to what does that do to their end markets and how does that flow back to us. Too early to tell. We're not going to get too down about it right now. We can do.

We'll take our next question from Scott Stember with ROTH MKM. Please go ahead. Your line is open.

Good evening, guys.

Hey, Scott.

Maybe we could just dial in a little closer to PVG and AAG on the automotive side, the truck upfitting side. I heard a comment in there about even on the higher end, it sounds like demand could be waning a little bit. Just trying to get a sense of what the overall demand trends look like there, whether it's worsened throughout the quarter and where things are right now.

Yeah. On the high end, so let's talk PVG first. On the high end of our vehicle where we're supplying shocks into the high end products that Ford sells or Toyota sells, when it comes to actually end user demand, that's remained intact. It fluctuates a little bit up and down, but for the most part that was a growth business for us in ‘24. So for the most part Ford specifically was a growth business for us. So that is positive. I don't see that changing that dramatically as we look into 2025, but I think other areas of those of the automotive business can be a bit softer. We're seeing Stellantis actually rebound a bit in ‘25 or early days of ‘25 versus what happened in ‘24. So that was really more of just cleaning up inventory issues at the dealer level. So again, we're not really calling out growth in a business like our Stellantis relationship for ‘25. We're assuming it's flat, potentially some upside there as again with that inventory getting mitigated. And then on AAG, really, you know, it's such a mixed bag because in ‘24, we had chassis delivery issues relative to quality at the OEM level. So we were missing chassis we needed. What we found when we get the appropriate chassis and do the appropriate outfit, whether it's a Shelby or a Fox Factory truck or a Harley-Davidson truck, these really iconic enthusiast-driven brands, we're fine. When we get down into products that are not as iconic or kind of middle market, it's more of a challenge. And I'd add to that in the dealer world of selling trucks, interest rates matter no matter what. And we have found that in the last couple of years that as interest rates have climbed or stayed high, that has a headwind to truck sales. So we're hoping probably not so much in 2025, but as we look forward in ‘26 and ‘27, that that interest rate environment starts to improve. Right now, we're just going to go build the best trucks we can and make sure it's the right mix, as Dennis said, on the dealer lots that attract those customers that want these vehicles no matter what.

Yeah. I remember when joining, Mike talked about the way to win is contenting up these vehicles, the right content on the right vehicles, the right design, and that's what we're focused on in doing. So he's right. That demand will be there at that very high end.

And what we have to do, you know, is we have to make sure that we're diversifying in that space and creating vehicles that people need and want. When you think about, I mentioned agriculture, which is interesting for us to talk about agriculture at a company like FOX. But when you think about ranchers and ag guys, they're changing trucks every couple of years. And they take these trucks that are basically stock off of a dealer lot. Then they have to modify the heck out of them to make them useful in their environment, in their lifestyle. We're doing that form now with really, really cool enhancements to these vehicles. And when we can do it through our ag dealership relationships that are very unique and specific to that product set, we're very compelling to a use case and to a buyer that we really haven't touched in the past. So we've got to continue to think about how do we get expanded broader relationships with different dealers on products that are sellable kind of regardless of the macro.

Got it. And just one last question on the expense savings that you're expecting. Is $25 million for ‘25 or is that all in stuff that you've done in the 3Q and 4Q as well?

Yes. So this is going to be a really tremendous lift for this company. It is a really difficult exercise. And we are making progress against that goal of $25 million. Tangible progress. So as we talked about earlier, we closed the Colorado plan in ag. In Taiwan, we're in the process of closing a facility there. Mike and I just visited there in February, and the progress is going extremely well. In our PVG business, we've conducted several RIFs. We're down about 25% of the headcount there. And when we look at one of our key metrics there, revenue per employee it's up 25%. These are no small matters. This is really work that's being done week in and week out, making a difference to really drive out costs, continuing to take decisions on footprint consolidations, putting in CapEx where we can get the make versus buy favorable. Lots of work going on. We expect to hit that ‘25, and that would be mainly in the back half of the year as many of these projects get ramped up.

And we will take our next question from Craig Kennison with Baird. Please go ahead. Your line is open.

Hey, good afternoon. Appreciate all the color so far. Dennis, any comment on EBITDA margin by segment as we think about the year and how it unfolds?

Well, yeah, that's a great question. I mean, as you think about early on, from an SSG standpoint, we're going to be seeing some margin in Q1, for instance. We're still investing in the MLB relationship, in our engineering there. So I think things will start out a little soft, and then they'll start to recover in the second half as volumes start to recover in Marucci as well. Bike will kind of follow suit in the sense that we'll start off light just like last year in the first half, and then it will start to build, and those margins will improve as well. They will also be bolstered by the cost-out actions that we're taking. You'll see a very similar progression in AAG as we start to move through the year. The cost-savings initiatives will start to ramp as well as some of our volumes will start to ramp, commensurate with some product releases. Relative to PVG, I'd say flattish. Well, they'll start to grow sequentially here in Q1 and Q2, and then it will start to pick up a little more as their cost-savings initiatives start to run through the P&L.

Great. Thank you.

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

Hey, good afternoon, guys. [Indiscernible] mentioned, I think, in the bike discussion, sort of I think you said positive signals that you'd seen in Q4 and Q1. Are you seeing anything anecdotal that says the consumer is feeling better in Q1? It seems like some of the consumer sentiment data recently has not said that.

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.

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.

Yeah. That's what we can control. Product innovation.

And in the guide range, do you assume that there's no rate change or no interest rate change this year?

Pretty much. You know, we haven't reflected anything from an extraneous macro benefit or a rate change benefit. Obviously, with the guide kind of being flat to single digit up at the enterprise level, we're not expecting much help from anybody outside of FOX.

Great. Thank you.

Thanks.

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

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.

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.