Q3 2020 Standard Motor Products Inc Earnings Call
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<unk> third quarter earnings call at this time, all participants are in a listen.
<unk>.
You need to ask questions during the question and answer session.
Registered to ask a question.
To start.
<unk>.
Please note this call.
He recorded it is now.
My pleasure to turn today's program over to Larry. So please go ahead.
Well good morning, everybody and welcome to our third quarter Conference call.
We thank you all who attended.
With me today.
Eric Sills, President and CEO.
Jim Burke Chief operating officer.
Nascent <unk> Chief Financial Officer and.
Myself I always feel good.
Executive Chairman.
Here's the agenda for today.
I will begin by reviewing the highlights of the quarter.
And Jim will give a brief you on operations.
Hi, Jason will go into a more detailed review of the numbers.
And then I will have a short wrap up.
Before we open it to questions.
So with that.
Let me turn it over to Nathan So the forward looking statement. Thank you.
Okay. Thank you Larry.
Where we begin this morning, I would like to remind you that some of the material will be discussing today may include forward looking statements regarding our business and expected financial results.
When we use words like anticipate believe estimate or expect these are generally forward looking statements.
We believe that the expectations reflected in these forward looking statements are reasonable they are based on information currently available to us and certain assumptions made by us and we cannot assure you that they will prove correct.
You should also read our filings with the Securities and Exchange Commission for a discussion of the risks and uncertainties cause our actual results to differ from our forward looking statements I'll now turn the call over to Eric.
Hi, Thanks, Nathan and good morning, everybody. Thank you for joining us today.
I'd like to open by its tracking all of our employees.
It's difficult times.
As part of an essential industry, we have to jump through many hoops to stay operational so that people could come to work safely and I'm. Just so appreciate it with everyone who's dedication intelligence and skills, let us through this unprecedented experience.
Special Thanks goes out to the frontline employees at our factories and distribution centers, who believes in situation looking countless hours to take care of our customers. These folks are the true heroes.
Okay. So on to business as mentioned on our last call. We came out of the second quarter experiencing strong demand and I'm pleased to say that the trends continued throughout the quarter.
Let me discuss each of the divisions separately, starting with engine management.
Engine management sales were up 6.7% for the quarter clawing back about a third of our sales short fall off in the first half.
Consumer demand has been robust, which we believe reflects the deferred maintenance from the early days of the 10 Democrats causeway idled in driveways.
We're also experiencing a general surgery aftermarket there's older people staying at home and working on the vehicles.
We believe this is especially impacted the <unk>.
Good evidence that this strong performance of our wire and cable business.
Yes, its older vehicles. It is relatively easy to install which are two hallmarks of DIY business and while this line has recently been trending down 7% or so per year due to where it is in the lifecycle. It spiked up 10% in the quarter, which we have to assume as a temporary phenomenon.
Customer orders for all of engine management have been consistently solid and this has continued into October.
That said our forecast remains low single digit growth over the long term.
Our temperature control division was up 25% in the quarter driven by two dynamics.
First one is related to timing if you recall pre season orders from our last more customers was very light this year.
After our first half was down almost 20%.
And then it got hot how creating a surge in demand and across the country.
These two factors combined for a very strong quarter, though year to date, we are slightly behind last year.
This is why we always suggest looking at temperature control on a full year basis, so often quarterly anomalies, but they typically balances.
[noise] moving to earnings we're pleased to report that the quarter set an all time record for S&P.
Jim and Nathan will provide some detail on the drivers. So I just want to take a moment to speak to cobot related savings.
As we have mentioned in the past we put what we put in place short term cost reduction measures ratcheting back various discretionary expenses as well as cutting executive and board compensation.
Did you plan to assess what we've learned and identify areas, where we believe the savings can be sustained however, we do recognize that many of these reductions.
We have also taken steps to conserve cash, including suspensions of both our quarterly dividends and our share repurchase plan and we are pleased to reinstate both of these programs as they are core aspects of how we return value to our shareholders.
[music].
So in summary, needless to say, it's been a roller coaster of year.
After a mediocre first quarter kind of truly difficult second quarter, we were able to make up much of the lost ground with a very strong third quarter.
We always experience a certain amount of volatility period to period and while this year. It has been substantially more exaggerated. It does show that our business tends to balance overtime and we do expect that to continue going forward.
Before I hand, this off I would just like to make a few comments about the future.
First we are delighted, but not surprised to see our industry once again showing its resilience.
Basic fundamentals are solid and there are many favorable trends taking a school.
Well the crisis and certainly not over we are confident that we are smarter now than they were before.
Our teams are stronger as a result of managing our way through it.
We are well equipped to tackle whatever's going on.
With that I'll hand, it over to Jim will talk about operations Jim.
Okay. Thank you Eric.
I will provide an overview of our business from an operational perspective.
I have to touch on the basics from supply chain manufacturing through distribution.
As we have all experienced the past six to seven months has been challenging and demanding.
Our baseline was a 40% decrease in volume in April. This was followed by a relatively quick rebound in customer Pos numbers in May and June that turned into increased orders to us in June and July.
This momentum increased as we progress through Q3 and remain steady.
From a supply chain view this meant working feverish easily with our vendors to be able to meet our materials demand overall with a few exceptions, our vendors that supply team have been able to keep supply flowing through our factories.
Turning to our manufacturing base, we face surging demand with a significant mix shift towards older technology skews driven by our customer sales in the D. I Y. channel.
Early in the third quarter, we were hampered with a shortage of available labor a combination of higher demand and the cold it impact with high risk employees out and disruptions from contact tracing.
I'm happy to report that we have been able to secure additional manpower along with the return of our high risk employees [noise].
What is the result of the surge in demand.
Production levels are significantly up and all our manufacturing facilities generating favorable overhead absorption, which can be seen in our very strong Q3 gross margins engine management was 31.5% and temperature control was 29.2%.
These higher margins were generated from the surge in production volume, which we expect to level off well. This favorable momentum should carry into Q4, we expect sales and production to return to normal in 2021.
Our longer term gross margin targets would be engine management, 30%, plus and temperature control, 26% plus.
We are fortunate to have a substantial manufacturing footprint in North America, including three low cost operations in Mexico, reducing our China exposure.
Also note on occasion, we have transferred production back to the U.S. the benefit of automating previous manual assembly processes.
Quickly looking around the globe, our Poland operations, which is our coil manufacturing center of excellence, along with other switches and sensors has steadily grown in size and value.
Over the past year, we have approved they added capacity for Poland to meet our increasing ignition coil demand.
Our three China joint ventures, all in the temperature control product categories recovered very early from the pandemic at the start of the year all three jvs provide us a steady source of supply whereby we can control costs quality and lead times.
[noise] finally, our north American distribution centers or our last touch point with our products. Our Q3 surge in demand presented challenges for Ibcs shipping performance similar to our manufacturing operations, we experienced a shortage of available labor to meet demand.
The impact from this was slower turnaround time in our Dcs to ship orders. During this period, our Dcs, we're working six and seven days per week to keep up tremendous.
Tremendous efforts were put forward by our DC employees to satisfy our customer needs. We have made great strides securing additional headcount and I'm happy to report that we are comment again and beating our shipping turned around goals.
In summary, we're very fortunate to be a resilient industry that bounced back. So quickly. Unfortunately this is not the same for many other industries that have suffered dealing.
I commend our frontline heroes that were on the job six and seven days per week to satisfy the customer.
Customer satisfaction is ingrained in our S&P culture, and we just do it can.
Congratulations and thank you to our 5000 employees around the World I will now turn the call over to Nathan.
All right. Thank you Jim.
Looking now at the results in the piano our consolidated net sales in Q3, 2020 were 343.6 million up 35.9 million or 11.7% versus Q3 last year.
Our net sales for the first nine months of the year were 845.9 million down 50.8 million or 5.7%.
By segment, our engine management net sales in Q3, excluding wire and cable sales were 190.9 million up 10.1 million or 5.6%, but for the first nine months of the year were down 40.5 million or 5.7%, finishing.
Finishing at 498.2 million yes.
The increase in sales during the quarter. We believe was due to pent up demand from earlier in the year and strong customer Pos but looking in total with the first nine months the quarter increase only partially offsets declines we saw earlier in the year related to the economic slowdown caused by the endeavor.
Wire and cable net sales in Q3 were 38.7 million up $3.5 million or 10% for the first nine months were 105.6 million down 2.9 million or 2.6%.
While the wire and cable business continues to be in secular decline and we still believe it will decline 6% to 8% on an annual basis sales. This year have been positively impacted by an increase in D. I y. sales as consumers stay at home during the pandemic.
Our temperature control net sales in Q3, 2020, or 110.4 million up 22.1 million or 25%. However for the first nine month sales were down 7.4 million for 3.1% versus last year ending at 234.2 million.
As Eric noted temp control net sales in the quarter were driven by a very hot summer across most of the U.S. aided by very light preseason ordering earlier in the year net sales on a year to date basis. In this segment are more in step with last year down slightly from the first nine months of 29 team.
Our consolidated gross margin in Q3, 2020 was 31.4% versus 29.9% last year up 1.5 points for the first time.
30% versus 28.9% last year down 0.2 points.
Looking at the segments engine management gross margin in the third quarter was 31.5% of 0.8 points from Q3 last year.
Well for the first nine months of 2020, it was down 0.3 points to 29%.
Temperature control gross margin in Q3, 2020 was 29.2% up 3.2 points from 26% last year and for the first nine months. It was <unk> 0.5 points to 26%.
Margins for the quarter reflect strong sales volumes, we experienced in both segments and the positive impact of high fixed cost absorption, resulting from the compression of production into just a few short months as Jim alluded to earlier on.
On a year to date basis gross margins in both segments more closely aligned with long term trends as engine management margins are really flat with last year in temp control margins ended just slightly ahead of the prior year.
Consolidated <unk> expenses in Q3 were 59.5 million down 8.4 million for Q3, 19 and came in at 17.3% of sales versus 19.5% last year.
For the first nine months S., United spending was 163.7 million down 16.8 million at 19.4% of net sales versus 20.1% last year.
While our restaurant expenses in the quarter were roughly flat with last year the improvement as a percentage of sales is reflective of the higher sales volumes, we experienced this year.
Lower SGN expenses in the first nine months were helped by cost reduction plans put in place as a response to the impact pandemic and overall better leverage of expenses as a percentage of sales.
Our consolidated operating income before restructuring and integration expenses and other income net in Q3, and 20 was 48.3 million or 14% of net sales up 3.6 points from Q3 19 for the first nine months was 9.3% of net sales up 0.5 points from last year.
As we noted on our GAAP to non-GAAP reconciliation of operating income our performance resulted in third quarter 2020 diluted earnings per share of $1.59 cents versus one dollar and two cents last year and for the first nine months diluted earnings per share of $2.53 versus $2 or 51 cents in 2019.
The increase in our operating profit for the quarter was mainly due to higher sales volumes, while the increase for the first nine months, primarily reflects lower EPS, you know expenses across the company, which slightly more than offset the impact of lower sales volumes.
Turning now to the balance sheet accounts receivable at the end of the quarter were 238 million up one.
102.5 million from December 2019, and up 69 billion in September 2019.
Increase over year end reflects seasonal patterns in our business, while the increase over last year reflects the strong sales we experienced in the third quarter as well as the timing of those sales during the quarter as compared to last year.
Inventory levels finished the quarter at 311.4 million down 56.8 million from December 2019, and down 28.8 million from September 2019.
A decrease from both year end in September last year, mainly reflects the sharp recovery in sales we experienced in the third quarter after having lower production levels earlier in the year in response to general expectations of slowdown in sales.
Looking at the cash flow statement. It reflects the cash generated from operations in the first nine months of 2020 of 78.6 million as compared to a generation of $43.1 million last year the.
The increased cash generation during the first nine months of this year was driven mainly by timing both of movements in inventory and accrued customer returns and offset by an increase in accounts receivable stemming from strong sales during the quarter we.
We expect this timing around cash flows to normalize the sales and production levels stabilize.
During the first nine months, we continue to invest in our business and used $13.2 million of cash for capital expenditures, which was higher than the 12.3 million used in the first nine months of 2019.
Financing activities included 5.6 million of dividends paid an $8.7 million of repurchases of our common stock both of which occurred during the first quarter.
Financing activities also included $44.9 million of payments on our revolving credit facility we.
We finished the third quarter with total outstanding borrowings of 12 million and available capacity under our revolving credit facility of 238 million.
Finally as noted in our release. This morning. The board of Directors has approved a reinstatement of a quarterly dividend of 25 cents per share.
Outstanding.
Reinstated our share repurchase program, which has remained authorization from our board of directors and the amount of 11.3 million.
Thank you for your attention and I'll now turn the call over to Larry to wrap up.
Larry you're on mute.
Thank you [laughter].
I just wanted to say a few words.
Before we open for questions.
As you saw in the release come.
Come January 1st.
Good to be moving from executive Chairman to chairman of the board.
And this reflects the fact that I'll be stepping back a bit.
From day to day activities, but I still remain closely connected to the company as chairman of the board.
I believe this is an appropriate.
And probably rules.
Asked to 53 Glorious years.
I had the privilege of being part of the company's growth.
So roughly $20 million in our core business when I began to well over a billion dollars today.
And we still have many plans for future growth.
[noise] I'm confident that this is going to be a very seamless transition as all our major moves have been.
We have in place what I believe is the strongest and deepest management team I couldn't remember.
Prove themselves.
How well we performed during this.
Very difficult year so.
So I am very confident about the future.
So I. Thank you for listening and now we're going to move.
Move to questions and so this I can turn it over to the moderator. Thank.
Thank you.
At this time, if you would like to ask a question. Please press the star and one on your Touchtone phone you may remove yourself from the Q.
Any time.
Once again that is star.
One to ask a question.
Two questions. Thank you.
We'll take our first question from Scott Stember. Your line is open. Please go ahead.
Good morning, guys and congrats on a really nice quarter.
Thank you Scott and good morning to you.
Can we talk about Pos in the release, Eric you talked about very strong, particularly in engine management.
Could you maybe just frame that out for us and you know.
Maybe talk about the cadence throughout the quarter.
And frame that up against so what we're seeing right now in October.
Sure.
Well, let me talk about talk about the two divisions separately.
Engine management, what we saw a pretty consistent throughout the quarter was in the high density around high single digits or.
Touching and even.
Even though most of the low double digit probably high single digits and that continued throughout the quarter.
And has continued into October as well on the wire and cable a portion of it we saw that in the beginning it did start to taper off slightly.
In the last couple of months still very much in the positives with tapering off my which probably is reflecting the fact that the DIY business is going to at some point it return back to normal temperature control.
It was robust throughout it.
Roughly matched what are what our sales that were 25% or so pos throughout the entire summer I was very strong.
Got it and just on the gross margins.
You will never know that you had some inefficiencies.
You know on the distribution side and on the labor side, just because of the demand will be strong numbers that you put up but could you maybe quantify how much of an impact it had in the quarter.
And it sounds like it's mostly reversing itself in the fourth quarter correct.
Yeah, Hi, Scott This is Jim Burke.
You know there is there's so many there's so many variables that are going on at one time that are in there and while we had the inefficiencies that were there volume makes up for a lot of that so you know as a we gained leverage on <unk> as a percent of sales that was there a week I don't go.
To the individual details we have cost savings that we implemented because of the cold that crisis, which offset a lot of that inefficiencies that were there and volume barely made up for a lot of it.
Got it and then the last question and then I'll jump back in the queue along the S.J. line.
I know that there is definitely some.
Moving pieces and there are some things that were taken out a lot of stuff that was taken out over the last couple of quarters, but can you give us an idea of what we should be looking for auto.
For the fourth quarter or.
Where where where that could come out and then just you know we do.
You talked about some stuff coming back next year management comp or whether it's some of the other a growth weighted.
Spending can you talk about that just broadly speaking for next year.
Yes, yes, Scott so when you look at the S. United Mine, obviously like you said, there's a lot of moving pieces.
This year, we always talk about this line is being 75% fixed you know the rest variable.
And we would see.
Warmer lies I would say as we go through the fourth quarter into next year, obviously, we'll be looking at costs that can be controlled as Eric noted earlier in his remarks looking at what that might be as we go forward, but really expect something more normal.
Future at this point.
Okay.
All right. That's all I have for now thank you.
Thank you Sam.
[laughter].
Again that is star and one to ask a question.
Well take our next question from Daniel.
<unk>.
<unk>. Please go ahead.
Yeah. Thanks, Good morning, guys and congrats on the strong results.
Thank you Wonder third on the temperature control side, Jim you know really impressive both on the cost side and the demand side can you maybe talk about where inventory levels are as we exit the summer month, obviously that that help the lack of pre season sales help. Thank you, but how are we exiting the season and how do you think thats going to impact restocking, if we get normal weather trends.
Next year in 2021.
All right well good morning, Daniel This is Eric and then I'll tackle that.
As we look at the inventory position on that.
Andrew.
Sure because where we have the visibility.
We're actually pleased to see that that their inventory really kind of held up throughout the year.
The season, which reflects the fact that they were ordering hasn't from Boston has been able to manage their shelf. So.
Now that we're coming out of the season and looking at the fact that September October actually.
Somewhat strong.
Humor inventories now dropping a bit.
We don't have visibility yet of such recent.
I will try snapshot that does as you say tends to bode well for next year's preseason.
So we'll see what comes back I think it's reasonable.
Thanks.
Great. That's helpful. And then maybe following up just thinking about that next year outlook. I know you guys aren't guiding yet, but Eric as you think about demand being more resilient than we thought it would be this year what are some of the puts and takes as we're thinking about maybe industry growth for next year. How do you see industry grows shaking out should there be a tailwind from seemingly in miles driven.
Every will there be growth in the aftermarket we bought at any of the major factors you guys are looking at as you're thinking about what 2021 industry growth look like.
Hi, I wish we had such a good crystal ball. It's it's very at some point, we believe that the industry is going to return to some level of normal, especially within our categories, which are nondiscretionary heart failure tight.
Can't really create demand on engine failure I guess so.
Good point, we expect that to return to normal we don't know when that will be because it has continued to be robust suggests that there is always a certain amount of performs maintenance out there underperformed.
Yes.
Being performed at a higher rate than historical but once it does get back to normal we expected on the engine management side, it's going to go back to being a low single digit yes.
And on temperature control.
It's so weather dependent that that hot summers versus cool summers can move the needle up or down a few percentage points. Since you would just have to track with what.
Got it and then third one from US you know maybe if everything longer term just there's been a lot of talk in the market around visas lately states like California, and trying to phase out. The combustion engine you guys have hard assets that are pretty aligned with the internal combustion engine can you update us on how you're thinking that transition looked over time and maybe what are they.
Some of the levers you guys can pull to offset some of those headwinds if they do materialize in the next five plus years from growth in <unk> that are less internal combustion engine heavy.
That's a great question and it's one that we spent a lot of time discussing internally as you can imagine you gave the timeline to as low as five years, we think it's really going to be substantially longer that and that as it relates to.
Let me first that person needs to pick up in terms of the percentage of new car sales and then there's obviously a substantial lag before.
It starts to impact to the car Park.
Actually the sweet spot of that.
So we do believe that we have a really quite a few years before.
As any significant implications.
That said, we do believe that it is a win and not in yet and so we do need to prepare ourselves for that as you look at our engine management business.
Uh huh.
Certainly sir a significant portion of it is specifically targeting that combustion engine, but we are looking to broaden.
The offering to cover a lot of other aspects of that vehicle and we're seeing that much more as you get into safety related devices.
Whether it's advanced stop the old asked type products or some of the stuff that's been on vehicles for many years that she's analog braking systems.
Tire pressure sensors and so on.
Becoming a bigger part of our offering and a lot of other body control parts is lots of electrical switches and sensors throughout the vehicle and weve really brought into our portfolio.
Pursue a lot of that.
As we look at the.
Electric powertrain itself. It's we hope that there are going to be some some replacement parts opportunities right now frankly too early to tell because it's such a small part of the car Park and it's essentially young part of the car park that were not really seeing those values, but we do believe that it is going to be less than that.
Question engines, it's fewer moving parts and so that's why would you need to prepare ourselves for the other product categories, which we see plentiful and all that.
Thats opportunities.
Our other divisions of the temperature control division and while there are some nuances.
On electric vehicles.
They still basically have the same air conditioning system.
So we will continue to enjoy that plus there is a level of cooling opportunities and we're seeing that and ER.
Battery cooling components that we can get into and we'd like to point out just going back to the the combustion engine side that much of the growth much of the sales growth that you're seeing out there for easier.
He is really hybrids and they do still have a conventional powertrain on it which were enjoying so.
That's a long winded answer to say that we do know we need to prepare ourselves, but we think we have a long lead time to get.
That's great. Thanks, so much guys and best of luck.
I can't answer.
Well take our next question from Bret Jordan Your line is.
Hoping please go ahead.
Hey, good morning, guys.
Yep.
Oh, no I guess, you sort of looking at market share I mean, some pretty strong numbers in the third quarter and a lot of disruption globally. Do you think you guys had the opportunity to gain any share.
As a result of the pandemic and I guess not.
Follow up to that question given your opening up your.
Buyback and.
Dividend would be how are you thinking about the M&A environment has this event created any opportunities to buy and as you look at some of these new categories, maybe expanding beyond internal combustion do you see yourselves being more active here in the near term.
All right well I'll talk about market share and Jim can address the M&A question.
Core market share.
Yeah.
We as you know Brett we enjoy strong business relationships with really everybody out there so.
So we think that any market share movement would probably be more related to downstream market share shifts we continue to enjoy to pretty much unchanged relationships with all of our trading partners.
Jim on M&A Yeah.
Yeah and.
Brett on the M&A are you know we have a formal team that's in place and were continuously monitoring opportunities that come up again many of them are come from our source of supply be it our vendors.
Or product categories that we may acquire out of a larger company Oh, Hi, Yi like we did with pilot then stoneridge that was there. So I'd say the past year things, obviously have been very quiet with the whole cove it impact, but we continue to monitor nothing to speak up yet I think the pipeline is.
So relatively stable.
But we're focused on the engine.
Engine management and temperature control in that area.
Okay, and I guess, Eric to that to the market share question I got you. So you're not seeing any bias to move away from import programs to North American supply chain partners or I guess, even the inverse are you seeing.
Buying groups pushing more to direct source out of Asia, you know in this environment.
Hi.
Yeah, we have not really seen that over over the course of this year, we do find ourselves as you can imagine having discussions with everybody about the security of our supply chain and as Jim went through in his prepared remarks, it's been very secure and stable. So we think that our lesser role.
Clients on the far East does help us, but I wouldn't say, that's yielded and real benefits to us.
Great. Thank you.
Thank you Sir.
Well take our next question from Robert Smith. Your line is open. Please go ahead.
Hi, good morning, and thanks for taking my questions.
So basically my questions have been answered already.
But I do want to discuss.
A certain point. So you guys have a really venerable history of the company over.
Many many years 200 years or so so.
I'm looking at the historical record.
Uh huh.
I really think you should consider.
Uh huh.
Looking at special dividend by the end of the year to make sure homeless home.
The.
Dividends I Miss this year.
[noise] you wouldn't.
Again on a start of a record show any decrease in the dividends for the year.
And you've been very good dishes and.
[noise] paying the dividend and raising the dividend over.
A long span of year, and rich and I would like you to consider.
This possibility I know, it's kind of late I don't know.
About a board meeting or whatever but.
But I think you should consider in this sense as far as I can start on record.
Certainly snap back very quickly and.
I think can well afford it and it will provide your shareholders with some extra cash to spend during the holiday season. So.
All in all I think.
This isn't a suggestion that you.
Could consider and I I hope you're well.
Thanks, and as far as that's doing the question.
With Larry stepping back I'm not sure when that he will be present on future.
Our earnings calls like this it's not I certainly want to wish him all the best and what.
And future I'm.
Im a big hurdle and then over the phone.
So I'll answer the second one that's easy, England, yes, I, certainly plants will be above and looks like okay. Great and then once the war Werent wonderful [laughter] as for your first question I think maybe the right.
Okay.
Yeah.
Okay that came up and Robert again, Thank you for the question, yes, it it's a consideration.
You know our focus is really opportunities and what we first invest in the business with Capex that we have their dividends that we go through we address that you're bringing up a special dividend. We look for acquisition opportunities. So we have our cash allocation. It alone will review opportunities with the board we hear you as an investor.
There and everything is always under consideration, but again, our first focus is always investing in the business.
Thanks, then again.
Kind of historical record, that's that's how I look at it.
Okay.
Right. Thanks.
Thank you Robert.
Well take our next question from Carolina Jolly. Your line is open. Please go ahead.
Hi, Thank you for taking my question I'd also like to congratulate Larry.
I'm 20 million 10 billion I'm sorry in process.
Uh huh.
So that's on my question first I know you hard part Nondiscretionary business, but do you have an understanding of what kind of the underlying get for me get yourself next it.
[noise] named a top it yourself strength, especially in ecommerce does that affect your business in any way or how production is right.
All right Uh huh.
Okay, I want to go and that.
So [laughter].
Right now our product being a more.
Tailored for professional installation and not just because.
Non discretionary hard parts, but because.
They are more technical in nature, not just the ability to do repair by in a lot of cases, the ability to do the diagnostics.
It's much more difficult for a D I y type consumer.
Especially the newer technologies and so while we do believe there was an uptick over the course of a of the corridor.
It's still the minority of how our products are sold so did that did create a bump it's going to come back to normal.
We don't have total visibility of our DIY DIFM mix movies that visibility as it gets them through the channel but.
But its still certainly less than half an hour.
And therefore, leading to your second question if I understood. It correctly, you broke up a little bit had to do with the implications on on E. Tailing is that correct.
Hi, Yes, just that we've seen significant strength and he telling just seeing if that [laughter] in anyway.
Right and.
And so you're right. They are very related topics, we we do not sell directly to any of the pure etail players.
Players.
Designs and walk autos or the world.
So our products are sold on their platforms as fulfilled by our direct customers as well as obviously all the big National players have their own omni channel strategies, we see what's in there. So we do have a certain amount of my products that are sold online.
But it's and we've seen over the last few years, a very slow increase of that and perhaps over the course of this year and accelerated slightly but it's still a very small percentage of our business and talking less than less than 10% of our business is sold that way again, because it is professionally installed and so.
The name of the game is speed of delivery and having that inventory availability as close to the need as possible and.
So.
We believe it will.
We continue to be a minority part of our business.
Great. Thank you congratulations on a great quarter.
Thank you.
Yeah.
Once again that is star one to ask a question.
It appears we have no further questions at this time I will now turn the program back over to Larry.
Okay, everybody. Thank you very much we appreciate your attendance. Thank you very much.
Okay, all right. Thank you bye-bye.
This does conclude todays program. Thank you for your participation you may disconnect at anytime.
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Mm.
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