Q2 2024 Motorcar Parts of America Inc Earnings Call
Ladies and gentlemen, thank you for standing by my name is bullish and I'll be your conference operator today at this.
This time I would like to welcome everyone to the much called parts of America fiscal 2024 second quarter conference call and webcast. At this time all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press the star followed by the number one on your telephone keypad, if you'd like to be Julia question.
Just a follow up on the one once again.
Thank you I will now hand, the call over to Gary for the VP of communications and Investor relationship much called parts of America, you May begin your conference.
Oh. Thank you thanks, everyone for joining us today.
Before I turn the call over to selling Jonathan the Chairman, President and Chief Executive Officer, and David Lee The company's Chief Financial Officer, Let me remind everyone of the Safe Harbor statement included in today's press release.
Private Securities Litigation Reform Act of 1995 provides a safe harbor for certain forward looking statements, including statements made during today's conference call.
Such forward looking statements are based on the company's current expectations and beliefs concerning future developments and their potential effects on the company.
There can be no assurance that future developments affecting the company will be those anticipated by motorcar parts of America actual results may differ from those projected in these forward looking statements. These forward looking statements involve significant risks and uncertainties some of which are beyond the control of the company.
And are subject to change based upon various factors.
In particular expectations about.
Anticipated future growth and opportunities with customers, who may not be achieved the company undertakes no obligation to publicly update or revise.
Any forward looking statements, whether as a result of new information future events or otherwise.
For a more detailed discussion of some of the ongoing risks and uncertainties of the company's business I refer you to the company's various filings with the Securities and Exchange Commission.
Now I'd like to begin the call and turn it over to Selwyn. Thank you Gary.
I appreciate everyone. Joining us today, we are encouraged by record sales and record gross profit for the quarter and six months and solid cash flow from operating activities.
Company generated approximately $15 million of cash from operating activities during the quarter for the six month period. The company used approximately $5 million in operating activities. However, I should mentioned had we not intentionally decided to lower collection of receivables by $35 million as of September 30, we would have generated.
Approximately $30 million of positive cash from operating activities for the six month period predominantly coming in the second quarter.
Using the customer supply chain vendor finance programs, we have the option to draw down on customer payments at any time, which David will explain in more detail.
Industry trends remained favorable and we are seeing improving operational efficiencies with increasing sales volume. We are continuing our focus on leveraging our strengths, including our solid customer relationships highly regarded product quality industry, leading SKU coverage and quality not to mention our value added merchandize.
And marketing support in summary, our operating efficiency improvements along with increased overhead absorption from higher sales and production and price increases all bode well for margin expansion.
Our quarterly results reflect the benefit of some price increases and we anticipate additional benefits from further price increases for the balance of the year.
We are excited with our positive cash flow generation for the quarter and remained focused on neutralizing working capital as much as possible for the balance of the year.
Our initiatives include increasing gross profit and operating income managing our inventory as a percentage of sales and implementing programs to extend days outstanding on accounts payable.
Yeah.
As a reminder, we expect sales for fiscal 2020 forward to be between 720 and $740 million.
Representing between $5 four an eight 3% year over year growth respectively.
With respect to cash flow expectations to continue to generate cash David will expand upon this in a few months.
Regarding year end guidance, we expect operating income before the impact of the noncash and cash items and before depreciation and amortization to be between 90 and $95 million.
To provide more details before to provide more details before the non cash foreign exchange impact of lease liabilities in foreign contracts, the noncash impact of revaluation for cores and customer shelves and supply chain disruptions operating income income for fiscal 2024 is expected to be between 60 and 65.
Yeah.
We estimate other noncash items will be approximately $16 million, including core and finished goods premium amortization and share based compensation.
And cash expenses were approximately $2 million for special EV related R&D expenses that impact operating income.
Depreciation and amortization are estimated to be approximately $12 million.
In short for the fiscal 2020 for second half, we expect to continue to enhance our gross margins across the board and enhance our cash flow.
Multi year strategic initiatives and favorable industry dynamics bode well for the company.
And we are extremely well positioned for sustainable top and bottom line growth.
<unk> parts business as well as testing solutions.
Now, let me expand a bit further and provide some updates to other drivers of our business to support our ability to achieve our longer term financial targets.
Yes.
We continue to experience meaningful traction with customers and consumers with the launch of our brake related product lines with the operating efficiency improvements continuing as volume increases and with fixed cost absorption.
We have continued to expand hotspot sales in Mexico with multiple product lines as our customers experienced increased demand for aftermarket products.
We are receiving increasing orders and new customer interest for our test solutions and diagnostic equipment in particular bench top tester is alternators and starters for a major automotive retailers and distributors to the professional installer.
Major global automotive aerospace and research institutions for electric vehicle mobility product development and design continue to purchase our equipment and utilize our Detroit Tech Center testing services.
Lastly, the apex show last week was very positive and the outlook for new business remains very strong.
We continue to be well positioned to address both the internal combustion engine market and the emerging electric vehicle market with product functionality and applications across both markets.
Industry data continues to support our view that strong demand for our internal combustion engine applications and our broad line of non discretionary aftermarket parts will be here for decades.
Notwithstanding electric vehicle growth, which still represents a small percentage of the overall car park.
I'll now turn the call over to David to review our results in greater detail.
Thank you Selwyn and good morning, everyone I encourage everyone to read the earnings press release issued this morning as well as the 10-Q that will be filed later today.
Let me first provide key highlights for the fiscal second quarter net sales for the three months increased 14% to a record $196 6 million.
Gross margin increased by five five percentage points.
Gross profit increased 55, 2% to a record $41 1 million.
And the company generated approximately 15 million cash from operating activities.
I should mention that gross profit for the quarter was impacted by noncash items as well as cash items.
The noncash items reflect core and finished good premium amortization and.
And revaluation of cores and customer shelves, which are unique to certain of our products and required by GAAP.
Total for these noncash items in the quarter with approximately $4 7 million.
A more detailed explanation of core accounting is available on our website.
I would encourage anyone with questions about this topic to review the video.
Second quarter gross margin was 29% compared with 15, 4% a year earlier.
Gross margin was impacted by two 4% when the previously mentioned noncash items as well as one 6% from cash items as detailed in exhibit three of this morning's earnings press release.
In summary in addition to the noncash and cash items explained previously gross margin for the fiscal 'twenty second quarter reflects the partial benefit of price increases that went into effect during the current quarter and operating efficiencies as well as changes in product mix.
Operating expenses were $27 2 million compared with $24 7 million in the prior year period.
This included a noncash expense of $4 8 million for the foreign exchange impact of lease liabilities and forward contracts.
Compared with a prior year non cash expense of $1 1 million.
The remaining $1 1 million of operating expense decreases include a cost reduction initiatives.
Net loss for the fiscal year 'twenty for second quarter improved Q2 million or <unk> <unk> per share from a net loss of $6 5 million or <unk> 34 per share a year ago.
As detailed in exhibit one of this morning's earnings press released noncash items impacted results for the quarter by $8 7 million or <unk> 44 per share and cash items by a $2 $7 million impact or <unk> 14 per share.
In addition to the above noncash and cash items results for the quarter were impacted by the previously mentioned items that impacted gross margins.
As someone mentioned results are expected to benefit moving forward as the full impact of certain price increases realized combined with higher sales volume.
Results for the fiscal second quarter were impacted by $6 1 million or <unk> 23 per share of higher interest expenses.
I'm merely due to higher market interest rates related to the supply chain vendor finance program.
Interest expense was $15 4 million compared with $9 3 million for last year.
We have received meaningful annualized price increases, which will contribute to a net income enhancement.
Income tax benefit was $46000 compared with an income tax benefit of $914000. The same period a year ago.
I should mention that the effective tax rate for the fiscal second quarter was affected in part due to the inability to recognize the benefit of losses at specific foreign jurisdictions. However, we expect that these losses will be utilized against future profits, which will benefit future tax rate and short.
There are various factors impacting the tax effect.
EBITDA for the second quarter was $16 3 million EBITDA was impacted by $11 6 million of noncash items.
And impacted by $3 5 million in cash items.
EBITDA before the impact of noncash and cash items mentioned above was $31 4 million for the second quarter.
EBITDA for the prior year second quarter was $4 9 million EBITDA was impacted by $6 7 million of noncash items as well as $5 1 million in cash items.
EBITDA before the impact of noncash and cash items mentioned above was $16 7 million for the prior year second quarter.
Now, let me discuss the six months results.
Net sales for the fiscal 'twenty for six months period increased five 9% to a record $356 3 million from $336 5 million.
Gross profit for the fiscal 'twenty for six month period increased to a record $67 7 million.
$56 8 million a year earlier.
Margin for the fiscal year 'twenty for six months period was 19% compared with 16, 9% a year earlier.
Gross margin for the fiscal 'twenty, four or six month period was impacted by $8 1 million or two 3% of noncash items.
$5 2 million or one 5% of cash items.
Net loss for the fiscal 'twenty for six month period improved to three 4 million or <unk> 17 per share from a net loss of $6 7 million or <unk> 35 per share a year ago.
Results were impacted by noncash items totaling $9 1 million or <unk> 47 per share and cash items totaling $4 4 million or <unk> 23 per share as detailed in exhibit two.
Results are expected to benefit from various initiatives that will be realized as I discussed earlier concerning price increases and higher sales volume.
EBITDA for the fiscal 'twenty for a six month period was $29 6 million.
EBITDA was impacted by $12 2 million of noncash items as well as $5 9 million in cash items.
EBITDA before the impact of noncash and cash items mentioned above was $47 7 million for the current period.
EBITDA for the prior year fiscal 'twenty three six months period was $15 4 million EBITDA was impacted by $12 2 million of noncash items as well as $8 9 million in cash items.
EBITDA before the impact of noncash and cash items mentioned above was $36 5 million for the prior year's six month period.
Now, we will move on to cash flow and key corporate items.
The company generated approximately $15 million of cash from operating activities during the quarter with expectations that strong operating cash flow will continue for the balance of the fiscal year.
During this period the company intentionally deferred collecting approximately $15 million receivables offered through its customer supply chain vendor finance program, which resulted in lowering cash flow by that amount and interest expense savings of approximately $1 million.
This enabled the company to differ interest expenses until price increases for interest rates are fully recognized.
Additionally, the company used <unk> to pay down the 11, two 5 million balance of its term loan.
Interest rates on the term loan or approximately 2% percentage points higher than rates offered by the company's customer supply chain vendor finance program.
In short we will continue throughout the year to monitor interest expense levels and opportunities to reduce interest based on the timing of monetizing customer payments, we can elect when to be paid through the customers' supply chain vendor finance programs offered and we pay the proportional discount rate.
We expect to generate an increase in operating profit on a year over year basis for fiscal 'twenty four supported by organic growth from customer demand and operating efficiencies from our now completed footprint expansion and generate positive cash flow for fiscal 'twenty four in.
In addition to our goal of generating increased operating profits. We are diligently focused on opportunities to neutralize working capital growth, including customer product demand planning enhance inventory management and improving vendor payment terms.
Our investments are and will further bear fruit and we are gratified by the ongoing success of our expanded operations in Mexico, and the growth momentum of our emerging brake categories.
Along with expectations of increasing financial performance from both new and existing product lines.
Our net debt at the end of the quarter, excluding our convertible note was approximately $155 million.
Our total cash availability was approximately $112 million.
For further explanation on the reconciliation of items that impacted results and non-GAAP financial measures. Please refer to the exhibits one through five in this morning's earnings press release.
I would now like to open the line for questions.
Thank you.
If any participant we'd like to ask a question. Please press star followed by the number one on your telephone keypad, if you'd like to withdraw your question. Please press star followed by the one once again.
One moment please for the first question.
Okay.
Our first question comes from the line of Matt Koranda from Roth I'm Ken Please.
Please go ahead with your question.
Hey, guys good morning.
Just wanted to start off with a traditional question around the breakdown in revenue between rotating electrical wheel hub.
<unk> products and other.
Hi, Matt so for the second quarter of rotating electrical was 67% wheelhouse.
Wheelhouse, 9%.
Break related products was 20% and others was 4%.
Okay.
Okay got it.
And then in terms of the.
The growth that Youre getting out of brake can you, maybe just talk about sort of.
How we should think about the new business. That's rolling on there I know you're expecting a bit of a ramp up there is growth in the quarter. Obviously, there was last quarter, but it feels like still there is a bit more on the come for the back half maybe just talk about sort of how we should think about growth expectations.
And the brake products side of the business.
Yes.
I think things are going well.
In general across the board for our product lines.
<unk> business is continuing to grow lots of opportunities significant.
Significant opportunities that we are preparing for.
So I think just in general.
We feel real good about.
Current state of our business and demand for our products, including brakes.
Okay, and then on wheel hub, but I noticed I guess, it's down for the second quarter in a row here.
That has been sort of in a bit of decline in the last year.
Can you just speak to sort of the dynamics that are happening there I think there was some seasonality in the last few quarters, but maybe just could you talk about.
But the dynamics at play with the wheel hub business.
I think that business is slightly slower right now I'm not sure exactly why.
Just.
Unfortunately, it's there's no real specific data that says that it should be slow and ultimately it should grow.
But overall again I'll go back to the overall just.
The.
<unk> is positive for all product lines and hopefully we will see.
Resumption on the wheel hub.
Growth.
Can't give you too much insight other than we expect it to.
<unk> growth.
Just to spin.
Unseasonably a little bit slower.
Okay got it and then just implied in the growth outlook that you have for the year.
Sort of a high single digit percentage growth for the back half if I kind of use the mid client.
The guidance that you've given.
You guys have put in place like a decent amount of price.
Taken several rounds of pricing to my knowledge.
I assume also you'd probably get some volume lift.
Maybe just could you speak to sort of the.
How much left do you think youre going to get some price in the back half of the year.
Versus sort of volume and then just maybe any commentary selling inventory positions at your customers.
Where do they said in terms of being maybe in line with where you need them to be versus light or a little heavy.
Okay.
A lot of pieces in that question I mean, let's just talk about pricing.
We talked about pricing.
Making up for the increased interest rates I mean, we are very comfortable that that's going to happen.
We will see incremental pricing in the next quarters that have already been committed to.
We remain we remain committed to passing on inflationary costs, where there'll be an interest or other expenses through.
And so whatever that ends up being it will end up being but we do have.
Good visibility already approved pricing increases.
The other side of it is volume for all of our products is up.
And we were off to a good start this quarter, we expect volume to continue to be driven the reason we've talked about the fundamentals of the aftermarket.
I mean their tail winds and an aging car fleet average age continues to go up miles driven is.
Continues to be positive.
And so these costs these costs are going to fail.
I need non discretionary.
Parts that we're talking about so.
Don't see any product lines that we have in decline mode. I mean, I do see obviously wheel hubs, but there's no fundamental but says that wheel hubs will.
We will not recover so all of our product lines look good I think as we as we ramped up.
Experience has greater margins I mean, these quarters are becoming more of a norm for us.
And we have better overhead absorption our efficiency.
Get better and as we take on new business, which again, we expect to take on.
The mix.
I mean, hopefully for the foreseeable future.
We should see margin accretion, we should see volume growth.
We should see positive cash flow inventory, we are building a little bit of inventory right now.
Just because the outlook for.
Sales is very positive.
So in order to keep up with that we are building inventory.
We do have new business that we're ramping up for as well and so.
So there'll be some inventory increase I do expect receivables to come down.
In time as we go forward so the actual cash flow will be seen.
We will catch up the collections of receivables, we have the option to take it whenever we want they are sitting there waiting for us.
So liquidity is as strong as it's ever been.
<unk>.
And we expect to see that in the positive cash flow numbers.
Okay, I don't know if I answered all your questions. There was a lot in your question, but yeah I'm good at asking questions embedded.
Okay. So.
So it's pricing action complete at this point, so we put theres. So many rounds are there more to come but can you help us understand sort of the timing of anything incremental that you're done.
I think for sure Youll see more price increases in this current quarter.
Still rolling in and even some more in the fourth quarter.
And for.
Now Thats correct, but I mean again, depending on inflationary costs.
We'll monitor it.
We'll have to see.
Hopefully interest rates interest rates stabilize it looks like.
And if we see increases there, we intend to increase prices to make up for it.
Okay got it.
Just a couple more quick ones. So the the outlook if I sort of.
Look at the implied margin.
In the back half of year over year, it looks like Youre, assuming that it gets a little worse than sort of what you put up in the second quarter, but just with all the pricing that you put through the volume lift youre getting maybe some mixed benefits and cost absorption.
Why should it be the case that margins erode relative to the second quarter.
And look we are being very conservative.
At some point there should be no reason.
We were.
We're sitting here, we're experiencing extreme tail.
Tailwind to our business positive things to our business at the same time, we were being very cautious about.
About change in the outlook.
Things will look positive for US right now and there is no reason that it should get worse.
Okay, and then just lastly can you level set everybody on cash flow expectations for the rest of the year I know you deferred or you said you deferred like $15 million.
Our collection, so that that's a good guy for the third quarter.
Maybe just speak to can we expect positive cash flow from operations in the third quarter and fourth quarter. This year and then maybe just if you on threat and are talking about.
Any of the inventory or dynamics that we should think about for the rest of the year as a potential working capital.
So working capital neutrality is is probably becoming a buzzword for NPA internally.
So first of all let me answer your questions. Yes, we expect positive cash flow for the back six months, we generated $30 million essentially generated $30 million in the first six months.
We don't know why we couldnt do that in the back six months.
We'll have to wait and see the other side of it is I mean.
Increased gross margins increased EBITDA increased.
Work on days outstanding on payables, and neutralizing working capital, yes, there will be some growth in working capital for the new business that comes on no question about that but that'll be quickly reversed is that new business kicks in on the sales kick in from that but.
But we're again, we're very focused on cash flow, we are very focused on stable growth.
We expect things to continue on this trend line.
Okay.
Okay I appreciate all the answers so on I'll leave it there.
Thank you. Thank you.
Thank you as a reminder, if you'd like to ask a question. Please press the star followed by the one on your telephone to cancel this Chris. Please press the star followed by the one one skin.
Our next question comes from the line of Brian Nagel from Oppenheimer. Please go ahead with your question.
Hey, Good afternoon. This is William Dossett on for Brian. Thank you for taking our questions.
Thank you.
So you have discussed that demand remains strong and thats consistent with.
The update that you gave back in August can you just describe discussed.
Broadly the drivers of the strength and I wanted to ask about for guidance any range of outcomes potentially embedded.
Perhaps the key areas of upside and downside.
So again, what's driving our businesses number one.
Continue to have great market share number two we have price increases in the most important piece is that the fundamentals of the aftermarket continue to be really strong.
And our customers.
Inventory levels somewhat asked I didn't answer that properly and the last question I'll address that now customers need inventory.
There's no there is non discretionary parts when the consumer needs to replace that part the customer hazard. We don't believe that there is excess inventory in the channel at all we think there's still opportunity for growth in inventory in the channel quite frankly.
And so that's another tailwind and the average age of the car Park continues to grow miles driven seems to be at least stable to positive.
<unk>.
So I just I don't see.
We have as an industry every now and again, you'll get a blip in our product demand.
People try and describe what that is but that's somewhat of an unknown, but overall these cause named these replacements when theyre going to have it and so.
I think there is overall strength everywhere for us.
I think the upsides for us on new business opportunities that we have.
We are ramping up also there is upsides there.
I think there is upsides and the margin opportunity clearly from price increases, but also from overall production efficiencies.
Challenges all you never know again, whether.
Cause short term blips there is always a risk that you can lose business, but.
We hope we're not on that side of it and we don't expect that.
But overall, we view as the outlook for our business very positively right now.
Thank you for that and to follow up just on your point have you seen any short term blips that we suspect that there there has been at all any.
<unk>.
Higher inflation.
And then to that point.
Is there any point at which you think price elasticity comes into play.
Just with the cost increases for purchases.
Yes.
<unk> had blips I mean, we've had some large customers have had some challenges in that theyre coming out of that.
They are still coming out of that so there's some more upside in that so that has caused some blips for us.
You may now fundamentals of our business have been really strong, but we have we will have some.
Unusual customer book.
And our last fiscal year, so we see the back of that.
Optimistic that all of our customers continue to be strong I think we see.
A little slower ramp up in some parts of our brake business with very strong but.
That's because of some slowdown in changeovers, but we expect that to will recover.
So again I think overall, there's some deferral in demand and our product lines I think that's coming but again the day to day fundamentals the register fundamentals.
But we see for our product lines look really positive.
In terms of price elasticity, we have non discretionary products so to the extent that these products cost more.
And that's valid.
We expect that the demand should not be affected by price increases.
Think that overall, the consumer choices to either repair the vehicle.
Or scrap that and if you look at the relative value of the vehicle versus the repair the repair makes all the sense in the world.
Unless theyre, absolutely unable to make a repair than that up to resort to public transportation, but.
We see the non discretionary in nature.
Basically.
Overcoming any pricing obstacles or short term pricing obstacles on that those prices can be.
Pushed through in.
And should stick in the disproportion of value of the repairs score.
Much positive for the consumer.
And then alternators starters, etcetera, etcetera, the cost of them compared to the value of the vehicles and the.
Alternatives.
Miniscule.
So we see plenty of upside.
That's very helpful.
So.
Another question that I wanted to touch on was.
From our team.
Regarding factoring in interest rates.
<unk>.
On that topic.
<unk> all called out price increases for the third and fourth quarters to help compensate for the higher interest rates.
Can you discuss NPA.
Ability to pass on these higher cost to customers and <unk>.
As you've done with the election not to draw down on the factoring last quarter what towards <unk>.
Can you use to mitigate and manage our interest expense.
Look.
Theres not a lot of tools that we see out there to manage the high interest in here is what it is I mean at the end of the day.
Sure.
We feel that we deserve a fair price and that includes <unk>.
Project from these interest rates.
So these suddenly the accelerated interest rates and so we have been passing them through to <unk> never easy to get price increases but.
But we absolutely must happen I mean, I think every supplier must have that because.
I mean this is a true cost, it's a cash cost and so we need to make up for it so.
I think we will continue to pass them through.
From where we are right now.
Okay.
Hopefully they are they at least stay stable and eventually start moving downwards, but.
But we intend to pass it through and Unfortunately this is part of the.
All costs get eventually passed onto the consumer the consumer makes a judgment on whether you will continue to spend on that particular product in our case, it's non discretionary.
Value quotient is extremely positive even with a price increase.
And quickly follow up on that.
This forthcoming price increases in Q3, and Q4 debate compensate you for the current level of interest rates.
Yes.
One reason I ask is to be able to understand.
Yes.
Okay.
We had a future cost increases.
Thanks, Austin marketplace.
We are not there yet so I mean that compensates for a lot of the increase but we can we think we should be.
Getting more I mean again.
Say that as an industry participants.
Sure.
I'm not advocating that.
We're all going to get them I'm, not going to get I'm going to have to wait and see but.
Again, we believe that these these the factoring rates extend the term for the customer and the customer has to pay for those extended terms and so.
On the working capital cost and I don't think I'm unique in that and not feeling I think that the entire supply chain feels that way so.
Well, it's a difficult discussion I think its one thats pretty clear.
So.
I think that everybody needs strong suppliers out there.
And the consumer needs to have products.
We are a global goes down to the consumer the consumer needs. These products to keep their vehicles on the road.
If not for companies like ourselves the car park will be substantially damaged in terms of being able to be repaired. So.
The entire aftermarket supply chain needs to be able to needs to be viable in on that.
That includes the cost of interest.
Yes.
Thank you for that and the last question if I may from our team.
Was just on B.
Framing the opportunity in the longer term opportunity from some of these.
Some of these focuses that are beyond the more mature hard parts business, which is the I guess Brett.
The opportunity in Mexico.
Emerging product lines, such as break related product categories.
And power management in EV.
Do you mind discussing that.
Yes, I think let me start with the JBT one.
Which is us rotating electrical alternate on startup tests.
Have orders now back orders on.
Firm orders for over 3000 units.
There.
That product.
Product line has proven to be extremely successful and we are starting to see more and more benefit from that coming so.
That's that's that's that's a very significant piece of business and we expect.
<unk> triple or even quadruple that amount of demand to unfold in the next 12 months. So that's part of the business. We think is going to be extremely strong and we're very excited about it I think we have an industry leading product and the customers that have embraced that are seeing huge successes from it and are committed to it.
So very exciting there.
I think the electric vehicle diagnostics.
A little more choppy and that Capex budgets keep getting pushed back or you know theres a lot of sort of a little bit of negative discussion on the EV growth right now so.
That bodes well for combustion engine perceptions quite frankly, I think the perceptions whatever they are we've got.
So to use business at least in the combustion engine opportunity a tailwind quite frankly, and I think it will keep getting better.
But anyhow.
Towards EV talks a little bit.
The EV market is sporadic the demand for our testers are emulators.
Simulators continues to be good.
It's not as easy.
Usually to predict quarterly volume on that some of these projects are longer.
What is exciting though is our Detroit Test center, which is a software as a solution tests.
Seeing a lot of there's a lot of demand for that is in fact that we've got.
We've got reservations now that books up that facility for 120 days out so.
Thats pretty excited margins are very good in that business.
The electric power management is.
As a SaaS evolve in big demand category and whether it before.
Automotive aftermarket, but we're seeing a lot of it in drone technology.
And then aerospace so.
I think for longer term down the road, that's going to be quite exciting to us and especially selling <unk>.
Selling computer time.
For our solutions will be a big a big part.
A big part of that we've recently.
Put in a new CEO into that into that roll on.
On the electric.
Control of heavy Tech technology person has worked for us in the past, but has come through the ranks.
He has taken over there and we're excited about the opportunities there as well.
Thanks, So much best of luck.
Thank you very much appreciate your interest.
It's been no further questions at this time, Gary Matt I'll turn the call back over to you.
Okay, great. So.
I just wanted to say in summary, we're excited about.
Our fiscal second half Thats coming up and supported by strong demand for replacement parts and aging car park opportunities for multiple replacements as cost stay on the road longer we've built a solid platform for growth in our non discretionary after market products are a critical need for customers and consumers and.
And most importantly in closing I want to recognize the contributions from all of our management team all of our team members. We are focused everyday on providing the highest level of service. We're all committed to being an industry leader for parts and solutions that move our world today and in the future and.
And we thank everybody for your continued support and thank you again for joining us for the call and we look forward to speaking with you when we host our fiscal 2024 third quarter call in February.
In the interim investor conferences. So thank you very much.
Thank you. This concludes today's conference call. Thank you for your participation you may now disconnect.
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