Q3 2025 XPEL Inc Earnings Call

Speaker #4: Greetings and welcome to the Xpel incorporated . Third quarter , 2020 Earnings Call . At this time , all participants are in a listen only mode and a question and answer session will follow the presentation .

Speaker #4: If anyone should require operator assistance during the call, please press star zero on your telephone keypad. Please note this conference is being recorded.

Speaker #4: I will now turn the conference over to your host , Mr. John Nesbitt of IMS Investor Relations . Sir , you may begin .

Speaker #5: Good morning and welcome to our conference call to discuss expels third Quarter 2020 financial results . On the call today , Ryan Pape President and Chief Executive Officer and Barry Wood expels senior Vice President and Chief Financial officer will provide an overview of the business operations and review the company's financial results .

Speaker #5: Immediately after the prepared comments, we'll take questions from our call participants. A transcript of this call will be available on the company's website after the call.

Speaker #5: Take a moment to read the Safe Harbor statement . During the course of this call , we'll make certain forward looking statements regarding XPEL, Inc. and its business , which may include , but not be limited to , anticipated use of proceeds from capital transactions , expansion into new markets , and execution .

Speaker #5: The company's growth strategy . Such statements are based on our current expectations and assumptions , which are subject to known and unknown risk factors and uncertainties that could cause actual results to be materially different from those expressed in these statements .

Speaker #5: Some of these factors are discussed in detail in our most recent form 10-K , including under item one . A Risk Factors filed with the SEC .

Speaker #5: Expo undertakes no obligation to publicly update or revise any forward looking statements , whether as a result of new information , future events or otherwise .

Speaker #5: Okay . With that , I'll now turn the call over to Ryan . Go ahead . Ryan .

Speaker #6: Thank you John , and good morning . Also , welcome to our third quarter call . Q3 was a record quarter for us for revenue , which grew 11.1% to 125.4 million .

Speaker #6: Performance was led by the US region , which grew also 11.1% to a record 71.7 million . We saw double digit revenue growth in both our independent and dealership channels in the quarter .

Speaker #6: So that's encouraging . That's good momentum . Our EU region had a had a good quarter revenue , growing 28.8% to 16.5 million , which was a record there as well .

Speaker #6: As you recall , we saw headwinds in in Q3 last year . So it was also an easier comp , but good performance .

Speaker #6: And as you likely know , we completed our long contemplated acquisition of our Chinese distributor in early September . Given the acquisition closed late in the quarter , we didn't see much material , financial impact .

Speaker #6: But you will see elevated SG&A from acquisition related professional fees in the quarter . And then , of course , added SG&A expense for the month of September under our ownership .

Speaker #6: We've hit the ground running . On the integrations underway . It was with our team two weeks ago . I can tell you that that we've added amazing people to the team .

Speaker #6: Both our our team and our customers are very excited about this and what it means for for our business in the country . The the customers were very receptive .

Speaker #6: And so it was it was incredibly encouraging . We have a lot of work to do from the integration perspective , but obviously see huge opportunity and really will continue our focus to pursue the OEM and force business in China with this acquisition , along with our acquisitions of Japan , Thailand and then India .

Speaker #6: Prior to that , we really rounded out our our footprint that we see in APAC . But then beyond we continue to see a similar trends affect all the regions at different times , similar to the slowness we saw in the US to start 2020 for Canada , revenue declined from the prior year , continuing a trend of a slow market in Canada for this year .

Speaker #6: You know , we saw really slow Q1 , Q2 was better . Q3 was was not as good as as Q2 . I wouldn't call that anything in particular except just a broad based slowness across the whole portfolio of customers .

Speaker #6: And then , as I mentioned , Europe was up meaningfully . India , Middle East grew modestly . But this market's more tied to distributor sales .

Speaker #6: So it's a little bit of cell in cell sell out noise there . But we're really bullish on what's happening there . It's it's a priority market for us .

Speaker #6: And there's a lot more to come . Latin America was flat . Due to weakness in Mexico . But really from a switch to a direct model in Brazil from a distribution model .

Speaker #6: Our expectation for Q4 revenue would be in the 120 to 125 million range . You know , with sort of the normal cyclicality we see in in US and North America .

Speaker #6: Assuming we hit those numbers , that would take us to year over year annual growth for 25 in the 13 to 14% range on the gross margin front , we did see a little pressure to gross margin in the quarter relative to our overall trend .

Speaker #6: We had unfavorable price increases that were out of line with the market , which cost us about 170 basis points of gross margin in Q3 .

Speaker #6: Absent this specific impact , we have actually seen gross margin grow from the prior year . These aren't tariff related , and we've mitigated that going forward , and we expect to see that reverse starting in Q4 and into Q1 .

Speaker #6: The other item that has an impact on gross margin in the near term is the nature of our China distributor transaction . We're selling through inventory acquired in the acquisition .

Speaker #6: And as we do that , we're only recognizing roughly the former distributors portion of the margin as the inventory is now on our books at an amount that approximates the distributors former cost .

Speaker #6: So obviously , a key rationale to buyer distribution is to increase gross margins , which it will do for us in a meaningful way , but only as we sell through existing inventory .

Speaker #6: Burial. Discuss a little bit more the unique structure of that transaction relative to inventory. But we did add on the order of $22 million, plus or minus, in inventory as part of the purchase.

Speaker #6: So you'll see inventory increase on our balance sheet. But really, that's a function of this transaction, and it's structured in a way that's very favorable for us.

Speaker #6: So our underlying inventory trend and and our improving inventory turns remain solid . And I would not interpret the balance sheet on face value to say anything else relative to inventory .

Speaker #6: With that said , you know , we'll have great cash flow as we sell through that inventory because the the turn times to replace it and the total inventory needed to supply the , the customers both on our side and the former distributor side , will reduce .

Speaker #6: So we'll see start to see relief from that in Q1 when we have both halves of the margin , as both the supplier and distributor for the first time .

Speaker #6: So as we get into Q1 and Q2 next year , we'll see record gross margins for the business at the at the consolidated level , based on these investments and changes , SG&A continues to run hot as we invest in the channel to support these new countries .

Speaker #6: We've got some optimization to do in our in our corporate cost structure . But most of the costs added in the past 18 months is is in the channel and in the in the distribution business .

Speaker #6: And now that we've really completed the build-out of those, save a little bit more investment in Brazil, we'll start to see leverage on that.

Speaker #6: You know , China is an example with this acquisition will add 5 million plus or minus in annual SG&A , including intangible amortization .

Speaker #6: But once we see the full gross margin, we'll pick up approximately $10 million in operating income from China on an annual run-rate basis.

Speaker #6: So I , you know , just remind everyone that you have to you have to consider the SG&A and the the gross margin interface together when looking at the trajectory of the business , especially as we start to realize that gross margin into next year .

Speaker #6: And I think from our perspective, you know, there's no better time in history to make these really final investments in these countries where you want to operate the most.

Speaker #6: This is a very tough environment for many people . For many of our competitors , you see a lot of a lot of folks pulling back where we're investing .

Speaker #6: And I think that's what you want for the long term . You know , the investments in G&A in in these countries is very much front end loaded .

Speaker #6: But these are the best markets in the world , and they're ones that are impossible to develop in any meaningful way without our direct participation .

Speaker #6: So investing now sets up perfectly for going forward . And certainly , as you see us demand in the environment , recover and , you know , we see different performance in different places .

Speaker #6: Obviously . We've spent the better part of 18 months on our capital allocation strategy , which we've discussed pretty freely in these calls .

Speaker #6: And this is include evaluation of a number of approaches , including expansion via M&A into adjacent products and services . Really in the broader industry in which we participate .

Speaker #6: And this is looking at things that aren't directly related to what we do , but could ultimately bring more demand by bringing other customers into the fold , you know , after a thorough review , our boards that , you know , continuing to invest in the core of the business is really the best strategy .

Speaker #6: There may be other adjacencies in the future . There are plenty of opportunities in our core today , and we've yet to hit the full operating potential of the existing business .

Speaker #6: So once we hit that full potential , we can reevaluate those concentric rings that surround our business . But to do so today is premature .

Speaker #6: And at the end of the day , much as we like those other opportunities for growth and our desire to build a bigger business , you know we don't like them better than our core business .

Speaker #6: And that that will , you know , guide our our near-term decisions . So to that end , we will be investing more in our manufacturing and supply chain via varying approaches .

Speaker #6: Direct CapEx , M&A , or JV relationships . We have a goal of increasing gross margin by approximately ten percentage points to around 52 to 54% by the end of 2028 .

Speaker #6: Through those activities , we with that extra gross margin running through our various businesses , you know , particularly where we control our own distribution and get full margin , we have a goal of realizing operating margins in the in the mid to high 20s commensurate with that , even with the costs of any of those things will do .

Speaker #6: You know , we would consider investment in the range of 75 to 150 million over this period . Pretty wide range . But we've got a number of options about how we do this .

Speaker #6: And it's either way , it's a very favorable return without the risk or complexity of adding additional lines of business relative to our overall strategy decision .

Speaker #6: Secondly , we will continue to pursue service business acquisitions within our core , with the focus on dealership services with our current product set .

Speaker #6: Those opportunities are comparatively few in number and relatively small in scale . For the most part . But as we can identify and acquire them , this will remain a core part of the strategy .

Speaker #6: Finally , even with the aforementioned investments , we do expect to have excess cash considering healthy balance sheet and strong cash flow and an appetite for modest leverage .

Speaker #6: Assuming all that remains true , they'll likely be an opportunity to return cash to shareholders share repurchases . Look particularly attractive at the moment , given our view of the valuation of the business .

Speaker #6: Turning to to business , we have a number of exciting things going on . We've talked in the past year about our product line additions , color films , windshield films , and we'll spend the next year getting these to their full potential .

Speaker #6: We have a very robust product line now, and our focus will be less on adding additional products and more on selling more of what we already have.

Speaker #6: And iterating to the next generation of the products that we already have . Like entering new channels , new products , and the launch of new products , the development of new products are expensive , and our focus will be getting a return on the investments that we've made .

Speaker #6: Our OEM business interest is strong with the global car manufacturers , although our bottom line performance from our existing programs is missed , our expectations and certainly a drag on results due to disruptions that plague the manufacturers or create inconsistent spikes in demand , which which challenge us on the cost side , we get better at how we manage this environment with each passing month and in each subsequent project .

Speaker #6: And it remains an important focus for us . And a an important growth driver of the business going forward . Part of that is our referral personalization platform , where we're selling installations online to consumers on behalf of of our partners , namely some of the OEMs .

Speaker #6: We've been driving increased volume to our aftermarket network for installations in a model that no one's ever done before . We continue to have more interest from from others .

Speaker #6: And expanding this program . And it's become quite valuable to many of our installer partners as a source of volume . While the retail aftermarket remains very sluggish , we expect to continue to expand this going into next year and beyond .

Speaker #6: And finally, discussion of our investments in DAP, our SaaS platform, has taken a back seat to other initiatives that work on this continues unabated.

Speaker #6: We received, we redirected some of our team to our personalization platform, as we've launched that in earnest. But we continue to advance on DAP in a way that we know will make our customers more efficient and ultimately sell more products, benefiting them and us.

Speaker #6: You know , our view is even in the aftermarket channel , due to the friction and inefficiency of how the channel operates , there is substantial consumer demand that just slips through the fingers of the of the collective industry .

Speaker #6: And our goal with this project is to is to solve for that . So I think a really important time for us , a lot of moving pieces in different things going on , but we feel very good about the decisions we've made and about our strategy going forward .

Speaker #6: We're really pleased to have this acquisition in China complete . It was a tremendous amount of work , obviously more work to come , but it really helps cement our direct distribution model in in the most important global car markets of the world .

Speaker #6: And so it's quite it's quite an accomplishment . And it will pay tremendous dividends for us . And I think everybody on our team and everybody else who's been involved in getting that done , so very pleased with that .

Speaker #6: So with that, I'll turn it over to Barry.

Speaker #7: Thanks , Ryan . And good morning , everyone . Just a couple more bullet points on our top line performance . Our total window film product line grew 22.2% in the quarter .

Speaker #7: And this continues really to be a nice growth driver for us . Our total installation revenue increased a little over 21% in the quarter .

Speaker #7: And this includes product and service for our dealership services business . Our corporate owned stores and our OEM business all had solid performance in the quarter .

Speaker #7: Notwithstanding , the OEM choppiness Ryan mentioned . You know , in our corporate store performance , as we said in the past , is a decent indicator of how the aftermarket is doing on a year to date basis .

Speaker #7: Our total revenue grew 13.1%. Our total SG&A expenses grew 20.8% in the quarter to $35.7 million, and this was 28.4% of total revenue.

Speaker #7: We did have approximately 1.3 million and added acquisition related SG&A and approximately 0.8 million in bad debt and some other costs that are not expected to reoccur on a year to date basis .

Speaker #7: Sdna grew 18.2% to 102.7 million . Our EBITDA did decline in 7:45 point 1% to 19.9 million , and our EBITDA margin finished at 15.9% on a year to date basis .

Speaker #7: Our EBITDA grew 4.6% to 57.8 million , and our year to date EBITDA margin was 16.3% , net income for the quarter decreased 11.8% to 13.1 million , reflecting a 10.5% net income margin and EPs for the quarter was $0.47 per share on a year to date basis .

Speaker #7: Net income grew 3.7% , reflecting a 10.7% net income margin in our year to date , EPs was $1.37 per share . I thought it'd be useful to give a brief overview of the structure of the China transaction , given its complexity .

Speaker #7: We first , we formed a new entity in which we have a 76% interest . This new entity then acquired the assets of our Chinese distributor , the purchase consideration for this total , just under 53 million before discounting for time value of money .

Speaker #7: And there are essentially three components to the consideration . First , obviously there was a cash up front . Second , there was deferred consideration or really cash payable over a four year period .

Speaker #7: And thirdly , there was consideration contingent on future sales of what we considered as excess inventory . As of the close date . This excess inventory was part of the inventory acquired and the contingency is structured such that we pay some consideration if the excess inventory is sold at a profit .

Speaker #7: But we effectively are not penalized if any of the excess inventory is sold at a loss or is never sold and needs to be written off .

Speaker #7: As Ryan mentioned in the overall transaction , we effectively added approximately 22 million in inventory . If you consider inventory acquired , inventory contributed by minority holders , the first two items , the cash up front and the deferred consideration are about 75% of the total consideration .

Speaker #7: And for various customary legal reasons, you need to know that only a portion of the cash paid up front was actually remitted, and the rest of the upfront payment will be paid very soon.

Speaker #7: And this is important to understand when you look at our balance sheet , as we've broken these components out there , the remaining upfront payments still payable and the contingent consideration is reflected in the short term and other short term liabilities .

Speaker #7: On the balance sheet . The deferred consideration , the cash payable over a four year period is reflected in other long term liabilities .

Speaker #7: So , as Ryan mentioned , we're certainly happy to get this deal behind us . It was somewhat complicated deal . And there was a lot of hard work done by several people to make this happen .

Speaker #7: We have a great team in the region and we are really looking forward to watching them grow . That market . Our cash flow provided by ops was 33.2 million for the quarter , compared to 19.6 million in Q3 last year , which was a record for us .

Speaker #7: And you may notice if you're looking at our balance sheet , a decent sized increase in our AP and accrued liabilities line , there's nothing unusual there .

Speaker #7: This is related primarily to timing . We've got extended terms with most of our raw material suppliers . So timing of payments can create some fluctuation .

Speaker #7: But it's all in the normal course of business . I'll also add that we did see a slight improvement in our cash conversion cycle in the quarter .

Speaker #7: So all in all , a solid quarter for us . And we look forward to closing out the year strong . And with that , operator , we'll now open the call up for questions .

Speaker #4: Certainly , ladies and gentlemen , the floor is now open for questions . If you wish to join the queue to ask a question at this time , please press star One on your telephone keypad .

Speaker #4: We do ask if listening on speakerphone today that you pick up your handset while asking your question . Once again , please press star one on your keypad .

Speaker #4: At this time, if you wish to join, please queue to ask a question. Hold on a moment while we pull for questions.

Speaker #4: And your first question is coming from Jeff Van Sinderen from B. Riley. Jeff, your line is live. Please go ahead.

Speaker #8: Hi. Good morning, everyone. Just curious if we could circle back to one of the things you touched on in the prepared comments.

Speaker #8: I think you pointed out that there were some out of line price increases . You experienced . Maybe you could touch on how those manifest , how you mitigated and also then if you could kind of dovetail that into leaning into taking more of the manufacturing in-house .

Speaker #6: Yeah . Jeff . Sure . So we did experience some some price increases that really manifest in in the quarter . I think in our remarks , we called out that was about 170 basis point impact to gross margin .

Speaker #6: I think that I guess the best way to characterize that is , you know , I think if you if you look at the at the industry overall , it's it's been a challenging time for people and , you know , a lot of decisions made on how best to run your own business .

Speaker #6: And , you know , where where you may want to make up , make up margin for lack of demand . Obviously not impacting this and not impacting us is the overall tariff environment .

Speaker #6: So that's been a challenge for for some suppliers . And , you know , looking for extra margin in other places . So you know , I really can't characterize it more than that except that , you know , we've got a very robust set of suppliers .

Speaker #6: And so where there's outsized price increases that don't make sense for the market , you know , we have plenty of options on how we mitigate that .

Speaker #6: And so , you know , that was that that happened . But it's been mitigated . We'll start to see that reverse in in Q4 .

Speaker #6: And I think , you know , broadly speaking , to the second point , we we have a desire and see incredible opportunity to invest further to be a , you know , high , highest quality and lowest cost provider of the products .

Speaker #6: And , you know , if you have the the the best supply chain and the best distribution and the best brand , I think you're in pretty good shape for the long term .

Speaker #6: And so , you know , I , I wouldn't characterize what we're doing there in , in a very discreet way . Certainly there's elements of the supply chain we could take in-house and , and do that in a number of ways , but we also have a number of really good partners that we could form deeper partnerships with .

Speaker #6: And so , you know , we have a very broad mandate to do that . And we have a lot of ways to win by doing that .

Speaker #6: And , you know , this is not a an overnight thought either . This is something that's been in the works for some time in terms of our analysis and and so I wouldn't characterize just one way to do that .

Speaker #6: But what we know is that we can drive , you know , substantial , gross margin improvement in this business over time by investing in it .

Speaker #6: And I think the big picture is that , you know , until we've done that and we've maximized the business that we have , you know , we need to prioritize those investments versus pursuing other lines of business in which we have , you know , less competitive advantage and less experience .

Speaker #6: And so that's the direction in the in the decision that we in the board have made . And , you know , we have a great team who who will now execute on that .

Speaker #8: Okay . Thanks for that . And then curious on the the rollout of your colored films . Notice the marketing around that seems pretty exciting .

Speaker #8: Any any color you can give us I guess on on early dealer embracement of that and how impactful do you expect the colored films to be to your business over the next year or two ?

Speaker #6: Yeah , it's a it's a great question . So the the rollout has been has been great . It's been well received . Our team has done an amazing job .

Speaker #6: Probably the best product rollout that we've ever done in our history . When you and I and I say that from external facing standpoint , but also an internal standpoint , which which the rest of the world wouldn't appreciate .

Speaker #6: But I certainly do . I think it's , you know , our , our view on it has been a relatively conservative , you know , I think the question is , you know , what is the what is the growth opportunity within that space , given the sort of aftermarket color change business has been around for a long time .

Speaker #6: So do we see this as something that we can just take share in , or do we see this as something where the underlying demand is , is going to grow ?

Speaker #6: You know , our our initial view was it was certainly a market in which we could take share . I think what we're seeing a little bit of is that I think the , the market's going to grow .

Speaker #6: I think as the products now are better and they can be delivered in a , in an even better way . And , and marketed better .

Speaker #6: There's probably more new interest in that than , than I would have thought . And you see I think you'll see a more engagement to from whether it's the , the dealership channel and the OEM channel wanting to offer more options to consumers that maybe you can't do with a a limited color palette in a traditional , you know , automotive setup .

Speaker #6: And so I think though , if those get traction , you have the opportunity for substantial expansion of that . So early days for us .

Speaker #6: But I think I'm I'm quite pleased . And expect to see more from that going forward .

Speaker #8: Okay . Great to hear . Thanks for taking my questions . I'll take the rest offline .

Speaker #6: Thank you Jeff .

Speaker #4: Thank you . And as a reminder , if you wish to join the queue to ask a question at this time , you may press star one on your telephone keypad .

Speaker #4: Once again, that will be star one. If you wish to join, queue to ask a question, and your next question is coming from Steve Dyer from Craig-Hallum.

Speaker #4: Steve , your line is live . Please go ahead .

Speaker #9: Hey , thanks . This is Matthew Rob on for on for Steve in the PR . You called out the mid to high 20% operating margin by 2028 .

Speaker #9: Given the investment in manufacturing you know that that implies ten pints of expansion over the next few years . I guess whether it be organic or inorganic growth , what are the revenue assumptions underpinning that that margin expansion ?

Speaker #6: Well , I think we've been pretty consistent that , you know , we think that a a low double digit sort of organic revenue growth , even even with all the the noise and the weakness that we see that continuing out for us , you know , certainly through through the midterm .

Speaker #6: So it doesn't you know , we're not , you know , sort of making any change to our kind of mid-term view that that's a sort of revenue growth we think we should be able to generate .

Speaker #9: Okay . That's helpful . And then maybe just a couple housekeeping items , you know , maybe , Ryan , if you could just give an update on the sentiment across the aftermarket in dealer channel , you know , Q4 guiding to 15% growth in the quarter .

Speaker #9: Obviously , obviously good . But but any other further detail you have , there would be great .

Speaker #6: Yeah . I mean , I think it's it's a it's a real challenge . I mean , if you if you look at sort of our , our peers in the aftermarket and other places , you know , there's a real mixed sentiment .

Speaker #6: What , what we've found , interestingly , is that the , the weakness and the sort of trough in sentiment has sort of bounced around globally , obviously , you had the US , you've got sort of Canada now , you had Europe , maybe at some point last year and we've kind of seen it more negative .

Speaker #6: And then recover some . I think you look at the the retail automotive business in the , in the US , you know , they're certainly back in the mode of looking for extra gross profit as things are are tougher .

Speaker #6: There . And you know , just compression in in margins and challenges with affordability and and tariff impacts into new car pricing and all that .

Speaker #6: And so , you know , that's , that's negative in the sense that , you know , that's still a headwind for the consumer where you have upward pressure on pricing and affordability , you know , maybe we get some relief from sort of the interest rate situation in terms of the affordability overall .

Speaker #6: But it's positive for us in the sense that when it's tougher for dealers , you know , there's more push to find other ways to make money .

Speaker #6: And the things that we do provide more value on a percentage basis when it's harder overall . So I think from that standpoint , that's actually quite positive .

Speaker #6: I just think it's , you know , we've never , never been in an environment where you get more differing views on what's happening .

Speaker #6: You know , I , I don't think there's this universal consensus that things have substantially improved or that the , the consumer sentiment is , is way better .

Speaker #6: But at the same time , there hasn't been any skies falling moment . So , you know , our approach has been that , you know , we we have to , you know , power through .

Speaker #6: We've got to be mindful of those dynamics . But we've got to set the company up for the long term success and make investments where we need to make it .

Speaker #6: And we know that the , consumer and the demand picture , it will all it will all settle out . And I think you've seen some stress .

Speaker #6: Barry mentioned in his remarks, you know, bad debt. There was an aftermarket chain of some sort that filed for bankruptcy that we had some exposure to.

Speaker #6: So you see , you see a little bit of signs of stress like that . Nothing , nothing meaningful or material to the business overall .

Speaker #6: But I think that's kind of emblematic of what's going on . And then , you know , you've also seen , you know , an influx of competitors into this space and , you know , this current environment makes it more challenging for them , especially those trying to get rooted and footed .

Speaker #6: And that's all the more reason why we need to keep the pedal to the metal and maintain and grow our positioning so long answer to your question , but I think it's it's a mixed bag overall .

Speaker #9: Understood . Thank you . And then on gross margin , it sounds like there's a little bit of a drag expected in in Q4 .

Speaker #9: Just given some of that China inventory and then expect a record in Q1 and Q2 2026. You know, the level of the impact there.

Speaker #9: You know , across those those three quarters would be helpful .

Speaker #6: Well , we you know , I yeah , the the sort of drag from China with that higher , higher priced inventory and then sort of the tail off of some of that price increase that will remain in , in Q4 .

Speaker #6: However , on a , on a comparative basis , Q4 of 24 was quite low in gross margin . So the expectation is that we should see some gross margin improvement from the prior year in in Q4 on a percentage basis .

Speaker #6: Even though we to your point , were we off of that sort of full potential until we get into the the end of Q1 , where we're we're recognizing all of the the margin in China and and we fully remediated the the cost increases that we've seen .

Speaker #9: And then any , any commentary on Q1 and Q2 26 , just the level of improvement expected there .

Speaker #6: I think I'm hesitant to to quantify it any more than we have , only because we've got a turn the inventory and and sell , sell what we've got .

Speaker #6: But you know , our our position is that , you know , we will be seeing , you know , highest gross margins .

Speaker #6: We've seen as we get into that time frame .

Speaker #9: Understood. Thank you very much.

Speaker #6: Thank you .

Speaker #4: Thank you . And this does conclude today's question and answer session . I would now like to turn the floor back to management for closing remarks .

Speaker #6: I want to thank everybody for joining us today and thank our team for doing an amazing job. We've got a big contingent at the SEMA Show in Las Vegas, a big annual event, and we're on great display.

Speaker #6: So thanks . Thanks everyone .

Speaker #4: Thank you . This does conclude today's conference call . You may disconnect your lines at this time and have a wonderful day . Thank you once again for your participation .