XPEL, Inc. (NASDAQ:XPEL) Q1 2024 Earnings Call Transcript

XPEL, Inc. (NASDAQ:XPEL) Q1 2024 Earnings Call Transcript May 2, 2024

XPEL, Inc. misses on earnings expectations. Reported EPS is $0.2412 EPS, expectations were $0.26. XPEL isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, everyone, and welcome to the Xpel Incorporated first quarter 2024 earnings call. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions after the presentation. If anyone should require operator assistance during the conference, please press star zero on your phone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, John Nesbett of IMS Investor Relations. John, you may begin.

John Nesbett: Good morning and welcome to our conference call to discuss Exponent’s financial results. For the first quarter of 2024. On the call today, Ryan Pape, Xpel’s President and Chief Executive Officer, and Barry Wood, Xpel Senior Vice President and Chief Financial Officer, will provide an overview of the business operations and review the Company’s financial results. Immediately after the prepared comments, we’ll take questions from our call participants. Now 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 of 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 our actual results to be materially different from those expressed in these statements. Some of these factors are discussed in detail in our most recent Form 10 K 10 K, including under item one A. risk factors filed with the SEC. Xpel undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. With that, I’ll now turn the call over to Ryan. Go ahead, Ryan.

Ryan Pape: Thank you, John. Good morning, everyone, and welcome as well to the first quarter 2020 for conference call, I think obviously Q1 was a tough quarter for us. Revenue grew 5% to $90 million. US revenue grew 1.9% compared to Q1 2023 to $52 million. We saw softness in the aftermarket to start the year, and this is a continuation of a trend that we saw starting in late summer, which I think we’ve talked about generally. We’re also now going to be lapping the stronger part of 2023, which was the first half our customers in the aftermarket are very diverse and it’s hard to generalize them as a whole. But for context, it was not uncommon to see dealers who were down 10, 15% in the first quarter from the prior year period.

As we’ve said before, our internal Company-owned locations are a good proxy for the aftermarket as well. And we saw the same type of weakness in those on a year-over-year basis in the first quarter. So obviously, some customers were down more than others, some grew depending on their business model and there were new and lost customers as there always are. But the universal theme for many and many that I spoke to personally was a slow start now January and February in particular this year and that was really across geographies, mostly folks in the US that I spoke to personally, but East Coast, West Coast and in between. So in terms of what we’re seeing, I think one, there is more consensus on emerging of just weakness in the consumer overall.

And this buyer makes up the substantial portion of our aftermarket business where the dealership component in the aftermarket makes up a smaller portion, kind of seen some of that echoed in earnings season and even in this week. But we’re our own niche. So we’re going to feel and experience this and in our own way, I think for us, there’s probably a better consumer credit centric leading indicator for us that we’ve that we’ve yet to find, but that’s probably out there. Secondly, I think the EV adoption over in the past few years has likely been a tailwind for the business, really for two reasons. If you think about our core enthusiast customer who still makes up a substantial portion of our of our customer base, they began to adopt EVs, but more importantly, leaves the EV revolution if you will, it created a new class of enthusiasts.

And these were not traditionally our customers. They were in enthusiast by virtue of the EVEV. cycle. And as that market has cooled. The EV market has cooled, have the EV buyers lowered to the market now by discounting and in this part of the cycle are probably less likely to be our customer in the aftermarket. So in that sense, EV sales declines probably hurt us twice once on volume, but also by shifting the composition of those buyers to those that have a lower propensity to participate in the automotive aftermarket in general. So I think it highlights also the continued need to reach all types of customers, including those that would not normally participate in the aftermarket. So programs like we have with Rivian OEM, other OEM programs at dealership activation for us and for our installers in the aftermarket.

These are all things that help do that. And that’s why we’re focused on that. We have some data. We actually see this play out on a model level as some of the big global OEMs launch their first EV platforms, attach rates would start high and then they would decline. So showing the sort of enthusiasm for those vehicles even embedded in all of the big global OEMs. And then third, port delays in the US specifically resulted in reduced sales, Porsche and Audi to the tune of 20%, I believe is the number in the case of Porsche, which these are two of our top brands for traditional paint protection film coverage by one measure of attachment that we have. So this is this disease sort of post quarter and is probably contributing to the stronger April that we that we saw traditionally in our business.

It would be unusual to see April with higher revenue than March. That’s counter to the normal cycle in the start of the season, but that’s what we’ve seen this year. So that said, no, there isn’t one vehicle brand that dominates all others for us. When you’re looking at it, any of the metrics we have or a metric of attachment of say and how many bumpers with for by brand do we cover with film? So you have four variables that drive our attach rates. As we talked about, you’ve got the enthusiast nature of the brand, first and foremost on the price point of the vehicles and traditional paint protection film news, it’s still relatively expensive. And so you have a over-index as the price goes higher and then the number produced is obviously significant.

And I think we cover and protect lay more Toyotas than anyone realizes. And that’s not because they have the highest attach rate, but it’s because they produce so many vehicles. And then you have the effectiveness or lack of effectiveness of the dealership channel in selling these products because the dealerships service centers dealerships, they can reach customers that we’re not going to reach in the aftermarket and you see quite a divergence in the brands overall in terms of how it’s active, they’re doing that. So while the port delays were a U.S. specific item for the quarter, these trends are not unique to the US overall, but as it’s our far our largest market by far, we’re going to see it more here where we have a larger existing base of business versus other markets that are still in their infancy where new customers comprise a much larger percentage of the growth, and you’ve seen that play out.

If you look at our geographic distribution and results this quarter. The dealership services business continues to be a bright spot. We’re seeing growth both in the quarter and car counts and in the ASP.s, both trending in the right direction. The team is doing a really good job of introducing more paint protection film into our existing relationships and doing that with great service and again, this is part of the mission to reach customers that aren’t going to take their vehicle into the aftermarket. We’re evaluating further service opportunities in the dealership channel to build deeper relationships with the dealerships we serve or the dealerships we might want to serve. And you can see how our results here in different parts of the business that performed differently over time.

The aftermarket is not the same as the dealership business in terms of the customer base in terms of the product composition or even price point in these segments have fundamentally different to different characteristics for us. No, credit access is different in the aftermarket versus in the context of a new car purchase. We’re our products are typically financeable. So there are many different variables to consider. And also in the US in April, we reached an agreement with TIM world. This is an automotive accessory and window tinting franchise with well over 100 locations to supply their franchisees of co-branded products. This is predominantly 10th window tenant as the name might imply and also some patent protection film coatings. We’re applicable to world offers a range of services, including Windows 10 vehicle, Rhapsody electronics and others.

We look forward to working with them in the coming years and two, working to integrate with them over the rest of this year. So really happy with that with that relationship. I’m looking outside the US, the China region finished at $1.5 million for the quarter. And that was obviously a big driver of our overall lower than anticipated revenue growth rate. In addition to the U.S. and pricing discussed, we timed numerous times on our previous calls we’re constantly not in China with the sell in our sell through dynamic that makes the business lumpy. And China had the highest quarter in history in Q4 of last year. So we knew Q1 was going to be lower than you know, with that, China still finished about three to $4 million lower than our forecast was last year, and we’re making a lot of progress in terms of evolving our strategy and go to market in China with the help of our team on the ground and the reorganization of our business, we look forward to discussing our plans more in the subsequent quarters, we’re focused on making significant changes in the go-to market, including optimizing the product portfolio and increasing inventory and supply chain efficiency, both in and outside the country as well as other changes to the distribution model.

And our priority for the first three quarters of this year is to implement all of these fundamental changes in stream, streamline the product lines and inventory. This will continue the lumpiness for now, but will set us up well for the future where that that lumpiness will be eliminated and the business in-country will grow. So credit to our growing team, nine Asia for their work there and also in the other markets in Asia, even outside China, that we’re prioritizing. So more to come on that. But I feel very optimistic about the plan that we have there, and we’ll talk more about it in the future. And the rest of the world outside the U.S. and China had a good quarter, growing a little over 30% record quarters in Europe and A-Pac and Middle East, Latin America.

Again, Q1 is typically the lowest quarter for these regions as well. So continued good performance there. And our operation in India is well on way as well on the way to being fully established and it’s going to provide a lot better support for our customers in the Middle East and our expansion there. So very pleased with how that’s going in addition to what we plan to do in the domestic market in India. So good progress. And finally, the sub OEM business was a bright spot. Revenue was up just around 58% year over year on really kind of that quarter end or subsequent to quarter end, also starting to launch a full Stealth maxdome [ph] option with Rivian. So again, that will be there will be growth and more awareness for that type of product as well.

The best forecasting tool we have with thousands of individual customers is to work backwards to look forwards and obviously that makes forecasting complicated in a changing environment because things have to change to look backwards at them on looking at the state of the market and the trends to start the year which are obviously lower than our internal modeling. It gives us some conservatism, I think, for the year. So as a result, we’re reducing our revenue guidance for the year to a 10% organic growth. And our expectation for Q2 revenue is up $105 million to $100 million range. Look, it’s a it’s a dynamic environment, as I mentioned, seeing in April, exceed March is very unusual in the typical cycle we have in the US. So we need to we need to understand that.

But that’s sort of what we’re the best we’re looking at now in terms of our expectations, and we’ll update that as we go. I think while the current environment is incrementally more challenging, we’re very much focused on the future and continuing to drive the long term double digit revenue growth. And we are very mindful of the current state and the cost structure we built. And obviously, we’ve built that for even more growth. But our focus remains on setting us up for the continued maximum growth over time. So there’s no dimension of the opportunity set in front of us and we don’t want to make short-term decisions that compromise any of our long-term prospects. So excluding the impact from any acquisitions, which we’ll talk about from an SG&A standpoint at this point, we’re really more focused in the near term on holding our cost structure rather than trying to reduce it significantly.

There’s plenty of opportunity for our core business, even in this environment to grow and to grow into that cost structure. And obviously, if things change, we’ll change and we have to be flexible, but that’s our current view. Bright spots for the quarter was gross margin performance finished at 42%, returning to the trend that we expect after lower than expected margin due to due to the high distribution sales in Q4 and in some respects that that outperforms even a little bit because as volumes are down, you become less efficient in some ways with costs that are that are part of your cost of goods, but over a short period of time are relatively fixed. So I think that’s a that’s a good number for us. And it’s one that we still will look to continue to grow over time.

Improving our free cash flow remains a top priority for management and our Board and managing inventory is the primary not the only way. But the primary way to accomplish that in the quarter, we’ve seen a significant reduction in our raw materials and work-in-progress inventory as those turn into finished goods and then ultimately sold through in the future. And as they’re sold through, we’ll see our days on hand reduce through the year. So that’s it’s a really important step to continue that process of reducing the days on hand. And as you may recall from last year, a lot of those raw materials and work in progress materials were inflated in the second half of last year, which we didn’t anticipate going into the year. So that’s good progress to see that go down and get work through the channels.

What we want to see, obviously, higher revenue in Q1 and in particular, the sales to China that we had forecast that would help in terms of the inventory situation as well, because those products are still on hand instead of being sold. But the plan is tracking for the year. And there’s really on I mean, hard to say outside of growing the business as aggressively as possible, but there’s something more important to us than then optimizing that. And finally, I want to talk about capital allocation. We feel that the best the best use of our capital remains M&A does not change in the current environment. We haven’t seen multiples compress up to now, but I think it’s possible that we can we might see that change. And we’ve been asked about that many times over the past few years.

But as you as you saw, the relative strength of all the businesses in the in the overall ecosystem, even when we had saw declines due to inventory and things like that. We just didn’t see any of that, but I think could and now it’s possible that we’ll start to see that and it would be smart for us to be opportunistic there. But I would like to highlight that we really laser our focus even further in terms of M&A in this environment now is not the time. So our attention to wander from the core, I think that’s really important to emphasize. We first, we have several international distributor acquisitions that we’re pursuing this year and expect to complete this year of these acquisitions have been some of our best performing over time and deepening our presence in a market is a way to drive growth, even in a slow market or a slower market as we’re able to take share in increased growth rates when we internalize the international distribution.

We’ve seen it time and time again, and you’re seeing it in. Probably the most recent example is the success that we’re having in Australia with that strategy post acquisition approximately 1.5 ago. So we’ll use that to round out our presence ourselves in the top car markets of the world. So that’s the number one focus. Second, we’ll be focusing on the dealership business and ways to invest to grow that further, it’s performed well. And as I mentioned a couple of times, it creates an opportunity to expose more people to paint protection film that wouldn’t learn about it any other way so it’s good for revenue and it’s good for product awareness. This will probably predominantly be looking in service businesses directly in our space or even slightly adjacent our service businesses targeting dealerships where our products could be added through existing relationships, you’re less likely to see us pursue acquisitions targeting additional products or to pursue a costly acquisitions or acquisitions of any consequence in other verticals at this time that there’s one thing I want to emphasize, it’s the discipline that we’re trying to bring to the process, both in light of the current overall macro, but also increasing our effectiveness at putting more capital to work and doing it more efficiently.

And the focus there, intensifying that focus, we think is really important to help do that. And speaking of products, we announced a number of tuck-in products into our various product lines during our dealer conference site, as we mentioned previously. And these are largely things to round out the portfolios that we have and to ensure we’ve got a broad product set for any of our customers and the respective disciplines, but will be operating with discipline this year on future product additions relative to our free cash flow goals, as you can imagine, from adding too many new products reduces the efficiency of that inventory as those things are as those things are novel and we are planning to expand into more colored film options this year, in addition to the block that we’ve offered for some time there’s nearly a dozen colored GPU-based wrapping films either in the market or planned for launch by a variety of suppliers in the business.

And these are those wins a typical vinyl and PVC background and those with the PPF. type background in others, it’s unclear how much these will ultimately expand the addressable market for color, James, initially, we do expect to see share gain of these products at the expense of some of the traditional PVC vinyl based color wrapping films, what’s less certain is whether this will translate to appreciable growth of the color change business in the aftermarket. But as the product installation, it becomes more similar to paint protection film actually opens up the opportunity for a larger portion of the aftermarket to participate. And we believe. So as we’ve talked about previously, using colored films to replace pain, not seem to be viable at scale today, maybe if ever, but the improved durability of IPPU.

based color wrapping zone versus vinyl based film presents options for more accessorizing in the aftermarket dealership and OEM channels certainly opens up options there like doing contrast roofs with film and sort of multistep process they have to do so. All of this represents growth opportunities for the industry as a whole. So obviously, a challenging quarter for us. I want to highlight the areas we’re focused on that. We’ve got our whole team, our team aligned on. We remain very excited about the opportunity ahead that the potential for these products is as strong as they’ve ever been, and we’re excited about that. So with that, I’ll turn it over to Barry and then we’ll take questions.

Barry Wood: Thanks, Ryan. And good morning, everyone. Just to start out, I wanted to provide a quick reminder on the seasonality of our business in all regions. Excluding China, Q1 is typically our lowest quarter of the year, Q2 and Q3 can trade off being the highest quarters and then Q4 is less than Q. two Q. three, but higher than Q1. And this holds true in China, except that Q4 tends to be their largest quarter. So given all that comparing revenue sequentially versus Q4 is really not near as meaningful as it is in other quarters. Looking at the product lines combined paint protection, film and Cutbank revenue declined about 1% in the quarter. Again, owing to the China performance and lower US demand. Our window film product line revenue declined 2.9% quarter over quarter to $14.5 million, which represented 16.1% of our revenue.

But excluding China, the total window film revenue grew 10.3%, which is still up decent performance even in a seasonally lower quarter. Our Q1 Vision product line revenue, which is included in our total window film revenue grew 33.1% to $1.8 million. So again, good growth in a low seasonal quarter. And as Ryan mentioned, our OEM business continued to post strong results with revenue growing just under 58% versus Q1 2023 to 4.6 million. Our total installation revenue combining product and service grew 34.7% in the quarter and represented approximately 22% of total revenue. And as Ryan mentioned previously, many of our corporate store’s revenue declined versus Q1 2023. So the total installation revenue was certainly buoyed by our dealership services business and OEM businesses business.

Our Q1 SG&A expense grew 36.2% to $28.6 million and represented 31.8% of revenue included in Q1. SG&A was approximately $1.6 million in net costs from our annual dealer conference that was held in February this year, but held in Q2 last year. And if you normalize for that, our SG&A would have grown approximately 28.6% sequentially after factoring in dealer conference costs in Q1, SG&A grew 1.3%. And certainly our expense profile looks outsized in a down revenue quarter. But as Ryan alluded to, we’re actively managing our costs where we can and really trying to thread the needle between the right trade-off of managing costs versus continuing to do right by our customers. And we’ve gotten and continue to get an ROI on our SG&A spend in the form of improved gross margins, and we want to continue that for sure.

So we’ll continue to monitor this. But our expectation is that our SG&A run rate will remain largely intact for the remainder of the year, especially in light of the improving revenue momentum. Our Q1 EBITDA declined 31.5% to $11.7 million, reflecting an EBITDA margin of 13%. And normalizing for the dealer conference costs, again, EBITDA would have declined 22.1% and EBITDA margin would have been 14.8%. Our Q1 net income declined 41.7% to $6.7 million, reflecting net income margin of 7.4% and our EPS was $0.24 a share. But again, normalizing for the dealer conference cost net income margin would have been 8.8% and EPS would have been $0.29 per share. And Ryan talked about our inventory earlier. So I don’t have much to add to that other than it did impact our cash flow from ops where we posted a use of cash of approximately $5 million.

Again, our expectation is to return to positive operating cash beginning in Q2 as we as we work down our days on hand, as we’ve discussed. So tough quarter for sure, but we’re well positioned to continue to work through these macro challenges and get back to solid double-digit growth. And with that, operator, we’ll now open the call up for questions.

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Q&A Session

Operator: [Operator Instructions]. Our first question is coming from Jeff Van Sinderen of B. Riley.

Jeff Van Sinderen: Thanks and good morning. Tom, I wonder if you could give us your expectations for gross margin, your gross margin was I think one of the highlights of positivity in Q1 on maybe for Q2 and for the rest of the year, anything we should be factoring in for that? And then operating expense expectations for Q2 and the remainder of the year? Just maybe giving us a better sense of how to model those.

Ryan Pape: Sure, Jeff. Yes, thanks for the thanks for the question. Yes, I think we had a goal last year was we really exit the year at around that 42% gross margin, and we started the year there. And so that’s where we want to be or higher. And I think that in gross margin, we still have opportunity to improve that over time as we’ve talked about and what weighs against that is that you do have costs that are part of cost of goods that over a short period of time on interim period of time, still more fixed. So that probably challenges us a little bit to go much higher than that in the near term, but we still have that opportunity. On the flip side is there’s there was nothing really that unique about like Q1 that would prevent us from sort of maintaining that level.

And I think on the SG&A question, as as Barry mentioned, we really don’t intend to go backwards and in a meaningful way in our overall SG&A kind of at the run rate that you see and we want to make sure we’re doing that efficiently. Make the right trade-offs we need to do and prevent that from growing and certainly excluding some type of acquisition impact or something else that could impact that one way or the other on with the expectation that we’ll see, we’ll see growth and we’ll grow into that to that cost structure in our [indiscernible]. Now, of course, if the if the environment were to deteriorate further in some way, we might take a different view. And but we’re really working to hold the SG&A and get the most out of what we’re spending rather than we are trying to reduce it sort of been in total dollars, if you will.

Jeff Van Sinderen: Okay. That’s helpful. And then I just wanted to hit on one of your comments in the prepared remarks. I know you spoke to some what you saw in your own dealer units and what you saw in folks that you sell product to. Are your partners out there, if you will. And I think you said 10% to 15% declines, order of magnitude was not unusual in Q1. And so just sort of juxtaposition that with the improvement you saw in April, maybe you could speak to your level of confidence and getting to the 8% to 10% growth in revenues for the year?

Ryan Pape: Yes. Well, I think, frankly, we saw much better growth within that segment in April versus the aggregate we saw in the first quarter. And so that’s quite a change within that within that segment. Now April is one month and you’ve got some sort of hangover effect from the first quarter, maybe April, outperforms May and June. I mean, frankly, we don’t know. But we’ve seen we’ve seen more growth than we saw sort of declines in the first quarter. So I mean, that’s candidly, when you look at the if the data that we have, you have that’s as far into the future as we can see. So I think that is a a positive trend, but maybe one month doesn’t that trend may.

Jeff Van Sinderen: Okay. Fair enough. And then just order of magnitude on I realize you guys are selling to a lot of different regarding film and a lot of different car brands, vehicle brands on order of magnitude were there any 10% size for 10% or larger vehicle brands in Q. one? And maybe you can sort of speak a little bit more about what you’re seeing in the EV brands. I know you mentioned Rivian on how much and which brands impacted your business to most. Anything you could say a concentration of those brands?

Ryan Pape: Yes, I think as we’ve talked about today and in the past, as the distribution of this of this business is likely a lot wider than people might think there’s this idea that well, all of the revenue is concentrated in one brand or two brands or something. And that’s really not the case. I mean, I think we’ve talked about the type of comp make related concentration. Last year, you know, like 5% or less. And so what I think use of is maybe not obvious that we continue to work to trying to explain that or is that you have all of these trade-offs, right? So you’ve got a mix with huge volume like Toyota, but did have a low much lower attach rates. Then you have brands like Porsche that have much lower volume but much higher attach rates.

And the same is true with all the other brands. But when you when you put that together, you can have various measures of attachment, which looked there’s many ways to think about it on a content per vehicle versus some film per vehicle or versus using the bumpers in the proxy. We have all of this where you have these top brands that all of that, all by some of these measures all have kind of the same aggregate volume. Now the attachment rate is fundamentally different. So and I really just can’t stress enough that there isn’t a single of single point concentration risk into any one vehicle in this business, they all trade against each other. And when you get to enthusiast vehicles, you know, we will see higher attach rates in some brands than others that are ultimately meaningful to their results.

I mean, we’ll see BMW attach rates by the measures we have that it did far exceed far exceed Mercedes. And so there isn’t one thing driving that there isn’t one outsized brand and they all have their part in what we’re doing here. And if we had outsized concentration in any one may call one segment, we would talk about that.

Operator: [Operator Instructions]. I’m not seeing anyone else come into queue at this moment, so I will now hand back over to management. Apologies. We’ve just had someone join from Steve Dyer of Craig-Hallum. Steve, your line is live.

Unidentified Analyst: Rob on for Steve. I guess I’ll just start with China in Q1. Obviously, it was much weaker under 2 million. Can you kind of talk about what you see in Q2 kind of thinking about the revenue guide? Seems like it’s much more second half weighted. So that kind of the right way to think about it?

Ryan Pape: Well, I think I think it is in the sense that we have this sell-in versus sell-through dynamic that we’ve talked about sort of ad nauseam on, but our goal is to we eliminate that this year and to then have the ability to recognize our revenue in China as it as it occurs. And that’s part of what we’re trying to accomplish there. And part of what we’re trying to on to change to actually enable us to see even more growth in China. And that could take a number of forms in terms of what we do, a vendor-managed inventory type process or others. And so all of that is a part of what we’re working on in China when you’ve got the bulk of the product for on China coming from the U.S., you’ve always got lots of material in transit.

You’ve got lots of inventory held at different points. And so that creates this lumpiness until you can actually sell through it. And that’s what we’re that’s what we’re going to change. So our quarter to quarter, our sales into China really have almost no our relationship to actually what’s happening on the.

Unidentified Analyst: Okay. Yes, makes sense. And an interesting commentary on the on the colored film Can you kind of explain what sparked that move because you guys have been cautious in the past. Just curious why why and why the change?

Ryan Pape: Well, I think you you’re at a you’re at an inflection point here to say does the application of colored films now fit more in with our business model on if you can use a technology and installation profile that more of our customers are familiar with the incumbent products, the non sort of TPU based products are fundamentally different in there, our physical characteristics, if you will. And so that that leap from a technician or an installer standpoint is a further leap because it’s not the same to install. But as you see the movement and the momentum around using a TPU based colored film that brings it. I’m more into the realms of our current customer base and the labor that we’ve trained and the labor that exists in the market so it creates an opportunity for that.

The products itself, if you’re using TPU. as a substrate, they have the possibility of being more durable, the possibility of better optical properties and a better appearance. So that’s attractive. But I think at the same time where we’re being candid about it is that I don’t know at a consumer level that it fundamentally changes the number of people that want to change the color of their car. And that’s still something that is a bespoke option and not inexpensive. And so it probably appeals to have a fairly narrow fairly narrow portion of the buyer. But as you’re looking at other programs around accessories, operation and customization at the dealership level or the OEM level there will be more opportunity from that. So the time is right to further advance that.

And I think from a product line standpoint, you have to you have to be mindful around things like colors, maintaining many colors requires a lot of inventory and colors come in and out a style, particularly in the aftermarket. So that’s probably part of our conservatism and approach on that historically. But I think it said you’re going to see you’re going to see some reordering of the industry in the aftermarket relative to colored stones over time. Just by virtue of this bifurcation and the technology that’s used. And I think ultimately, that can play to our strengths. So that’s why expanding that sort of beyond black is something that’s worth doing.

Operator: Thank you very much. We will now be handing back over to management for any.

Ryan Pape: Yes, I want to thank everybody for joining us on the call today, and thank our team for working, really hard it set the business up for success and look forward to speaking with everyone again, thank you very much.

Operator: This does conclude today’s conference. You may disconnect your phone lines at this time.