So, that’s kind of the underlying thesis. And then, obviously, from a retail dealer standpoint, we’ve got to show them they can make an equal or greater amount of money doing this or get more consumer acceptance. But I think you’re seeing that happen, and we expect that to be the case across the product line, everything we’re doing and then anything we might add in the future.
Jeff Van Sinderen: Okay. Great to hear. Thanks for taking my questions. I’ll take the rest offline.
Ryan Pape: Thanks Jeff.
Operator: Thank you. Your next question is coming from Tim Moore from EF Hutton.
Tim Moore: Thanks. Ryan and Barry, terrific continued execution and EBITDA margin expansion in the first half was amazing. Three of my questions were already asked, but I have two remaining ones. Your scale and operating leverage benefits have been phenomenal over the past few years, and the gross margin expansion was very good this year. I just want to delve more into the gross margin potential beyond this year. And I know Ryan gave us a little bit sneak peek in the prepared remarks. But Barry, I’m just wondering, was maybe half the gross margin expansion this year from purchasing power and scale? And is the other half maybe from the new products mix that Ryan was talking about? And you actually lapped a lot of those Rivian delayed start-up costs in the first half of this year.
They were a bit of a drag last year. So, I guess, I was really kind of wondering, should we think of 42% to 43% as the floor on gross margin, or do you think it could dip a bit if China sell-through accelerates December quarter early next year because the China margins are lower and a little bit dilutive?
Barry Wood: Yes. Tim, how are you doing? Yes. I think, to answer your first question, the gross margin expansion thus far, obviously, mix and product mix and that played a part in that. But it’s been primarily the efforts we’ve made around the supply chain. So, that continues to be the case. And I think that as we go forward, I don’t know that we would expect gross margin to dip. How high it can go remains to be seen, but certainly, we don’t — we certainly don’t think that 43% is the cap by any stretch, but there’ll be a lot of factors. And as Ryan has alluded to, we’ve — there’s — we have — we feel good about our prospects there, and it’s hard to say at this point how high it will go.
Ryan Pape: I think, Tim, I would add to that relative to China is the good news, bad news, but there was a point where China on a percent of revenue basis was much larger. And so, yes, it is a lower gross margin region for us. But as a percent of revenue with how the rest of the business has grown, it’s just not as impactful now even when we see that rebound relative to offset in a substantial way this other work that’s done. So, the risk of China fundamentally altering margins at this point is pretty low. And if that were to happen, which we don’t think it would be a result of some spectacular performance out of China, which we would gladly take if that happened, but it doesn’t seem likely that that’s going to be the case.
Tim Moore: Sure. That’s helpful color. Yes, I remember, it’s been a couple of years. I mean, I think it was 18% of sales a couple of years ago before the lockdowns. That’s good. That’s really helpful color, and it seems like that is a permanent purchasing power and supply chain effort. I know you changed the suppliers a bit last year. That really helped. And my second and last question is, how are dealership services progressing? I know you did a small acquisition a couple of months ago. And just on a high level, Ryan and Barry, I mean, is the number one limiter to installation and distribution target acquisitions or dealership services, your integration team? Because it’s clearly not your cash and liquidity, but obviously, you have to spend a lot of your time on the core business and don’t want to get distracted. So I’m just wondering, are there any limitations on the integration side for pickup in acquisitions?
Ryan Pape: Well, I think that the limitations we have are probably less in that realm, are probably less related to actually integrating an acquisition and more, if we’re trying to ensure that everything we’re already doing at the scale we’re doing it that we have the infrastructure to support it and to keep doubling down on that. We’ve added — our headcount has grown substantially as we’ve added various programs that are more human capital driven. And so, as we do that in a decentralized way and add more countries, you just need more infrastructure to do that. So, I don’t foresee the actual integration of acquisition is a limiting factor. And I think for us, we want the right deals at the right price. And the downside, upside of doing the small deals that we do is sometimes you can get great deals and sometimes you can run into just a wild pricing asymmetry, if you will, given the profile of the seller.
And so, we just have to be patient and flexible. And if we — if it doesn’t work today, we’re still there tomorrow. But no, I don’t think the integration is holding us up, and I just don’t see an issue with deploying the cash we’re going to generate. It’s just a matter of the timing of when that occurs.
Tim Moore: Great. And that Australia acquisition seems like a grand slam, given how much you’ve already grown sales. But, thanks. And that’s it for my questions.
Ryan Pape: Thank you, Tim.
Operator: Thank you. There are no further questions in queue at this time. And I would now like to turn the floor back to management for closing comments.
Ryan Pape: Thank you all for joining us, and thanks team for a great quarter and a lot of hard work to deliver these results. We’re very appreciative of it, and look forward to another quarter. Thank you.
Operator: Thank you. This does conclude today’s conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
