Fox Factory Holding Corp.

Good afternoon. Welcome to Fox Factory Holdings Corporation third quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, please press star 1 on your telephone keypad. Please note this conference call is being recorded. I'd now like to turn the conference over to your host, Vivek Balkuni, Senior Director of Investor Relations and Business Development. Thank you. You may begin.

Thank you. Good afternoon and welcome to Fox Factory's third quarter 2022 earnings conference call. I'm joined today by Mike Dennison, our chief executive officer, and Scott Humphrey, our chief financial officer and treasurer. First, Mike will provide business updates. Then Scott will review the quarter and full year financial results, and then the outlook, followed by closing remarks from Mike, We will then open the call up for your questions. By now, everyone should have access to the earnings release, which went out today at approximately 4 or 5 Eastern Time. If you have not had a chance to review the release, it is available on the investor relations portion of our website at investor.ridefox.com. Please note that throughout this call, we will refer to Fox Factory as Fox or the company. Before we begin, I would like to remind everyone that the prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. Such statements involve a number of known and unknown uncertainties, many of which are outside the company's control and can cause future results, performance, or achievements to differ significantly from the results, performance, or achievements expressed or implied by such forward-looking statements. Important factors and risks that could cause or contribute to such differences are detailed in the company's latest Form 10-Q and in the annual report on Form 10-K filed with the Securities and Exchange Commission. Except as required by law, the company undertakes no obligation to update any forward-looking or other statements herein, whether as a result of new information, future events, or otherwise. In addition, where appropriate, in today's prepared remarks and within our earnings release, we will refer to non-GAAP financial measures to evaluate our business, as we believe these are useful metrics that better reflect the performance of our business on an ongoing basis. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are included in today's press release, which has also been posted on our website. And with that, it is my pleasure to turn the call over to our CEO, Mike Dennison.

Thank you, V, and good afternoon. We appreciate everyone taking the time to join us for today's call. I want to take a quick second to give a shout-out to all of the Fox athletes who have dominated the downhill and Enduro World Series season. I want to also send a congrats to Fox driver Bryce Menzies, who scored back-to-back victories at the Baja 400. On behalf of Fox Factory, we get a tremendous surge in pride every time we see athletes push the limits with our products and take the podium. This provides the inspiration that fuels us to continue setting records and challenging the impossible. Speaking of records, let's turn to our business highlights from the quarter. Our teams delivered the highest revenue of any quarter in our company's history, helping us exceed $1.5 billion in revenue on a trading 12-month basis. What's really impressive is the fact that just five quarters ago, we crossed the $1 billion revenue mark on a trading 12-month basis. This exemplifies our team's ability to operate through tough economic terrain while staying focused on our mission. Credit goes to the dedication and resilience of the entire Fox team for sustaining our top-line momentum. These results came from another record performance in our powered vehicles product group and a strong quarter-over-quarter performance in our specialty sports product group. which grew over 25% and 9% respectively versus the same period last year. Overall, our third quarter sales were $409.2 million, an increase of 17.8% compared to the third quarter of last year. We also reported an earnings per diluted share of $1.20, an increase of 16.5%. On a non-GAAP adjusted basis, we reported an earnings per diluted share of $1.35, increasing 13.4% from the same period last year. As you consider these strong results, know this significant momentum is fueled by leaning on our core values, leadership, collaboration, service, trust, agility, and ingenuity to expand our competitive advantage across the market while creating a deep connection with our consumers. Digging a little deeper, Let's start with the Powered Vehicles Group, which delivered a record $235.2 million in revenue. This is led by a strong performance in our upfitting product lines, combined with higher revenue from our increased OEM sales. As I had mentioned in my last earnings call remarks, we anticipate maintaining a similar growth rate for the remainder of the year. Thanks to strong demand in our upfitting business and substantial backlog in our power sport and auto OE products. From an operations perspective, here's a quick update on our Gainesville facility. We are pleased with our efficiency improvements and the resulting higher output. The team's continued passion to streamline our efforts is driving success at this facility, and we are applying lessons learned across the business where it makes sense. Over the next several quarters, we remain committed to delivering the 250 to 350 basis point margin improvement, which we have discussed on prior calls. Shifting gears to the specialty sports group, in Q3 2022, we delivered approximately 174 million in sales. I am also incredibly proud that we just celebrated the 10-year anniversary of our Taiwan operations, all culminating in the team gaining local recognition as being one of the best employers to work for. With regards to channel inventory, high-end mountain bikes are still below the preferred levels. and the rise in popularity of e-bikes is continuing to keep the demand relatively strong as supply chains are improving. However, as previously discussed, we are seeing increased signs of demand normalizing, and consequently, we expect SSG performance to return to typical seasonality in Q4. Recessionary pressures in the European region, significant inflationary pressures, and the impact of a strong dollar impact against the pound and euro are exacerbating the situation. Since our last earnings, the pound and euro currencies have devalued anywhere from 3% to 7%, which automatically makes our product relatively more expensive in those markets. These macroeconomic headwinds, as well as higher energy prices, have a direct impact on consumer confidence and behavior. With no easing of these macro pressures in sight, we believe they will have an impact on our short-term growth expectations. This difficult environment will likely persist well into 2023. We will continue to monitor the impact of these factors and, as always, remain agile and nimble. On a long-term basis, and as these headwinds abate, we remain committed to our expectations of mid- to high-single-digit growth. We will continue to strengthen our core competencies and be relentless in extending our competitive differentiation. We also believe the continued optimization of our Gainesville plant will drive margin improvement, as I discussed earlier. The dynamic operating environment has only become more complex as the year has progressed. And still, the team has delivered another record revenue quarter. This, along with raising our revenue guidance to close out the year, deserves to be celebrated, and I cannot thank each and every single member of our Fox family enough for helping us challenge the impossible every day. And with that, I'll turn the call over to Scott.

Thanks, Mike. Good afternoon, everyone. I'll begin by telling you about our third quarter financial results and then review our guidance. Sales in the third quarter of 2022 were $409. 28% versus sales of $347.4 million in the third quarter of 2021. Our power vehicles group, PDG, delivered a 25.1% increase in sales in the third quarter compared to the same quarter last year, primarily due to strong performance in our up-to-date product line and increased demand in our OEM channel. Living and Specialty Sports Group, FSG, delivered primarily due to increased demand in our OEM channel. On a year-to-date basis, sales were $1,193.9 million versus $956.7 million over the same period last year, an increase of 24.7%. This jump in sales is driven by increased demand primarily in FSG's OEM business and strong performance from our exiting product line. Fox Tech's gross margin is 33.5% in the third quarter of 2022, a 10 basis point increase of 33.4% in the same period in the prior year. For the third quarter of 2022, non-GAAP adjusted gross margin also increased by 10 basis points to 33.9% versus Q3 of 2021. The increase in gross margin and non-GAAP adjusted gross margin were primarily driven by favorable product mix compared to Q3 2021, led by higher volume sales in our specialty storage group and strong performance in our up-to-date product line. Our results were also positively impacted by improved factory efficiency. The increase in gross margin and non-GAAP adjusted and we are starting to see an easing of global cost pressures. Total operating expenses were 71.9 million, or 17.6% of sales, in the third quarter of 2022, compared to 16.8 million, or 17.5% of sales, in the third quarter of last year. The increase in operating expenses in Q3 2022 was primarily due to higher employee-related costs, higher insurance and facility-related costs, higher commission costs, and higher professional fees. Looking at non-GAAP operating expenses as a percentage of sales, our non-GAAP operating expenses increased by 38 points to 15.8% in the third quarter of 2022, compared to 15.5% in the same period in the prior year. Focusing on operating expenses in more detail, sales and marketing expenses increased approximately $6 million in the third quarter of 2022 compared to the third quarter of 2021, primarily due to higher commissions of $2.9 million. Research and development costs increased approximately $1.7 million in the third quarter of 2022 compared to the third quarter of 2021, primarily due to personnel investments to support future growth and product innovations. General and administrative expenses increased by approximately $3.4 million in the third quarter of 2022 compared to the third quarter of 2021, due to higher and fully related costs of $1.7 million, as well as higher professional fees of $1 million. For the third quarter of 2022, our effective tax rate was 20.8%. As anticipated, the rate was higher than an estimated full-year 2022 range guidance of 11% to 15%. The higher rate is primarily due to the impact of recently finalized U.S. tax regulations, which limits the amount of newly generated foreign taxes that are credible against U.S. income taxes and resulted in an increase in foreign-declined taxes, as well as increased benefits from lower-staff-based compensation. These increases were partially offset by a lower tax rate on U.S. foreign-derived earnings. On a gap basis, net income for these local stocks in the third quarter of 2022 is $15.8 million, or $1.20 for the needed share, compared to $43.8 million, or $1.03 for the needed share in the same series in the prior year. On a year-to-date basis, Net income attributed to both stocks was $152.3 million, or $3.59 per billion share, compared to $126.1 million, or $2.98 per billion share in the prior year period. Non-GAAP adjusted net income was $57. an increase of approximately $6.9 million, or 13.6%, compared to $15.5 million in the third quarter of last year. We delivered $1.35 of non-GAAP-adjusted earnings for the weighted share in the third quarter of 2022, compared to $1.19 in the third quarter of 2021. On a year-to-date basis, non-GAAP-adjusted net income was $171.8 million, and an increase of approximately $25.8 million, or 17.7%, compared to $146 million in the prior year period. We also delivered $4.06 non-GAAP adjusted earnings per diluted share, compared to $3.35 in the prior year period. Adjusted EBITDA increased by 16.9% to $85.1 million for the third quarter of 2022, compared to 72.8 million in the same quarter last year. Adjusted EBITDA margin decreased by 28 points to 20.8% in the third quarter of 2022, compared to 21% in the third quarter of 2021. The decrease in adjusted EBITDA margin in the third quarter of 2022 is primarily due to change in the product mix impacting stronger dollars and inflationary cost pressures. offset by increased efficiency that our gains go frank. On the year-to-date basis, adjusted EBITDA increased by 27% to $245 million. However, the adjusted EBITDA margin decreased by 70 basis points to 20.5% versus the prior years. Now focusing on our balance sheet, for the third quarter, which ended on September 30, 2022, compared to on December 31st, 2021. We ended with cash on hand of 153.1 million compared to 179.7 million. Accounts with usable was 194.4 million compared to 142 million. Inventory was 354.2 million compared to 279.89. Increased paid and other current assets was 175.4 million compared to $123.1 million, and accounts payable was $131.7 million compared to $100 million even. The increase in inventory as of September 30, 2022 is primarily due to higher input costs and the receipt of long lead time items that had been delayed. The increase in prepaid and other assets at the end of the quarter is primarily driven by deposits for securing cash accounts receivable and accounts payable reflected in this graph, as well as the time and the vendor payment. Our net property payment claimant increased to $199.6 million as of September 30, 2022, compared to $192 million at the end of fiscal year 2021, reflecting capital expenditures of $35.6 million year-to-date. Lastly, our interest and other income and expense went down by versus Q3 of 2021. The primary driver of the decrease was a gain of $2 million for the sale of a small tract of land in Georgia. Now, who needs guidance? For the fourth quarter of 2022, they expect sales in the range of $370 million to $390 million, and non-GAAP adjusted earnings for the leaded share in the range of $1.20, $1.30 per share. For the fiscal year 2022, the company expects sales in the range of $1.565 billion to $1.585 billion, and non-GAAP adjusted earnings for the limited share in the range of $5.15 to $5.35. For our 2022 full-year tax guidance, we expect our tax rate to be closer to 15% for the year 2022. And also, they can note that we're not providing guidance on Gatton yet, and it cannot be provided without unreasonable efforts due to the difficulty of actually submitting the elements necessary to provide such guidance and recommendations. With that, I would like to turn the call back over to Mike.

Thank you, Scott. Once again, I am extremely pleased with the results our team has produced in the third quarter, especially given the tough economic and operational backdrop. Looking forward, we are cognizant of the rapid changes in the macro environment. Consequently, the ability to pivot and deliver under multiple scenarios is more important than ever before. As we plan ahead for 2023, we are focused on what we can control, and we're taking a balanced approach against an uncertain economic outlook. Our top priorities include increasing inventory turns and the generation of free cash flow driven through decision and production agility. We are certainly pleased with our robust balance sheet, and I believe it to be one of the top defenses against any bumps in the economic environment that we may experience. We remain committed to continual improvement in our operating model for sustained and predictable performance to our long-term goals, thus maximizing value for our employees and shareholders. I would now like to open the call for questions. Operator?

At this time, if you'd like to ask a question, please press the star and one on your touchtone phone. You may remove yourself from the queue at any time by pressing star two. We'll take our first question from Larry Sello from CJS Securities.

Thanks, guys. I guess the first question, Mike, lots of moving parts. You mentioned inventory levels still remain below normal. Your backlog sounds like it's still pretty good, at least on the power vehicle side. And obviously the economy, though, continues to get a little bit worse. What kind of visibility, not giving guidance, but how's your visibility like as you look out into 2023? And then the second part of that question is, About a year ago, you gave your 2025 outlook. I think you put that together almost two years ago. Do you feel as good about that outlook today as you did back then?

Yeah, Larry, I'll start your second question first. We still are confident in our 2025 vision. We didn't expect to see the growth we have seen in the last two years in SSG when we laid out that vision. So we got a bit ahead of ourselves, probably getting to that 2025 number with a great success in the last two years. But even with a flattened or diminished SSG business on a short-term basis, we still feel comfortable with the long-term plan. Partially because, and this kind of gets to the first question, our spec share on our OEM bikes has remained strong and gotten stronger throughout the two years, so we're gaining market share. That's the positive. The negative is, to the question about kind of next year, is you've just got so many moving pieces from foreign currency and inflation around the world and foreign currency in Europe specifically. a really clunky supply chain in bike, meaning we might be able to deliver shocks and forks, but somebody else can't deliver a drivetrain or something else. So you've got lots of parts and pieces of bikes sitting out somewhere in the supply chain that need to be configured. And that's causing a lot of clunkiness and a very opaque view of what 23 would look like relative to actual net demand. So we're being pretty conservative about it. You know, obviously, as you mentioned, I'm not going to guide 23 just yet. And also, we're not going to guide it just because stuff is changing daily. So by the time we get to that 23 guide, we'll have a pretty clear view. But a lot changed even in Q4 and probably the last two weeks. So, you know, we contemplated that in the guide that Scott gave you in his comments. I think you need to give us a couple of months to really get our hands around 23. But I would expect that – Even with the upside of spec loans, the downside of market volatility in just the overall economy is going to cause us to be pretty conservative in what we estimate 2023 to look like.

Right. So it sounds like it could be below your, at least on the SSG side, below sort of that normal targeted growth.

On the SSG side, but on the PDV side, which we didn't talk about, Larry, we're seeing significant volume coming through in the auto OEM side, and power sports is still really strong. So the benefit of our business model is the diversification, right? So even if I see a little bit of weakness in the bike side, we're seeing some strength in other parts of the business. PDV is still doing really well and will continue to do really well. So that's what I love about the business. I think the diversification there really helped carry us through.

Right. Okay, great. And, you know, you mentioned, obviously, Georgia continues to, you know, efficiency continues to improve there. I guess the question I have is, I mean, you kind of reaffirmed your sort of 250 or 300-bit basis point improvement. It won't be a linear improvement, right? But is that sort of a, you know, you expect sort of a kind of, in a creative mode now where we should kind of be adding additional incremental benefits per quarter as they move out?

Yeah, I think you'll start to see that. We didn't really see it as incremental benefit in Q3, but I think you'll start to see that now, and I think you'll just see it continue throughout Q3.

Right, and this quarter was also impacted, I guess, by mix, too, right, the OEM piece, the auto OEM piece.

You know us well, Larry, yeah. As you move to more of that auto OEM mix, you get the benefit of high-volume, low-mix, but you don't get the benefit of some of the gross margins that you would see in other parts of the business.

Great. And just a last question on the balance sheet. Obviously, it's improved the last couple of years. Would you entertain the idea of an acquisition in this environment, or might you be a little more cautious and, you know, hold your, you know, keep some powder dry?

A little bit of both, actually. We are looking at some potential opportunities in this space, and we've always looked at opportunities. So we're not, we have not stepped away from that notion of an acquisition. But I also, and we've talked about this today as a management team, as we go into pretty uncertain economic times next year, we're going to be pretty conservative on how much leverage we want in the business. So, you know, what that might mean is we do less significant acquisitions, but really, you know, well-targeted acquisitions. And, you know, the good news is as the recession gets, if there is good news in a bad recession or a bad economy, things get cheaper. And that's a good time for us to use some of our dry powder to pick up things that we think are long-term valuable to the company.

Gotcha. Great. Okay, excellent. I appreciate all the call. Thanks.

You bet.

Our next question comes from Mike Swartz from Truist Securities.

Hey, guys. Good afternoon. Maybe just a couple questions here on guidance. You beat at the midpoint of your third quarter EPS, guide by about $0.10, you're raising the full year by about $0.07. Maybe give us some context to some of the puts and takes. I know currency, I know interest rates, we're probably headwinds to that, but just how should we think about that guidance increase?

Yeah, no, absolutely, Mike. I think we're trying to, as always, be somewhat conservative in our outlook but we are fighting against a little bit of currency headwind. We started a hedging program in Q3, which was very successful in helping us mitigate some of that impact that we would have seen otherwise, and we'd already had a fairly robust interest rate swap program in place to help combat interest rates, but we certainly have not swapped all to fixed, and so we are impacted by higher rates a little bit taxes. We've also raised our guidance for the year because we had some return to provision adjustments that will come through in Q4. So we have some headwinds, not to mention mix continuing to materialize as we expected, but a little bit even more on the automotive OE side, which, as Mike just said, makes it tougher for us to overcome with improvements in efficiencies in Gainesville. So, yeah, I think just kind of taking a very balanced approach to our outlook for Q4, given some of the sort of non-business things that we're faced with, I think we're still happy with what we see in Q4 from a business perspective. We're just fighting against a whole bunch of other things.

Okay, that's helpful. And I noticed on the balance sheet the prepaids came down sequentially pretty nicely. I guess how should we read that in terms of, you know, either demand or chassis supply in the upfitting business?

Yeah, demand is still very strong, and chassis supply, actually you should read it as a good thing for chassis supply because we felt comfortable enough in our relationships and in our relationships Sort of our feedback that we're getting from the OEs, specifically we've talked about how when it hits our balance sheet and prepaid, that that's primarily like an FCA relationship with Ram and Jeep. that we felt pretty comfortable that we were going to be able to get access to chassis. And so where during pandemic we had gone out and bought everything that we could get our hands on, we have curtailed that in order to better manage our working capital. As I mentioned last quarter, that was going to be a big focus for us was getting working capital under control, And, you know, all credit is due to the team in our PVD group, and especially over in Birmingham at SCA, for working to get that inventory level down so that we're living more on like six months of chassis versus 12 to 15 months.

Okay, great. I appreciate that.

Our next question comes from Anna Glaston from Jefferies.

Hi. Thanks for taking my question. First, I wanted to touch on the upfitting business. Great to see the demand strength there. Previously, we've talked about how you could start to see some macro sensitivity towards the entry-level side of that business. Could you talk about how that business is performing by pricing tier?

yeah this is mike uh you know it's still performing strong across the entire platform so so we haven't seen anything kind of fall off i would say in september we saw uh uh late at the time on a dealer's lot increased a little bit but still on the historical average pretty pretty good um so as we as we think about kind of q forward into next year we're pretty we're pretty bullish on that puberty business because it does seem that it's weathering some of these inflationary pressures better than other parts of the business and other consumer products. So far, we're feeling pretty good about it.

Great, thanks. And then turning back to SSG, could you maybe comment on where we stand in terms of channel inventories? Is POS matching itself in a little bit better? Is there still a little bit more to build and how that should shape the expectation into 2023?

Yeah, I think it's getting close to equilibrium. You know, the challenge is, and I mentioned this in Larry's question, is that You've got a lot of clunkiness still in the unfinished bike side of the supply chain because you've got parts and pieces of bikes but not full bikes. So we've got to see that really flow through hopefully in Q4 and early Q1 to get a really good sense of kind of where the volumes are in the channels for the high-end premium bikes. But I would say that we're still a little bit under equilibrium now and we're looking our way in that direction. So we will see that season out in Q4. We'll see it in Q1. You know, those are Those are things that, as I said to you before and to others, I think that gives us some confidence that we can have a reasonably soft landing in bike because without seasonality, you kind of feel like you're going to fall off a cliff. And so I feel pretty good that we're going to start to see that come through in the next couple quarters.

Great. Thanks.

And once again, if you'd like to ask a question, that is star and one. We'll take our next question from Jim Duffy from Spiegel.

Thank you. Good afternoon, guys. Mike, I want to start with a question on the upfitting business. Can you speak about the opportunity for additional penetration on dealer lots where you stand right now relative to the opportunity and appetite from incremental dealers to engage with you in that business? That's a big lever for us if we see sales start to slow in the current dealer ranks. It's still going to challenge the first three quarters of this year to get enough trucks fast enough out to the lots to support new dealer engagements, but it's starting to get better, and I think that's really our opportunity going through the end of Q4 and into next year is to expand from 2,200 dealers to 2,500 and beyond. You've heard me talk about it in the past. I think that's Getting to the consumers across the country in a more efficient way across a broader dealer network is really our upside opportunity. We're close to capacity in our PVD business, so we're going to be expanding a little bit of space and capability to get some more throughput during the next year. But the dealer growth is obviously kind of top of mind for us. Great. Scott, a couple questions coming your way. There was some encouraging commentary about opportunities to realize margin benefit from Gainesville in 2023. I realize there's some uncertainty on the top line, but I'm curious to call out from a gross margin mix standpoint into 2023 just with respect to the mix towards powered vehicles and away from SSG.

Yeah, sure, Jim. I think You know, and certainly I want to go back to, you know, when you're talking about uncertainty, as Mike mentioned, I think on the PBG side, we're not seeing any weakness and, in fact, are expecting to see growth continue. And so not a big concern there, but I think you're right in thinking about from a mixed perspective. I mean, that's something that we've talked about many times over the last couple of years. As we see that mix change, we're going to be you know, we're going to be impacted by that margin mix. And then the improvements or the efficiencies in Gainesville will hopefully help to offset that. And so it may not be showing up as clearly in the posted results, but the improvements are going to be there in sort of how it's mitigating any of that mix.

Okay. And then Scott, can you talk more about just opportunities to improve your working capital efficiency? It seems like inventory is certainly an opportunity. Would you expect to see progress with that in 2023 to help cash flows? And then how should we think about the prepaid accounts balance from here?

Yeah, we're still working to optimize our inventory levels and upfitting, and so that's the prepaid piece. I think we can get a little bit more benefit out of that here in the short term. But like I said before, the team has done a phenomenal job in, I would say, kind of readjusting their sort of mindset from COVID, we need to take everything we can get our hands on to, you know, moving to more of a what do we need to actually, you know, meet demand and moving into that kind of headspace. I think your dead-on inventory is a focus for us right now and will continue to be next year. We've got to get our turns improved. Mike mentioned that in his prepared remarks. It is a huge focus for us next year and even in Q4 how we are managing inventory and improving our turns and our cash flow related to that.

Thank you.

Our last question comes from Craig Kennison from Beard.

Hey, thanks for taking my question as well. I'm curious what you're seeing on the power sports side with your customers that make side-by-side ATVs, snowmobiles, and other products. We know those channels have had very little inventory through the pandemic period. But maybe that's improving. I'm curious what you're seeing. And I'm curious if your OEM customers have begun to taper orders at all as they get through this period of, you know, severe shortages.

Yeah, Craig, this is Mike. In terms of the back half of that question, we haven't seen any tapering yet. Our customers are pushing us to produce more. We're getting better quarter on quarter. The first part of this quarter already, we're doing a lot better to get that product out the door. We're still in a pretty significant backlog situation with those customers, so we're working really hard to meet their expectations and and deliver product to them. I think ultimately power sports will start to trend like bike, but I don't know that we'll see that even in the next year. I don't know yet. It was probably too early to call the ball for the back half of next year, but the first half is going to look like this year, just more of it. So my expectation is eventually we'll see some of that kind of equilibrium coming back into power sports, but we're not hearing that yet.

Thanks. And then just as a follow-up, if you look at your white space opportunity within power sports specifically, what does it look like to you? Do you have opportunities to win spec share, get on new models or within a new brand? Where do you see the biggest opportunity to grow beyond what the industry can provide you?

We have some stuff in process right now, Craig, that I think is really interesting, and I want to call it out on the call because we're still working through the details of it. But there's parts of that business that I think create significant white space for us, not just in new technologies or new vehicles, but in new ways of approaching the market. Aftermarket in that space has been a very small business for a long time. We bought Shock Therapy to help us understand it better. We've learned a lot in that acquisition, even though it was a small acquisition. And so we're getting ready for, you know, some significant changes in 2023 that we're pretty excited about that I think we can start talking about in the next couple of earnings calls that will show us some good growth, even as that market starts to kind of balance itself out. Great. Hey, thank you.

Thanks, Craig.

It appears we have no more questions at this time. I will now turn the program back over to Mike Dennison for any concluding remarks.

Thanks. We appreciate everyone taking the time to join us on today's call, and we hope to talk to you soon. Have a good evening. Thank you.

This does conclude the Fox Factory Holding Corporation third quarter 2022 earnings call. You may now disconnect your line and have a great day.