Motorcar Parts of America, Inc.

Good day. My name is Rob and I will be your conference operator today. At this time, I'd like to welcome everyone to the Motorcar Parts of America Fiscope 2023 third quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star 1. Thank you. Gary Mayer, Vice President of Corporate Communications and Investor Relations. You may begin your conference.

Thank you. Thank you, Rob, and thanks, everyone, for joining us. Before I turn the call over to Selin Jaffe, Chairman, President, and Chief Executive Officer, and David Lee, the company's Chief Financial Officer, I'd like to remind everyone of the safe harbor statement included in today's press release. Private Securities Litigation Reform Act of 1995 provides a safe harbor for certain forward-looking statements, including statements made during today's conference call. Such forward-looking statements are based on the company's current expectations and beliefs concerning future developments and their potential effects on the company. There can be no assurance that future developments affecting the company will be those anticipated by Motor Car Parts of America. Actual results may differ from those projected in the forward-looking statements. These forward-looking statements involve significant risks and uncertainties, some of which are beyond the control of the company and are subject to change based upon various factors. In particular, expectations about anticipated future growth and opportunities with customers may not be achieved. The company undertakes no obligation to publicly update or revise any forward-looking statements whether it was a result of new information, future events, or otherwise. For a more detailed discussion of some of the ongoing risks and uncertainties of the company's business, I refer you to the company's various filings with the Securities and Exchange Commission. With that said, I would like to begin the call and turn the call over to Sal.

Thank you, Jerry. I appreciate everyone joining us today. Let me begin by addressing factors that impacted our results and then I will address our expectations for the near future. Before I begin, despite our softer than normal sales for the quarter, let me assure you that there were no customer or shelf space losses. There were two major items impacting our sales for the quarter. First, a certain customer reduced orders by approximately $14 million compared with the same period a year ago. In addition, we were impacted by delays in new business from certain other customers representing approximately $17 million of deferrals for the quarter. As a result, our sales targets for the quarter and nine-month period were affected. We are now experiencing a resumption of ordering levels in the current fiscal fourth quarter, with orders expected to gain further momentum throughout our next fiscal year. As a result of the lower sales volumes, we temporarily reduced production, which impacted overhead absorption, which in turn impacted gross margins. As sales and production volume increases, we expect to incrementally benefit from increased overhead absorption. I should emphasize that in the normal course of business, customer returns remain relatively constant. As such, when sales decrease, returns as a percentage of sales increase. Returns as a percentage of sales were higher for the quarter, which in turn further impacted gross margins. Gross margins were also impacted by inflationary costs not yet covered by price increases. We expect to realize the full benefit of our price increases in the current fiscal fourth quarter with further upside from expected order volume improvement. Operating efficiencies and cost reduction initiatives that we continue to implement across the entire organization. These initiatives including an ongoing company-wide strategic analysis of opportunities to realign our resources and cost structure to enhance profitability and cash flow. Clearly, our results were not acceptable and not what we expected when we hosted our fiscal second quarter call, primarily due to specific customer-related ordering activities and some macroeconomic headwinds, as I just noted. We experienced some supply chain challenges, primarily due to shortages for certain components. which impacted production of some products. Fortunately, sales that were impacted by supply chain issues last quarter are improving. This will also help mitigate the impact on gross margins going forward. High interest rates continue to have a significant impact on profitability, primarily due to rates related to long-established customer supply chain finance programs. David will discuss these items shortly. As you know, we are a major supplier of critical non-discretionary automotive aftermarket parts. We are working with our customers to address the sharply high interest rate environment, which impacts both MPA and our customers, as well as companies doing business with the leading automotive retailers. It's an industry challenge that requires practical solutions and further action. Now let me address our future outlook. We expect sales to increase by $52 million annually, just from resumption of expected normalized order volume from two key customers, starting in the current quarter. In addition, we expect to add incremental sales of approximately $15 million from additional committed new business. We also expect to more than double our business for brake pads and rotors in the next fiscal year. Equally important, Our gross margins will be enhanced by approximately $20 million of incremental price increases that start this quarter. In addition, as we wrap up for an all-time record fourth quarter, we expect to see margin accretion from efficiencies related to the higher volume and cost-cutting initiatives. As noted in our press release today, we have revised our annual guidance to reflect the actual third quarter results and our optimism for the current fourth quarter. While we don't provide quarterly guidance given our revised update, one can easily calculate it. We expect record sales for the fiscal fourth quarter between 183.6 and 191.6 million and record profitability of adjusted EBITDA between 27.5 and 32.5 million dollars. With respect to cash flow, our expectation is to continue to make progress to generate cash. we are committed to maintaining strong organic growth while focused on enhancing our gross margins and cash flow. In short, as a result of all these initiatives, we believe the company is well positioned for sustainable top and bottom line growth for parts and solutions, and our partnerships with our customers will be mutually enhanced. Now let me expand a bit further and discuss the other drivers to support our ability to achieve our longer term financial targets. Our break-related product lines are growing with expected operating efficiency improvements as volume increases with further fixed cost absorption opportunities. We believe our break-related business will exceed 300 million in annual sales above our fiscal 22 reported results within the next four to five years. We will continue to expand sales in Mexico with multiple product lines as our customers experience increased demand for aftermarket parts, which currently includes rotating electrical, wheel hubs, brake boosters, and brake master cylinders. All major automotive retailers are continuing the rollout of our rotating electric benchtop tester, and we expect sales from this opportunity to reach a cumulative $80 million in the next four to five years. We also expect additional revenue for maintenance and add-on services. Our electric vehicle contract testing center in Detroit, Michigan continues to attract customers, including a leading agricultural and construction equipment provider and leading EV automotive manufacturers to support the design and development of electric vehicles. This contract testing is an initial entry into software as a solution. In short, we are well positioned to address both the internal combustion engine market and the emerging electric vehicle market with product functionality and applications across both markets. We expect continued strong demand for ICE, internal combustion engine applications, for decades, notwithstanding electric vehicle growth. which still represents a small percentage of the overall car park. In summary, we have a broad line of non-discretionary aftermarket parts necessary to service the car population of approximately 285 million vehicles on the road, representing an uptick based on recently issued industry data. We remain excited about our opportunities, notwithstanding the headwinds we experienced for the quarter. I can assure you we are working diligently every day with our customers and suppliers to meet the demand for our products, as well as addressing the inflationary pressures we are all facing that I touched on earlier in my remarks. I will now turn the call over to David to review our results in greater detail.

Thank you, Selwyn, and good morning, everyone. I encourage everyone to read the earnings press release issued this morning, as well as the 10Q that will be filed later today. Let me now provide a review of our fiscal third quarter and nine months financial results. Net sales for the fiscal 23 third quarter were $151.8 million compared with $161.8 million in the prior year. Fiscal third quarter results were sharply impacted by a certain customer reducing orders by approximately $14 million compared with the prior year and delays with other customers for new business of approximately $17 million. Orders have resumed in the current fiscal 23 fourth quarter and were expected to continue through fiscal 24 as Selwyn mentioned earlier. Gross profit for the fiscal 23 third quarter was $21 million compared with $32.6 million a year earlier. Gross profit for the quarter was impacted by non-cash items as well as cash items. Let me provide details for each and then I will provide further details on the impact on each additional line item so you can further understand underlying fundamentals between periods and the opportunities to enhance profitability. The non-cash items reflect core and finished good premium amortization and re-evaluation of cores on customer shelves, which are unique to certain of our products and required by GAAP. The total for these non-cash items in the quarter was approximately $3.9 million. A more detailed explanation of core accounting is available on our website, and I would encourage anyone with questions about this topic to review the video. We also incurred transitory supply chain destruction costs of $2.4 million, compared with $4.3 million a year ago, as referenced in Exhibit 3 of this morning's earnings press release. We are encouraged that these costs are decreasing. Third quarter gross profit as a percentage of net sales was 13.8% compared with 20.1% a year earlier. Gross margin was impacted by 2.6% from the previously mentioned non-cash items, as well as 1.6% from the previously mentioned cash items from transitory costs related to supply chain disruptions. While global supply chain challenges seem to be improving we are still experiencing challenges and continue to assess COVID-19 and global geopolitical situations. In summary, in addition to the non-cash and cash items explained previously, gross margin for the fiscal 23 third quarter compared with the prior year was impacted by inflationary costs not yet covered by price increases, temporary lower absorption of overhead costs due to lower production volume, and changes in product mix. Gross margin improvement is expected to be enhanced as the full benefit of certain price increases is realized and with higher sales volumes in the current fourth quarter and fiscal of 2024. Operating expenses were down 6.4 million for the quarter to 17.5 million from 23.9 million in the prior year period. This included a non-cash gain of 4.3 million for the foreign exchange impact of lease liabilities and forward contracts, compared with a prior year non-cash loss of $385,000. The remaining $1.7 million of operating expense decreases include cost reduction initiatives. We reported net income of $1 million, or $0.05 per diluted share, as detailed in Exhibit 1 of this Morning's Courier's Press. Results reflect the impact of non-cash items totaling $484,000 or $0.02 per diluted share. Cash items that impacted results included transitory costs related to supply chain disruptions totaling $2.8 million or $0.14 per diluted share. In addition to the above non-cash and cash items, as previously mentioned in the gross margin discussion, results for the quarter were impacted by inflationary costs not yet covered by price increases, temporary lower absorption of overhead costs due to lower production volume, and changes in product mix. Results are expected to be enhanced as the full benefit of certain price increases is realized and with higher sales volumes in the current fourth quarter and in fiscal 2024. I should note that we have implemented cost reduction initiatives throughout the company, including travel, outside services, labor costs, and overall cost-saving opportunities, which are expected to enhance profitability. Additionally, results for the fiscal third quarter were also impacted by $7.5 million, or 29 cents per diluted share, of higher interest expenses, primarily due to higher market interest rates compared with the prior year. Interest expense was $11.5 million, compared with $3.9 million for last year. Of this increase in interest expense, approximately 98% resulted from higher market interest rates. I should further emphasize that the large interest expense incurred in the third quarter was primarily driven by a sharp rise in interest rates of 4.5% compared with the prior year for the accounts receivable discount program offered by our customers. This increases more than triple the discount rate the company paid in interest expense in the prior year period. As a critical supplier of non-discretionary automotive parts, we are committed to arriving at a satisfactory solution to this issue. Additionally, we are focused on improving cash flow to pay down borrowings. Additionally, income tax benefit was $9 million, compared with $1.6 million income tax expense for the prior year period. The income tax provision reflects the expected benefit from tax losses. I should also mention that the effective tax rate for the nine months was affected in part due to the inability to recognize the benefit of losses at specific foreign jurisdictions. However, we expect these losses will be utilized against future profits, which will benefit future tax rates. Net income was 3.1 million, or 16 cents per diluted share, in the year-ago period. Results a year earlier were impacted by non-cash items totaling $4.8 million, or $0.25 per diluted share, and cash items totaling $3.7 million, or $0.19 per diluted share, primarily transitory costs related to supply chain disruptions. EBITDA for the third quarter was $6.6 million. EBITDA was impacted by $646,000 of non-cash items as well as 3.8 million in cash items, primarily due to the transitory costs related to supply chain disruptions. EBITDA before the impact of non-cash and cash items mentioned above was 11 million for the third quarter. In addition to the above non-cash and cash items, EBITDA for the quarter was further impacted by inflationary costs not yet covered by price increases, temporary lower absorption of overhead costs due to lower production volume, and changes in product mix as previously mentioned. In summary, EBITDA improvement in the current fourth quarter and fiscal 2024 are expected to be enhanced by the full benefit of certain price increases and with higher sales volume in addition to cost reduction initiatives. EBITDA for the prior third quarter was $11.9 million. EBITDA a year ago was impacted by $6.4 million of non-cash items, as well as $4.9 million of cash expenses, primarily transitory costs related to supply chain disruptions. EBITDA before the impact of non-cash and cash items mentioned above was $23.2 million for the prior year third quarter. Now, let me discuss the nine-month results. Net sales for the fiscal 23 nine-month period were $488.3 million, representing a 3.2% increase compared with $473.1 million in the prior year, which excludes $13.3 million in core revenue due to a realignment of inventory at customer distribution centers with sales benefits evolving as product mix changes. Gross profit for the fiscal 23 nine-month period was $77.8 million, compared with $92.1 million a year earlier. Gross profit as a percentage of net sales for the fiscal 23 nine-month period was 15.9%, compared with 18.9% a year earlier. Gross margin for the fiscal 23 nine-month period was impacted by 2.4% of non-cash items and 1.8%, primarily transitory supply chain disruptions, as detailed in exhibit four in this morning's earnings press release. In addition to the non-cash and cash items just mentioned, gross margin for the fiscal 23 nine-month period was impacted by various items discussed previously for the quarter. We expect gross margin improvement to be enhanced with the full benefit of certain price increases and with higher sales volumes, as I noted in my previous comments for the quarter. Net loss for the fiscal 23 nine-month period $5.7 million or $0.29 per share compared with net income of $7.7 million or $0.39 per diluted share a year ago. Results were impacted by non-cash items totaling $9.6 million or $0.50 per diluted share and cash items totaling $9.5 million or $0.49 per share, primarily transitory costs related to supply chain disruptions as detailed in Exhibit 2. In addition to the above items, results for the nine-month period were primarily impacted by various items discussed previously. Results are expected to be enhanced as a result of the various initiatives I discussed earlier concerning price increases and higher sales volume. EBITDA for the fiscal 23 nine-month period was $22 million. EBITDA was impacted by $12.9 million of non-cash items, as well as $12.6 million in cash items. EBITDA before the impact of non-cash and cash items mentioned above was $47.5 million for the current period. In addition to the above items, EBITDA for the nine-month period was impacted by various items as referenced previously for the quarter. In summary, as I discussed for the quarter, we expect EBITDA improvement as a full benefit of certain price increases and higher sales volume are realized along with cost reduction initiatives. EBITDA for the prior year fiscal 22 nine-month period was $33.6 million. EBITDA was impacted by $19.9 million of non-cash items, as well as $14.2 million in cash items. EBITDA before the impact of non-cash and cash items mentioned above was $67.7 million for the prior year period. Now, we will move on to cash flow and key corporate items. Net cash used in operating activities during the fiscal third quarter was $4.5 million versus $2.2 million cash provided by operating activities in the prior year period. This reflects working capital requirements to support year-to-date sales growth and expected record sales for the fiscal 23 fourth quarter. We expect to generate an increase in operating profits on a quarter-over-quarter basis for the fourth quarter supported by organic growth from customer demand, introduction of new product categories, price increases, and operating efficiencies from our footprint expansion. I should point out that due to record sales volume, we expect our accounts receivable balance to increase significantly in the fourth quarter, which will result in further enhancements to cash flow in the new fiscal year. It should be noted that our day's outstanding receivable is approximately 45 days. Our return on invested capital on a pre-tax basis at December 31st, 2022 was 13.3%, compared with 23.1% a year earlier. As our investments bear fruit, we expect to realize further benefit from the expansion of our Mexican operations and the launch of our new break categories with expectation of increased returns from both new and existing product lines. Our net debt at the end of the quarter was approximately $176.3 million, while total cash and availability on the revolving credit facility was approximately $70 million. Lastly, we recently entered into a fifth amendment to our credit facility to modify the covenant to match the timing of implementing price increases to address inflationary costs and the tripling of interest rates. For further explanation on the reconciliation of items that impacted results, and non-GAAP financial measures, please refer to Exhibits 1 through 5 in this morning's earnings press release. I would now like to open the line for questions.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad. Your first question comes from the line of Matt Cranda from Roth MKM. Your line is open.

Hey, guys. Good morning. I guess I'll just start out with my traditional first question, which is, David, if you could provide the breakdown of revenue between rotating electrical wheel hub brake products and other.

Yes, Matt. For the third quarter, rotating electrical was 66%. Wheel hubs was 10%. Brake-lidded products was 20%. And others was 4%. OK.

Got it. Very helpful. And then just trying to understand the – it sounds like you called out two different buckets of headwind in the quarter, one being delays in new business, the other being reduced orders from an existing customer. Is that all coming from one customer in particular, and is that all in rotating electrical? Maybe if you could just give a little color on why exactly –

that uh you know that reduction uh which looks pretty stark on your rear basis yeah so it comes on that um it comes from two you know a couple of customers predominantly i mean the uh um it's a mix between um rotating electrical and and brake calipers brake rotors and brake pads really it's all it's all of those four and um And really, the good news is that those orders have started coming back in in this quarter. So we're seeing it now. And if the $35 million just gets to normalize reordering patents, which we expect it will, I mean, that should just give us an organic look next year, not about new business, just about existing business performing to our expectations. And then the other piece is new business changeovers that have been committed to us, and we had a little bit of a slowdown with extreme weather and some softening in the bays, but that seems to be coming back as well. So, you know, that should give us, again, an organic list of that approximately $17 million. And then we've got additional business changes We've got additional business that new business that will come on board next year that's already committed and quite frankly, some visibility of even more than that.

I guess I'm just trying to understand it in the context of like you have a decent sized customer that's reported results today and inventory looks like it's up mid-teens for them. Comps are super healthy. and yet we're seeing a reduction overall in rotating electrical revenues. I'm just trying to square the two and understand sort of why rotating electrical should be down in that context.

Again, relating to one particular customer, I mean, we can't talk about who it is or what it is or why it is, but no market share loss, but we expect that to come back. Just really, really, based on their initiatives, really more than anything. Okay.

Sorry. I can take the rest of that stuff offline. That's fine. Okay. And then just on the, okay, so the other thing I wanted to understand is the sequential guide. If I take the implied, even a guide at the midpoint for the fourth quarter, it's a big step up. We're looking at, you know, close to 900 basis points of improvement that you guys are guiding to. Maybe just if you could give us some confidence in the gross margin versus OPEX split in the fourth quarter, how to think about gross margin improvement on a sequential basis, and how much of that is coming from price versus volume. It would be super helpful just to understand a little bit more about what's embedded in your assumptions.

This is David. So we can talk about the three items we called out during the prepared remarks. So the inflationary costs, that will be addressed by the price increases that are going in. So large price increases have already started at the beginning of this quarter. So that's going to address the inflationary costs. The lower overhead absorption costs that we talked about due to lower production volume with now higher sales and growing production volumes, that should also address the lower overhead absorption. Now, we did also have product mix. So product mix, we do expect growth in all our categories. That should help the product mix a little bit. Another item that someone mentioned was the returns. So returns are constant. With the lower sales volume in the December quarter, returns as a percentage of sales was higher. Now back to higher sales volumes, those returns as a percentage of sales will now turn back to normalized levels. We do have one product line that during the December quarter was impacted by shortages of critical components. We're already seeing that those sales are back up. So with those higher volume product lines, that will also benefit the gross margins.

Okay. All right. And then just you mentioned price, David, maybe someone or David on this one. Can you talk about the rounds of price increases? I think last time you mentioned there was one in October. Sounds like that really didn't benefit the third quarter at all, really, from a margin perspective. And so there was another round that you had mentioned on the last call that was supposed to take place in January. So I'm assuming you're referring to that as kind of the last round of price increases. And that's what we're counting on to sort of improve gross margins in the fourth quarter, along with volume and some of the low return rates that you mentioned there. Am I understanding that correctly, or is there more price that you're embedding beyond the January actions?

No. So far, that is correct, Matt. Those are all committed price increases that have gone into effect. We continue to evaluate our business and market conditions, and we'll evaluate what we'll do on price as we go forward. But as of now, that's where we are. I mean, that includes, you know, the sort of annualized leftover, you know, is $20 million. $20 million on our existing revenue base, about $20 million of price increase. And, you know, some of it just started, so maybe, you know, maybe a little more there. But around that, that's left to go into effect on an annual basis.

Okay, got it. And then in the press release, I think you mentioned brake pad and rotor product line net sales expected to double in fiscal 24. That's not overall brake products revenue as a whole, is it? I mean, we shouldn't be taking the run rate you're on this year and doubling that for next year, but maybe just give a little color on what that implies for overall brake products growth as we head into fiscal 24.

Yeah, well, I think you're going to see overall brake products growth north of 30%, maybe even 40% for next fiscal year. We haven't really given guidance yet on that, but the pads and rotors is fast becoming a big part of that. We've also got other brake-related products in there that are all growing. So we're up to continue to be optimistic there, and margins are starting to unfold there where We're just getting through some of that startup margin headwinds and starting to get to a more normalized level, but they'll continue to improve as this volume continues to grow.

Okay, helpful. I'll take the rest of my time, guys. Thanks.

Thank you. Your next question comes from the line of Brian Nagel from Oppenheimer. Your line is open.

Hi. Good afternoon, guys. Hey, Brian. How you doing? So my first question, just with respect to the sales disruption in the quarter, I think it's probably a follow-up to some extent to the prior question, but just to get to be clear, I mean, are these sales, in your view, are these sales just simply delayed, or is there a component that is lost because of this? It sounds like one competitor, the adjustments they've made.

I think they're lost. Having said that, I think this customer will step up orders to maintain its competitive position. I shouldn't say will, they are to maintain their competitive position in the marketplace. And so I think we'll see an elevation and a return.

with them as they as they increase their inventory levels um but i don't think those are recoverable the the the changeover revenue that's 17 million that's just a deferral and i followed you i've watched your company for a while now i i don't remember something like this happening in the past so i guess the question is you know does this happen is is this unprecedented you know you know In an event like this, you know, could it be a leading indicator of something else?

It's unprecedented. We have not seen it at this size before. I think it's an indicator of strategy. And, again, you know, we can't talk about any of our customers and their strategies, but I think it's an indication of a short-term strategy that's being reversed.

Got it. Shifting gears a bit, there's on the supply chain. I think, David, you were making comments here, but just with regard to the ongoing disruptions. I guess my question is, we've seen, broadly speaking, supply chain challenges for your company, for your sector, even more broadly, abate, but there's still some out there. Are we still thinking that most of these supply chain issues are more or less transitory in nature, or are we getting now to the point where you know, maybe some of these disruptions will just simply persist or have now become structural.

No, I think they're transitory. I, you know, we're seeing it getting better and better as this COVID and factories become more predictable and are able to stay open on a more predictable basis, which, you know, we had a massive outbreak of COVID in China and, you know, some delays, you know, prior to Chinese new year and coming out of Chinese new year, but it looks like, you know, and I, I'm, by no means an expert, but it looks like the COVID, while the outbreaks may be voluminous, the severity of it seems to have passed. And it seems like, and again, it's not over yet, but it certainly seems like for us that as it passes over, the predictability of our factory and supply chain will get much better. And we're seeing that already. I mean, I'm cautiously optimistic. I do I do feel like we have to continue to watch what happens in China, in particular, both with COVID, which I think, again, we're able to see it now, and I think hopefully we're getting through that. And then hopefully there are no... I'm not sure what the other political ramifications will be as we go down the road. Just the whole geopolitical situation in the world now is a little crazy. But I think it's stabilizing. Freight seems to have stabilized, and that's transcontinental freight. It seems to have stabilized. We still have a lot of headwind in local freight. But hopefully, capacity in the roads will catch up, and that part of the freight equation will get better. But for now, that's a bit of a headwind. And then predictability on semiconductor chips And some of these Chinese factories are still, there's still some headwinds there.

I appreciate it. Thank you. Thank you.

And again, if you'd like to ask a question, it's star one on your telephone keypad. Your next question comes from a line of Bill Dizzle from Titan Capital Markets. Your line is open.

Thank you. Relative to the 17 million of new business that was delayed last Did we hear you correctly that that is now coming back or ramping up here this quarter? That has already begun?

Yes, that has begun, and we're excited about it. Yep, continues to ramp up.

And what category or categories is that in?

Yeah, it's a mix, Bill. I mean, you know, predominantly brake-related and electric vehicle, you know what I mean, in general.

Okay, thank you. And then next, relative to the delayed orders, kind of the $14 million, given that you have price increases that were taking place at the beginning of the fourth quarter, what would cause a customer to delay orders? the shipments, it seems as though they're just instituting a price increase on themselves by doing that.

That's a good point. No question about that. And again, we just can't talk about what our customers are doing, unfortunately, or fortunately. I mean, it's just something that's up to them. This is just so extreme that we felt it was appropriate to to call out. So, I mean, I prefer not to go down that road, but the comments that I can make are, yes, that orders that are coming in now will be at a higher price, and yes, the orders have resumed coming in, and we feel like they have a strong strategy going forward, and that we should benefit from it, and we'll be keeping a close eye on it. as it progresses.

So counter to what one would normally expect to see, which is orders in advance of a price increase, they just ignored that and it sounds like you did not give them a special deal where they were able to have the old price but a later shipment.

That is correct.

Thank you. And by the way, thank you for not giving them a special deal. Also, where are you all at from a back-to-work-in-the-office hybrid versus work-from-home? Where are you at in that whole scheme of things?

You know, that differs by department. A number of people are back in the office on a full-time basis. Some of the people, more of the analytics and data-driven people are on... two days a week mandatory, but many of them come into the office. And so we have flex schedules by department.

And are you at all feeling like it may be time to have people in the office more frequently given these external challenges that are coming at you and that may be more quickly and readily addressed if there's more person-to-person contact?

Yeah, you know, I think that meetings are extremely effective, you know, remote and hybrid as people in and out the office. But I will say just as COVID settles and as we get through the winter months, I mean, we'd be evaluating a full-time return to the office in the spring and summer.

Thank you. And if I may ask one more relative to the vendor finance programs. Yeah, what progress has been made at finding a solution there?

Yeah, I can't discuss that, unfortunately, at this point. All right, well, thank you for the time. Thanks, Bill. Appreciate it.

And there are no further questions at this time. I turn the call back over to Selwyn for some final closing comments.

No, thank you very much. I appreciate everybody's questions, and I appreciate... The interest, I will say that sort of to summarize where we are, that notwithstanding the headwinds that I discussed this morning, we are excited about our future. We have built a solid foundation for both top line and bottom line growth for existing product lines. And it is supported by strong demand for replacement parts and an aging car park. In closing, we have great team members, and I appreciate their dedication to the company and our customers. We appreciate your continued support, and we thank you again for joining us for the call. We look forward to speaking with you, and when we host the fiscal 2023 fourth quarter, you're in conference call in June and at investor conferences in the future.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.