XPEL, Inc.

Good morning, everyone, and welcome to the Expel 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 hosts, John Nesbitt, IMS, Investor Relations. John, you may begin.

Good morning and welcome to our conference call to discuss Expel's financial results for the first quarter of 2024. On the call today, Ryan Pape, Expel's President and Chief Executive Officer, and Barry Wood, Expel's 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. I'll take a moment to read the Safe Harbor Statement. During the course of this call, we'll make certain forward-looking statements regarding Expel 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 10K, including under item 1A, risk factors, filed with the SEC. Expo owner takes no obligation to publicly update or revise any forward-looking statements, whether a result of new information, future events, or otherwise. Okay, with that, I'll now turn the call over to Ryan. Go ahead, Ryan.

Thank you, John. Good morning, everyone, and welcome as well to the first quarter 2024 conference call. I think obviously Q1 was a tough quarter for us. Revenue grew 5% to $90 million. U.S. revenue grew 1.9% compared to Q1 2023 to $52 million. We saw softness in the aftermarket to start the year. 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. And 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, you know, 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 the slow start of January and February in particular this year. And that was really across geographies, mostly folks in the U.S. that I spoke to personally, but East Coast, West Coast, and in between. In terms of what we're seeing, you know, I think, one, there is more consensus emerging of just weakness in the consumer overall. And this buyer makes up a 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, you know, we're our own niche, so we're going to feel and experience this in our own way. I think for us, there's probably a better consumer credit-centric leading indicator for us that we've yet to find, but that's probably out there. Secondly, I think the EV adoption over – 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 customer base, they began to adopt EVs. But more importantly, the EV revolution, if you will, it created a new class of enthusiasts. And these were not traditionally our customers. They were an enthusiast by virtue of the EV cycle. And as that market has cooled, EV market has cooled, the EV buyers lured to the market now by discounting 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 had with Rivian, OEM, other OEM programs, dealership activation for us and for our installers in the aftermarket. These are all things that help do that and is 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, you know, attachment 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 U.S. 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 E's sort of post quarter and is probably contributing to the stronger April 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 and the start of the season, but that's what we've seen this year. So that said, you know, there isn't one vehicle brand that dominates all others for us when you're looking at any of the metrics we have or a metric of attachment of, say, How many bumpers 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, the price point of the vehicles. You know, traditional paint protection film is still relatively expensive, and so you have an over-index as the price goes higher. And then the number produced is obviously significant. You know, I think we cover... and protect way 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 effective 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 U.S. overall. But as it's 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 in car counts and in the ASPs, both trending in the right direction. The team's 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 have performed differently over time. You know, 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. You know, these segments have fundamentally different characteristics for us. You know, credit access is different in the aftermarket versus in the context of a new car purchase where our products are typically financeable. So there are many different variables to consider. Also in the U.S., in April, we reached an agreement with Tint World. This is an automotive accessory and window tinting franchise with well over 100 locations to supply their franchisees with co-branded products. This is predominantly tint, window tint, as the name might imply, but also some paint protection film and coatings where applicable. Tentworld offers a range of services, including window tint, vehicle wraps, audio electronics, and others. We look forward to working with them in the coming years and to working to integrate with them over the rest of this year. So really happy with that relationship. Looking outside the U.S., 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 as we discussed numerous times on our previous calls, we're constantly met in China with the sell-in versus 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. Even with that, China still finished about three to four million lower than our forecast was last year. 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. 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 and streamline the product lines and inventory. And this will continue the lumpiness for now, but will set us up well for the future where that lumpiness will be eliminated. and the business in-country will grow. So credit to our growing team in 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. 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 APAC and Middle East, Latin America. Again, Q1 is typically the lowest quarter for these regions as well. So continued good performance there. Our operation in India is 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. Very pleased with how that's going, you know, in addition to what we plan to do in the domestic market in India. So good progress. And finally, the OEM business was a bright spot. Revenue was up just around 58% year over year. Really kind of at quarter end or subsequent to quarter end. Also starting to launch a full stealth, a matte film option with Rivian. So Again, that 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 look backwards, to look forwards. And obviously, that makes forecasting complicated in a changing environment because things have to change to look backwards at them. 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 to the year to eight to 10% organic growth. And our expectation for Q2 revenue is in the 105 to 108 million range. Look, it's a dynamic environment. You know, as I mentioned, seeing an April exceed March is very unusual in the typical cycle we have in the U.S. So, you know, 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, you know, we're very much focused on the future and continuing to drive the long-term double-digit revenue growth. You know, we're very mindful of the current state and the cost structure we've built, and obviously we've built that for even more growth. But, you know, our focus remains on setting us up for the continued maximum growth over time. So there's no diminution 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 look obviously if things change uh we'll we'll change and we have to be flexible but that's our current view a bright spot for the quarter was gross margin performance finished at 42 returning to the trend that we expect after lower than expected margin due to the high distribution sales in Q4. And in some respects, that outperforms even a little bit because as volumes are down, you become less efficient in some ways with costs that are part of your cost of goods, but over a short period of time are relatively fixed. So I think 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 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 channel. It's 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 hard to say outside of growing the business as aggressively as possible that there's something more important to us than optimizing that. Finally, I want to talk about capital allocation. You know, we feel that 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 might see that change. You know, we've been asked about that many times over the past few years, but as you saw the relative strength of all the businesses in the overall ecosystem, even when we had SAR declines due to inventory and things like that. You know, we just didn't see any of that. But I think now, you know, 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 lasered our focus even further in terms of the M&A in this environment. You know, now is not the time for our attention to wander from the core. I think that's really important to emphasize. First, we have several international distributor acquisitions that we're pursuing this year and expect to complete this year. 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 the slow market or 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 we're seeing it in probably the most recent example is the success that we're having in Australia with that strategy post-acquisition approximately a year and a half 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 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 predominantly be looking in service businesses directly in our space or even slightly adjacent 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 costly acquisitions or acquisitions of any consequence in other verticals at this time. If 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. Speaking of products, we announced a number of tuck-in products into our various product lines during our dealer conference, as we mentioned previously. 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 in the respective disciplines. But we'll be operating with discipline this year on future product additions, you know, relative to our free cash flow goals. As you can imagine, adding too many new products reduces efficiency of that inventory as those things are novel. We are planning to expand into more colored film options this year in addition to the black that we've offered for some time. There's nearly a dozen colored TPU-based wrapping films either in the market or planned for launch by a variety of suppliers in the business. And these are those with a typical vinyl or PVC background and those with a PPF type background and others. You know, it's unclear how much these will ultimately expand the addressable market for colored films. You know, 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. You know, 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 becomes more similar to paint protection film, it actually opens up the opportunity for a larger portion of the aftermarket to participate, we believe. So as we talked about previously, using colored films to replace paint, it's not seen to be viable at scale today, maybe if ever, but the improved durability of a PPU-based color-wrapping film versus a 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 instead of multi-step paint process they have to do. So all of this, you know, represents growth opportunities for the industry as a whole. So obviously challenging quarter for us. I want to highlight, you know, the areas we're focused on. that we've got our whole team aligned on. We remain very excited about the opportunity ahead. You know, 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.

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 Q2, Q3, but higher than Q1. And this holds true in China, except that Q4 tends to be their largest quarter. 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 cut bank revenue declined about 1% in the quarter, again, owing to the China performance and lower U.S. 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 a 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 stores 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 the dealer conference costs in Q1, SC&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 tradeoff 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 that income margin of 7.4%, and our EPS was $0.24 a share. But again, normalizing for the dealer conference costs, 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 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.

Thank you very much. At this time, we'll be conducting our question and answer session. If you would like to ask a question, please press star 1 on your phone keypad now. A confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For anyone using speaker equipment, it might be necessary to pick up your handset before you press the keys. Please pause a moment whilst we poll for any questions. Thank you. Our first question is coming from Jeff Van Sinderen of B. Reilly. Jeff, your line is live.

Thanks, and good morning. 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. 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.

Sure, Jeff. Thanks for the question. Yeah, I think we, you know, a goal last year was to really exit the year, you know, at around that 42% gross margin. And we started the year there. And so, you know, 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. What weighs against that is that you do have costs that are part of cost of goods that over a short period of time or a midterm period of time feel 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. But the flip side is, You know, there was nothing really that unique about Q1 that would prevent us from sort of maintaining that level. And I think on the SG&A question, as Barry mentioned, you know, we really don't intend to go backwards in a meaningful way in our overall SG&A kind of at the run rate that you see. 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 with the expectation that we'll see growth and we'll grow into that cost structure. Now, of course, if the environment were to deteriorate further in some way, we might take a different view. 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 in total dollars, if you will.

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, you know, what you saw in your own dealer units and what you saw in folks that you sell product to, 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 juxtapositioning that with the improvement you saw in April, Maybe you could speak to your level of confidence in getting to the 8% to 10% growth in revenues for the year.

Yeah, well, I think, frankly, you know, we saw, you know, much better growth within that segment in April versus the aggregate we saw in the first quarter. So that's quite a change within that segment. Now, you know, April is one month, and, you know, you've got some sort of, uh, hangover effects from the first quarter, you know, maybe April outperforms, uh, May and June. I mean, frankly, we, we don't know, but you know, we've, we've seen, we've seen, you know, more growth than we saw sort of declines in the, in the first quarter. So, I mean, that's, you know, candidly, when you look at the, at the data that we have, you know, that's as far into the future as we can see. So I think that is a, a, uh, a positive trend, but, uh, you know, maybe one month doesn't a trend make.

Okay, fair enough. And then just order of magnitude. I realize you guys are selling to a lot of different, you know, you're getting film on a lot of different car brands, vehicle brands. Order of magnitude, were there any 10% size or 10% or larger vehicle brands in Q1? 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. How much and which brands impacted your business the most and anything you could say on concentration of those brands?

Yeah, I think, you know, as we've talked about today and in the past, you know, the distribution of this business is likely a lot wider than people might think. You know, there's this idea that, you know, 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, you know, we talked about the type of make-related concentration last year, you know, like 5% or less. And so what I think is maybe not obvious that we continue to work to try and explain better is that you have all of these trade-offs, right? So you've got makes with huge volume like Toyota, but that have a low, much lower attach rates. Then you have brands like Porsche that have much lower volume, but much higher attach rate. And the same is true with, with, you know, all the other brands. But when you, when you put that together, you know, you can have, various measures of attachment, which look, there's many ways to think about it, you know, content per vehicle versus some film per vehicle or versus using the bumpers as a proxy. We have all of this, but you know, where you have these, these top brands that all, that all by some of these measures all have kind of the same aggregate volume. Now the attachment rate is fundamentally different. So, you know, I really just can't stress enough that there isn't a, 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'll see, you know, higher attach rates in some brands than others that are ultimately meaningful to their results. I mean, we'll see a BMW attach rates by the measures we have that, that far exceed Mercedes. And so there isn't one thing driving that. There isn't one outsized brand. They all have their part in what we're doing here. And if we had outsized concentrations in any one make or one segment, we would talk about that.

Okay, thanks for providing all that. That's helpful. I'll jump back in the queue. Thanks, Jeff.

Thank you very much. Just a reminder there, if anyone has any remaining questions, please press star 1 on your phone keypad now. Okay, I'm not seeing anyone else come into queue at this moment, so I will now hand back over to management. Oops. Apologies, we've just had someone join the queue. And it's from Steve Dyer of Craig Hallam. Steve, your line is live.

Hi, guys. This is Matthew Robb. I'm 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? It seems like it's much more second-half weighted. Is that kind of the right way to think about that?

Well, 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 nauseum. But our goal is to eliminate that this year and to then have the ability to recognize our revenue in China as it occurs. And that's part of what we're trying to accomplish there and part of what we're trying to do 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, vendor managed inventory type process or others. And so all of that is part of what we're working on in China. When you've got the bulk of the product for China coming from the US, you've always got lots of material in transit. You've got lots of inventory held at different points. And so that creates this, this lumpiness until you can actually sell through it. And, you know, that's what we're, that's what we're going to change. So, you know, our quarter to quarter, you know, our sales into China, you know, really have almost no relationship to actually what's happening on the ground.

Okay. Yep. Makes sense. And 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 the change.

Well, I think you're at an inflection point here to say, does the application of colored films now fit more in with our business model if you can use a technology and installation profile that more of our customers are familiar with? You know, the incumbent products, the non-TPU-based products are fundamentally different in their physical characteristics, if you will. And so 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, you know, the movement and the momentum around using a TPU-based colored film, you know, that brings it 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. You know, the products itself, if you're using TPU as a substrate, you know, they have the possibility of being more durable, the possibility of, uh, better optical properties and a better appearance. So, so that's attractive, you know, but I think at the same time where, where we're being candid about it is that, you know, I don't know at a consumer level that it fundamentally changes the number of people that want to, uh, change the color of their car. That's still something that is a bespoke option. and not inexpensive. And so it probably appeals to a fairly narrow portion of the buyer. But as you're looking at other programs around accessorization 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 be mindful around things like colors. Maintaining many colors requires a lot of inventory and colors come in and out of style, particularly in the aftermarket. So that's probably part of our conservatism and approach on that historically. But I think you're going to see some reordering of the industry in the aftermarket relative to colored films over time. just by virtue of this bifurcation in 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.

Okay, great. That's it for me. Thank you very much.

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

I want to thank everybody for joining us on the call today and thank our team for working really hard to set the business up for success and look forward to speaking with everyone again.

Thank you very much. This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.