Xpel Inc
NASDAQ:XPEL
Earnings Call Analysis
Q4-2023 Analysis
Xpel Inc
In 2023, the company achieved a notable performance with revenues surging by 22.3% and net income rising by 27.6%. Moreover, the EBITDA reached an impressive $25.6 million, underscoring a profitable year for the business.
The U.S. market saw a revenue increase of 16.8% to $55.6 million in the quarter, buoyed by the dealership business which benefitted from heightened car counts and recovering new car inventories. However, there are expectations for a modest slowdown in the preload component of the business as inventories normalize to pre-2020 levels.
The company's aftermarket growth is fuelled by acquiring new customers and scaling the business of existing partners. To encourage customer investment decisions that facilitate growth, the company avails better tools, software enhancements like DAP, employee training, attractive payment systems for dealership work, and targeted marketing campaigns. These steps are vital, especially in well-developed aftermarket regions like the U.S. and Canada.
China experienced a remarkable quarter with revenues hitting $16.6 million, outpacing its previous peak by $3 million. While the turnover exceeded expectations due to the timing of deliveries and sell-in versus sell-through, this spike doesn't fully reflect the planned strategic changes following the company's direct market setup in the region.
The company also witnessed substantial growth in other regions, with a special mention of the Middle East, where revenues doubled compared to the previous year. Even though this is predominantly a distribution market with lower margins, the strategic efforts to balance direct and distribution business have shown promise. These efforts are managed from an operational base in India, suggesting a strategic vision to get closer to customers internationally.
Looking forward, the company anticipates revenues to fall in the $93 million to $96 million range for Q1 2024. The forecast is cautious due to an expected low quarter for China and the uncertainty of distribution orders. Nevertheless, the company targets an ambitious 15% revenue growth for the year, balancing the risks and opportunities ahead.
Q4 saw the gross margin at 38.8%, a slight dip from the prior year's 39.6%. The quarter's sales mix, especially due to high distribution sales in China and the Middle East, affected these numbers. However, the company envisions a rebound, with gross margin expected to climb back over 40% in Q1 and maintain an upward trajectory throughout the following year.
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Greetings. Welcome to the XPEL, Inc. Fourth Quarter and Year-End 2023 Earnings Call. At this time, all participants are in listen mode. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, John Nesbett with IMS. Sir, you may begin.
Good morning, and welcome to our conference call to discuss XPEL's Fourth Quarter and 2023 year-end financial results. On the call today, Ryan Pape, XPEL's President and Chief Executive Officer; and Barry Wood, XPEL'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 will take questions from our call participants. A transcript of the call will be available on the company's website after the call. Take a moment to read the safe harbor statement. During the course of this call, we'll make certain forward-looking statements regarding XPEL, Inc. and its business, which may include, but not be limited to, anticipated use of proceeds from capital transactions, expansion into new markets and execution of the company's growth strategy. Such statements are based on our current expectations and assumptions that are subject to known and unknown risk factors and uncertainties that could cause actual results to materially to be different from those expressed in those statements. Some of these factors are discussed in detail in our most recent Form 10-K, including under Item 1A Risk Factors filed with the SEC. XPEL undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Okay. With that, I'll now turn the call over to Ryan. Go ahead, Ron.
Thank you, John, and good morning from me as well. Welcome to the fourth quarter and year-end call. Overall, 2023, another solid year for us. Revenue grew 22.3%, net income, 27.6%, and EBITDA of $25.6 million. We closed the year with a strong fourth quarter, revenue growing 34.5% to $105.5 million, net income growing 43.2% and EBITDA growing 33.6%. So a good end of the year. Our U.S. region had a good quarter with revenue growing 16.8% to $55.6 million. Our dealership business continued to be a bright spot for us as car counts have increased and new car inventories have been returning. We'll likely see the preload component of our business to slow modestly as inventories catch up with their pre-2020 levels, probably over the first half of this year. Since preload attachment happens as the vehicles are delivered or sit on the lot. However, we'll continue to grow with new dealerships, and we've been quite successful at adding content per vehicle and expect that, that will continue as well. I think there's no question now that the aftermarket has slowed over the past 9 months from its peak that we've seen. But our view remains that as long as consumers are buying cars, particularly in the enthusiast segment that's well served by the aftermarket, that they'll continue to make the decision to buy our products as well.
Growth in the aftermarket is driven by net new customers for us as in new shops, new points of installation or competitive conversions and by growth of our existing customers. In our larger markets like the U.S. growth from existing customers constitutes a larger percentage of growth than in the smaller or more developing markets. And in order for the existing customers to grow, they need to invest in their businesses. They need to hire more employees, expand facilities, et cetera. So if a change in sentiment impacts their decision to do that, that can impact growth rates even absent a macro change in the aftermarket channel. So our job is to do everything we can to encourage and help the customers make those investment decisions that will enable them to continue to grow. And so this is, for us, focus on giving them better tools, better software like with what we're doing with DAP, training to encourage them to invest in more labor, things like payment systems to make dealership work more attractive and then obviously, marketing to drive more demand. So those are all the things we're focused on to continue to support that channel. And really, that where we see that phenomenon the most is in the U.S. because it's our most developed aftermarket country in the world, alongside Canada probably.
China region experienced a record quarter in Q4 Revenue was $16.6 million. This was $3 million higher than our previous high for sales into the country in Q4 of 2019. As we discussed last quarter, we did expect the China to have a strong fourth quarter, but this result was ultimately higher than we expected, again, just based on timing of deliveries and sell-in versus sell-through ultimately. We're still in the early days of our direct presence in China, which we set up at the end of last year and the resulting changes in our strategy and go-to-market that will occur there. So this was a great quarter. It really doesn't represent impact from what we're planning to do there. This is more kind of the continued dynamic with how we've been operating with the sell-in sell-through. So, we're still yet to implement all the changes that we anticipate doing. So we'll see continued choppiness in China as we do that. Still in Q1, where we had a record product sold in Q4. Q1 is typically the lowest quarter for China. So our expectation for China in Q1 it'll be quite low in less than Q1 of 2023 and coming off of that really high Q4 number. So continued noise there for a while. We've done a lot of work on the ground with our team that we haven't been able to do in the past 3 years. And it confirmed our brand position in China is very strong. We've known that, but we've been able to confirm it firsthand. And now the objective is to ensure that our share of wallet matches the share of mind relative to our brand for this product line in China. And that is our top priority for the market for this year.
Outside of the U.S. and China, we saw solid growth in our other regions. One particular note to call out would be in the Middle East, where we grew 100% over the prior year. This is largely a distribution market, not entirely, but largely. So it does have lower margins, and we felt that in the margin performance alongside China this quarter. But we're really executing well and it's a market we spent a lot of time working on. We've been focused on evolving our go-to-market there over the past 12 to 18 months, seeking the right mix of direct business versus distribution business. I think we're really making good progress. And we'll be managing the region from our operation that we've begun to establish at the end of last year in India with the help of executive on our team who we've relocated from Texas. So this is another way that we can be true to our strategy of getting close to the customer, and we're already seeing benefits of that and expect that, that will continue. Our expectation Q1 2024 is revenue to be in the $93 million to $96 million range. This assumes a low quarter for China given Q4, as we talked about, and then uncertainty as the timing of some of these other distribution orders. And like we talked about last year, we're targeting 15% revenue growth for the year. The downside risk is obviously interest rates impacting car sales at some point or accessory affordability, thus far, parcels have done quite well. So we've yet to really see that. And as I mentioned, downside risk would be a reduced investment in growing the businesses by our aftermarket customers.
On the other hand, China growth, the modifications to our strategy, our plans for the Middle East extending into India, potential positive movement on the interest rate side in terms of vehicle affordability and continued acceleration of attachment rates along with some large customer wins that we're pursuing, which are quite unusual for us. These all create upside potential for the year above that 15%. As does our inorganic activity in terms of M&A, which we will keep pursuing and expect to grow this year. Gross margin for the quarter came in at 38.8% compared with 39.6% in the fourth quarter last year. So as we discussed, we've been targeting exit the year last year at our year 42%, really made good progress on that, a couple of hiccups along the way. And then really for Q4, where we've got these really high distribution sales for China and the Middle East, we felt that. And the product mix within those distribution sales was probably unfavorable to margin. We've got a number of products we sell in China as an example that have varying margin profiles, so we felt that our expectation is to be back up in the 40% plus for Q1 and then throughout next year. I was happy with the performance in aggregate, even though it was a little bit choppy, as I mentioned, we grew gross margin by 160 basis points. We will build on that. And we still believe that we'll gradually increase our gross margin going forward, kind of ignoring the choppiness of the distribution business. We have room to continue to improve that overall profile like we've been talking about.
As we look out this year, we're really focused on reducing our days on hand inventory. Obviously, we've had a lot of discussion about this over the past quarters. And this is as we intended to do last year before we were thrown off track in the summer, as we previously discussed. So managing this and optimizing our free cash flow conversion is a top priority. Barry will talk about that a little bit more here in a minute. And then secondly, we've significantly increased our SG&A expense really over the past 3 years. Some of this will begin to lap such as the introduction of more equity compensation across our team, starting 3 to 4 years ago. Obviously, we've been looking to replicate over the long haul, what our high inside ownership has done for us in the past. But we've also grown our corporate team substantially with a focus on R&D, quality team manufacturing and our product team over this time. And we expect those to continue to grow, but the rate will moderate going forward. We've made large investments in the percentage rate growth for all of those type of headcount adds have been really high. Our sales and account management and some of the operations will grow more in line with revenue, whereas we would expect what I just mentioned to grow much slower than revenue. And then outside of that, there are 2 areas that we really want to continue to grow in an outsized manner at a rate potentially greater than we would grow revenue over time. And that's really our marketing and our DAP team. Marketing specifically, we want to see an increase on a percent of sales basis. When we look at marketing, excluding sales as opposed to sales and marketing together, we're just now kind of approaching 3% of revenue to marketing, and we would like to see that expand going forward on a percent of revenue basis and fund that by our increasing gross margin and then also more leverage on the other SG&A line items that won't be growing at that rate. And then related to that, in terms of our prioritization is expanding our AP team, this is critical. This is becoming a platform that crosses every part of our business, and we wanted to be a force multiplier for our customers to help them grow their business and have it be a reason that they feel confident to grow their business.
So in short, our incremental SG&A run rate continues, but we'll see these incremental adds from our past trend to moderate as we go forward. And this will help us drive further operating performance in the coming years. A couple of business updates. As we mentioned, we closed on 3 acquisitions in the fourth quarter, and then we actually did a very small acquisition last month in January. As we discussed on our last call for the end of the year, one was a chain of 6 installation locations in Canada. We had a business based in Europe serving some OEM manufacturers. And then this year, in Q1, we did another small acquisition in Australia to add to our growing business there, really insignificant revenue, but it adds capability for that operation. It's been performing very nicely since we acquired our distributor. As all those acquisitions address the strategic objectives relative to the size, the complexity of doing those deals, probably high relative to their size and the transaction costs are high, but they're all done to really play to the strategy that we're executing rather than just as a means to try and grow revenue or roll up something that roll up the customer base. That's really not the objective of any of those. We see good opportunities to put the cash to work and as we've talked about, we expect more international distribution acquisitions this year. And this is typically folks that are distributing our product in country somewhere else in the world, where we see an opportunity to acquire them and invest in that operation.
Generally, we're improving margins. Sometimes we're reducing sales price to the end customer but ultimately growing faster in those markets. So we see opportunity for that this year. These have generally been the highest ROI acquisitions we've done, but they're just limited in terms of how many candidates there are because buying distribution of a competitive product is not a great strategy. So sort of limited to our captive customers as we pursue that. So we'll continue with the smaller acquisitions. We're also looking at some larger acquisitions, larger for us in a relative sense, $25 million to $50 million plus purchase price. This could have a more significant impact on the business, bring on new markets or capability or scale. So even though our average acquisition size has been quite a bit smaller, we're very much open to incrementally larger acquisitions and these would have an impact on the business, but they don't change who we are. They're not transformative in a sense that it turns us into something we don't want to be, but very active on that. Our GAAP NEXT, which is the newest version of our DAP platform. This has really progressed. I think we're at 99.9% of customers using the new software. The evolution here really focus on our customers' businesses and making them more efficient. The initial incremental feature set is around managing leads and optimizing the business that we send to the customers, working on technician commissions, how do you pay your staff. This is a huge driver of making these businesses scalable is a labor model that can do that and a compensation model to go with it. So those are the things that are very active now. We continue to receive a lot of great feedback on what we're doing there.
We have our dealer conference starting tomorrow and Friday and Saturday here in San Antonio. We've got a great turnout, I think, 500-plus customers attending. We hold the events every year. You may recall, we held it in April last year. So it's great. We have high interest despite sort of not even a year between conferences. We sort of prefer this February time line, but couldn't do it last year for some reason. We've got a number of new product introductions that we'll be releasing at the conference. And then the bulk of the content is really focused, though, on showing our customers how they can grow their business. And that's in new markets like marine, which we've been getting good traction in. And then obviously, in dealerships where we want to encourage all of our customers in the aftermarket to do more work for dealerships. We think that's important. And to reinforce to the customers that we want them to invest in their businesses. We want them to grow and when they do that, we win. I like the conference because we really get the voice of the customer and our team knows that they need to leave the event with list of items on how we can be better. And there's really no better way to do that to talk to people face-to-face to get that, especially when you've got folks from different functional areas, we were able to interact with customers that don't normally have as many day-to-day customer interactions. So that's super important. I know that we get as much out of the conference as our customers do, even though we do it for them, we get tremendous value out of it. So really looking forward to that.
And finally, just a little bit of housekeeping, and I'll turn it over to Barry. We did change a slight change in our earnings cadence today. So consistent with past, we'll file our 10-K next week, which is in line with when we normally file. We released earnings in advance of that this week because I'll be traveling in Asia, and it wouldn't be practical to have the call and wanted to make sure that I could be here. I also want to thank our team for the efforts this year, it's been really busy. We've accomplished a lot, restructured a big parts of the company, both from an operations standpoint and then from a global business standpoint. That's been a lot of work and a lot of change, but it's really set us up well for going forward. So I want to thank everybody internally for that. So with that, we'll turn it over to Barry. Barry, take it away.
Thanks, Ryan, and good morning, everyone. Just a couple of more comments on revenue. If you look at the product lines, combined paint protection film and cutbank revenue grew 32.4% in the quarter, and this increase was primarily due to increase in product sales in pretty much all of our regions and particularly in China. Our total window film product line revenue grew 19.2% quarter-over-quarter to $14 million, which represented 13.2% of our revenue, and this was down sequentially, primarily due to seasonality. Revenue for the Vision product line grew 141% to $2.8 million, which represented approximately 2.6% of our overall revenue. Our OEM business continued to have strong performance with revenue growing a little over 74% versus Q4 2022 to $4.7 million. And this was up sequentially a little over 20% quarter-over-quarter versus Q3 '23. And although Q3 did have some factory holiday shutdowns, but still, this was a solid performance. Our Fusion ceramic coating product line, which is included in our other revenue line, grew 50% for the quarter to $1.7 million and represented 1.7% of total revenue for the quarter. And our total installation revenue, combining product and service grew 45.7% in the quarter and represented 18.8% of total revenue. And this increase was due mainly to really solid performance across all of our installation services portfolio, but certainly led by our dealership services business. On the SG&A front, our Q4 SG&A expense grew 32.2% to $26.7 million and represented 25.7% of total revenue. Sequentially, SG&A increased about 12%. And included in our Q4 SG&A expense is approximately $1.2 million in expenses associated with our Q4 acquisitions and approximately $0.8 million in costs associated with SMA, which is our largest marketing event of the year after our dealer conference. And this cost occurs annually every year in Q4.
And as Ryan mentioned, our annual dealer conference will occur this weekend, while last year, the conference was held in April and so last year's conference did cost us about $1.5 million in net costs. So we'll certainly be quantifying the impact of this year's conference in our Q1 call. EBITDA for the quarter grew 33.6% to $17.7 million, reflecting an EBITDA margin of 16.7%. On an annual basis, EBITDA grew 25.6% to $76.9 million, which is an EBITDA margin of 19.4%. So good result there. Net income for the quarter grew 43.2% to $12.0 million, reflecting net income margin of 11.3%. EPS for the quarter was $0.43 per share, and net income for the year grew 27.6% to $52.8 million, reflecting a net income margin of 13.3%. EPS for the year was $1.91 per share. And as Ryan alluded to and we discussed on our last call, our inventory levels remained elevated in Q4 and our days on hand increased right around where we expected. And we're currently forecasting Q1 days on hand to decrease from Q4 and our inventory levels to be relatively consistent with Q4. We're also forecasting our days on hand to improve substantially beginning in Q2 and in the year in the $120 to $125 million range, and I think we have a solid plan to get there. And as we continue to work our days on hand downward, we expect to generate substantial free cash flow, which will be used to pay down any existing debt and fund our acquisitions. Cash flow used in ops was $1.1 million for the quarter, and this use of cash was due primarily to our forecasted increase in inventory levels for the reasons we've talked about both on this call and previous calls. We did see a slight degradation in our cash conversion cycle due to this increase in inventory in the quarter, but this we expect this will ride itself as we progressed on our reducing days on hand.
We also spent approximately $14 million on acquisitions during the quarter, and we drew down $19 million on our credit facility, which was primarily used to fund those acquisitions. And on a year-to-date basis, our cash flow provided by operations totaled $37.4 million. And finally, our Q4 effective tax rate was lower than our run rate due primarily to some changes that occurred in statutory rates in some of our international operations and return to provision true-ups, which we always book in the fourth quarter. So that's the reason the rate was a little bit lower than our run rate. But for planning purposes, you can assume a 20% effective tax rate for 2024. So again, a good quarter and year for us overall, and we remain financially well positioned to execute on what we need and want to do in 2024. And with that, operator, we'll now open the call up for questions.
[Operator Instructions] Your first question for today is coming from Steve Dyer with Craig-Hallum.
Early on, Ryan, when you were talking about sort of upside possibilities or areas for potential upside this year. I think you alluded to or you said something about a potential large customer win or large customer wins. Can you sort of help us think about what that might look like or what not specifics, obviously, if you don't want to, but just sort of what area of the business, what kind of business.
Yes, sure, Steve. I think when you look at our makeup of customers, particularly in the aftermarket, they tend to be quite small. I mean you could have between 50 and $200,000 of annual revenue is a common sort of distribution. When we look at sort of the overall global portfolio of customers, we just have more larger opportunities that are possible than we've seen. These could be larger groups or other networks of customers where a $5 million account or a $5 million to $10 million account is possible. And that's relatively unusual for us. We have some customers like that already, but for whatever reason, across the global footprint, we've got a few of those opportunities sort of possible intending. And so that's a little bit different for us, which I think is a good thing, but more unusual.
Got it. Could you talk a little bit? I didn't hear you mention much about OEM business. Can you kind of remind us again how many you have and how you sort of see that playing out throughout the year?
Yes. No. The OEM business was strong. I think I didn't mention it specifically. I know Barry called out the growth. I think it was quite substantial year-over-year growth. The business has been good. We continue to see is interest in additional programs. The account of OEMs that we're doing something with has grown to it's under 10, but it's certainly growing in different kinds of programs. So we see both new programs with new folks that we've not worked with before and then also the possibility of growth of the existing programs to say, okay, if we've had success with one platform or with a certain number of vehicles, can we grow that? So I think it's a positive story there pretty much all the way around. We're at their mercy in some sense in terms of their production and the unit volumes that they can generate. So there's a little bit different dynamic there with that business at scale, but we continue to see new accounts, new growth, new platforms and then growth of the existing. I think that was reflected in the Q4 growth and expect to see more of that this year.
Just you mentioned a little bit some potential inorganic opportunities, maybe larger ones than you've typically looked at. In terms of funding that, what is that likely to look at, look like? Are you sort of comfortable with your credit limits and some sort of debt facilities and so forth, would you look to potentially raise equity? Would you buy in stock? What are some ways to think about that?
Yes. I think, our overall position has really been very conservative for a number of years in terms of our net debt and total leverage, which has basically been 0. So I think our primary use would to fund those acquisitions would be just through borrowing that way. We're not opposed to that debt and think a lot of these things pencil out. We do expect to generate a lot more cash flow this year, as Barry mentioned. So that's obviously an option. In some of the opportunities we have, there's a possibility of seller financing as well with the profile of people we look at. So that's something you have to look at on a case-by-case basis. And then I think really for us, the question on the equity side would be more is equity a tool to gain alignment with the sellers in terms of the type of performance we want to see post acquisition. I think that's kind of where we see the potential use of equity more than as a necessity to fund that way is, can we better achieve our objectives, particularly if we're looking at any larger acquisitions that may be less traditional for us and that they can sort of function a little bit more independently. That would be another tool to create alignment with the sellers assuming they're around. But I think absent that, you're going to see us look at more borrowing and seller financing and our customers...
[Operator Instructions] your next question for today is from Jeffrey Van Sinderen with B. Riley.
Maybe if we could just circle back to China for a minute regarding the outlook there. If you could speak more about some of the changes that you're still working on in China.
Sure, Jeff. Yes, I think when we look at our view of the China market today, you really have multiple product lines and multiple price points in the country in a way that we really don't see elsewhere. And I think that the opportunity for us is to evolve our go-to-market to have products at more of those price points and ensure that we can have all the products we need in country that there's no constraints on inventory availability and that we can work or partner with our distributor to ensure that we can address the entirety of the market. And I think that the reality for us now is that we're addressing the most bespoke part of the market. And that's great for our brand positioning, but it's not great for our share of wallet, as I mentioned. And I think we have the opportunity to maintain that brand positioning while taking more share. And there's a number of strategies we can use to do that, that we're working on in conjunction with the team that we've built in China and are building and then with our distribution partners there. So I think it's a little bit premature to say that exactly what that is, has been finalized, but I think we have a good sense of what we want to accomplish. And now it's just a matter of exactly how do we do that the net results as we're successful in doing that is selling more. I mean that's how we'll measure our effectiveness and how good of a job we've done.
And then since you mentioned it as a focus, maybe you could just touch more on what you're seeing in the rate of onboarding new dealers overall and then more specifically, onboarding new car dealers? And maybe just kind of you're approaching that going forward? Any changes to that?
No. I mean there's really no changes to the approach or the strategy. The aftermarket has a channel management that's different than the dealership business. I mean there are elements of dealership business that we could serve directly that a lot of our customers don't want to do. And so in many respects, every dealership in the world should be selling our products one way or the other. They could internalize it and do it themselves. They can work with one of our installers in the aftermarket or in other cases, we can do the work for them. So from a dealership standpoint, the selling proposition and what's out there is very clear. Now the difference is dealerships tend to have a longer selling cycle. It's a little bit more involved sale. And then once you're in the dealership, their unit volume is more or less fixed, where a customer in the aftermarket could grow their business 100% in the year if they were so motivated, the dealership for the most part, is not going to grow their unit volume 100%. That's just not possible. So you have a fixed unit volume with the dealerships, but you have a big variable in terms of sort of the ASP and how much content can you get? And then sort of in contrast in the aftermarket, we can't serve every customer in the aftermarket and maintain our brand positioning, but we could be the best partner for those that want to grow the most. So they're really 2 completely different approaches to the market. They're complementary. But aside from focusing on both of them in their own way, I would say no change in our strategy. I think you continue to see new customers on in the aftermarket. I think the only thing that we probably see now that started midway last year is that you're seeing, in aggregate, lower growth year-over-year within the aftermarket channel than maybe we saw the previous year. But that really doesn't have much to do with the rate at which we would onboard net new customers.
And then maybe finally, if you could just touch on new product introductions, anything you can tell us there?
Yes. I think we're broadening the offering and also going deeper in what we have. I don't want to steal any of the teams under for what they'll be releasing to our customers at the dealer conference. But I think incrementally, some net new products and then going deeper, more options and more depth within the things we're already doing, selling more to your existing customers across all channels is probably one of the bestselling strategies, if you can make your customers more effective and sell more, you get more leverage on those relationships. And so to the extent that we can broaden our product offering to be even more of a complete supplier to more of our customers, that's something that we want to do, and that's part of what we're working on and probably part of what we'll be releasing to our customers this weekend.
Your next question is a follow-up question from Steve Dyer.
Just a quick follow-up. You gave a lot of puts and takes on the various operating expense line. Big picture is kind of this $26 million, $27 million run rate sort of a good level to kind of grow off of? Or I kind of got mixed up with all the one-timers and so forth, but how should we generally think about that going forward?
Yes. I think to Barry's comments on that, we're talking in Q4, he was really referring to more the incremental SG&A inherited by the acquisitions we did versus sort of one-timers. I mean, yes, there's optimization to be done there, and there's one-timers embedded in that. But I think that comment was more about sort of the permanently embedded SG&A. So I think if you ignore kind of the 2 big seasonal hits that we have being the dealer conference and then the big trade show in Q4. What we would be looking for is kind of yes, the run rate SG&A, but then the growth of that moderating as we move forward from where we've been in the past.
We have reached the end of the question-and-answer session, and I will now turn the call over to management for closing remarks.
I'd like to thank everyone for attending today and really thank our team, we've got a huge presence in our headquarters today from around the world for our customer conference, dealer conference this weekend. And it's going to be amazing, and thank them all for being here and all their hard work and look forward to speaking with everyone again next quarter. Thank you.
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.