Q4 2023 Xpel Inc Earnings Call
Participants
John Nesbett; Investor Relations; IMS Investor Relations
Ryan Pape; Chairman, President and Chief Executive Officer; Xpel Inc
Barry Wood; Chief Financial Officer, Senior Vice President; Xpel Inc
Steve Dyer; Analyst; Craig Hallum
Jeff Van Sinderen; Analyst; B. Riley Securities
Presentation
Operator
Greetings. Welcome to the Excel Inc. Fourth Quarter and Year End 2023 earnings call. At this time, all participants are in a listen only mode, a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. 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.
John Nesbett
Good morning and welcome to our conference call to discuss expos Fourth Quarter and 2023 year end financial results. On the call today, Ryan Paychex, Bell's President and Chief Executive Officer, and Barry Wood, Expo, 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 material material to be materially 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 one A. risk factors filed with the SEC. Ectel undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. With that, I'll now turn the call over to Ryan.
Ryan Pape
Thank you, John, and good morning from me as well. Welcome to the fourth quarter and year end call. Overall, 2023 of another solid year for U.S. Revenue grew 22.3%, net income, 27.6% and EBITDA 25.6%. 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 good end of the year. Our US 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 lots. 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 nine 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. They do 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 and 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 the with what we're doing with app training to encourage them to invest in more labor, things like payment systems, to make a dealership work more attractive and obviously marketing to to drive more demand. So those are all the things we're focused on to continue to support that channel. And really that's where we where we see that phenomenon.
The most is in the U.S. because it's our most developed our aftermarket country in the world.
Alongside Canada, probably China region experienced a record quarter in Q4 revenue of $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 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. It represents impact from what we're planning to do there. This is more kind of the the continued dynamic with how we've been operating with the sell in sell through. So we've still got we've still yet to implement all the changes that we anticipate doing. So we'll see continued choppiness in China as we do that. So 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 is it will be quite low and less and 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 in the past three years. And it confirmed our brand position in China is very strong. And we've been we've known that they've been able to confirm it first hand. 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 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. And one of particular note to call out would be in the Middle East, where we grew 100% over the prior year. And this is largely a distribution market, not entirely, but largely So it does have lower margins, and we felt that in the margin performance. So alongside China this quarter that 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 as 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 our executive on our team that we 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 some benefits of that and expect that that will continue. And 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 an uncertainty as to 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 on the downside risk is obviously interest rates impacting car sales at some point or were accessory affordability thus far, parcels have done quite well. So we've yet to really to really see that. And as I mentioned, no 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, our potential positive movement on the interest rate side in terms of vehicle affordability and continued acceleration of attachment rates, along with some some large customer wins that we're pursuing, which are quite unusual for us and 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 expect to grow this year. Our 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 of last year at or near 42%, really made good progress on that, a couple 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 is probably unfavorable to a margin. We've got a number of products we sell in China as an example, that have varying margin profiles. And so we felt that there our expectation is to be back up in the 40% plus for Q1 and then and then throughout throughout next year. And I was happy with the performance in aggregate, even though 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 will gradually increase our gross margin going forward.
Kind of ignoring the choppiness of the distribution 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 summers 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 three years. Some of this will begin to lap such as and the introduction of more equity compensation across our team starting three, three to four 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 the focus on R&D and 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 made large investments and the percentage rate growth for all of those type of headcount adds have been really high in 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 two 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 data 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 a 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 percent of revenue basis. And you'll find that by our increasing gross margin and then also more leverage on the SG&A.
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 data team. This is critical. This is becoming a platform that crosses every part of our business. And we want it 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, in our incremental SG&A run rate continues on that. We'll see these incremental adds from our past trend to moderate as we go forward.
This will help us drive further operating performance in the coming years.
A couple of business updates. As we mentioned, we closed on three acquisitions in the fourth quarter, and 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 six 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. That's been performing very nicely since we acquired our distributor as all those acquisitions addresses strategic objectives relative to the size, the complexity of doing those deals probably probably high relative relative to their size and the transaction costs are high, but they're all done to really play to a strategy that we're executing on 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 put the cash to work. As we've talked about, we expect more international distribution acquisitions this year, and this is typically the 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. And these could have more significant impact on the business, bring on new markets or capability or scale. So even though our average acquisition size has been 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. We are not transformative in the sense that it turns us into something we don't want to be, but a very active on that.
So on our DAPX., which is the newest version of our data platform, this has really progressed I think we're 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 on the initial 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 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 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 up starting tomorrow and Friday and Saturday here in San Antonio. We've got a great turnout. I think you have 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 I'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 and all of our customers in the aftermarket to do more work for dealerships. I think that's important and to reinforce to the customers that if they and we want to, we want them to invest in their businesses. We want them to grow. And when they do that, we win, I like I like the conference because we really get the voice of the customer and our team, our team knows that they need to leave the event with lists of items on how we can be better. And there's really no 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, serial interface interact with customers that don't normally have as many day-to-day customer customer interactions so that's super important on. I know that we get as much out of the conference as 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 we plan to 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. And I also want to thank our team for the efforts this year. It's been really busy. We've accomplished a lot. We've restructured a big parts of the Company, both from a 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 going forward. So I want to thank everybody internally for that.
So with that, I will turn it over to Barry. Take it away.
Barry Wood
Thanks, Ryan, and good morning, everyone. Just a couple of more comments on 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, $14 million in 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 2020 to $4.7 million, and this was up sequentially a little over 20% quarter over quarter versus Q3 23. Although Q3 did have some factory holiday shutdowns, but still this was this was a solid year. 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 insulation services portfolio. But certainly led by our dealership services.
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 CF, which is our largest marketing event of the year after our dealer conference. And this current this cost occurs annually every year in Q4. And as Ryan mentioned, our annual dealer conference will occur this weekend, while last year conference was held in May, and so last year's conference did cost us about $1.5 million in net costs. So we'll be Quantum certainly be quantifying the impact of this year's conference in our Q. one.
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. Net income for the year grew 27.6% to $52.8 million. Second, 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 remain elevated in Q4 and our days on hand increased. You're 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 Q2. We're also forecasting our days on hand to improve substantially beginning in Q2 and in the year in the 120 to 125 range. And with 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 acquisition.
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 right itself as we progress on our reducing our 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.
Finally, our Q4 effective tax rate was lower than our run rate due primarily to some changes that occurred in statutory rates and some of our international operations and return to provision true-ups, which are we always book in the fourth quarter. So that's 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.
Question and Answer Session
Operator
Certainly at this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two, if you would like to remove your question from the queue participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please. While we poll for questions, your first question for today is coming from Steve Dyer with Craig Hallum.
Steve Dyer
Thanks, Kevin, and good morning, guys. Thanks for taking my question. Early on Orion, 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 that not specifics, obviously, if you don't want to, but just sort of what area of the business, what kind of business?
Ryan Pape
Yes, sure, Steve. Yes, I think when you when you look at our when you look at our makeup of customers, particularly in the aftermarket, they tend to be the quite small. I mean, you could have between $50,000 and $200,000 of annual revenue is a common sort of distribution on we've got when we look at sort of the the overall global portfolio of customers, we just have more larger opportunities that are possible than we've than we've seen. These could be larger groups or other networks of customers where a $5 million account or $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 that's a little bit different for us, which I think is a it's a good thing, but more unusual.
Steve Dyer
Got it. Thank you. Tom, 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?
Ryan Pape
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 a quite substantial year-over-year. Growth on the business has been good. We are well, we continue to see his interest in additional programs on the account of OEM.s 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. We've had success with one platform or with the certain number of vehicles, can we grow that? So I think it's I know it's a it's a positive story. They're pretty much all the way around where 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 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 that and the Q4 growth and expect see more of that this year.
Steve Dyer
Just you mentioned a little bit some potential inorganic opportunities, maybe larger ones than you've typically looked at on just in terms of funding that what is that likely to look at look like? Are you sort of comfortable with your with your credit limits and certain 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?
Ryan Pape
Yes. I think that I mean, 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 zero. So I think our are, you know, primary use with our primary way to fund those acquisitions would be just through borrowing that way. We're not 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 on a case-by-case basis.
Then I think really for us, the question on the equity side would be more on used equity 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 is a necessity to fund that way. Can we better achieve our objectives, particularly if we're looking at any larger acquisitions that may or 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 sellers assuming they're around. But I think absent that you're going to you're going to see us look at more borrowing and seller financing and then cash from ops.
Operator
As a reminder, if you would like to ask a question, please press star one. Your next question for today is from Jeff Van Sinderen, B. Riley.
Jeff Van Sinderen
Good morning, everyone. Or 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?
Ryan Pape
Sure, Jeff. Yes, I think when we look at the our view of the China market today, you really have of 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 product we need in country that there's no constraints on inventory availability and that we can work or partner with our distributor on to ensure that we can address the entirety of the market and I think that the reality for us now is that we are addressing the most the spoke 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 and 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 this, the team that we've built in China and are building and then with our distribution partners there. So I guess a little bit premature to say that exactly what that is has been has been finalized, but I think we have a we have a good sense of what we want to accomplish and not just a matter exactly how do we do that. The net result is we're successful in doing that is selling more. And and that's that's how we'll measure our effectiveness and how good of a job we've done.
Jeff Van Sinderen
Right. Okay. And then Houston, 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 how you're approaching that going forward or any changes to that?
Ryan Pape
No. I mean, there's really no no changes to the approach or the strategy there is that the aftermarket has a channel management that's different than the dealership business. I mean, there. There are elements of dealership business that we could serve directly that a lot of our customers don't want to do 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 that going to 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 that the differences dealerships tend to have a longer selling cycle, it's a little bit more involved sale. And then once you're in the dealership there, unit volume is more or less fixed on 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 up 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 two completely different approaches to the market there. They're complementary. But aside from focusing on both of them in their own way, I would say no change in our in our strategy. I think if 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 a lower growth year over year within the aftermarket channel than maybe we saw the previous the previous year on. But that really doesn't have much to do with the rate at which we would onboard net new customers.
Jeff Van Sinderen
Okay. That's helpful. And then maybe finally, if you could just touch on new product introductions. Anything you can tell us there?
Ryan Pape
Yes. I think we are we're broadening the offering on and also going deeper in what we have. I don't want to I don't want to steal any of the team Sundar for what they'll be releasing to our our to our customers at the dealer conference. But I think incrementally some some net new products and then going going a deeper, more options and more depth within the things we're already doing, you know, selling more to your existing customers across all channels, is probably one of the best selling 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 will be we're releasing to our customers this weekend.
Jeff Van Sinderen
Okay, great. Thanks for taking my questions and best of luck.
Ryan Pape
Thanks, Jeff.
Operator
Your next question is a follow-up question from Steve Dyer. Steve, your line is live.
Steve Dyer
Thanks. Just a quick follow up. You gave a lot of puts and takes on the various operating expense lines. 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?
Ryan Pape
Yes. I think you know to Barry's comments on that. We're talking, I think, in Q4, you is 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 fee permanently embedded in SG&A. So I think if you if you ignore kind of the the two big seasonal seasonal hits that we have being dealer conference. And then the big the big trade show in Q4, what we will be looking for is kind of the run rate run rate SG&A, but then the growth of that moderating as we move forward from where we've been in the past.
Steve Dyer
Thank you.
Ryan Pape
Thanks, Steve.
Operator
We have reached the end of the question-and-answer session, and I will now turn the call over to management for closing.
Ryan Pape
We're 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.
Operator
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
