Good day, and thank you for standing by. Welcome to the Acushnet Holdings Corp. Q3 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Sondra Lennon, VP of FP&A and Investor Relations. Please go ahead.
Good morning, and thank you for joining us today for Acushnet Holdings Q3 2021 earnings conference call. Joining me this morning are David Maher, our President and Chief Executive Officer, and Tom Pacheco, our Chief Financial Officer. Before turning the call over to David, I would like to remind everyone that we will be making forward-looking statements on the call today. These forward-looking statements are based on Acushnet's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations. For a list of factors that could cause actual results to differ, please see today's press release, the slides that accompany our presentation, and our filings with the US Securities and Exchange Commission. Throughout this discussion, we will be making reference to non-GAAP financial metrics, including items such as revenues at constant currency and adjusted EBITDA.
Explanations of how and why we use these metrics and reconciliations of these items to a GAAP basis can be found in the schedules in today's press release, the slides that accompany this presentation, and in our filings with the US Securities and Exchange Commission. Please also note that when referring to segment and regional year-over-year sales increases and decreases, we will refer to sales in constant currency. Please also note that when referring to year-to-date results or comparisons, we will refer to the nine-month period ended September thirtieth, twenty twenty-one, and the comparable nine-month period. With that, I will turn the call over to David.
Thanks, Sondra, and good morning, everyone. As announced in today's earnings release, Acushnet continues to build terrific momentum across our businesses as our team effectively navigates the current supply chain environment. Global golf market fundamentals are healthy and demand across our Titleist, FootJoy and KJUS brands is strong. Acushnet's talented associates and committed trade partners are doing great work to keep pace with this demand, while operationally we benefit from vertical integration and geographic diversity within our supply chain and a company-wide commitment to the health and well-being of our associates. Now getting right to our results. Q3 revenues of $522 million increased 8% versus last year and are up 25% compared to 2019. Titleist golf clubs, gear and FootJoy led this growth, with clubs and FootJoy each posting double-digit gains.
Golf balls were up almost 40% versus 2019, yet down 3% versus last year, as availability was tight throughout the quarter. The company's growth and strong top-line performance contributed to adjusted EBITDA of $70 million in the quarter, which, as noted on our last call, reflects incremental supply chain costs and investments throughout our business. Year to date, Acushnet sales exceed $1.7 billion and were up 45% and well ahead of 2019 levels. Each of our businesses is in great shape and strong demand is driving healthy growth while we manage tight availability in just about every product category. Year to date, adjusted EBITDA of $333 million is up 80%.
These results fortify the company's strong balance sheet and provide us with great flexibility to invest in future growth opportunities and execute against our capital allocation priorities. Now turning to slide five and a review of our business by segment. As noted, Titleist golf ball sales were down 3% in the quarter and up 37% year to date. We are pleased with the performance and momentum of the Titleist golf ball business. The Titleist ball count across worldwide tours is a leading 73%, more than seven times the nearest competitor, and our teams are doing a good job leveraging this pyramid success into strong demand across regions. We are enthused about the recent launch of our new Pro V1 golf balls with radar capture technology or RCT, which has been developed by our team to optimize the indoor user experience with Trackman devices.
While not a large volume opportunity, this product offers a good example of how the company's unwavering commitment to golf ball R&D can enhance the golfer experience and further position Titleist as the golf ball innovation and performance leader. As discussed on our prior call, golf ball production levels have been limited by raw material shortages, and we expect this dynamic will continue, resulting in tight availability for the foreseeable future. Similar to last year, we have recently converted production lines to support the launch of new Titleist golf ball models in the Q1. As you would expect, the timing of this transition becomes a balancing act as we seek to both satisfy current demand while also building inventories to support upcoming launches.
Moving to Titleist golf clubs, sales were up 12% for the quarter and 52% year to date, with our highest growth coming in the U.S. and Japan. The global launch of our new T-Series irons in August was comprehensive and successful, a testament to the good work by our product development and operations teams to advance plan and execute in this dynamic environment. Underscoring Titleist golf club strength and momentum, Titleist was the most played driver, hybrid, iron and wedge this past season on the PGA TOUR, where more winners use Titleist equipment than any other brand. The Titleist club business is in great shape. While the Q4 will be down as we comp against last year's TSi driver launch, we think the business is well-positioned for the future.
Our Titleist gear segment continues to grow and gain share, with sales up 4% in the quarter and 33% year-to-date. Sell-through of our 2021 line has been excellent, and while availability has been impacted by factory shutdowns in Vietnam, we are seeing this situation begin to stabilize as vaccination rates climb. Moving to FootJoy, you see year-to-date sales of $462 million are up 42% on the year and 18% for the quarter. This growth is led by the success of key footwear franchises, Premiere, HyperFlex, and Traditions across all regions. The FJ Apparel business is tracking ahead of expectations, led by accelerated growth in the U.S. and Korea and great response to our seasonal collections.
Rounding out the Acushnet portfolio, we are pleased with strong performances and growth from Titleist apparel in Asia and our KJUS golf business in the U.S. and Europe. Now turning to slide six and a review of our key geographies. As you see, all regions are healthy and posting strong year-on-year gains, with growth ranging from a low of 30% in EMEA to almost 50% year-to-date growth in Japan. Acushnet's business in the U.S., which represents about half the global golf market opportunity, is up 45% on the year. Year-to-date rounds of play have increased in all regions, with the three largest markets of the U.S., Japan, and Korea up between 8% and 15% through September. Now looking forward, we are optimistic about the health of the game and its underlying fundamentals.
Golfer engagement levels are high, and our trade partners are successfully adapting to golf's evolving new normal. Our Titleist, FootJoy, and KJUS product development pipelines are in great shape, and we look forward to launching a comprehensive range of new products over the next several months. While we are confident in our team's ability to proactively manage supply chain complexities, we anticipate that the current environment of raw material shortages, disrupted production schedules, longer component lead times, and increased freight costs will continue for the foreseeable future. That said, we're enthused that many of our supply partners are investing in their infrastructures, which will ultimately benefit Acushnet supply chain capabilities. Looking to the long term, accelerated investments in our digital infrastructure over the past year are leading to continued expansion of our global B2B and D2C capabilities.
These investments will drive improved service levels, shorter lead times, and enhanced user experience for our trade partners and end user golfers. Similarly, the transition to our centralized U.S. distribution center is well downfield and will over time provide faster and more cost-effective fulfillment for a wide range of Acushnet products. Our $125 million capital investment in support of golf ball manufacturing innovation and customization is underway, and we are optimistic about how this initiative will position the Titleist golf ball business for future success. In closing, we are confident that Acushnet is structured and well-positioned to capitalize on this vibrant golf market, and that our focus on the game's dedicated golfer and proven track record of product innovation and supply chain management will support the company's long-term growth objectives. Thank you for your time this morning.
I will now pass the call over to Tom.
Thanks, David, and good morning, everyone. I would like to start by thanking our associates for their exceptional efforts to keep pace with demand and to navigate various supply chain complexities, which have resulted in another strong quarter for Acushnet. Starting with income statement highlights on slide nine, consolidated net sales for Q3 were $522 million, up 8% compared to Q3 2020 and up 7% on a constant currency basis, as demand for all our products continued and our supply chain operated at a high level despite continuing challenges. These are very solid results considering that Q3 2020 was up 16% compared to 2019 on the strength of increasing demand after the COVID-related closures in Q2 2020. Gross profit for the Q3 was $269 million, up $17 million or 7% versus 2020.
However, gross margin was 51.5%, down 70 basis points. The increase in gross profit comes primarily from higher sales volumes and higher average selling prices during the quarter, mainly in Titleist golf clubs and FootJoy footwear and apparel, but were partially offset by higher inbound freight costs across all segments and higher raw materials and manufacturing costs, primarily in Titleist golf balls. These higher costs also drove the declines in gross margins. SG&A expense in Q3 was $200 million, up $46 million or 30% compared to 2020, and R&D expense was $15 million, up $4 million compared to 2020. The increase in SG&A was from higher selling and distribution expense as a result of the higher sales volumes during the quarter, higher G&A expense, primarily from higher employee-related costs and increased investments in our information technology platforms, and higher advertising and promotional costs.
Income from operations for the quarter was $52 million. Interest expense for the quarter was $1.1 million, and our effective tax rate was 20.8% compared to 18.1% in 2020 as a result of a change in the mix of our jurisdictional earnings and the impact of a one-time discrete benefit, which was recorded in the prior year. Net income attributable to Acushnet Holdings was $39 million, and our Q3 adjusted EBITDA was $70 million. Moving to our results for the first nine months of 2021, consolidated net sales were $1.7 billion, up 45% compared to last year and up 41% on a constant currency basis. Gross profit for the first nine months was $914 million, up $305 million or 50% compared to the first nine months of 2020.
Gross margin was 52.9%, up 180 basis points from the prior year. SG&A expense for the first nine months was $586 million, up $149 million or 34%, and our R&D expense was $40 million, up $5 million or 14% compared to 2020. Operating income for the first nine months was $282 million. Interest expense for the first nine months was $6.6 million, and our effective tax rate was 23.1% compared to 21.6% in 2020, primarily because of changes in the mix of our jurisdictional earnings. Net income attributable to Acushnet Holdings for the first nine months was $205 million, and adjusted EBITDA was $333 million.
There is a reconciliation of net income to adjusted EBITDA for Q3 and the first 9 months of 2021 in our earnings release as well as in the appendix of this slide presentation. Moving to slide 10, our cash and liquidity position is strong and continues to improve. At the end of Q3, we had about $319 million of unrestricted cash on hand. Total debt outstanding was approximately $320 million, a decrease of about $57 million from Q3 of last year, and we had $386 million of availability under our revolving credit facility. Our leverage ratio was 0.7x at the end of Q3, down from 1.8x at the end of Q3 2020.
Consolidated accounts receivable at the end of Q3 2021 was $300 million, up $32 million from Q3 of the prior year due to higher sales. Our accounts receivable aging remains very healthy, and DSOs were 53 days, down eight days compared to the prior year. Consolidated inventories were $325 million, far lower than our optimal levels, but up $7 million from Q3 of the prior year, with increases in golf balls, clubs and FootJoy, partially offset by decreases in gear, Titleist apparel and shoes. DSIs were 117 days at the end of Q3 compared to 170 days at the end of Q3 2020. Cash flow from operations was $280 million for the first nine months of 2021, up $113 million compared to last year.
The increase comes mainly from higher net income, partially offset by changes in working capital. Looking to capital expenditures, we have spent $19 million during the first nine months of 2021 compared to $15 million last year. We now expect our capital expenditures for full year 2021 to be in the range of $40 million-$45 million, as the receipt of some purchases has been pushed into 2022 as a result of supply chain challenges. Turning to slide 11, our capital allocation strategy and priorities have not changed. Investing in the business with a focus on product innovation, golfer connection and operational excellence is still our highest priority, and we continue to pursue acquisition opportunities that align with our focus on premium performance products that appeal to dedicated golfers. We believe these investments will advance our long-term strategy and drive growth at a favorable return.
We also continue to focus on generating strong cash flow and returning capital to shareholders. On September 17, we paid our previously announced Q3 dividend, which totaled $12 million. I am pleased to announce that today our board of directors declared a $0.165 per share dividend payable on December 17 to shareholders of record on December 3, which would also represent an expected cash outflow of approximately $12 million. During Q3, we repurchased approximately 242,000 shares for a total of about $12 million, increasing our year-to-date purchases to approximately 742,000 shares for a total of about $30 million. Reinforcing our commitment to return capital to shareholders, our board of directors recently increased our share repurchase authorization by $100 million to a total of $200 million.
We now expect to repurchase up to an additional $50 million worth of shares by the end of 2021, making the full year total up to $80 million. Moving to slide 12, our outlook for the full year 2021 has improved. Demand for Acushnet products continues to be strong, and while we have raised our forecast for the balance of the year, our outlook continues to be governed by supply chain challenges, which are causing higher raw material costs and material and component shortages across all of our businesses.
These supply chain challenges are impacting our ability to meet demand and are resulting in further production disruptions and increased costs. We continue to face escalating inbound freight costs, which we expect to continue well into 2022. We now expect our reported sales for full year 2021 to be in the range of $2.08 billion-$2.11 billion, up about 30% at the midpoint compared to 2020. We expect full year adjusted EBITDA to be in the range of $305 million-$325 million, up about 35% at the midpoint. These expectations assume no significant worsening of the impact of the pandemic, including incremental closures of global markets or additional supply chain disruptions.
At the midpoint, this outlook implies Q4 sales of $368 million, down $53 million compared to 2020, and an adjusted EBITDA loss of $18 million, down $66 million compared to 2020. The decrease in sales comes primarily from lower volumes in golf clubs as we comp against last year's TSi metals launch in Q4. Sales for the rest of our segments for Q4 are expected to be flat to slightly down compared to 2020, as supply chain challenges are expected to further limit our ability to meet strong demand. The decrease in adjusted EBITDA comes primarily from lower gross profit on the lower club sales volumes and lower gross margins from higher inbound freight and higher raw materials and manufacturing costs.
Additionally, OpEx will be up about $19 million compared to 2020 from higher advertising, promotion, and selling costs as we are investing to take advantage of the current industry momentum and from higher associate related costs. In conclusion, Acushnet delivered another strong quarter in Q3, led by tremendous execution by our associates and trade partners. We have again raised our full year 2021 financial goals, and we are confident in our ability to execute our long-term strategies and to deliver a solid long-term total return for our shareholders. With that, I will now turn the call over to Sondra for Q&A.
Thanks, Tom. Operator, could we now open up the lines for questions, please?
At this time, if you would like to ask a question, please press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Daniel Imbro of Stephens Inc.
Yeah. Hey, good morning, guys, and congratulations on the quarter.
Hey, Daniel. Thank you.
Yeah, I wanted to start one on the sustained sales growth. I guess in the release, you talked about price increases on FootJoy and some of the golf gear. Can you provide some color on just how units are tracking and your ability to meet that demand on that side of the business? And then as you look to the Q4 and beyond, which categories are seeing the biggest lack of availability on the unit side, and what is your ability to continue to take up price to offset that?
Okay, Daniel. I'll get into that. At really the highest level, you know, all of our categories are constrained to some degree from an availability standpoint. As it relates to the Q4, you know, the biggest constraints are in golf balls, and that's really twofold. That's raw materials, one, but that's also our decision to stop producing current models to begin producing and building inventory to support our Q1 launch. You've got a couple of factors at play there. The club side of our business, as we've said all along, and we typically like to run custom club lead times at about two days, which are, you know, among industry best. That's not been the case for quite some time as you know.
We continue to have a pretty good backlog of orders that we're working through. You know, as it relates to price, I think the best way to think about pricing looking forward is to maybe illustrate what's happened in 2021. Our preference always is to think about pricing first and foremost from an innovation and golfer performance enhancement perspective. We think we've done that. But of course, you know, we are dealing with cost inflation throughout the business.
If you look at how we're thinking about price and how we've responded to price in the back half of 2021, we've taken increases in some areas, but not all. Examples would be our iron launch, gloves, golf bags, and I think that's the right way to think about how we'll look at pricing going forward in 2022. We'll look at it on a case-by-case basis. We will take some price increases, but again, it'll be specific to each product group. And won't be a sweeping approach to our total business. I mentioned what we've done in the second half. We took a price increase on Pro V1 in the first half.
Clearly the environment, whether it's from a supply versus demand comparison, number one, or a raw materials, labor cost, distribution cost element number two, would support the reality that, hey, there will be some price increases in 2022, again, in some parts of the line, not all.
Yeah. Closely related to that, I guess one of your private competitors seems that they've taken up price intra-launch on clubs, which is a bit odd and something you guys haven't done yet. Is that something you guys think the consumer could handle or would handle in this environment? Or how do you guys think about intra-launch price increase on hard goods? Just
Yeah, we really, it's been our practice for many years to really attach price increases to new product launches. That, you know, we believe is in our best interests, and we don't see any deviation from that approach going forward. Again, I understand the rationale behind it, why it may happen, but again, our approach has always been, again, to sync up any price changes with new product launches.
Tom, just a financial one on the guidance. You did give some helpful color at the end there. I guess in the Q3, you know, gross margins only down 65 basis points is remarkably impressive given the cost pressure. Was there any one-time benefit in the quarter? Then as we look at the Q4 guide, you just gave us the pieces. I think you said $18 million in costs. That seems to imply gross margins somewhere in the mid-40s, 44%-45% range in the Q4. I guess, are we backing into that guide correctly? Any color, just you can help us quantify as, you know, what's driving that 700 basis points plus of margin pressure in the Q4.
Sure, Daniel. In terms of Q3 gross margins, no, there weren't any one-time items there. You know, that performance was really based on our sales volumes and some of the price increases that we've taken, as David mentioned. You probably expect we still have pretty significant headwinds from freight, which impacted us in Q3 and will impact us in Q4 and into 2022. You know, in terms of Q4, we do expect our gross margins to be down from Q4 of 2020 and 2019. I don't think we're expecting them to be down quite as much as you suggested. You know, probably more a little bit higher than that.
You know, most of that decrease is really just coming from volume. You know, there is a pretty sizable decrease in our sales volume compared to last year, primarily because last year we had the TSi metals launch. So volume is clearly the largest piece there. But we are expecting about a you know, a $9 million hit from freight in Q4 compared to 2020, and then the rest would just be sort of that price and cost inflation we're seeing as a result of you know, some of the raw materials and other supply chain issues.
Got it. That's helpful. I'll hold that with you. Thanks, guys.
Thanks, Daniel.
Thank you.
Operator, we'll take the next question, please.
Your next question comes from the line of Kimberly Greenberger, Morgan Stanley.
Hi, this is Quinn Jacobs on for Kimberly. Thank you for taking our question and congratulations on the great results. We want to get a little more insight around your guidance for the rest of the year. Q3 sales came in 25% above 2019 levels, but then decelerated from the 35% growth in the Q2. The implied Q4 guidance suggests that sales will decelerate quarter-over-quarter and come in flat compared to 2019, looking at the midpoint. Could you give us some color on the drivers of this deceleration? Is this driven by any particular products or regions?
No, I'd say it's across the board. You're right. Our Q4 sales in 2021 look to be roughly flat compared to 2019. You know, we do expect you know, sort of similar seasonality there. What I will say is in Q4 2021, you know, demand, you know, the demand environment is much stronger than it was in 2019. You know, some of our supply chain constraints are making it difficult for us to meet that demand. I think the demand environment is much stronger. But when you take into account some of our constraints, we're just not able to meet all the demand that's out there.
Great. Thank you.
Okay. Thank you. Operator, next question, please.
Your next question comes from the line of Anna Laskin of Jefferies.
Hi. Good morning. Thanks for taking our questions. Taking, I guess, a step back, could you walk through how the quarter progressed versus expectations? Clearly came in ahead. Was it more of a function of supply chain being less constrained than feared when you were contemplating the guide, you know, on the Q2 call? Or was it a better than expected demand environment?
Yeah, Anna. Much more the former in that it was our outlook for the Q3, really our outlook for the second half, was really built around supply chain and what we thought we could get out of our supply chain. As that improved, our ability to meet demand improved. Not a lot of change from a demand standpoint. Demand has been strong all year. It remains strong, albeit seasonally adjusted. The Q3 played out largely because our supply chain across all categories, across all segments, delivered more than we anticipated. Part of that is the very good work by our team. A lot of that too comes from better results, better performance from our supply partners, from our raw material partners, et cetera.
Got it. Thanks. Thanks for touching on the ball availability. I guess, clearly, you know, the supply chain, it's difficult to say when this will rectify, but, you know, how long could, you know, the channel backfill benefit extend in that segment? Is this like a 2022 and beyond, maybe mid-2022? Just how to think about, you know, the retail versus wholesale dynamic.
Well, you know, of course, it's a moving target. We would anticipate based on our, you know, what we know today, and that's driven off the forecast we're provided from our supply partners around raw materials. We would expect channel inventories to remain tight well into 2022, and can't at this point put a more definitive timeline on it. We would expect inventories across the golf ball spectrum to be tight. We're at a point now when the industry is making more than we sell to gear up for spring launches and really the beginning of the 2022 season. I would expect to see inventories remain lean through the heart of 2022.
As I've said before, we're confident that we'll have enough product out there to meet consumer demand. Again, you're just gonna see a lean channel inventory environment.
Great. Thanks.
Thank you, Anna. Operator, next question, please.
Your next question comes from the line of Casey Alexander of Compass Point Research.
Hi, good morning.
Good morning, Casey.
Hi. I have a question. In your presentation, one of the things that you didn't really talk about was market shares. I'm wondering if, you know, not all supply shortages are created equal, and it seems to me that suppliers don't want to, you know, bad pun, they don't wanna shaft their biggest customers. Are the supply chain shortages you're navigating, I think, better than most, allowing for some market share gains against the competition who may even be having more trouble with supply chain shortages than you are?
Casey, good question. Everybody's, you know, battling for available raw materials supply. We think we're doing a pretty good job. Part of it's tied to where we are seasonality from a launch cadence standpoint, and that would apply to our competitors as well. You know, as a share, as it relates to share, we don't often get into share commentary. I think the available data out there captures some channels, but not all. We don't get too caught up in share commentary.
We like our position right now across categories and expect that, you know, our team is gonna continue to position the company to take full advantage of whatever availability is out there. I know our competitors are thinking about it the same way. It's tough to really quantify its impact on share at the product level. You know, as we look at our business up near 40% year to date, we certainly feel good about that performance in the context of a really constrained supply chain environment.
Okay. Thank you for that. I'm gonna put you on the spot just a little bit. If you could look forward a little bit into 2022, understanding that we have to project into 2022, and sort of help us contour how we're looking at 2022 in relation to 2021, I think that would be very helpful.
Yeah. Great. Fair question. Not putting us on the spot, but I'd say the following, Casey. You know this, retail is healthy, channel inventories are lean, consumer strong. I'll add to that, as noted, we're very confident in our product plans for the first half of the year. Of course, the planning process is far more complicated today than it typically would be given supply chain environment. As we balance raw materials, component availability, costing, freight, lead times, et cetera. I'm gonna caveat a bit and say, given the strength and momentum of our business, we would expect growth in all segments next year in a normalized supply chain environment.
Ultimately, however, as the plan comes together, it will be more reflective of the supply side than any demand driven forecast. So, not maybe the literal answer you were looking for, but again, from a demand standpoint, from a market fundamental standpoint, we really like what we see. It really is gonna be a function of what can we pull out of the supply chain.
All right, great. Thank you for taking my questions. I appreciate it.
Thanks.
Thank you, Casey. Operator, next question, please.
Your next question comes from the line of Joe Altobello of Raymond James.
Hey, guys. This is Adam calling in for Joe. Congrats on the strong quarter again. If I could just get, I know you gave some detail in 4Q, but an update on just the estimated impact of COVID and supply chain headwinds this year, just kind of putting it in a vacuum. I know last year you cited the roughly $75 million-$80 million versus the second half of 2019, if I'm not mistaken. I'm not sure if you guys have an updated, you know, number there in terms of, you know, how things have changed based on your 4Q outlook now, but any update there would be helpful.
I'm not certain I recollect the numbers you just put out. I'm not sure we put out a specific number as it relates to the impact of supply chain on our results. I mean, obviously, there has been a significant impact, both in top line, in our ability to meet top line sales and demand that's out there. Then also, specifically things like the incremental freight costs that we've quantified in the past. I don't think we've put out something specific around the supply chain impact.
Gotcha. If I could squeeze in one more. I know you guys may not share the color on the detail of the rounds played in 2021, but I think last year, you know, a big driver was avid golfers playing more. Is that still kind of what we're seeing this year, or are you also seeing last year's new golfers increasing their play just in terms of just trends we're seeing within those rounds played, play data so far through September?
Yeah, you know, the starting point, the game's in good shape. Facilities are busy. Really maybe answering this through the U.S. lens, rounds are up-
...8% over 2020 and about 18% over 2019 year to date. Q3 was down about 5% compared with last year, which you know, I would say our year to date performance from a round standpoint probably better than anybody anticipated at the start of the year. Full year rounds are on track to surpass last year's really aggressive pace. A healthy outcome given COVID realities. I'll add to that the fact that weather was more favorable than last year. As to the composition, we you know, anecdotally, you continue to hear that it continues to come from three sources, right? The avids playing more, the latents who came back to the game because of COVID, and new entrants.
You know, best we can provide, it's still probably half of it, the incremental play coming from the avids, a quarter from the new and a quarter from the latents. Again, we'll update that as we see more industry data come out at year's end, but I think that's the right way to think about it for now.
That's really helpful. Thanks a lot, guys.
Great. Thank you, Adam.
Adam, thanks. And thanks everybody. We appreciate your time and efforts to understand this dynamic business environment, and we look forward to speaking again on the next call. Have a great day.
This concludes today's conference call. You may now disconnect.