1. Based on the benchmarking analysis below, what is a logical conclusion to draw about the margin profile of the target company?

HISTORICAL

                                                            2020            2021          2022

Gross Margin %                                67.4%           67.9%         68.3%

Private Peer                                      66.5%            67.3%         66.8%

Private Company target                  64.6%            65.1%       65.5%

Total SG&A of Sales

Public Peer                                      45.1%              44.5%          43.6%

Private Peer                                     47.0%              45.5%           45.1%

Private Company Target               45.2%              46.5%            47.1%

There is room for operational improvement across the board

A) There is no room for margin improvement

B) There is room for gross margin improvement only

C) There is room for SG&A margin improvement only

D) The target has unsustainably high margins