XPEL - Earnings call transcript Q4 2017

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Operator

Greetings, and welcome to XPEL Technologies Fourth Quarter and Year End 2017 Earnings Call. At this time all participants are in a listen-only mode. A question and answer session will follow the formal presentation. [Operator Instructions].

As a reminder this conference is being recorded. to conference like host, to now Belodeau. Jen would turn over the your I

Jennifer Belodeau

welcome Conference to XPEL and morning Good our Results XXXX. Technologies Call for Financial discuss to

a Executive Pape, On prepared today provide comments, to after questions the an moment business take Chief XPEL’s company’s Officer; the will and from of we participants. and President Financial the will Safe Officer, Barry Ryan I’ll the our the and Harbor operations call overview financial XPEL’s Wood, Immediately take Chief read call review results. statement.

certain other of control risk equity known could the products, acceptance unknown and factors, and the always, and words company’s result call, phrases; course of the forward-looking might, which and strategy. dates expects, as management growth and plans, can make statements or the variations, taken, of affecting as generally achieved. not be variations regarding performance statements or are in such specific into of or events During and would, by execution including anticipates, proposes this statements economic of be of expected, discussed of a words, they markets capital beyond markets circumstances the of XPEL not expectations include, results occur, Corp. be and this by limited the of the based or believes, business, or may we’ll but or all its the from negative Often, certain use could, or anticipated many such of expansion may, proceeds XPEL. occur not and will The company’s events forward-looking differ to, materially state XPEL. are on uncertainties factors use current company, certain factors as Technology actions, transactions, may the Such scheduled, forward-looking contemplates, call intends, the at competition, identified of new

cause that required other factors differ anticipated, forward-looking statement results as differ actual guaranteed, or actions, be attempted to events to estimated described that actions, events identify has could applicable materially intended. factors to from cause XPEL be except securities those Although can or may laws. by No forward-looking important in there from results those or statements,

speak of the they made, a Ryan. ahead, over as of obligation and the call date of any information, only otherwise. whether statements Forward-looking statements, the as new which me let to undertakes are no Go or or turn way update that future on out XPEL Ryan. publicly With events forward-looking revise to result

Ryan Pape

Welcome quarter and our Jen, good call. fourth everyone. to conference year-end morning Thanks,

previously last transformational As I for year said quarter a XXXX was us.

accomplish think of growth put the I from some the good overcoming challenges up the we optimism while pretty previous and lock year.

with year XXXX. rate revenues the ended XX.X% XX which of million, was over growth just we So, under

in our rapid saw We sequential increases also quarterly XXXX growth.

reflect think I momentum. revenue strong that So represents

our So, markets we cost in of the price last have in sold efficiency. to reduction of increases strongest have costs a phenomenon while this -- address and price other some increases our lowest of and to targeted where growth combination year due mix non-product begun occurred goods we in to margins,

efforts So, is which payoff we’re already these seeing great in a thing. XXXX,

fourth which the in revenue million, far highest the XX.X grew revenue history. by to For was our quarter quarter XX.X%

but a in China and a all little across earlier We’re seeing or spotty, in which year different more strong particularly the little growth of Asia bit in regions, is was a bit our it specifically.

for a quarter. us. building grew obviously total XX% it’s just revenue obviously a the our year the us. And been for new development that’s China nice so for revenue over to it’s So, over of fourth dynamic

that during the growth we’re and building momentum year revenue seeing we’re QX. So, on continue and revenue strong into

several discussing major on executed last and facilities as major started fourth our and operation sales staff. consolidation we the of and third several quarter our restructuring included during initiatives we quarter. So, They

this third we the experience resulted the in in quarter costs like and recruiting severance quarter. fourth in So,

anticipated were these fourth as fully And cost quarter. changes. been those of in So, these the recognized part the changes associated have with

two complete. those things are So substantially

impacted some the products in film of space you working capital the of eliminate forward, we of offer specialized lowest bringing margin quarter to are as aggressively our other these market. We product just the paint will by higher that and where favor some as gen next that the more in specifically our elimination, were we products, for products if be lines, going will leaving and lines products also flexibility the well consolidation today protection products margin we oldest our and worked these of our to the

So, is QX will entirely not be impact complete, while in elimination any. that if the of minimal those SKUs

substantially complete. it’s So,

So, generated of aggressive pressure we’re we in point sold these very our also SKUs about of a on of non-recurring two-thirds contributed the third. reduce cost because some from at the as margins in this to fourth resulted in Did we continuing gross But to flow cash products of this our revolving debt by and price consolidation operations million quarter $X.X the impact quarter. us and the significant helped for in release, the experience in margin just mentioned that quarter at as year-end. well some in similar gross that

launching characteristics, discussed be Ultimate product film called of Plus, evolution as a officially April, in Plus product advantage last that’s optimal better a our paint thing. generation installation the Also, which characteristics, quarter’s good of we protection as is on Ultimate call. next the which our better key really next is Ultimate We’ll installers. So for

pricing margin to in we operate geographies introduce the that this, of result all enhancement really. further that will a for provide as able modified some So we’re

is Canada as previously locations. Canada, leading acquire window we announced we Protex film So fourth a in or also, protection which with franchise franchise paint XX the quarter over in

So, Canada supply franchise exclusive Canadian serve subsidiary had a on our an basis. to XPEL group the agreement already

our already to success selling because the So, the to support are on acquisition double result product didn’t group we of the now, But near ensure franchise act franchise. of lot really extra to lock and a the the the we can and relationship. in revenue,

will place, paid back franchise the get of a part Protex So, team who from arrangement dedicated a to as sales in we value still we’ve to Protex got on rebate exclusive Previously, supply remains great management them. them. for

So get other and Protex's is of from primary now source to royalty that recapture obviously, revenue we on sales franchisees.

So, we course pick which high revenue, is dollar but significant that a overall of obviously the up amounts to not revenue. relative margin,

office Canada. significant have we Mexico in the But Protex established don’t we at beyond point quarter, global a any continually products our Also, Canada So, about for is we and we’ll prospects a this even great market penetrate sales number opportunities And for establishing and excited during the years worked beyond facility to [indiscernible]. footprint the forward. Mexico distribution operations we’re for Protex our facility. evaluate going prior one a for plans to there. by in opening for of

It’s portfolio markets the particularly XX-XX of expect we a think, film and a some film a probably but that product in. cost other the well larger an and and there address it’s in country about mix market, film served now we attractive protection market. window to large structure attractive to not we’re have market play and than window paint running We’re we large role and

months they So usually in right but modest sales years now, in the our initial previously we’ve country, sold what dwarf are in in Mexico.

headquarters and the positioned San Antonio, long well to support So, ties. business well it's through history markets Mexico two as our to also Texas connections important we're many between of a us,

this So, a really for advantage us. is strategic

Close long-time acquired hopefully So, the a the smaller is excited to we presence. talk quarter, we're to example that also development Get In a and coming year. a there market others we it’s where have more further Auto, strategy. market about customer than about get a over we our customer the of physical Boise Boise

different helpful for set is which of a circumstances us. presented this So,

continue model going the to tweak we So, and forward. evaluate

with the Boise on to buying this our just overall As base revenue. in add of films, other build customers to presence are local we're as the service that around locations in our not we strategy use looking

So, well. and applies as the Boise part of to strategy a I think that's key

personnel I improve a the have we've what product restructuring, with lot able I accomplish metrics. operating I'm changes very our with XXXX of and in XXXX, made really So, pleased line in overall we're to different positioned we're been the great we've think think on various a to consolidation, the

I be good for upcoming year it So, really think us. should

with over that to take Barry detail then and Barry? I'll review more in to numbers it very turn we'll the So, to some questions. of

Barry Wood

Thanks, everyone. Ryan, morning and good

For quarter, the revenues increased to million. $XX.X XX.X%

We quarter robust in significant experienced our of As occurred [in XXXX. in to Ryan fourth third growth but quarter has continued our all which particularly Asia] record the million in revenues this as regions, crossed of of demand accelerate quarter region. mentioned, was growth our previous $XX.X

XX.X% For to the $XX.X grew year, revenues million.

grew consolidation of grew forward. XX.X% Gross XX.X% incur within mix offset mix XX.X%. a the XX.X% distribution due impacts do future really alluded year-to-date $X.X further SG&A sales this increases in price again from XX.X% additional continuation sales $X.X margin have gross sales QX, margin prior consolidation Ryan by that we versus we initiative impacts initiatives, quarter XX.X% gross was increased related the our was for declined earlier. been to as a Normalizing reference, for and As margin the -- have million prior XX.X%. of margin mainly XXXX we On and have for year as to Gross XX.X%. basis. been for XX.X% XX.X% sales however, decreased XX.X%. of to year-to-date our around gross expenses margin that SKU lower and quarter of year-to-date But the growth those for revenue but costs margin to costs, $XX.X a in percent move a quarter in the did on normalizing to of basis, quarter began and would this lower is non-recurring the our quarter channels would to potential a with believe We effect of of channels as affected the the for higher versus million margin of percent mix. product to through as year million point to

declined XX.X% XXXX. percent a SG&A of sales, costs XX.X% As in to versus

of straight approximately discussed method method We quarters change changed some to again incur So, we previously, we costs sales method began January the Xst, the change XXXX that the our begin line our assets XXXX. will change leverage we of into is this began QX future significantly did from in declining also of in And again lessen XX.X% operation, the we've in this and expenses on assets how onetime this in and represented to non-recurring and doubled some the consume fixed our for change of better would see balance related made And noted depreciation reflect normalize to restructure of of the total impact And of depreciating to prior older grown these effective cost beyond. as our calls assets $XX,XXX. $XXX,XXX right staff sales. our SG&A restructuring and benefits did accelerate around depreciation impact XX.X% and there. to and have QX was of this and

loss XX.X% onetime million pretty approximately for reductions around receivables, as $XXX,XXX and items the for SG&A would the EBITDA that and So, as million than XXXX normalizing quarter a the $XX,XXX prior our for representing year-to-date resulted been income continue was been to items have Cash and X.X X.XX million again versus helped year, advances we improved about year the Net and saw non-recurring million year’s our to net strong on inventory was we robust income prior quarter the million a Factoring in million date year. increased the we income from for did in $XX,XXX on which to the feel X.X for a a the last X.X% basis better direction have would versus basis. but year-to-date was the EBITDA non-recurring quarter $X,XXX in a quarter been a $X basis, slightly factoring would would year-to-date million from we year began was and the quite quarter versus work on line moving to year on which the have million in quarter $X.X a cash X.XX $X.X impact forward. QX about items only right customer prior income slower EBITDA, year. for the operations flow bit. on representing in collections net in move net for quarter we this of good million mainly X.X monetize quarter, items, decreased versus receive future sales the some decreased some X.XX and prior levels to our flow for $XXX,XXX which increase increase

net debt our X.XX to and provided compared as performance basis, to last by in burdens line versus flow times $X Return allowed strong our year. Ryan our cash a times on XX.X% of sits our down as Debt-to-equity inventory XX.X % our million. operations to now to as we at XXXX our cash million year reduce So, on year-to-date at paid at totaled XXXX in which $X $X us X.XX ratio substantially alluded was prior the million XXXX. credit balance

strong So clearly effectively our remains I move to a the meeting we manner sheet well think and we these cost-efficient very in balance at forward. as are business positioned

accomplished driver big encouraged outstanding for along pleased we continue year the was certainly topline in growth results in accomplishments with revenue significant to seat SG&A very a top our think we’re we to put know topline XXXX margin we to So, with see XXXX. by momentum for XXXX. growth efficiency and company our you that be priorities continue things us our deliver of enhancement in some and

So, questions. turn to with that the operator call we’ll over now for

Operator

At a conducting session. will Instructions]. [Operator we this time, question-and-answer be

Our proceed first question. with Adam the your of question Please Investor. comes Goldstein of from Private line

Adam Goldstein

direct was wondering have And Hi. China fantastic the you reason mentioned China guys consider I growth in just this Obviously, than distributor? the for a a you was that. going revenue rather was main pretty through quarter. to model

Ryan Pape

thanks Adam, the question. for

and we we the greatest we, possible Because that’s So, be operating that I brand sense. it proposition position the have value effectively. think think our where makes most as direct pretty clear I we that deliver preference think to how is that, can been overall as

would So, the have this to that’s I it’s under that to operate think hits but not all think Mainland would as But something be at it that something our on, directly at elsewhere. strategy, that’s all any totality China But that not things the it near-term we agree to in consideration. time. work ultimately obviously in of all we’re is think contemplating overall given I I factors this consider point something we and the China

Adam Goldstein

Okay.

due of efficiencies quantify operating as mentioned You all of impact to some profit in you’re and targeted margin some improve Could forward. what to going decreases see to percentage you you a hope that kind terms going that the at of price sales? improve, could

Ryan Pape

Yes.

the we’re We’re to able position mean wise, the end quantify first obviously, yet. quarter. not it the nearing I where, timing we’re of in

that loaded about and in the the seeing tends confident we’re we that be So, be typically March is in the the we’re month enough said, direction that improving it characteristics momentum to should But month. backend of see. in talk busiest quarter first to

in this warned So, through have the margin to in and I performance direction think need are shows growth. as we given we’re and at quarter. March that the the quarter, But close that opportunity it past, we and point us, right we the in headed the to improvement revenue and get on

Adam Goldstein

Okay.

years. a This decline in so the of couple gross trend say percentage. But past much even clearly not has profit quarter. maybe the focusing Just on over just of overall particular been

you’re adjusted like is the SG&A numbers, then quarter of for recent your to, revenue the margin this And adjusted according was using gross XX.X%. most XX.X%. a as now So percentage

the to operating margin pretty of down we’re So, X.X% getting skinny, is revenue.

of in just margin is expect somewhere model of terms of around So should going forward? we business our going what emergency business operating X.X% this that forward kind

Ryan Pape

No.

margins I that. think in for aiming higher we’re

question timing we where a of and where just it how and we invest. and grow consistently, pretty that said how we think I the exact and

in we’re areas we growth SG&A. as revenue in European operation our annual our seeing a last talked by of of But one now percentage. added that growth quarter, think equivalent $X the areas, I result, highest about investment as the million

sort there. fix should SG&A of that through quickly So burn that

So, where and is areas growing been the it's the been targeted through going continues We’ve last decision in invest of at we've to SG&A. not think get year helps number. forward to of it constant to, the and and our and help to happy with you that the I final those where investment scales, grow investments then level intentional rates a managed as growing that and sure need make we've business larger

Adam Goldstein

Okay.

which be I reporting looks I'm has how Can notice International brought changed? to confused. issue on reporting. a your like up it last reporting back what the used some Europe to now you an disclosure I you've Now now to called Other, it's the changed quarter from little explain was

Barry Wood

Yeah, Adam. question. This for is the Barry. Thanks

in So basically, or terms item what started a we really year and late and move to part significant impact most separate obviously the to going which change. really think disclosures a in that anything as other the that have didn't regional of said we we evaluate past we investors. we did as that -- so since of was what for up the mirror forward only have Mexico in is line useful international, disclosures and as put that column we're got in the we useful, to the it continue try now

Adam Goldstein

as an those Canada, out business think here's other, Okay. then I Europe the breaking understanding, sense, on four investor my my it? U.S., make doesn’t to least and based at into it seem suggestion, Well buckets all

Barry Wood

for That's continue and certainly, that forward certainly as we option Yeah. us to well I as an evaluating we'll again be XXXX. in move said,

Adam Goldstein

the to Europe it Europe Could say since a broken curious you the earlier been region. of filing, very I'm did fast-growing prior how out QX in discussed as had year? XXXX compared Okay. in wasn't

Ryan Pape

Yeah, Adam. Ryan, It’s again.

approaching in So, growth saw year-over-year. there. XXX% It the we doubling revenue Yeah. was revenue Europe very high

Adam Goldstein

Wow. pretty That’s impressive.

as So, guess? you hoped, Europe as well is I going

Ryan Pape

to expect challenge I I more. in are double we revenue always any to in position say certainly markets that because Yeah, know weren't of close to you it's would a being different. a have what exactly these think expecting dynamics that or where year-over-year the

it with solely team having before are that years there third-party a very this those and prior the say relying to distribution how -- shows over the shows strong revenue. fraction two backstop happy is with well of a fundamentals and on value prior executing. And doing, operations that, weren't would past to we're establishing but that and that of our the shows it of there, and I the So, we teams

be the so faster for if North initially value think more ourselves I we we I for level other say a it it's in and get was think that we’re in test can get invest able just a and really overall operator bring that where with those proving of and and seeing, to thought us bring try know once our bear rate to all elsewhere we investment customers we and everything a we our into but think. And And for and me we and do Europe successful there that that we through need was to what know you where validates higher smartly than I we think offer you of it bit overall realize America key it we’re type really have big really geographies grow that, you I you SG&A growth and we hurry. the in

we’re it. with happy So, very

Operator

Hershman, from Jason comes Private line question. Investor. question next the a Our with of Please proceed your

Jason Hershman

A do always is you little the next I didn’t a growth digit there topline goal quarter guess. for disappointed and triple

today. some I is for so Since So China’s have or color maybe a appreciated. you’ve film on can two is what released it quarter overall, you bit driving is provide fantastic that color PPF China of more the be you you overall combination, little in qualitatively. the important becoming a it’s Zeus give new and questions growth whatever can or acceptance will this the Was

Ryan Pape

of a it’s Sure, I say would things. combination

well developments, been those that close China it they’ve So, we that with alluded we way it's of in the in XPEL really they’re and you only additional in with XPEL of the a we in as selling the displayed believe that. how in although China executing our done help reflection years strong the world line of branded for, very to and distributor from four in just you’ll what year investments do a shops to anywhere represents the over have China in I have a that we’ve products, that brand terms of really are in locations see past sales. rivals working portion massive

to and And helping support the of also and so, and airplane I manage teams that’s of lots we considerable a because give them them help our that them. time amount a have credit various spent in of a miles lot things

film and is rooted a in So, very I to container think for its the important brand great XPEL to be anonymous the as I still is could built going better business that around the and broad by understand that’s far us think business shipped but based that’s long-term. XPEL be heavily very brand contrast to

the result overnight couple So, an on particular doing of one past not it’s not it’s that hard our of work that support very they’re thing, incrementally thing, a it's in years. building over

Jason Hershman

of other just Okay, about from to colors that similar maybe maybe then a know Are in mainly if Canada any is it you Canada, ask in or regions just or seven-figure I’ll Canada size color and a Protex. in film could certain you question figures user business? provide. any you the user switch provide just can China is on there of film you stronger I six-figure that this Canada;

Ryan Pape

at those cases and Protex are a window across operator all is is So, paint there film locations there protection are the or there film of an look think when in I multiple you Protex and XX couple owned locations. franchisee so network franchise and and you the independently know

franchisees. XPEL prior supplier would had products to franchisees the we to a those to buy their directly product where exclusive from of the sell sell their supply franchisees So them we not because them to the but the Protex XPEL to acquisition rather even Protex but Corporation we’d individual agreement would Canada were all

that’s revenue that because selling us, you but to in a revenue new have net several a that’s already that if acquiring franchisees, the we the by million as dollars revenue to altogether of directly franchisor, sense? not year know So result makes

Jason Hershman

along your on marketing an glass, I wondering, you promote was flat they their glass how update if elsewhere? I online and own know that’s still the Sure. give on flat Instagram also to And going and just this, Canada line. Segway [indiscernible] and in and online start

Ryan Pape

Sure.

we just So restate said before. to what

is XPEL but purposes. have window residential it’s And automotive, this line obviously but similar is customer not we supply automotive are aware people commercial entirely overlap for window there new for which for overlap is to film us. So, Vision, for film, that architecture which many and us, of a chain business is of,

And so, that lot we’re initial really soft with architecture initial them our that in audience, launch different to very been we because launch the Protex of captive in franchisees a film able work We’ve accelerate that get geographies. with space. represent are throughout the initial a and of and they a marketing too target can quickly.

why elsewhere. of see year accelerate of that I Protex you’ll we and Protex work of from marketing next over the outside year that launch that’s of of more coming fully. out So to more this you or as franchisees think line the that probably rest see But us more and

Jason Hershman

how quantify the Finally, could working take capital out X these you discontinuations, to I Barry, from working I’m able of how released X.X million, it was curious specialty one for capital much you were it if may. Barry much was was question business? film million.

Barry Wood

that Yes. I’ll actually answer Jason.

So, in other products our million was eliminate of in discontinue. about to of $X we that excess I think wanted inventory to that goal

it that was year-end, of don’t as we that substantial But exactly of So what done, directly. have a percentage. percentage was

sell build to products stock that permanently product the that shift goal capital be and working into not So, to faster that ultimate of the the turns most lower necessarily the requirements the more business. able was obviously. to of But

Operator

[Operator Instructions].

line your with Our Investor. [indiscernible] of comes next the question Private Please from question. Rob proceed

Unidentified Analyst

near-term, it and and really talk up I of while U.S. shifting comment seems is your like I listing? about upward your if I in I know direction. you it’s a a wondering, in the whether as to were or an was and Exchange on little American bit medium-term question what on, think shift on little close if thoughts not just periodically, that currency. momentum they’re you to been the to this wondering, could Toronto could comes it’s radar come listing Venture was XXXX just the sort but

Ryan Pape

ours. remains we’ve a important is of recognize, through we priority this is and what I think said it’s and it is it

So, we share don’t have any yet. timing to more specific

Operator

of comes from with question. the next question line Edgebrook Please Partners. Our your Preikschat Andy proceed from

Andy Preikschat

guys. hello Yes,

launching what from the mentioned any this the launch be you. and Ultimate doing You transition Ultimate? Plus could an terms Thank what on call you're that of in like April. officially detail in in you now will look just share Can marketing with

Ryan Pape

to and a and campaign Sure, around some a we've the there's visual try got Yeah will times around go packaging whole of and ends back other the go with presentation. of to it really some we've on we in things splash that improved timetable to videos an marketing and product marketing experience we and a to it up to and overall think create a of that reason launch Andy. better create little bit than excitement splash we've got so a and is that the it experience initially create some other bit different that part moved with number geared of with later we attention buzz and fact later it to want that's in in the April and being and different couple draw some the build or quite the why and and differences a a April targeted product highlight benefits

and think with we be and launch in good the I Ultimate Plus beyond have that. we products, some us other then for with can a will enhancements that that carry pipeline it the really So, through

Operator

now the to I reached have session. closing gentlemen, And the of like the question-and-answer Ryan end we turn to Ladies call for remarks. back and would

Ryan Pape

you I'd short order like to Thanks thank again talking everybody for QX. for participating and to asking look questions in and forward a lot. with we

Operator

conference. today’s concludes That

time. this Thank your disconnect at may lines You for participation. you your

XPEL (XPEL) 28 Mar 182017 Q4 Earnings call transcript