XPEL - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, greetings and welcome to the XPEL, Inc.

Third Quarter 2018 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Nesbett of IMS. Thank you.

begin. may You

John Nesbett

welcome financial and conference to call Good for to the XPEL's results XXXX discuss morning, our third quarter.

today and we questions participants. Chief financial results. On Chief will business operations an take call are after the XPEL's the Pape, the Company’s review President overview Executive of Officer; call Officer the Barry from Financial XPEL's Immediately our and Wood, will provide Ryan and prepared remarks,

me harbor Let a statement. read moment safe the take to

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

may laws, to undertakes statements be or factors in can XPEL as date or are anticipated, differ turn update over other or result the of forward-looking estimated to revise to forward-looking they obligation a that, events those XPEL actual no future there cause cause made With Pape. required intended. can those forward-looking materially ahead, events described from whether be Go identify that any attempted by speak now new only forward-looking to the call publicly I'll No could and on actions, Although of Except or or as events applicable securities as statements, information, has to Ryan results that the from otherwise. guaranteed. important Ryan. which statement, actions, results differ factors statement

Ryan Pape

everyone. Welcome Thank you, and John, call. XXXX quarter good third morning, also our to conference

third for the XPEL we've row, a year. finishing little third For at over quarter in versus million of quarter revenue last a experienced $XX.X record or revenues growth with a XX% quarter

XX%, sequential our pleased and year, and clearly QX, know QX for likely revenue a quarter XX% rates really QX of plus have yet lower XX% all QX trends of the had I'm revenue we you was still total about been performance. the than record of mix minus, this and which for quarter. had QX As XX% performance our XX% or so is growth each little another revenue quarter. revenue our China's in QX with exceptional respectively

we strongly I think including this the regions demonstrates our U.S. Europe. how and performed in other

expected overall all been more saying it. revenue didn't moderate, rates we've bit we really as moderation in we our year a long, see QX we So to do however, growth expect

forward it could QX. from have been So some pull

so happened from revenue a at strong lower yet, a would However in still standpoint October very that to QX we rate. expect was hasn't come growth

the fundamentals seeing of services with ongoing every really pleased business the the very be for we’re geography. to in products continue we demand underlying and However, the and

talked we policy trade to business as continue date. the impact to to We monitor on about particularly previously China our

overall China China welcome but haven't impact so is was our auto margin about. the macroeconomic very continue mixed to quarter remain the of We in tariff monitor sector but and been next the QX on for obviously something or trade which out particularly And the a and we some moderate in the China we’ll strongest that. XX.X% is positive. news improved QX talking any quarter XXXX partner seen from really in basis see Gross year. the for obviously China in signs in we'll a growth to real from situation, year-over-year development

our from also to in cost we’ve product continue combination see materials resulting improvement synergies. gross price improvements in actual margin non-bill and of We seen a affect COGS, but our that costs increases

this number for top that revenue. really at the and for to about a XX.X% for be focus this company of happy finished continues So SG&A quarter quarter. the

As we’re of targeting I XX% be to mentioned previously SG&A revenue.

operating to the So, it still we bounce between our a but to term, near will around leverage desire continue bit our balance the invest business. and XX% going target to driving still in strikes the that in think

We that still million cover number a finished that have Barry at share. $X.XX for quarter revenue. the our in a bumped Net SG&A $X.X at million or through but bit will expense EBIT in some target. QX that higher $X.X income a came one-time XX.X% that we of up side

line that still more bottom on target We substantial hitting I gross SG&A there margin and opportunity leverage. focus to continue create think to

and has base local strategy operations. established As our of on have yesterday, with our experience is business that Pu announced our international global in business. you with a of as Christine the around This our management and is many who Taiwan excited team Apogee's film the to our help the extensive in lead acquisition Corporation. CEO to will operations. Apogee we're team establish know with her that distributor people and presence joins and Asia to bring And paint relationship and window we foundation with our was of best along protection an Asia Founder She acquisition we run

when terms of at first in that look secondary these we of are consideration our is looking geography really market the this. that to in dynamics how at Now local

people You may we later that Continental in the that in we began the We European and to the did only expand recall trusted. Europe. was the having knew business and we which join right due U.K. team our wanted to

So Hong and operating serving Taiwan in Taiwan, Macau. Apogee was Kong in directly and customers

any entirely relatively now So our separate distributor in from this our business impact profile gross business China will Mainland, that will is directly small. business. in not areas is China and will although improved on from benefit we margin obviously There be immediate the serve

us be Initially rate we will is with our there serve If our partner sales that the in build doing well as develop we’ll in In objective as here strategy do beneficial in easily region the markets we influence be are we that in it our of own our long-term all market. it’s here other U.S. China However, very in decisions over three clearly time of the to additional those or the that serve to well one at Europe, well. possible countries help make region. distributors things area. can't been China economic redouble support over to team. team apply to set and and in existing for out for our And up might we business our the can whether acquisition the operations growth to regarding better objectives We’ll better to efforts is us our to the that from our other European time directly use Asia Taiwan continue new area in assist establish to our just the to or development of working how distributors to

knowledge. local We countries are country sales adding team in with in members key

dedicated in So we've sales four countries got with more now team members plans.

with pleased that for how is really a going. quarter It So great us. business was

and beginning of the of next momentum heading We year have continue the year. the to great into end

So to Barry. with over that, I will Barry? turn

Barry Wood

Ryan and good Thanks everyone. morning

sequentially growth record-breaking product continues than order in mentioned large to growth PPF pleased a this masking year-to-date We to Ryan film but the for versus product it and $XX.X rate which be XX.X% XX.X% in over this second Once saw at XXXX As QX by grew all XX.X%. $XXX,XXX. China window growth lines total had to which was again all growth QX QX grew mix revenues revenue product we extremely last somewhat million growth year with film dominate strong On the rather quarter's of XX.X% across product was little we film another line Window company. quarter-over-quarter. was in is coming continue Revenues window in grew across our revenue a quarter lines X.X% higher basis about performance. quarter-over-quarter. but quarter line

a the more our continue ahead to the quarter segment in revenue of Looking grew perspective, and doubled XX.X% quarter year-to-date and on XX.X% basis. robust. Canadian be growth than operating the Europe versus world rest in from revenues U.S. - rates and

of of increase one-time our year been consolidation Some a margin which quarter. to slightly QX year to quarter our QX normalize our Ryan moderate margin for doubled XX.X% QX more the of have we year slightly million, reason And in of our Canada tighter XX.X%. to impacted last QX you the costs of for margin. you would sales percentage of versus in strong warehouse incurred mentioned than saw And why XX%. total Canada that, prior quarter initiatives was related we and SKU last XX% consolidation so some ahead to part revenue. recall, mix When was revenue will about lower, QX approximately as shifted represented QX, Gross in is gross as $X.X many an which gross last

pretty pleased So with year. improvement this our continued we're

of also which about that recur quarter's to the future think quarters. margin expect XX.X% we're This numbers $XXX,XXX we're area. gross in to that do margin making achieve included speaks to this progress we able still costs gross And in I not despite

to prior see our product top gross to we improvement of prior margin year-to-date. grew versus going SG&A XX.X% to year COGS beginning as year in quarter. improvement quarter our for expect for our the prior non-product expenses to forward. in we're quarter at addition increased versus basis, the a some On in coming enhancement XX% continued as we're be on percent XX.X% mentioned, Ryan a continues us show As flat relatively items. revenue versus priority improvements and margins And of SG&A expenses XX.X% year-to-date

with were marketing China. overall distributor quarter legal audit higher also project support and marketing approximately we For our our our to and continue professional of connection the $XXX,XXX personnel And costs, non-recurring before related the Included fees in our costs and and related are of increases sales to in professional costs generally experienced business fees in the several as substantial acquisitions related legal in and in costs, to mainly higher in expense costs in due invest fees. we just quarter corporate said our for auditor change. general to rather we some SG&A some growth

we incurred we closer continue position severance to and to study completed been further clearly we XX% pricing also some costs If We the SG&A organization items our a we transfer growth. would to much target. refine as these normalize to have

million in about year-to-date we $X million $X.X for our EBITDA one-time So XXXX. with year On X% prior versus revenue $X.X year was Cash $X.X for used a million to basically was EBITDA $XX.X flow we on finished are. This basis million this of items where in quarter. focus million needs. at line a move versus On feel and business cycle finished previously. or the our was $XXX,XXX was at as margin same EBITDA our good approximately year. drive increased year you cash quarter to million compared conversion to QX in remains of is year-to-date to cash pretty much million the of forward. that enough flows revolving a to or from XX.X%. credit capital generate approximately pretty revenue normalize million the Sequentially part mentioned income million XXXX net operating at $X.X our quarter. in we X.X% million of attributable and during as on to continued versus year-to-date year-to-date working $X.X the for operations basis, operating $X Net cash the And performance of quarter I'll XX.X%, income the $X.X prior prior increased year flow margin continue in quarter for if as basis, prior the the I as QX, compared $X.X continue strong note operations for continues cash with period. zero balance and we our to improvements also EBITDA

we're poised and we investments Our is financial and business strong growth position accommodate forward. as ongoing move to in

based the the appointed U.S., recognized in headquarters and we the operations and weeks the align one we Tilly of it replacing as working sense a a majority Finally, our makes announced our Since new a as them. few ago, XX RSM with and substantial nationally Canada. in Baker of the largest with our we're just is have based shareholder U.S. U.S. of are part auditor, Tilly the base our to be Baker to excited accounting country in auditor. resides firm firms very and

the we'll for So strong. to call now for all-in-all, up quarter operator, the forward Company, look and solid year that, questions. And with the closing open we

Operator

[Operator question Our first from of from Instructions] Brock line comes the CleverInvesting. Erwin

are now You live.

Brock Erwin

to the Yes, just could color give maybe what looks relative measure market current competitors? like on I wondering specifically that on how if and and you you U.S. you was an in update give us your just can penetration like some

Ryan Pape

that comfortable paint cars film to as I there's sold. in think, industry X% new to we X% of rate a well the Yes, products U.S. fairly protection market, penetration feel an

we've to try But makes look and picture. that estimate of market it's a into that sort and data Beyond of our penetration at lot we other imperfect and share got points specific things.

data So we our data, in it's internal not share habit and something we're the identifiable software, numbers and around way. registration get market product that even from penetration sort warranty where certain then our approximate updating DAP which sales data of for that's but includes a recently includes of potentially in we the

Brock Erwin

trying like competitors? create the But anybody itself to probably awareness to position but a else? are I'm like your helped doing and hard in protection Maybe to general. guys relative obviously mean your paint in it's understand consumers to how measure about I brand like so better is that with a you're Yes, thing growing market you has understand to just than

Ryan Pape

share know on when Well, obviously a yes. win from we I market mean, we basis. so deal-by-deal competitors

So internally. that's something that we look at

industry on growing the may and business. to at fact of have that rest in have than those been won the that the that the time or individual You slower overlay faster we themselves customers of that

one growth with a confidence number you U.S. terms our or that offer in that market end that So, overall the coming But competitors but which that probably been a basis. with as know think business just that a of from, when example, our well of growing portion is a of than end reasons don't line. of quite you sense share this year, our that to lower up is industry don't we is faster you where business, real on is one the also in bit exactly look top high growing from a winning than overall regular lot overall up But is estimate. we I people where at

there's net cycle. industry feel sort to winner confident of well we business competitive growth tendency of that from today sort of the of a a very underestimate but think I even as that we're the

Brock Erwin

If you do you could in had share like what to you of the the U.S. estimate percentage that? market guys have

Ryan Pape

just it we at have purposes. in internal due comfortable Well, But point this use estimates we something for confidence share that to our we it's have that. we're our not internal but to that

Operator

comes [Operator from Goldstein, question a Investor. Adam line Our Instructions] of the next Private

live. now You're

Unidentified Analyst

film, architectural of existing film. XPEL future has what protection three Could product types. now each size film, window basic from talk for market each expect these Paint the and of these of about glass product you you growth type and markets? types automotive

Ryan Pape

Sure.

business into film architectural markets. and year. that we was very quote large film of of quarter automotive for very X% either - research of next well out it's small two automotive are I'll the those there. window going the architectural both business very the out percentage some obviously there understood then revenue have it's that the is of over that's our window think sort very, and both but I the And business And in areas,

that that those So are protection percentage constrain expectation to We've incredible even as film and over percentage helps for we grow and meaningful be window expect paint and of still areas our portion but over each of both time is us areas respectively the become on that both our going should from sales of of that exceptional of sales. sort a of automotive of seen growth total see those a growth time we're over those time revenue material portion a revenue.

Operator

Thank over at in further like no have you. back Ladies time. the to questions Management to queue gentlemen I'd closing. and we floor this turn for

Ryan Pape

Want to thank speaking participating forward for next everybody and year. with Thank to we look you you.

Operator

and Thank gentlemen. you ladies today. for our conclude does teleconference This

have this participation, at day. lines your disconnect your now and for wonderful you may You Thank a time.

XPEL (XPEL) 14 Nov 182018 Q3 Earnings call transcript