XPEL - Earnings call transcript Q4 2018

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Operator

Greetings and welcome to the XPEL, Inc. Year End 2018 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. pleasure Relations. your my of John now Investor IMS is to host, introduce Nesbett It Mr. you, Thank Nesbett, you may begin.

John Nesbett

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

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

Safe Harbor Let's moment take read the a statement. to

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

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

turn that, I call over the ahead, to Okay will Ryan. with now Ryan. Go

Ryan Pape

morning a XXXX everyone. well. our conference in Today end of the our as Thanks to John Welcome year company. good call is and milestone day history

but filing the of to details securities of more now, the on most requested you know through a U.S. today's timelines related that later, Barry first in Act. the U.S. of will the SEC. of and step our walk listing register Form took you means today's pursuant Form we XX effectively XX the As the XXXX we've with to the with by towards the filing that

XPEL. It's finance International the In done. team accounting symbol U.S. that issue to a And securities the accounting IFRS. or to we're a standards in excited for financial company I'm Standards getting in by to the to today's Financial issuer, accordance or Layman's been lot stated GAAP. to filing, for the our financial also in company our statements with in an register terms, here. U.S. congrats become switch we and accordance had statements finally Reporting obviously NASDAQ and were a of that's order in previously work, generally U.S. Capital Prior required issued we're listing for time Market our We long applied To on the accepted with SEC under coming that principles

today to clearly to talk With So, now relating outstanding XPEL. what that, an about results any was for GAAP-based numbers are let's year our we numbers. talk U.S. therefore,

to $XX.X QX continued grew strong growth for revenues million, Our for reflecting XX.X% the company.

to we as QX. and through in year As we did our went previous to we alluded on expected last revenue moderate calls, growth

represented our Given reflecting with that that, QX QX of I performance. mix. pleased Revenues was our from of XX.X% China moderation continued total revenue,

auto our to growth the For of of revenues impacted rate QX, in the earlier deadlines. in year, ahead in QX, which into and lower the WLTP attempted which was almost emissions regions. Europe grew to European the most change year, some Growth lot industry to $XXX million. a the in was business in In sales negatively QX the accelerated as sector new our than all emission XX.X% standards, get strong owing our turn of impacted

in in aberrations Europe that can temporary out evidently QX but into car have this been very to for sales of a seems data the You see phenomenon. QX,

off, China in This China Our quarters. one. so comp tougher a is year-over-year preceding because three is XXXX year-over-year than growth the in kicked where our was lower the QX is QX growth largely

is in for new significantly our timing products have Our of competitive China we're Overall, our were our of developing needs XXXX with factors been revenue to on a QX. been China peak acceleration marketing result see sales function we last year, that keep changing up peak product and very bullish prior from the we revenue distributors see China China the year. and and from run to China QX ending due to year move we assortment, we've March moderate effect and and as to customers working in hard for expect this still China, year. in to more would China up or of softness channel as off We into rate in pushed April with product the sequentially from the the from our the around XXXX, decline will the into like. prior catch of some in support sales to in And China channel terms demand. considering declined of bring in a XXXX able This the as

of between in those of customer, our finished that centers growth, revenue $X.X we're have expenses performance will is in at hard year-over-year there even the tremendous focus close at strong which to to improvements of and this despite expenses to share. results which to revenue. first versus company in XXXX. million continue were year revenue began GAAP it we be creates. U.S. operating continue said, the devoting $XX gross strategy which with the $X.XX at in million XXXX, gross our in and U.S. getting that income the as margin to reflecting I overall will top around in transition notion confident continue for time per the some the working the striking from decline to combination into and nice represented year business leverage and expansion the be overall we quarter we've one-time I more make result the the investing right year $X.X for complete. or for XXXX remains being our about. by million Net we to Obviously, this for balance ever XX.X%, transition now was our the XXXX. area that we'll related expansion on finished EBITDA the costs XX.X% XXXX, than pleased talked the to total and of SG&A controlling Margin the QX diligent late in very in modestly margin initiatives, driven company. finished strategy, a margin the also sales our right other regions. for That more our expansion, our remain comparison, As

our think results XXXX I confirm this.

As most our centers know, key of four around you strategy initiatives.

on execute expansion search First, opportunities and we continue makes to sense. where it global for

addition critically forward. presence Netherlands, presence XXXX, us driver of in Asia our execute is to established United be our first for our in This strategy. won't Canada, we Asia In a in our as and we all Kingdom, on which in in be our including as growth Mexico, acquired distributor Taiwan, to Asia, operations going China, last the going the

a be continue know drive leveraged industry. sales. in we recognition known enhance the product well to worldwide of growing XPEL's the additional brand and premium Secondly, brand awareness, more will brand automotive to We that global

As an to coating that protection FUSION paint protection XPEL a our hydrophobic is protection a launched which PLUS nicely FUSION ceramic complements our example, provides additional PLUS, self-cleaning coating, we recently paint new film. film to increase ability or to gloss the This make revenue clean. to the enhance and gross painted easier on it dealers vehicle. product surfaces vehicle's also addressable and our a per gives us

product, the We're It's of well As rollout this to month a brand complementary is our in. very the product XPEL line. very well-respected, top-notch about been has a received.

to do for to customer As we our and now film protection products paint on experience ceramic encouraging platform expand be from the line to adopt we'll automotive the best all of them the increasingly incentivizing to and window the dealers coating, product so. auto

strategy three of acquisition ability Canada end, revenue increased improved To acquired facilities when installation to third gets our strategy. product channel that that the around Our year. greatly continuation last centers in drive we We found we success have given expect currently several -- with continue to this local move and market. this through We've in as consistent key a strategy we with had under XXXX, a presence we continue model opportunities evaluation. we our

continue to product nonautomotive we drive of Finally, our portfolio. expansion

we in launch that XXXX, more. healthcare facilitated number foodservice which of taking just and has of different RX, XPEL Health, uses including now for E-Shields in the acquired to industries, silver-infused protective remember, market. customers which film, may potential you the As product a and antimicrobial We're

about and residential sum-up XX% payable, solar success and comparison while product in I reduction a for the We'll reduction more film, the last over plans for able be growth and of is million great $X.X year about this We almost we this go in XPEL for sheet commercial We year. very our through -- excited balance inventory, our debt. of the security a also for product our a with talking as million to line VISION the cash, accounts and flat launched opportunities XXXX. highlight VISION, more flat last were $X AR, think drive And year, year. year-over-year new to ending way these topline and ending line

operational that's So, performance. awesome an

I'm XXXX. proud for the but and look success and our results our year we to shareholders, to As for building we've XPEL, a fantastic of our for as the customers results very importantly just of employees delivered on to proud that forward

with Barry? to turn Barry some over to and the that, done of more we've financials. the I it transition will review So, of

Barry Wood

everyone. good Thanks morning Ryan and

walk on leading results, more little like announcement. our process our a talk up to to I through today's I would you Before filing

to filing on an to XX as raise in to this Ryan To common we capital not registration is pursuant stock we NASDAQ the to Act the U.S. securities our on register because under mentioned, clear, at a our need As be S-X this Form not list filed the seeking XXXX Exchange statement do symbol XPEL. we're time.

U.S. with the as As required Act, under XX. Because XX necessitates growth XXXX Form we're Act to financials submit emerging the we're of accordance designated financial the JOBS of Form company audited two required statements the of in GAAP. inclusion in XXXX, by only audited years an

financial As you were most IFRS. know, previous of statements our under

Given had our completed, as audit financial XXXX U.S.-based IFRS Baker our go that, GAAP-converted we an once XXXX statements well U.S. And re-audit conversion to statements. U.S. for was GAAP to XXXX to financial GAAP as our statements. had XXXX and that auditor, Tilly, our through financial U.S.

In Commission, Canadian instead we're an in which required a company, reporting Canada financial the Securities allows still statements. Ontario of statements requested GAAP-based financial IFRS-based addition, to us were exemption by file we U.S. otherwise and since currently the granted

quarterly quarterly IFRS U.S. financial exemption later to results be GAAP-based GAAP discuss that if Commission has to basis, cannot revenue have are since SEC file as annual As beyond quarterly these April to an GAAP this statements are our quarterly be means This statements until request, adjustments, Securities reviewed audited on you on on complete. financial Ontario a XXXX but the a SEDAR or be such, no determined need as issuer, XXth. than basis. comparatives our our to auditors applied will, effectively by meaning we our statements, granting to been financial U.S. we our completed, quarterize, they annual were XXXX will required to has which XXXX that interim condition us to detailed quarterly an XXXX This reviews as used And required statements.

XXs in standards. GAAP, costs. their Consequently, design U.S. would you accounting we capitalize likely XX and incurred comments various was file them. is mentioned the costs receiving as GAAP days recorded are kit way expect, our comment expensed the general, our automatically on costs life. Form are which amortize comments after during account over receive As differences a to I'll we And SEC results adjustments to address major U.S. IFRS, we We filed will useful from them IFRS difference for and bit this In more effective process GAAP convert there in Form GAAP. and the our Under these today. these as as are we One U.S. versus we estimated earlier, later. U.S. date. anticipate we XX Under those

Assuming are cleared. on approved, list we TSX until regarding yet There no decision has future. SEC NASDAQ been our cannot is NASDAQ application comments listing's all Venture the

pursuing company excited for time to our XPEL. U.S. a a corporate we're of our long coming As Ryan at mentioned, next very has listing enter and this chapter life been

results. Now, detailed more let's XXXX a into take look our

like our statement past presentations. income little looks I'd point bit that to different out First, a than

XX.X% where total we and and all revenue of requirements. $XXX.X and product represented $XX.X Product grew Ryan broken geographically, service U.S. protection of And by regions, grew almost strong total China, between total And XX.X% annual to revenue. of to in led XXXX as grew $XX revenue service grew million. revenue XX.X% out our film and our in grew our QX in XX.X%, million. growth is revenue. film in revenue category, grew saw X.X% reporting revenue Window million revenue tripled XXXX. And paint to product mentioned, Our the represented total revenue with to XXXX million. accordance XX.X% Total revenue XX.X% XX.X% $XX.X the almost

our or Access cut consists software; revenue, access use revenue service credits for Our cut Program of charged and represents our bank for fees the Design of software fees which DAP; DAP for sales installation and company-owned centers; from that classes. portion training charged attendance primarily income, fee of are revenue installation resulting finally, fees training installation of the the labor our from labor

While your our incent if monthly purchase and Basically, use our and to user straightforward, DAP DAP you of categories square just bank. you film, labor you're I you film. film, like your it briefly patterns who have our fee. cut program. cut through from The access to installation customers cut is When checking film buy software fairly are bank. pay at cut bank. of the purchase you you want the essence added, is your to bank bank the our One buy square up footage walk our in footage of our you your a cut program only ability square total to we footage us to to your add Think account balance

square à until your cannot Historically, more bank or into buying patterns If from bank, zero, either cut credits. goes offered carte more to your sell you us film bank by any purchasing you more bank in certain credits to deposit circumstances. la footage cut we have cut

purchased us required because IFRS, value this recognition they film. not all-in-all, product our now, known the Topic or heard service allocation follow effectively portion bank added going a you those into to So, our new estimated GAAP-based under straightforward. XXX was customers' U.S. revenue to for to revenue this, too until go made. for you've of of allocate up that bank this likely revenue I'm of we fairly credits But standard ASC XXX. cut of cut companies, deep not as to And was but

to back results. So, revenue service

access labor, a to to our Software of our revenue, implementation labor in about revenue cut restructuring due strong credits side mainly of increased product under due bank revenue company-owned installation mainly centers. the mainly declined combining as program. Installation product increased fees Cut grew sales. continued a installation with total to And commensurate strong demand X% XX%, XX.X%, little XX%. bank note, due DAP and the

gross percentage move remains XX.X%. company which the profit just pleased we with As Ryan finished for has focus XXXX top And gross from gross XXXX, again, margin the XXXX. at and for to a dollar as particularly margin into are doubled we mentioned, reiterate, results our our

general due ongoing travel-related to statement for personnel, marketing-related of and occupancy, due XX.X%, administrative XX.X% professional and to expenses XXXX, and grew XXXX grew the sales general the grew of required Sales IT, preparation the of bit and continued and reporting margin the strong related well costs in XXXX business category And And expenses XX.X% than business. the mainly grew ancillary past Our $XX.X as EBITDA EBITDA the ongoing $X.X is at SG&A XXXX expenses total mainly out we versus this expenses to growth because increases to well and as U.S. million, you'll versus increases filing of and closed growth in revenue. income from support our due as fees were margin support costs statement. leverage. also registration mainly performance million marketing XXXX and represented XX.X% for related and to to XX.X%. break XXXX gross a to expenses different the purposes. administrative reflecting notice in of in revenue presentation operating

IFRS as with our to execute we'll forward lot move results. we open And that, XX/XX/XXXX. XXXX with accomplished We continuing design a call In is $X.XX million calculation Again, Ryan as earlier, how forward. closed now XXXX ops zero now for changes and operator, flow U.S. XXXX over summary, very strong effectively $X.X very remains something in XXXX but for look and as expense just position from grew I $X.X were GAAP of one and to at lives, was our revenue. $X.X to to we amortizing costs. pleased this math useful As we keep questions. incurred cash the exercise for major estimated a we X.X% our and to their account EBITDA from grew financial to we balance sheet, million per the the represented EPS were on is alluded costs capitalizing million his impacted. going comments net mentioned income debt of versus forward. kit to share. And million. at total $X.X net in mind our And these costs Because just our

Operator

Thank you.

Instructions] Goldstein, proceed We Investor. line now Adam question-and-answer with Please a session. from question will your be Private first conducting the Our [Operator of comes question.

Unidentified Analyst

just in you Hi. first or in of of XXXX? question. a decline a Thanks there to the my quarter comparison be quarter for want to understood. make in I XXXX first of Was comparison said Ryan, will sure to in the taking revenue that decline I XXXX. QX

Ryan Pape

No, speaking we're year-over-year.

Unidentified Analyst

Wow.

there'll revenue. I that ever a I've in be first year-over-year think time decline So, That's seen that. -- the

Ryan Pape

in first of volume as first just have the despite, as that's we of our quarter and month Well, instead year equalizing that March essentially we elsewhere. I strong number seasonally. finished in channel, is of in few out very Yes. But off we're we decline China first did the exact last building first the as the tripling the our which coming days sort we will a quarter normalizing And don't a revenue of biggest -- sort in when just year building from -- XXXX. mean, really, know product result typically demand of did, volume the and ago, modest we're modest of sort the volume half just to last a quarter into of very performance and the

So, year, a part just of in that is last it's basis QX there. on was like make talked so year-over-year has really to we that, obviously, comparison have exceptional about the -- growth it in we big a China moderated, and

Unidentified Analyst

it segment disclosed? on Okay. noticed used more to going case, I geographic or that my on that's the net there's no based And Did miss more there guess, I one like there be just -- disclosure is will no be. -- is to longer follow-up, income I

Barry Wood

That's is correct, Adam. Barry. This

have GAAP. one are U.S. We under We segment. effectively

we'll basis, on that's present. go-forward way So, the a

Unidentified Analyst

got queue. another got few I've in -- more put back myself the questions. Okay. I'll I've a

Barry Wood

Sure.

Ryan Pape

there. -- I'd I to would add that and to remark -- Yes, Barry's

around of by rather I not that in presentation, will net notice you mechanisms geography got looking on the segment assigned income because And may while that arbitrarily profit is you've IFRS GAAP internally, us world. to financials. revenue U.S. particularly than the the you can tell useful the segment we seem a transfer and IFRS have particular that presentation metric So, pricing sort useful at

income net would fact. really seem. I I basis, we as on on the a while sort useful be geographic So, segment it like mandated of think it's in actually breakdown losing the that a have the as And useful, in I more now of may think loss, U.S. revenue is surface sort think don't presentation, instead,

Operator

Please Our question Jason Instructions] of [Operator next your line the Hirschman with question. proceed from a comes [ph], Investor. Private

Unidentified Analyst

bit on other to can NASDAQ. Hi pending guys. of opportunities you and year the wondering, a in future perhaps, Asia-Pacific, little I've you for you the that bit areas Japan XXXX today. into the question and on if little specifically Korea. Great a more and congratulations I got see uplisting was in comment a

Ryan Pape

which over Sure all many Asia that example. very we've these a substantially Jason. but the success Japan for economy, is the Yes, of correspondingly you about underperforming speaking, the historically I there, is as in sales our other very in think year by the and under-penetrated mean it past growth, are extensively good I relatively think China it. good talked I or any markets highlights a metric, that are point, small. see particularly of size

of one in in six past of our really, been focus specifically. has so over our the Japan leveraging And months, Taiwan team areas

local have a to and resources of of particularly to expectations a we you more them among real a to time And go an draw that so Japan, on that's that sort and other cater other in focused to the to. mentioned have have way Asia they're devote the as presence. unique we these we we're the Japan, right are markets these direct distributors all has points partners certain region. different. different. to or to But -- China market and or spend markets one markets are able and and And profile example, and other product more for unique around And high are

Unidentified Analyst

Just commentary you developing on QX XXXX. and Continental that's how give more you've commentary, a perhaps, is for that Could given question far? some one Europe China so little follow-up on

Ryan Pape

how of I opportunity. mentioned, behave. we that's see Europe, sort growth Yes, we've still we've been Like seen kind QX. there, watching great pleased going of of of, rates out decline coming to sort

continues of customers flow to projects. leads and new of be Our opportunities in terms unique ever along with lot of as other strong a new

we things Shipments are the an Tesla, the just time. now just Many sold. do started recently. first of terms rate to attachment as Model Europe well just X, in which on very in, One we're of example, of them seeing our for now is reaching there Teslas

net So, positive all along initiatives that's for us, a our with of other there.

So, think forward we're very and a on Europe I lot opportunity bullish we there. have going of

Unidentified Analyst

Thank Great. much. you very

Ryan Pape

Jason. Thanks

Operator

There the hand I are in no further back would like to call management to queue. the questions for closing comments.

Ryan Pape

I'd for like Thank joining to today on forward and look with to next us everybody we speaking end thank you call you. our year time.

XPEL (XPEL) 3 Apr 192018 Q4 Earnings call transcript