XPEL - Earnings call transcript Q3 2019

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

Operator

Greetings. Welcome to the XPEL, Inc.

Third Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. given time. be will instructions at that Further [Operator note, this being recorded. conference is Instructions] Please

turn to the Nesbett, now will I conference Investor your Relations. John host,

You begin. may

John Nesbett

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

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

I’ll moment a now take Safe to Harbor read statement. the

certain course statements business the Company’s the of markets are anticipated During this include capital strategy. call, proceeds growth may XPEL, its not new we’ll and make transactions, and execution of limited into to use forward-looking of Inc. be but regarding which from expansion

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

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

to that Okay. Go now ahead, like With done, turn Ryan Ryan. over to call the I’d Pape.

Ryan Pape

John, morning, Thanks, and Welcome XXXX to good third conference our everyone. quarter call.

million, mid-term saw great $X.X was gross to margin with end which SG&A record to our a XX.X%. income finished XX% Clearly, grew was quarter a and very Revenue more of XX.X% progress finishing almost our $XX.X QX of net a million. I’m continued revenue of our We target results. than to in at XX.X% us. to at improvement revenue, the with pleased EPS grew doubled and And XX%. was EBITDA XX.X% XX.X%. quarter-over-quarter close which our for finally, $X.XX EBITDA of share. margin

leverage for when margins with operating business. terms So, does the see can what us growth we combine of revenue improved for gross in now creating really

the finished So, We QX. by growth at some the our at was QX. look of business had to which if reports U.S. for XX% in our U.S. you growth sluggishness quarter, amazing region, in off our business during the compared XX% quarter

basis year-over-year by insignificant. timing X%, so U.S. shift shift account non-automotive a about had of that reduced purchasing that reduced also growth -- their We on a not

October saw good was in U.S. it all-in-all, very And quarter. business. strong the a for a So, the for us result we

into our was about only that’s So, it so far business, positive. terms in QX of visibility but U.S. the very

in the XX.X% inventory for revenues previous Having the build we’ve previous QX. in and growth growing quarters, quarter. to returned calls through discussed China worked with

that are in growth being new rolled our QX. we indications in China are will products received continue all out So, well and

here. so, with and really, with our good really And our distribution who’s results working with pleased been really in China really we’re pleased that, team

in We the see was currency to have despite so most continues in Canada strong stable us in growth. of U.S. we dollar into The fairly on basis. much penetrated QX for protection growth quarter-over-quarter, In impact perhaps in coming the XX.X% didn’t a Canada, market terms being exchange grow. the rate film on world paint

great that’s So, to see.

we XX.X%. In growth dollar currency was QX posted functional U.S. growth continental and of XX% Europe,

some still currency So, impact.

operate growth countries the the still We’re UK, continuing and as expansion on our QX about at ground that. from a growth on really saw basis. phenomenal expand the came In we we execute a organic currency there XX%. a XX% combination in we and about higher, On to team strategy, customers coming was in little on feel in new from net That and which existing of that growth good UK over even pound adjusted customers. basis, growth a

see how to being the great that growth, been a compared in long team. of there that of runway So, got our still in largest Europe in there, market awesome and lot terms we’re to we’ve that we’ve UK continental UK

at XX% APAC many still Growth for our regions. of came quarter. And under like business in a broad-based, in little is the our this

a have geographic of a and We lot huge opportunity territory. it’s

over to distributors support quarter, During region had had We really great and event. growth, to and dealers grand participants our all the from attend. new operation moved the continued in we opening a Taiwan a facility

business Asia. that grow continued exciting So, seen sequential Asia our exciting in and to all to expect Pacific and in in year investments see growth focus be to that continue region. able execute we to demonstrate And them continue we’ve as I and planned really the to to

America quarter our by growth Latin Mexico. led the business in business Our during XX% plus posted

continue other And do to growing expectations. of done film to growth will is direct the while handedly our market other our we’ve peso XXX%, in we’re revenue there in little in sales a to the in over add places, terms to places. for was Mexico. film paint continuing of higher protection creating continues Functional team markets, percent as single there other We’re outperform our in awareness product, in window than currency Mexico

East, the at QX revenue we stronger In Middle growth in coming recorded in XX%.

As regional been has you us. for know, this a focus

management this but region a last interior still terms focus there. with launched solution area top our so, we’re during week, protection. We year of this improvement, a happy show and efforts for And SEMA the in

are are in you As there days vehicles surfaces know, larger as scratch. these and a to surfaces many other screens glossy that and of well of the as interiors variety easy

cut exterior installed that Our film. solution the a similar to protection involves manner film be and protection can in

used So, a damage lot vehicle, and as really standpoint but existing is actually for from market extra an for in film used new the can of opportunity of improve mask a reconditioning per this also useful obviously cars, the a car appearance revenue it’s vehicle. the

forward it into for great obviously was overall, momentum the quarter So, seeing we’re and QX. a us, carry

in expect mark probably strong. we the to our revenue this, quarter-over-quarter water QX be Given XX% forward or terms around growth terms high operating minus year plus and operating of we show performance just But was in QX like QX growth closing great out to in the yet well. year, leverage look the as QX for revenue was margin. will of assumingly gross

little Barry So, then the a over questions. Barry? more to take call some and with I turn can that, detail will we for

Barry Wood

and Ryan, Thanks, morning, everyone. good

And to right window was came was to for which film to Sequentially XXXX that China film quarter total XX.X% revenue was represented $XX.X In to quarter $X.X revenue XX.X% non-China XX.X% grew product revenue line. million, window in in previous revenue category increased category, our or growth QX revenue at grew a our record-breaking growth XX.X% XXXX XXXX XXXX, protection our the QX million. was XX.X% $XX.X which record while versus in XX%. at million of mentioned, us. increased line $XX.X product for revenue quarter. QX XX.X%, XX% product record which another grew quarter our which also million. film paint Ryan QX -- the

software; access our to Total consists cut And service the attendance from credits training fees as use revenue charged training know, at centers; cutbank company represents DAP you primarily our software; labor owned at revenue our resulting from for revenue, income grew of DAP fees classes. our of which sales million. our portion XX.X% installation service for labor installation for charged installation fees the our of and fee $X.X revenue

Cutbank of and revenue sales, which users. primarily approximately continue and our labor, to product up Canada. increased the total product mainly Software revenue increased strong of DAP XX.X% installation Installation XX.X% we U.S. due increase the amount and our to as in we well total revenue credits and as labor our combine XX.X% revenue. represented XX.X% grew increased X.X%

installation in So, a mentioned to facilities. And increased strong which see indicator we’re revenue calls terms owned the of is training finally, health XX.X% as in for us of previous great company on our leading quarter-over-quarter, business. continuing performance

on our QX in as but and distributor, million percentage is quarter which bit sell margin to down great terms but XX.X% XX.X% margin know margin revenue, the margins the XX.X% gross is gross as gross XXXX. China XX.X% grew $XX.X for lower indicative efforts of a the of It’s finishing we’re But focus various continuing those high and for margin that. our tripling initiatives. on line. a on very revenues result having essentially results, QX, success is finished in margin peak Sequentially, QX, Gross despite a in from at through for you margin is to versus the XX.X% our us we continuing percentage we’re management at yields our gross our focus these to with gross

and XXXX to XX.X% expenses SG&A Ryan expense total Sales represented XXXX close was marketing mid-term and revenue, XXXX slightly versus mentioned. of of QX $X.X versus QX our to XX.X% QX million. which target XX%, which Our grew declined

XXXX recall, XXXK. may we As China related business you a our one-time about QX charge marketing to in incurred of

approximately as previously, line So, sales revenue XXXX. that, marketing to if have points of And around our Ryan basis QX XX would expense grow marketing intend in grown still you we mentioned normalize item expense and for XX.X%.

$X.X administrative research QX share. EBITDA growth XXXX, development million QX occupancy, support XXXX the versus to XX.X% continued to personnel, XXXX, quarter c of revenue. ongoing more IT, in quarter-over-quarter for to the an XXXX of the reflecting mainly and $X.X versus business. income increased and XXXX and and approximately margin QX expenses doubled EBITDA $X.XX costs, increases of XX.X%. general due QX QX XX.X% grew EPS total of than represented per was million net million, and

quarter QX ops million. the from $X.X for XXXX was cash flow

$X.X balance quarter the closed cash the coming acquisition which stated on previously, strategy inventory with $XX.X million our from we we we at bit in Also, as of QX. on little as closed use expect quarter sheet. cash up to out execute the the we million, And a Our our levels excess is months.

So, quarter the closing strong. forward and us, for out all-in-all year to we’re great looking

And operator, with over for questions. that call turn we’ll the

Operator

investors Steve Dyer of from line Please to question. Instructions] first Our questions with the now are comes analysts. of and [Operator your professional We prepared from Craig-Hallum. take question proceed

Ryan Sigdahl

quarter solid really Hey, Ryan really, there. guys. on on for Steve. Congrats Sigdahl the

Ryan, sales paint off, mentioned vehicles Can U.S. or the First remarks business. was new something it related to? Company-specific, in the few of protection, prepared you your headwinds just you softness on in Was elaborate what a auto cetera? et industry it

Ryan Pape

No.

I even think, as headwind. wouldn’t it’s necessarily characterize -- it I

feedback. of year-over-year that sort slow. change a really, then, first Just thought see And good obviously, the like the at quarter, at periodically. in when just our that think August, really mentioning. questions was like all, we October just of worth the we you it’s feedback we felt of U.S. I month are this anecdotal happens growth by of get the And team. time kind not get it’s growth a of very answers And look asking But, that’s if that. obviously that saying, alongside And September we That rate is kind we’re

So, I headwinds street. it se, just per on sort the talk the wouldn’t call of

Ryan Sigdahl

or anything couple trends guys in months October? were in structural you or and industry a with reverted a else, just nothing of then to better So, we’ve little kind bit that back slower here the

Ryan Pape

exactly That’s seen. what we’ve Yes.

Ryan Sigdahl

Can Great. non-auto the QX, that it that? I you And a specific mentioned what’s a the customer? had on what Then, then, business has was, guess was timing shift. you timing shipped also that recognizing elaborate of

Ryan Pape

between and kind split QX QX. ended really It it of a Yes. up specific was and customer,

out, that moved non-automotive uses So, But, would We’ve orders, really it it’s just of relative the in product a kind to based it the ended on that particular to relative case, and overall for the we large call timing up felt insignificant. wasn’t got just this themselves, aren’t of general. QX back up just in split, because timing handful business. of

Ryan Sigdahl

on a on China, QX from a Based activity. recovery strong master what reasonably on sell-in one distributor you’re then, quick and there. normal so retail hearing And levels really your inventory Was or in versus sell-through, QX, commentary then, is on or any was quarter-over-quarter growth kind the restocking year-over-year there in anything a that lumpy basis? quarter? of secondly, expected else on the And

Ryan Pape

Yes.

lot things terms last So, Obviously, China, to comparing sell-in we pay we a when pretty sell-through. -- attention in versus to are we think think year, to relative that normalized of that. of

visibility So, perfect we have don’t more. we have a lot but

certainly, do may be -- felt it then, we’re to XXXX, minus at point not year-over-year very sort think that in but from that plus seeing going XX% QX call normal any of certainly we’re inventory out, which for future, building if QX similar to that if at growth the we’re XXXX So, a for respect. And And reason that respect. for what or that happens, at looking over we’re now. in we QX

Ryan Sigdahl

of QX? to the overall clarify, expect the just And China, then, just sort business, is And you growth in XX% year-over-year correct? some in

Ryan Pape

That’s correct. correct. That’s

Ryan Sigdahl

anything margin despite right quarter there mix onetime call last or is one then One here? margins from the just in for Is going over. I’ll up structurally to gross Great. turn out impressive into China. the headwind it But, me,

Ryan Pape

no it long side. We’ve It’s area us very There or improvement a margin. attacked and talked a gross for we’ve important for hit is to onetime on No. every one time. that about

we’re that QX to we had where and especially see up quarter really off China just like QX slightly pleased high. So, really pick with really, back the that

effort I fruition seeing years, to seeing think, we’re come our several the that So, certainly to the over that higher now. of number fruits past manage

Ryan Sigdahl

Good guys. Thanks, Great. luck.

Ryan Pape

Thanks, Ryan.

Operator

[Operator We now any have of the the turn management remarks. over closing call the back end to session. I Instructions] will for reached question-and-answer

Ryan Pape

to you. time and We Thank forward speaking thank everybody year. for next again your look

Operator

conference. concludes This today’s

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

XPEL (XPEL) 11 Nov 192019 Q3 Earnings call transcript