Earnings call transcript Q1 2023

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Operator

Greetings, and welcome to the XPEL, Inc.

First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode and a question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Mr. Investor IMS of Nesbett Relations. John begin. Sir, you may

John Nesbett

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

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

to read moment safe harbor I'll a now the statement. take

During call, statements the may on uncertainties assumptions, and based to make regarding strategy. markets limited proceeds we'll XPEL, not expectations new current and which execution which are risk our subject into of to, and but growth of Such business, from of course statements this expansion company's unknown known and certain factors capital anticipated use are Inc. forward-looking and include, transactions, be its the These in filed statement, Form undertakes revise discussed under to cause Securities most obligation differ recent XA statements. otherwise. XX-K, materially our actual Commission. Exchange forward-looking and events or detail the our publicly no in future whether Factors Risk new these any to as that result Item a of or could update results in those factors with including from XPEL information, expressed are

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

Ryan Pape

factor historically Clearly, lowest we're history, $XX.X considering second of revenue a our our and everyone. quarter, is million. quarter first to morning, XXXX Welcome always off is good revenue almost in was John, quarter call. start our highest This Thanks, to and QX In great X%. million. in been inventory better to great XX.X% seasonal grew the which rising XXXX. benefited grew quarter performance, seems and results, QX contributing the finished Results to which SAAR were we a XX.X% This to than over little compared levels $XX and from new most to year. up car with this coincide U.S. sequentially better-than-expected that. U.S. QX by was a to XXXX revenue expected

the in car such potential discussed higher new could the the far, so be of quite our have we we've to environment But that interest proven macro impact challenges buyer. rates buyers past, new mindful as been car resilient. of As impacts current

I into results. share think for in we're the that in which an we the is market our that a luxury all-time the of seeing reached us of because segment market. And to as QX, over-index point continue good well U.S. high

the coming finished versus last region declining China where with out and and destocking expected about the right Our lockdown of changes quarter. prior we year approximately inventory we of the talked XX% what revenue year,

XXXX reach QX, increases the quarter-on-quarter in of flat China annual be and year. for China pretty expect We're incremental total the still we trough So the forecasting the given to year. we revenue sequential to relative sales start XXXX of slow rest should in the

Having the opportunity said that, China. – we're on long-term in bullish

our ground to we have participants, support have. and we the and to get discussed of car expect was the large conference X,XXX time we're the the were set over relationships host where positive. team up the to first able that was our China dealer similar March and and years, was end for very And on what restrictions, quarter. second last energetic, of to that that quickly towards in the by moving three dealership operational OEM the their to on in very in distributor ground end COVID our attended we we to it we get As with be call, team China did able

the transition market to we're us. So opening that happy about

for of part year. big a the be to remainder the going it's our So focus of

for record QX most quarters, quarters had the all lowest And again, East, APAC, revenue regions was LatAm, of as Europe, year is quarter the strong of these, seasonally. Middle other well. typically great. The which

second a results for there. we us quarter. sets positive all that up think And So strong

be We expect the million to million range. QX revenue $XXX $XXX in to maybe

So first in history. $XXX the revenue time should in for quarterly our exceed that million

nice China, digits, but in quarter. this a And down assumes compared just the milestone. digits QX incremental that's mid-single for So improvement single XXXX to still

pain that the we the from now, certainly strong hasn't But outlook business. some sees macro on from impact vehicle our impacting and of – the current We're changed this view continuing. and business cycle of Overall, of possibility for our tightening our in has the business year right our February. uncertainty really view haven't onset aware substantially our delayed affordability. The it spite remained seen in

positives, a In at our of gross XX.X%. to highlight want certainly performance quarter we with a lot margin

around gross XX% year, ahead you is of to we're bit a by on we that, guided schedule and the the which of end margin As recall, great. little

embedded building some from from in on We discussed of in And preponderance the little to margin. as year. and we've pricing gross our improvement the our materials the continue continue China margin of to work the mix, result costs and last see costs a ongoing is gain leverage margin benefit gross continued lower then around mainly benefit we fixed past, of bit

there about really minus So channels, though but we're products We may and get QX and that. a at very a mix around with little few mix range, year still even expect QX XX% good, of the all, happy sooner finish plus here to planned, bounce basis we than different we all in different the as bit or points. of

nice for over As an of $XX.X there. operating a XX%, from grew and increase quarter EBITDA XX.X% margin to XX.X% EBITDA a a sequential the result, million, QX leverage really reflecting QX, little

had our a interacting other. their XPEL. customers in format, And XXXX not on lecturing XX It's each to had there in small experience conference products about session was get success. This on XXX and was on business attendance standing the The a and it. really from history. countries. our is we've We're really, customers We not people It energy the or about was conference huge droning breakout largest about conference. our improve dealer with in our the held just amazing. We

year. So it most was amazing. do of we every things one And it's the important

to announced as conference our automotive the additions as line, a coating which included latest during aircraft Fusion+ ceramic our well to We line. also products some product incremental fusions Fusion+

these to verticals we'll slowly business expand products – we've So our target, continue over our term. longer the for do the as we coatings to discussed plans

You've seen well like the current we're automotive did marine and it's launch the products and aircraft as we over in time additional incremental product, vertical going verticals with towards then expansion deeper now of this as products. Fusion+ working

we're do to going So continue it's of it. and well more to been received,

be good extension better, a the even done run is development product more software further going We're dealer next sessions by then of lot a NEXT, what on really we've and One a means demand, us their with but means as than excitement cut DAP in the which our version and of retiring that at what focus what's businesses version conference to to our to and old the which a as that of three all reveal our the our enable tool DAP four newest help platform. of feedback. We to months, for training our about of come. great on them, traditionally extension for but platform, great us. obviously good was to to will the and is customers was just really the our There importance of new is got manufacture

of So will energy platform, with to driving that the retirement that that put the much us old allow forward. more

to be of So us by that's for of the going milestone a summertime. big sort the end

doing forward great conference dealer and was conference, to look overall, the it I next February. So again

we've brings and acquisition million of revenue we $X us, million our further which that services the Additionally, we new a was this purchase the segment It's footprint, completed addition a It Great dealership on May immediately services. acquisition add small first around done boxes. a checks services which will accretive business business, overall all about X, product the service year. of and integrate into expand revenue. dealership strategic in as is our will dealership of expands $X for and

consistent and million with our QX, $X Our China of inventory the for with year. up finished year QX QX of demand especially quarter, expectations, reduced at last $XX.X million from which out the around this of was for

this we business, that number a in run bring it should to But continued the inventory plan want solid this, days In honor that but to to we a peak thing the And hand planned cash to overall. to optimize discussed, down us take this commitments over down have to is be on to one we manage not coming work of vendor growth. levels we’ve do and addition as to chosen revenue as out product. still we’ve unwind had ever And do the we support of time our flow. quarter

the we making good we’re on that So will year. the fall lower as and off wheels throughout see hand days happens, but when progress we progress

team, All XXX the for that put dealer really all us, particularly or show quarter our and our appreciate amazing for weekend so on in our conference dedicated to all, great an customers. their efforts the of

So great quarter.

to that, color with on Barry. So a it Barry Go – add over to numbers. turn ahead, Barry little the I’ll

Barry Wood

good everyone. morning, and Ryan Thanks,

Just points revenue. more to cover on off a couple

was over Looking XX% quarter and over at film the a a X%. and in the product lines protection up cutbank revenue grew combined paint sequentially little little

really by revenue revenue. XX%, of line XX.X% for a is up $XX And product total window quarter-over-quarter which million, film this quarter window solid over grew film. QX our from XX.X% so represented Our to sequentially little

to X.X% and grew $X.X over a this XX% was million, revenue little line product vision QX sequentially. Our up

strong January low in a as Our pretty we vision be seasonal product us. with month March have February line months, as this and for line but tends to momentum was December,

over product to XX.X% revenue, in the million. and really quarter performance quarter growing good across OEM service total Our all the the grew in XX% a board And our XX% solid quarter. little combining XXXX revenue installation had total a of versus so revenue represented QX all, and in $X.X

represented And expense QX from expense bit the revenue. annual the quarter impact XX.X% out the timing conference. a and period The in was muted of XX.X% $XX Our million QX XXXX. was of about dealer with $XXX,XXX growth our in SG&A grew of impact to our

considering quarter. year, hit saw those some So in conference we’ll that really see expenses but QX we the in leverage nice this even

net is factor we QX And XX%. contributing lower revenue and revenue December. under quarter net grew up than Cash was month to income March record $X.X was substantially million, $XX.X income number. million margin just XX.X% a flow is in of higher had $X was that $X.XX ops XX.X% about net reflecting Our EBITDA the income for our than was from one where share. which per million Sequentially EPS

as has million so it over end. increase did it by year DSO that our Our so AR would been follows fairly about consistent, $X.X

any percent a delinquencies, of seeing in not customer remained of movement which constant. has is We’re terms revenue

as impact Ryan $X.X increase factor. negative as impact of was million. $X was about negative so cash can well. So that by finally, And we timing one And this either had payments quarter levels mentioned, that approximately And quarter-to-quarter. by operating way did that PMA inventory our flow million, impact a from

And expect inventory our sales there’s in few the outstanding day’s been driver doubt quarters. in a over and our But our levels somewhat cycle. cash we coming the the quarters to in conversion consistent no has increase our efficiency our be payables in decreased primary day outstanding last

cash So operating as future that to begin given normalize. inventory we’ll our see levels impacts to positive flows

able And strategic be while of position flexibility foreseeable cash, we in future. acquisition fund all Also facility the maximum increasing facility. – enhances the new to term we borrowing nicely for most to addition this doing facility And expect in credit primary on in our financial $XXX April, of provides to just execute initiatives. new dry financial to on driver plenty and to The a with powder financial our new get this terms our capacity. our closed pipeline better was million of

we’ve into So good the year again, going QX. really start good to momentum and got some

questions. to Looking now next turn that for call over operator, With forward quarter. again we’ll the talking

Operator

Instructions] [Operator Thank you.

from is Steve with Our first Dyer coming Craig-Hallum. question

may proceed. You

Steve Dyer

Good Nice results. guys. morning, Thanks.

Ryan Pape

Thanks, Steve.

Steve Dyer

We an to this kind last a about in continue marketplace. talked but bit eye of wondering I’m the just on keep quarter, sort and

or loosen as got the little questions becomes dealers vehicles inventory seeing to it. a that the if, that starts looser to the of opposed maybe a preload the as bit on have negotiation just of you’re a preloads of to and preloading change wrap among you is, point and get as of it any little tell that things here more you sort One

Ryan Pape

see Sure. protection there’s Yes. ways. seen look a dynamics more with. where preloaded, with We’ve both line it we No, we paint begin most product window you products at When than couple there. film our think to are much I do often it the the

actually that we whole for network protection film amount relatively So the substantial is see preloading, of low. coverage across at the paint least

So I in don’t think markets. to preload a exposure necessity And that. many is as a huge we have really film window a

any that be environment. pretty So durable should in

seen market on have winding – And side, we’ve in or seen so interest reduced. of the from flip terms adjustments have the products been then that being been substantially definitely prevalent, as down adding dealers had

don’t see to continues exposure dynamic that inventory I as So significant to shift. that

Steve Dyer

That’s great color. Thank you.

you specific company it on get in this you’re as Just segment, you Dealer cetera? more could that made et wondering the what How acquisition Services just doing, bit already does? integrates a little what if with to the

Ryan Pape

Yes.

isn’t version in attach protection for in typically And or interested acquisition PermaPlate our that this integrate to that smaller the network and subsequent rate business high in as we business for dealership dealerships And a services, like is can window volume two type dealerships. we’re what a So car of And really do work relatively by high ago. acquisition the film with installation our volume. another paint doing this with preload of that that of just aftermarket directly. terms we existing is years that’s did

Steve Dyer

your Okay. on And guess growth? I to the QX XX% given year some change sort XX% to along view with revenue beat, revenue the there marginal any of of then

Ryan Pape

there we’re really that. keeps what position changed. still seeing now, No, don’t our for us think fundamentally track I we’re and think has on I

we We’re were not two than about nor pessimistic we year months more the inherently are more ago. optimistic

good little But as still our I about just the cautious we’re is. fundamental So think change business, in feeling outlook. no everyone a

Steve Dyer

color the Good Appreciate luck. right. All it. Got guys.

Ryan Pape

you. Thank

Operator

you. Thank

with B. coming is Our Riley. Sinderen next Jeff Van from question

proceed. may You

Jeff Van Sinderen

everyone. morning, Good

add congratulations. me Let my

wanted to if could us point. PPF? that the know for if are attach on Just rate on we with at parts, but some got I you maybe update just can where touch you this see we’ve moving maybe

Ryan Pape

Yes.

that a I rate, So ever for best this tell. moving, we but PPF, mean, mean, yes, can I – slow I is increasing

attached. than how at multiple momentum you even, accurately you look film tell something able quarter-to-quarter a you’re protection attach still more at quarters that. sure. rate to of this paint U.S., from that depending the probably sequentially, talking the I looking amount high paint product you’re But for we’re protection upward for digits So film the some on we single isn’t that, of define still with probably would see

Jeff Van Sinderen

Okay, then seeing coming normalizing in you and levels in good. services And to dealer kind think trend the about process see lots. of improving inventory we are more automobile how dealer inventory Where on your business on the to could broadly speak quarters? great you’re lots dealer next of you do you business what maybe and expect that over

Ryan Pape

for a that that pertains business that the most differently inventory. just and I’m Sure. it impacts because business with concentration Yes, makes correlate geographic of I to the in we’re concentration various overall – mean, perform only we’ve reasons to manufacturer’s as certain trend our dealership terms hesitant for restock But even the around have part. services to how in it ability our seen based directly, improvement broad

of I their situation an standpoint. substantial been for we in a from dealerships have that’s complete both inventory some service from car a numbers the of We’ve improvement had then positive think that improvement. this highest quarter. seen and a probably that And standpoint the in affecting count seen XX%, revenue overall we’ve either segment us or a XX%

of rest of we think as in that been back good So of has be for certainly kind for us. we sort of the the to that continue positive I – as dealerships those situation, XX% to get that And us. that’ll trend XX% service

Jeff Van Sinderen

new – could end I speak software that. on you old then wonder software little feedback basically if software? the be bit the [ph] initiative left on done Okay, of about more little depth the to life a good. What’s as more a you And

Ryan Pape

I – a Well, in what it anyone in knows terms say would done, never project left be is who’s ends. is of ever what left involved to software been

never So it will end.

do customers to we’re be things and make think our for of right. compensation they’re it’ll that done. more core people with some help options paying process never trying be So terms I to the efficient for But commission to of in sure to

a structure to very maybe more today, discovery fine, and don’t without data the or that’s not, you The to want know. And then it, platform be. enable we the has the installation though it’s and industry pricing maybe of about what ultimately a should these behind pricing cost create technology simplistic

So from that here standpoint, are go we’re that talking bring iterative to value. many cycles left to

to platform. all So right on wins to going people things do. we’re this work incremental then to come But shifting that to be hit really now exactly focused we on for the this years the want to and to do there’s

Jeff Van Sinderen

and Thanks continued enough. my Okay. for questions success. Fair taking

Ryan Pape

Jeff. Thanks,

Operator

Thank you.

Our Moore Hutton. next question EF from Tim is coming with

may You proceed.

Tim Moore

on margin. gross congratulations strong and the Thanks

sales were driven update so bit did smaller questions if a answered, were up plan? more by of A – can already or if let I the a we there? but if correctly over European XX% me you OEM And heard relationships that few maybe continue hear with OEM I have kind the from Rivian execution of sequentially off start of came and it can that was my

Ryan Pape

Yes, revenue month-on-month QX contributor scale it’s the things. that over produced XXXX. And its October. a a prior combination that. of as XX% was in Certainly, working And sequentially program year so each Rivian is been after to that we’ve then, it that first really of

logjams at more as their well So that system the all is vehicles have or in released. the been through put a But counts have driver or vehicle same manufacturing other of time, terms programs efficiency That’s of that. our grown as too.

is certainly, to revenue on contributing mixed year. the So there wasn’t bag. that a Rivian where basis in year-over-year a now it’s really But prior

Tim Moore

Great. That’s helpful color.

profile. the And be like been the rate? rate. PPF dedicated smaller drive Are assume seems trying they to growth? would some the revenue I investors have may they How but consistent know it on with teams growth up follow attachment that window approve tinting, are you growth side to up a for base, team? very to it’s the Just I window broken you from have sales are overlooking

Ryan Pape

so our have dedicated team Yes, is films architectural products our on architectural do automotive then the about side. there window and where we really the bifurcation

In one terms vehicle lines, core and our at, per content And coating goal look we’ve paint easier. are all And There core people is established. business. of three is for versus in of are window sale protection team. of other got really more product window familiar automotive, obviously ways, more and in the automotive various those, film the is that’s handled drive with film our various by a business to across channels that sometimes it. the you The

So there paint then with are else. trying or leading come times with and protection coatings in to where film and we’re back that anything

really to number That’s on it cars can. job dollar many as one. is we So much depends. as get as But job our share content

less then, types. split is, among important And that different our the product ideal

window is driver will so happened. tin to we’re you’ve in a it growing a of either and And the of order and seen that where business. established ultimately market coatings business, good one good the business which be film and coatings value more I is the film it paint And service or depending with much business protection slower think win on because the able the that in provide and the paint and share protection

Tim Moore

Maybe those few news Ryan. last curious, new ceramic a the Great. week last quarters? coding My little talk is for bit growing That’s I could announcement you just ceramic the the how past is, that saw coating fast question helpful, I coding? options. about was maybe four

Ryan Pape

a Yes, small on we’re still base.

the customer are intersects it that there. installation we coating, the necessarily of of benefited So grow That’s equally much where growth in of a characteristics growth differentiation. think smaller our we’ve product But of can be in product it by faster. all far the on we base. more overall a higher Not think actually and will it So product excess actually extensive sell growth rates, seen differentiation products ceramic terms help one we as the sort it’s right? generally preferences

of seen the more aircraft on catalyst So, car. sales there, more the the the be think the within expansion really options is of we even continue high ignoring have a that rate one because to that we sort how people did get component we we’ve growth will we automotive, product for on

that. So happy yes, really about

Tim Moore

look to That’s Barry. at you and seeing this forward conference to Ryan And it in the I York. questions. for week Thanks, New my you

Ryan Pape

Tim. Thanks,

Operator

you. Thank

reached of the have session. We end question-and-answer our

call over back management So remarks. I’ll to any now hand for closing the

Ryan Pape

and for quarter our you great Yes, all for soon. thanks thank team joining to and you to a we’ll Bye-bye. us speak

Operator

your for concludes Thank you. you time. today’s this This disconnect We conference. lines participation. may And you your thank at

XPEL (XPEL) 9 May 232023 Q1 Earnings call transcript