XPEL(US:XPEL)2022-08-09 18:42Financial Data and Key Metrics Changes - Revenue for Q2 2022 grew 22% to $83.9 million, with a record gross margin of 39.3% and an EBITDA margin of 20.5%, the highest in company history [7][17][34] - Net income increased 16.8% year-over-year to $11.9 million, reflecting a net income margin of 14.2% [37] - Year-to-date net income grew 15.7%, with an EPS of $0.21 per share [39] Business Line Data and Key Metrics Changes - Product revenue grew approximately 14.3% to $67 million, while service revenue increased 67.3% to $16.9 million, representing 20.1% of total revenue [31] - Total installation revenue, combining product and labor, increased over 106% [33] - The window film business grew 42% for the quarter, reaching $60 million, while the architectural film business remains small but is growing [23] Market Data and Key Metrics Changes - U.S. revenue grew 43.4% to a record $49.2 million, despite challenges in new car sales and lockdowns in China [8][12] - Canada, Europe, U.K., and Latin America also saw record revenues, with strong demand continuing in Canada [10] - The company faced a negative impact of approximately $6.5 million on overall revenue due to the strengthening U.S. dollar and COVID-related lockdowns in China [13][11] Company Strategy and Development Direction - The company aims to reach a 40% gross margin run rate by the end of the year, focusing on managing expenses and improving gross margins [16] - A partnership with Rivian was announced to be the exclusive supplier of their factory direct paint protection film program, enhancing the company's OEM program [24] - The company is actively pursuing acquisitions to enhance its software offerings and expand its market presence [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in revenue growth, estimating 2022 annual revenue growth to be in the 25% to 28% range, slightly lower than previous guidance due to China impacts and currency strength [19] - There is optimism regarding new car production recovery in the second half of the year, which could benefit the company [20] - Management expects Q3 revenue in the $85 million range, with improvements anticipated in China [21] Other Important Information - The company finished the quarter with approximately $74 million in inventory, indicating a stabilization after a significant build earlier in the year [26] - Cash flow from operations returned to $1.8 million as inventory build moderated, with plans to utilize cash flow for acquisitions [39] Q&A Session Summary Question: What are the biggest drivers of growth in the U.S.? - Management attributed growth to increasing attach rates for paint protection film, more product per vehicle, and the expansion of service offerings [44][46] Question: How many franchise dealers are selling paint protection film? - Management indicated there are several thousand new car dealerships connected to the company, with significant opportunities for growth in dealership offerings [47][49] Question: Is the deal with Rivian the only OEM partnership? - Management confirmed there are opportunities for further OEM partnerships, emphasizing the potential for increased market reach [55][57] Question: What is the outlook for inventory recovery? - Management noted that while inventory has improved, a full recovery is expected to take multiple quarters [61] Question: What about the software acquisition? - Management stated they are looking to integrate the acquired software into their DAP platform and are open to further acquisitions to enhance their technology offerings [66][68]