XPEL(US:XPEL)2021-11-09 18:36Financial Data and Key Metrics Changes - Q3 2021 revenue was $68.5 million, flat compared to Q2, but down approximately 5% sequentially when excluding acquisition-related revenue [6][33] - Organic revenue growth for Q3 was approximately 38.4%, with year-to-date revenue growth of 71.4% [33] - Gross margin for Q3 was 35.7%, down from 36.7% in Q2, but up from 34.8% in Q3 2020 [26][27] - Net income increased 26.1% year-over-year to $8.3 million, with an EPS of $0.30 [38] Business Line Data and Key Metrics Changes - Product revenue grew 44.2% to $56.9 million in Q3, with paint protection film growing 35.2% to $43.2 million [33] - Service revenue grew 74.9% in Q3, with total installation revenue from company-owned centers growing 107.6% [34] - The PermaPlate Films acquisition incurred most integration expenses in Q3, expected to complete by year-end [11] Market Data and Key Metrics Changes - U.S. revenue grew 69.5%, with organic growth of 49%, despite new car sales being the slowest in a decade [7] - Canada revenue grew 40.3% to $8.7 million, with strong performance in both U.S. and Canada [12] - China revenue reached $10.6 million, but new car sales were down 13% year-over-year [15] Company Strategy and Development Direction - The company is focused on expanding into mid-range markets through acquisitions like Tint Net and One Armor [8] - Recent acquisitions are aimed at enhancing the product portfolio and increasing market penetration [13][19] - The company plans to maintain an aggressive inventory strategy to mitigate supply chain disruptions [23][24] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing pricing pressures and supply chain challenges, with expectations for continued volatility [60][62] - Anticipated Q4 revenue is expected to be slightly higher than Q2 and Q3, contingent on recovery in new car inventories [25] - Management remains confident in achieving gross margins approaching 40% by mid-year next year [27] Other Important Information - The company plans to build inventory levels to approximately $45 million by year-end to hedge against supply interruptions [24] - Integration of recent acquisitions is a priority, with no new acquisitions planned for the remainder of the year [40] Q&A Session Summary Question: Performance amidst new vehicle inventory challenges - Management acknowledged strong performance despite low new vehicle inventory, attributing it to product adoption and dealer incentives [46] Question: Future acquisition strategy - Management indicated that while installation acquisitions have been a focus, they remain open to expanding the product portfolio [51][54] Question: Supply chain and pricing pressure dynamics - Management elaborated on unpredictable pricing and supply chain shortages, emphasizing the need for inventory buildup [58][63]