XPEL(XPEL) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue grew 9.9% to $112.9 million, a record high, with total revenue excluding China growing 12.3% [5][22] - EBITDA increased 10% to$ 21.7 million, reflecting an EBITDA margin of 19.2% [25] - Net income rose 9.1% to $14.9 million, with an EPS of$ 0.54 per share [25] - Gross margin for the quarter was 42.5%, down 100 basis points from Q2 [16] Business Line Data and Key Metrics Changes - U.S. business revenue grew 9.4% to $64.6 million, marking one of the highest revenue quarters in history [5][6] - Canada revenue increased by 25.7% [7] - Window film product line revenue grew 20.6% quarter-over-quarter to$ 22.6 million, representing 20.1% of total revenue [22] - Total installation revenue grew 27.4%, accounting for approximately 20% of total revenue [22] Market Data and Key Metrics Changes - Revenue in China was $9.1 million, a decline of just under 12% quarter-over-quarter [9] - Latin America and Asia Pacific (excluding China) continued to show strong growth, primarily through indirect distribution channels [7] - European and U.K. markets experienced slower growth due to macroeconomic headwinds [9] Company Strategy and Development Direction - The company is focusing on a more direct model in international markets, particularly in India and Japan, following recent distributor acquisitions [8] - A strategic review of the go-to-market strategy in China is underway to optimize operations and improve competitiveness [13] - The company plans to expand its OEM and dealership opportunities in China, with recent small contracts won [12] Management's Comments on Operating Environment and Future Outlook - Management noted challenges in consumer discretionary spending but expressed optimism for continued growth in the U.S. market [6] - The company expects Q4 revenue to be in the range of$ 105 million to $107 million, with lower sales in China due to strategic changes [15] - Management highlighted the importance of managing inventory and cash flow to drive free cash flow [14] Other Important Information - The company launched a new Windshield Protection Film product, which is expected to serve as a gateway product to attract new customers [17] - A solid cash flow quarter generated$ 19.6 million, with plans for capital deployment focused on expanding services and products for the dealership space [20] - The company is hosting an Investor Day and facility tours on December 5 [21] Q&A Session Summary Question: Strategy shift in China - Management clarified that the strategy shift aims to align product offerings with market demand and optimize operations for growth [28][29] Question: Competition from domestic brands in China - Management acknowledged the changing dynamics in the Chinese market but emphasized that the company is adapting to remain competitive [31] Question: Future acquisitions - Management indicated a focus on distributor acquisitions as a core strategy while exploring larger opportunities that complement existing services [32] Question: Opportunities in Japan - Management expressed confidence in the potential for higher margins and growth following the acquisition of distribution in Japan [33] Question: Windshield protection product strategy - Management highlighted the cost-effectiveness of windshield protection and its potential to attract new customers [35] Question: Expansion of Tesla referral program - Management noted plans to grow the referral program with Tesla and explore similar opportunities with other OEMs [36]