• Revenue: Grew 9.9% to $112.9 million, a record high.
• US Revenue: Increased 9.4% to $64.6 million.
• Canada Revenue Growth: Increased 25.7%.
• China Revenue: $9.1 million, higher than the first six months of the year.
• Q4 Revenue Guidance: Expected to be in the range of $105 to $107 million.
• Gross Margin: 42.5%, down 100 basis points from Q2.
• SG&A Expenses: Grew 23.6% to $29.5 million.
• EBITDA: Increased 10% to $21.7 million, with a margin of 19.2%.
• Net Income: Increased 9.1% to $14.9 million, with a margin of 13.2%.
• EPS: $0.54 per share.
• Cash Flow: Generated $19.6 million in the quarter.
• Cash on Balance Sheet: $21 million.

• Warning! GuruFocus has detected 3 Warning Sign with XPEL.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• XPEL Inc (NASDAQ:XPEL) achieved a record high revenue of $112.9 million for the third quarter, marking a 9.9% increase.
• Excluding China, total revenue grew by 12.3%, indicating strong performance in other markets.
• The company's US business reported a 9.4% revenue growth, marking one of the highest US revenue quarters in its history.
• Canada showed impressive growth with a 25.7% increase in revenue, benefiting from timing and overall solid performance.
• XPEL Inc (NASDAQ:XPEL) successfully closed acquisitions of distributors in India and Japan, which are expected to accelerate business growth and provide optionality for product and service expansion.

Negative Points

• Growth in Europe and the UK was slower than expected, attributed to macroeconomic headwinds.
• China's revenue declined by nearly 12% quarter over quarter, and the company anticipates lower sales in China for the fourth quarter.
• Gross margin decreased by 100 basis points from Q2, partly due to the mix impact from China.
• SG&A expenses increased by 23.6% over Q3 2023, reflecting enhanced marketing efforts and other strategic initiatives.
• The company anticipates a year-over-year revenue decline in China for the fourth quarter due to strategic changes.

Q & A Highlights

Q: Can you elaborate on the strategy shift in China beyond improving the sell-in and sell-through dynamics? A: Ryan Pape, CEO, explained that the strategy in China is to ensure the brand's market share matches its mind share. This involves optimizing the product portfolio, ensuring distribution partners have access to necessary products, and exploring OEM and dealership opportunities. The goal is to set up for more growth and optimize operations for efficiency.

Q: Are the changes in the Chinese domestic car market, with a shift towards local brands, a threat to XPEL's market share? A: Ryan Pape, CEO, acknowledged the shift but sees it as an opportunity. XPEL is adapting to be competitive in this environment and has initiated OEM programs with domestic brands, indicating potential growth rather than a threat.

Q: With XPEL's cash generation and willingness to leverage, are there plans for acquisitions, and will they be similar to past tuck-ins? A: Ryan Pape, CEO, stated that while distributor acquisitions remain a core strategy, XPEL is also exploring larger opportunities that could add complementary services or products, indicating a potential shift from smaller tuck-ins to more significant acquisitions.

Q: What are the opportunities and plans for XPEL in Japan following the acquisition of the distributor there? A: Ryan Pape, CEO, highlighted that owning distribution allows XPEL to ensure full product representation and correct pricing, leading to higher margins and growth. Additionally, it enhances XPEL's value to OEMs by offering services in more geographies.

Q: Can you provide more details on the windshield protection product and developments in other areas like architectural and marine? A: Ryan Pape, CEO, noted that windshield protection is a gateway product appealing to a broader audience due to rising windshield replacement costs. While marine and architectural segments are growing, investment focus remains on core areas due to the current environment.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.