Q2 2024 XPEL Inc Earnings Call

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Rose Vera: Rose Vera, and my line had dropped.

Operator: I apologise there; my line had dropped. Welcome to Xpel Incorporated's second quarter 2024 earnings call. At this time, all participants are in a listen-only mode, and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your phone. Please note, this conference is being recorded. I will now turn the conference over to your host, John Nesbett, IMS Investor Relations. You may begin.

Operator: Welcome to Xpel Inc. 2nd Quarter 2024 earnings call. At this time, all participants are in a listen-only mode, and a question-and-answer session will follow the formal presentation. If anyone should acquire operator assistance during the conference, please press star zero on your phone keypad. Please note this conference is being recorded.

Speaker Change: I apologise there, my line had dropped.

Operator: Welcome to Xpel Incorporated's second quarter 2024 earnings call. At this time all participants are in a listen-only mode and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference please press star zero on your phone keypad.

John Nesbett: I will now turn the conference over to your host, John Nesbett, IMS Investor Relations.

Operator: Please note, this conference is being recorded.

Speaker Change: I will now turn the conference over to your host, John Nesbett, IMS Investor Relations. You may begin.

John Nesbett: You may begin. Good morning and welcome to our conference call to discuss Xpel's financial results for the 2nd quarter of 2024. On the call today, Ryan Pape, Xpel's President and Chief Executive Officer, and Barry Wood, Xpel's Senior Vice President and Chief Financial Officer, will provide an overview of the business operations and review the company's financial results.

John Nesbett: Good morning, and welcome to our conference call to discuss Xpel's financial results for the second quarter of 2024. On the call today, Ryan Pape, Xpel's President and Chief Executive Officer, and Barry Wood, Xpel's Senior Vice President and Chief Financial Officer, will provide an overview of the business operations and review the company's financial results. Immediately after the prepared comments, we will take questions from our call participants.

Speaker Change: Good morning and welcome to our conference call to discuss Xpel's financial results for the second quarter of 2024.

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

John Nesbett: Immediately after the prepared comments, we will take questions from our call participants. I'm not taking a moment to read the safe harbor statement. During the course of this call, we will make certain fully looking statements regarding Xpel Inc. and its business, which may include but not be limited to anticipated use of proceeds from capital transactions, expansion into new markets, and execution of the company's gross strategy. Such statements are based on our current expectations and assumptions, which are subject to known and unknown risk factors and uncertainties that could cause actual results to be materially different from those expressed in these statements.

John Nesbett: I'll now take a moment to read the Safe Harbor Statement. During the course of this call, we will make certain forward-looking statements regarding Xpel, Inc. and its business, which may include, but are not limited to, anticipated use of proceeds from capital transactions, expansion into new markets, and execution of the company's growth strategy. Such statements are based on our current expectations and assumptions, which are subject to known and unknown risk factors and uncertainties that could cause actual results to decrease or be materially different from those expressed in these statements. Some of these factors are discussed in detail in our most recent Form 10-K, including under Item 1A, Risk Factors, filed with the Securities and Exchange Commission.

John Nesbett: Xpel undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Okay, with that, I will now turn the call over to Ryan. Please go ahead, Ryan. Thank you, John.

John Nesbett: I'll take a moment to read the Safe Harbor Statement. During the course of this call, we will make certain forward-looking statements regarding Xpel Inc. and its business, which may include, but not be limited to, anticipated use of proceeds from capital transactions.

John Nesbett: expansion into new markets, and execution of the company's growth strategy. Such statements are based on occurring expectations and assumptions which are subject to known and unknowns risk factors and uncertainty that could cause actual results to!

John Nesbett: Some of these factors are discussed in detail in our most recent Form 10-K, including under Item 1A Risk Factors filed with the Securities and Exchange Commission. Xpel undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Speaker Change: to be materially different from those expressed in these statements.

Speaker Change: some of these factors are discussed in detail

Speaker Change: and our most recent Form 10-K , including under Item 1A, Risk Factors, filed with the Securities and Exchange Commission.

Speaker Change: undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Okay, with that, I will now turn the call over to Ryan. Please go ahead, Ryan.

John Nesbett: Okay, with that, I will now turn the call over to Ryan.

Ryan Pape: Please go ahead, Ryan. Thank you, John, and good morning for me as well.

Ryan Pape: Thank you, John, and good morning from me as well. Welcome to the second quarter 2024 call. Q2 was a record revenue quarter for us, revenue growing 7.5 percent to 109.9 million. Our U.S. business grew just under 10 percent to 64.9 million. While this was a significant improvement from the 1.9 percent year-over-year growth in the first quarter for the U.S., overall, the aftermarket remains off its trend from the prior year, as we discussed in the first quarter. However, while the sentiment was universally negative in the first quarter, the second quarter has been a bit more positive.

Ryan Pape: Welcome to the second quarter, 2024 call. Q2 was a record revenue quarter for us. Revenue growing 7.5% to 109.9 million. Our US business grew just under 10% to 64.9 million. While this was a significant improvement from the 1.9% year-over-year growth in the first quarter for the US, overall, the aftermarket remains off its trend from the prior year, as we discussed in the first quarter. However, while the sentiment was universally negative in the first quarter, the second quarter has been a bit more positive. We saw April up more significantly given some of the headwinds in the first quarter, and the feedback from our customers has definitely been more mixed versus all negative to start the year.

Ryan Pape: Thank you, John , and good morning from me as well. Welcome to the second quarter 2024 call. Q2 was a record revenue quarter for us, revenue growing 7.5% to $109.9 million.

Ryan: Our U.S. business grew just under 10% to $64.9 million. While this was a significant improvement from the 1.9% year-over-year growth in the first quarter for the U.S.,

Speaker Change: Overall, the aftermarket remains off its trend from the prior year, as we discussed in the first quarter. However, while the sentiment was universally negative in the first quarter, the second quarter has been a bit more positive.

Ryan Pape: We saw April up more significantly given some of the headwinds in the first quarter, and the feedback from our customers has definitely been more mixed versus all negative to start the year, so I think that's good. Our dealership business continued to perform well, growing a little over 30 percent for the quarter. A little apparent impact from the well-discussed CDK software issue, as far as we can tell, but probably some impact. Obviously, there's lots of talk about macro consumer sentiment, etc., which we're not going to speculate on, but the first half of last year was stronger than the second half of last year, so going forward, we will lap the slower part of last year. Our China business posted revenue of $4.4 million, which was a 45.7% decline compared to the same period. The Cell In vs.

Ryan: We saw April up more significantly given some of the headwinds in the first quarter and the feedback from our customers has definitely been more mixed versus all negative to start the year. So I think that's good. Our dealership business continued to perform well growing a little over 30% for the quarter.

Ryan Pape: So I think that's good.

Ryan Pape: Our dealership business continued to perform well, growing a little over 30% for the quarter. A little apparent impact from the well-disgust CDK software issue, as far as we can tell, but probably some impact. Obviously, there's lots of talk on the macro, consumer sentiment, et cetera, which we're not going to speculate on. But the first half of last year was stronger than the second half of last year. So going forward, we will lap the slower part of last year.

Ryan: A little apparent impact from...

Ryan: The well-discussed CDK software issue, as far as we can tell, but probably some impact.

Ryan Pape: Obviously, there's lots of talk on the macro, consumer sentiment, etc., which we're not going to speculate on. But the first half of last year was stronger than the second half of last year. So going forward, we will lap the slower part of last year.

Ryan Pape: Our China business posted revenue of 4.4 million, which was a 45.7% decline compared to the same period in the prior year. The sell-in versus sell-through dynamic continues to hide a lot of the work we're doing there. We launched in the quarter additional product line that drove our in-country versus sell-in, PPF sales unit volume buyer distributor up substantially on a unit-term basis over the prior year, given the positioning of the product to the mid-tier in China where we've historically not participated. This is a good dynamic for the market. Much like our business, we're working with our distributor to streamline and reduce inventory in country, especially as we modify our product line and go to market.

Ryan Pape: Our China business posted revenue of $4.4 million, which was a 45.7% decline compared to the same period in the past.

Ryan Pape: Cell Through continues to hide a lot of the work we're doing there. We launched in the quarter an additional product line that drove our In-Country vs. Cell In PPF sales unit volume by our distributor was up substantially, on a unit terms basis over the prior year, given the positioning of the product to the mid-tier in China, where we've historically not participated. This is a good dynamic for the market. Much like our business, we're working with our distributor to streamline and reduce inventory in-country, especially as we modify our product line and go to market.

Ryan Pape: in the prior year. The sell-in versus sell-through dynamic continues to hide a lot of the work we're doing there.

Ryan: We launched in the quarter an additional product line that drove our in-country versus sell-in PPF sales unit volume by our distributor up substantially.

Ryan Pape: on a unit terms basis over the prior year, given the positioning of the product to the mid-tier in China, where we've historically not participated.

Ryan: This is a good dynamic for the market, much like our business, we're working with our distributors to streamline and reduce inventory in-country, especially as we modify our product line and go to market.

Ryan Pape: So we'll continue to experience this choppiness this year, but we will ultimately reach a more stable revenue pattern through either our management of inventory in-country for the benefit of our distributor or via acquisition of the distributor, as we've done in other businesses. Overall, though, our additional product tier serves to increase our China TAM substantially over time. And this is a pattern for other low-labor-cost markets that we intend to pursue in Southeast Asia, India, and elsewhere. Our rest of the world revenue, excluding the US and China, grew 16.1% in the quarter. Continental Europe grew by 17.2%, which is a little bit lower than we've seen in previous quarters.

Ryan Pape: So we'll continue to experience this choppiness this year, but we will ultimately reach a more stable revenue pattern through either our management of inventory in country for the benefit of our distributor or the acquisition of the distributor, as we've done in other markets. Overall, though, our additional product here serves to increase our China TAM substantially over time. And this is a pattern for other low labor cost markets that we intend to pursue in Southeast Asia, India, and elsewhere.

Ryan Pape: So, we'll continue to experience this choppiness this year, but we will ultimately reach a more stable revenue pattern through either our management of inventory in-country for the benefit of our distributor, or the acquisition of the distributor as we've done in other markets.

Ryan: Overall, though, our additional product tier serves to increase our China TAM substantially over time, and this is a pattern for other low-labor-cost markets that we intend to pursue in Southeast Asia, India, and elsewhere.

Ryan Pape: Our rest of the world revenue, excluding US and China, were 16.1% in the quarter; Connell Europe from 17.2%, which is a little bit lower than we've seen in previous quarters. We see that market a little bit weaker than the previous trend, like we saw in the US earlier. But the growth dynamics there, different market is still in its infancy, so it'll perform differently than what we see in the US for sure. All in all, we still feel good about our revenue growth guidance of 8% to 10% for the year, although, as we remind everyone, we're still looking backwards to look forwards.

Ryan Pape: Our rest of the world revenue excluding U.S. and China grew 16.1% in the quarter.

Ryan Pape: Continental Europe through 17.2% which is a little bit lower than we've seen in previous quarters. We see that market a little bit weaker than the previous trend like we saw in the U.S. earlier but the growth dynamics there are different. Market is still in its infancy so it'll perform differently than what we see in the U.S. for sure.

Ryan Pape: We see that this market is a little bit weaker than the previous trend, like we saw in the US earlier. But the growth dynamics there are different. The market is still in its infancy, so it'll perform differently than what we see in the US, for sure. All in all, we still feel good about our revenue growth guidance of 8-10% for the year. Although, as we remind everyone, we're still looking backwards to look forwards. Obviously, the current macro uncertainty doesn't aid the accuracy of that process.

Ryan: All in all, we still feel good about our revenue growth guidance of 8-10% for the year. Although, as we remind everyone, we're still looking backwards to look forwards.

Ryan Pape: Obviously, the current macro uncertainty doesn't aid the accuracy of that process. But June and July, we're record revenue months for us. August tends to be a little bit lower due to time off and plant shutdowns in Europe. For Q3, we expect US to trend slightly higher than Q2, and we expect higher Q3 revenue in China than the entire first half of the year. So, assuming that plays out as expected and based on what we know, and could obviously change, but that would quote us at 112 to 114.9 revenue for the third quarter.

Ryan: Obviously the current macro uncertainty doesn't aid the accuracy of that process. But June and July were record revenue months for us. August tends to be a little bit lower due to time off and plant shutdowns in in Europe .

Ryan Pape: But June and July were record revenue months for us, while August tends to be a little bit lower due to time off and plant shutdowns in Europe. For Q3, we expect US revenue to trend slightly higher than Q2, and we expect higher Q3 revenue in China than the entire first half. So, assuming that plays out as expected and based on what we know, and could obviously change, but that would put us at $112 to $114 million in revenue for the third quarter.

Ryan Pape: For Q3, we expect U.S. to trend slightly higher than Q2 and we expect higher Q3 revenue in China than the entire first half of the year.

Ryan Pape: So, assuming that plays out as expected and based on what we know, and could obviously change, but that would put us at $112 to $114 million in revenue.

Ryan Pape: On the product side, we're really excited about the launch of our windshield protection films. That's going to be late Q3, early Q4. Product has been the most asked-for product from consumers over time, and we're finally ready to meet this demand. And it's a win in two ways. One, more content for vehicles, which benefits us and our installer base. But also, it gives us an opportunity to attract a whole new set of customers who are interested in something else, which is the windshield damage protection. And that's ultimately a referral source for the other product. So really excited about that product launch.

Ryan Pape: On the product side, we're really excited about the launch of our windshield protection films. That's going to be late Q3, early Q4. This has been the most asked-for product from consumers over time, and we're finally ready to meet this demand. And it's a win in two ways.

Ryan Pape: for the third quarter.

Ryan Pape: On the product side, we're really excited about the launch of our windshield protection films.

Ryan Pape: the people

Ryan Pape: One more content per vehicle, which benefits us and our installer base. But also, it gives us an opportunity to attract a whole new set of customers who are interested in something else, which is the windshield damage protection. And that's ultimately a referral source for the other products. So, really excited about that product launch. The customers we have who have been using it and who are starting with it are very, very pleased with it.

Ryan Pape: us and our installer base.

Ryan Pape: But also, it gives us an opportunity to attract a whole new set of customers who are interested in something else, which is the windshield wipers.

Damage Protection and you know that's ultimately a referral source for the other products. So really excited about that product launch. The customers we have who have been using it and starting with it are very very pleased with it so we have high expectations for that.

Ryan Pape: The customers we have who have been using it and starting with it are very, very pleased with it. So we have high expectations for that.

Ryan Pape: So, we have high expectations for that. Also, we've launched a new OEM and partner referral program utilizing our independent installer network. And under this program, the partner will refer their customers to an e-commerce site that we run that allows the end consumer to purchase installation of products on their card directly from us, from Xpel. We collect payment, route the job to the nearest participating installer, pay the installer promptly, and depending on the setup, we may compensate the partner through a rebate or other structure.

Ryan Pape: Also, we've launched a new OEM and partner referral program utilizing our independent installer network. And under this program, the partner will refer their customers to an e-commerce site that we run that allows the end consumer to purchase installation of products on their car directly from us from Expel. We collect payment, route the job to the nearest participating installer, pay the installer promptly, and, depending on the setup, you may compensate the referral through rebate or other structure. And this can be scaled up or scaled down in terms of participating installers, geographies, and products quite easily. We've launched our first pilot program using this system with a U OEM to us.

Ryan Pape: Also, we've launched a new OEM and partner referral program utilizing our independent

Ryan Pape: We are the Dependent Installer Network. Under this program, the partner will refer their customers to an E-commerce site.

Ryan Pape: that we run.

Ryan Pape: that allows the end consumer to purchase installation.

Ryan Pape: the products on their card directly from us, from Xpel.

Ryan Pape: We collect payment, route the job to the nearest participating installer, pay the installer promptly, and depending on the setup, you may compensate the referrer through a rebate or other structure.

Ryan Pape: And this can be scaled up or scaled down in terms of participating installers, geographies, and products quite easily. We've launched our first pilot program using this system with a new OEM to us, and we have interest behind it from several others. The program has utility beyond the OEMs with other industry partners that are in a position to refer automotive buyers to us. And our team did an amazing job launching the program.

Ryan Pape: And this can be scaled up or scaled down in terms of participating installers, geographies.

Ryan Pape: We've launched our first pilot program using this system with a new OEM to us.

Ryan Pape: And we have interest behind it from several others. The program has utility beyond the OEMs with other industry partners that are in a position to refer automotive buyers to us. And our team's done an amazing job launching the program. We look forward to building on it, evolving, and talking more about it in the future. But this is another way to increase the pool of people we can reach who wouldn't normally participate in the aftermarket. So something we think can be quite valuable for the network. over time.

Ryan Pape: and we have interests behind it from several others. The program has utility beyond the OEMs with other industry partners that are in a position to refer automotive buyers to us.

Ryan Pape: We look forward to building on it, evolving, and talking more about it in the future. But this is another way to increase the pool of people we can reach who wouldn't normally participate in the aftermarket. So, it's something we think can be quite valuable for the network.

Ryan Pape: And our team's done an amazing job launching the program. We look forward to building on it, evolving, and talking more about it in the future. But this is another way to increase the pool of people we can reach who wouldn't normally participate in the aftermarket. So it's something we think can be quite valuable for the network over time.

Ryan Pape: Another bright spot for the quarter was our gross margin performance: 43.5%. Obviously, we get a little help with customer mix, but continue to be pleased with the execution on the plan to increase margins over time. We'll see some downward pressure on margin when China returns to more normal levels, as we do with our other distribution markets, but our view is we should be able to offset most, if not all of that, and continue to have room to improve that over time. SG&A expenses grew 20, 25% during the quarter to 28.7 million. As I mentioned on the last call, we're focused on maintaining the growth of SG&A.

Ryan Pape: Another bright spot for the quarter was our gross margin performance of 43.5 percent. Obviously, we get a little help with customer mix, but we continue to be pleased with the execution on a plan to increase margins over time. We'll see some downward pressure on margin when China returns to more normal levels, as we do with our other distribution markets, but our view is we should be able to offset most, if not all of that, and continue to have room to improve that over time. SG&A expenses grew 20.5% during the quarter to $28.7 million.

Ryan Pape: Another bright spot for the quarter was our gross margin performance, 43.5%.

Ryan Pape: Obviously, we get a little help with customer mix, but continue to be pleased with the execution on...

Ryan Pape: a plan to increase margins over time. We'll see some downward pressure on margin when China returns to more normal levels as we do with our other distribution markets, but our view is we should be able to offset most if not all of that and continue to have room to improve that over time.

Ryan Pape: SG&A expenses grew 20.5% during the quarter to $28.7 million. As I mentioned on the last call, we're focused on containing the growth of SG&A. We're focused on optimizing and better utilizing the dollars we're already spending.

Ryan Pape: As I mentioned on the last call, we're focused on containing the growth of SG&A. We're focused on, you know, optimizing and better utilizing the dollars we're already spending rather than cutting them. And that remains our position today.

Ryan Pape: We're focused on optimizing and better utilizing the dollars for our expending rather than cutting it. That remains our position today. We have plenty of SG&A line-out items we invested in over the past few years, including things like the product quality manufacturing teams, our investment in HR, people and systems necessary for the growth of our service business, and we expect to see leverage on these by reducing those line-out items on a percent of revenue basis over time. So, absent some serious macro deterioration, we will overcome the burden of those now through additional revenue growth both organic and organic.

Ryan Pape: We have plenty of SG&A line items we've invested in over the past few years.

Ryan Pape: We have plenty of SG&A line items we've invested in over the past few years, including things like product quality, manufacturing teams, and our investment in HR, people, and systems necessary for the growth of our service business. And we expect to see leverage on these by reducing those line items on a percent of revenue basis over time. So, absent some serious macro deterioration, we will overcome the burden of those now through additional revenue growth, both organic and inorganic.

Ryan Pape: including things like a product quality manufacturing teams our investment in hr

Ryan Pape: people and systems necessary for the growth of our service business.

Ryan Pape: And we expect to see leverage on these by reducing those line items on a percent of revenue basis over time. So, absent some serious macro deterioration, we will overcome the burden of those now.

Ryan Pape: through additional revenue growth, both organic and inorganic. We see a very clear path to do that going forward into the future. Again, not trying to undo the good work we've done via SG&A reduction.

Ryan Pape: We see a very clear path to do that going forward into the future. Again, not trying to undo the good work we've done via SG&A reduction.

Ryan Pape: We see a very clear path to do that going forward into the future. Again, not trying to undo the good work we've done via SG&A reduction. Another highlight of the quarter was our cash flow performance coming in at almost $26.9 million, which is just higher than Q2 last year, which was by far our highest cash flow quarter in history. So, you know, kind of a long time coming and very important.

Ryan Pape: Another highlight to the quarter was our cash flow performance came in at almost 26.9 million, which is just higher than Q2 last year, which was by far our highest cash flow quarter in history. So, you know, kind of a long time coming and very important. We've made progress on inventory in terms of absolute dollar and days on hand reduction from Q1 in the start of the year, and borrowing any unforeseen issues that come up in the future. We should be able to continue to generate solid cash flow from quarter to quarter. And we will be most focused on our days on hand, inventory number going forward versus the absolute inventory dollars.

Ryan Pape: Another highlight to the quarter was our cash flow performance came in at almost $26.9 million.

Ryan Pape: which is just higher than Q2 last year.

Ryan Pape: We've made progress on inventory in terms of absolute dollar and days on hand reduction from Q1 at the start of the year. And barring any unforeseen issues that come up in the future, we should be able to continue to generate solid cash flow from quarter to quarter. And we will be most focused on our days on hand inventory number going forward versus the absolute inventory dollars. And over the balance of this year, our ongoing work in China will aid our inventory turns and cash flow conversion over time as well, as that sell-in, sell-through dynamic is not only challenging from a revenue standpoint, but it's very inefficient from an inventory and supply chain standpoint as well.

Ryan Pape: which was by far our highest cash flow quarter in history. So, you know, kind of a long time coming and very important. We've made progress on inventory in terms of absolute dollar.

Ryan Pape: and Days on Hand reduction from Q1 in the start of the year. And barring any unforeseen issues that come up in the future, we should be able to continue to generate solid cash flow from quarter to quarter. And we will be most focused on our Days on Hand inventory number going forward versus the absolute inventory dollars.

Ryan Pape: And over the balance of this year, our ongoing work in China will aid our inventory turns in cash flow conversion over time, as well as that sell-in sell-through dynamic is not only challenging from a revenue pattern, but a very inefficient form of inventory and supply chain standpoint as well.

Ryan Pape: And over the balance of this year, our ongoing work in China will aid our inventory turns and cash flow conversion over time as well, as that sell-in, sell-through dynamic is not only challenging from a revenue pattern, but it's very inefficient from an inventory and supply chain standpoint as well.

Ryan Pape: On the acquisition front, we did close two acquisitions recently in June. We closed on the purchase of Protective Film Solutions, or PFS, based in Orange County, California. PFS is an amazing brand. It has been an amazing brand ambassador for Xpel. But separate and above from how they're traditionally known in the automotive space, PFS has developed a substantial marine model for protection and application of a variety of products into the marine channel, and we intend to make that available in a structured way to our installer base over the next year for our installers that see that as a viable part of their business.

Ryan Pape: On acquisition front, we did close two acquisitions recently in Jude, the close on the purchase of Protective Dome Solutions or PFS based in Orange County, California. On PFS, amazing brand. It has been an amazing brand ambassador for X-Bell. But separate and above from how they're traditionally known in the automotive space, PFS has developed a substantial marine model for protection and application of a variety of products into the marine channel. And we intend to make that available in a structured way to our installer base over the next year for our installers that see that as a viable part of their business.

Ryan Pape: On acquisition front, we did close two acquisitions recently in June .

Ryan Pape: We closed on the purchase of Protective Film Solutions, or PFS, based in Orange County, California. PFS, amazing brand. It has been an amazing brand ambassador for Xpel.

Ryan Pape: but separate and above from how they're traditionally known in the automotive space.

Ryan Pape: PFS has developed a substantial marine model for protection and application of a variety of products.

Ryan Pape: into the Marine Channel, and we intend to make that available in a structured way to our installer base over the next year for our installers that see that as a viable part of their business.

Ryan Pape: We see marine as another adjacent market, a complementary market worth developing, and this is the first part of the investment to help kickstart that. Ryan Townsley, who's the principal of that business, has joined us as our Director of Marine to spearhead the initiative. And, you know, as you know...

Ryan Pape: We see marine as another adjacent market and complimentary market worth developing. And this is the first part of the investment to help kickstart that. Our line tells you is the principle of that business is joined us as our director of marine to spearhead the initiative.

Ryan Pape: We see Marine as another adjacent market, a complementary market worth developing, and this is the first part of the investment to help kickstart that. Ryan Townsley, who's the principal of that business, has joined us as our Director of Marine to spearhead the initiative. And, you know, as you know,

Ryan Pape: And as you know, it's all about the team in terms of what we can accomplish, so we're glad to grow in that direction. Just this week, we closed on a small acquisition of our distributor in India. At the end of last year, we established our own operations in India, as we previously talked about, and our distributors business will merge in with this operation. And as we discussed in the past, we want to be direct in direct presence and in the top car markets of the world. And this acquisition helps us further check that box. We expect to complete another four or five distributor acquisitions and key markets in Asia and Latin America over the next year.

Ryan Pape: It's all about the team in terms of what we can accomplish, so we're glad to grow in that direction. Just this week, we closed on a small acquisition of our distributor in India. At the end of last year, we established our own operations in India, as we previously talked about, and our distributor's business will merge in with this operation. And as we discussed in the past, we want to be a direct presence in the top car markets of the world, and this acquisition helps us further check that box.

Ryan Pape: it's all about the team in terms of what we can accomplish we're gl to grow in that direction

Ryan Pape: Just this week we closed on a small acquisition of our distributor in India. At the end of last year we established our own operations in India as we previously talked about and our distributors business will merge in with this operation and as we discussed in the past we want to be direct

Ryan Pape: in direct presence in the top car markets of the world and this acquisition helps us further check that box.

Ryan Pape: We expect to complete another four or five distributor acquisitions in key markets in Asia and Latin America over the next year. As we complete these, we will have a direct presence in the majority of the top 20 car markets in the world. So certainly, we're at an incremental SG&A and operational complexity to do so, but our direct presence in these markets continues to give us a multitude of advantages in our Yoda market.

Ryan Pape: We expect to complete another four or five distributor acquisitions in key markets in Asia and Latin America over the next year.

Ryan Pape: As we complete these, we will have a direct presence in the majority of the top 20 car markets in the world. So certainly we're adding incremental SGA and operational complexity to do so, but our direct presence in these markets continues to give us a multitude of advantages in our go-to market. Obviously, when we're selling directly to our customers, we can more easily tailor the product offering; supply chain elements be the most efficient. And offering our offering to our OEMs, inclusive of global warranty service, is only benefited by our international presence.

Ryan Pape: As we complete these, we will have a direct presence in the majority of the top 20 car markets in the world. So, certainly we're adding incremental SG&A and operational complexity to do so, but our direct presence in these markets continues to give us...

Ryan Pape: Obviously, when we're selling directly to our customers, we can more easily tailor the product offering and supply chain elements to be the most efficient, and our offering to our OEMs, inclusive of global warranty service, is only benefited by our international presence. And separately, we're actively looking to expand by decentralizing some of our European-based OEM operations into other countries through our international subsidiaries, either in dedicated facilities or in ports. And this wouldn't be possible without our presence. So this decentralization may let us be more competitive, it could improve quality, and ultimately, it can increase capacity where real estate is an issue by getting closer to the customer.

Ryan Pape: a multitude of advantages in our go-to-market. Obviously, when we're selling directly to our customers, we can more easily tailor the product offering, supply chain elements to be the most efficient.

Ryan Pape: And our offering to our OEMs, inclusive of global warranty service, is only benefited by our international presence.

Ryan Pape: And separately, we're actively looking to expand by decentralizing some of our European-based OEM operations into other countries through our international subsidiaries, either in dedicated facilities or ports. And this wouldn't be possible without our presence. So this decentralization may let us be more competitive; that could improve quality and ultimately can be increased capacity where real estate is an issue by getting closer to the customer.

Ryan Pape: And separately, we're actively looking to expand by decentralizing some of our European-based OEM operations into other countries through our international subsidiaries.

Ryan Pape: either in dedicated facilities or not ports

Ryan Pape: And this wouldn't be possible without our presence. So this decentralization may let us be more competitive, it could improve quality, and ultimately can increase capacity where real estate is an issue by getting closer to the customer. So.

Ryan Pape: So, a good quarter for us. And again, I want to thank our team for all their hard work. None of it would be possible without them. And with that, we'll turn it over to Barry.

Ryan Pape: So good quarter for us. And again, I want to thank our team for all their hard work. I know that will be possible without them.

Barry Wood: And with that, we'll turn it over to Barry.

Barry Wood: Thanks, Ryan.

Barry Wood: Thanks, Ryan. And good morning, everyone.

Barry Wood: And good morning, everyone. You know, as Ryan mentioned, our total revenue grew 7.5%. But I think that China noise kind of massed the solid performance in the US. Ryan referred to the fact that our US business posted a rather anemic 1.9% growth in Q1. So it was really nice to see the US return to near double-digit growth in Q2. And this was on a tough comp as Q2 was the US highest revenue quarter last year. So we were we were certainly encouraged by that. Looking a little bit more detail on the product lines combined product and cut bank revenue increased 2.8%, or solid US performance again was mostly offset with the impacts from China. Excluding China, combined product and cut bank revenue increased 7.8% in the quarter.

Barry Wood: Thanks Ryan, and good morning everyone. You know, as Ryan mentioned, our total revenue grew 7.5%, but I think the China noise kind of masked the solid performance in the U.S.

Barry Wood: Ryan referred to the fact that our U.S. business posted a rather anemic 1.9% growth in Q1.

Barry Wood: So it was really nice to see the U.S. return to near double-digit growth in Q2, and this was on a tough comp, as Q2 was the U.S. highest revenue quarter last year. So we were certainly encouraged by that.

Barry Wood: You know, as Ryan mentioned, our total revenue grew 7.5%. But I think the China noise kind of masked the solid performance in the US. Ryan referred to the fact that our US business posted a rather anemic 1.9% growth in Q1. So it was really nice to see the US return to near double-digit growth in Q2. And, and this was on a tough comp as Q2 was the US highest revenue quarter last year. So we were certainly encouraged by that.

Barry Wood: Looking a little bit more detail on the product lines, combined product and cut bank revenue increased 2.8 percent, where solid U.S. performance, again, was mostly offset by the impact of China. Excluding China, combined product and cut bank revenue increased 7.8 percent in the quarter, and sequentially, combined product and cut bank revenue grew 24.1 percent. Our window film product line revenue grew 8.4% quarter over quarter to $22 million, which represented 20% of our total revenue. Excluding China, total window film revenue grew 18.6%, and sequentially, total window film revenue grew 51.3%.

Barry Wood: Looking a little bit more detail on the product lines, combined product and cut bank revenue increased 2.8%, where solid U.S. performance, again, was mostly offset with the impacts from China.

Barry Wood: Excluding China, combined product and cut bank revenue increased 7.8% in the quarter. And sequentially, combined product and cut bank revenue grew 24.1%.

Barry Wood: And sequentially combined product and cut bank revenue grew 24.1%. Our window film product line revenue grew 8.4% quarter over quarter, 22 million, which represented 20% of our total revenue. Excluding China, total window film revenue grew 18.6%. And sequentially, total window film revenue grew 51.3%. Our Q2 vision product line revenue, which is included in our total window film revenue. Devinu grew 29.6% to 3.1 million and represented 14.1% of our total window film revenue and 2.8% of our total revenue. Our OEM revenue grew 23.6% in the quarter and represented 4.1% of total revenue. And our total installation revenue, which combines product and service, grew 33.9% in the quarter and represented approximately 21% of total revenue.

Barry Wood: Our window film product line revenue grew 8.4% quarter over quarter to $22 million, which represented 20% of our total revenue.

Barry Wood: excluding china total window film revenue grew eighteen point six percent and sequentially total window film revenue grew fifty-one point three percent

Barry Wood: Our Q2 Vision product line revenue, which is included in our total window film revenue, grew 29.6% to 3.1 million and represented 14.1% of our total window film revenue and 2.8% of our total revenue. Our OEM revenue grew 23.6% in the quarter and represented 4.1% of total revenue. And our total installation revenue, which combines product and service, grew 33.9% in the quarter and represented approximately 21% of total revenue. And this was really buoyed by strong performance in our OEM and dealership services businesses.

Barry Wood: Our Q2 Vision product line revenue, which is included in our total window film revenue, grew 29.6% to $3.1 million and represented 14.1% of our total window film revenue and 2.8% of our total revenue.

Barry Wood: Our OEM revenue grew 23.6% in the quarter and represented 4.1% of total revenue.

Barry Wood: And our total installation revenue, which combines product and service, grew 33.9% in the quarter and represented approximately 21% of total revenue. And this was really buoyed by strong performance in our OEM and dealership services businesses.

Barry Wood: And this was really buoyed by strong performance in our OEM and dealership services businesses. Interestingly, our corporate own stores, after normalizing for acquisitions, grew 8% right around 8%, which was relatively consistent with the overall performance of the aftermarket. You know, as we mentioned before, our corporate stores sort of act as a good, important check for us on particularly in the aftermarket. Our Q2 SG&A expense grew 20.5% to 28.7 million and represented 26.1% of revenue. However, we did hold our 2023 Annual Dealer Conference in Q2 of last year. So if you reminder, these dealer conference costs primarily impact our sales and marketing expense line in our income statement.

Barry Wood: Interestingly, our corporate-owned stores, after normalizing for acquisitions, grew 8%, right around 8%, which was relatively consistent with the overall performance of the aftermarket. As we've mentioned before, our corporate stores sort of act as a good, important check for us, particularly in the aftermarket.

Barry Wood: Interestingly, our corporate-owned stores, after normalizing for acquisitions, grew 8%, right around 8%, which was relatively consistent with the overall performance of the aftermarket.

Barry Wood: And as we've mentioned before, our corporate stores sort of act as a good, important check for us, particularly in the aftermarket.

Barry Wood: Our Q2 SG&A expense grew 20.5% to $28.7 million and represented 26.1% of revenue. However, we did hold our 2023 Annual Dealer Conference in Q2 of last year, so if you normalize for that, our SG&A would have grown approximately 28.6%. And as a reminder, these dealer conference costs primarily impact our sales and marketing expense line and our income statement. Sequentially, our SG&A expense was essentially flat from Q1, but if you normalize for the costs related to our 2024 dealer conference that we held this year in Q1, our sequential SG&A growth would have been right around 6%.

Barry Wood: Our Q2 SG&A expense grew 20.5% to $28.7 million and represented 26.1% of revenue.

Barry Wood: However, we did hold our 2023 Annual Dealer Conference in Q2 of last year, so if you normalize for that, our SG&A would have grown approximately 28.6%.

Barry Wood: And as a reminder, these dealer conference costs primarily impact our sales and marketing expense line in our income statement.

Barry Wood: Sequentially, our SG&A expense was essentially flat from Q1, but if you normalize for the costs related to our 2024 dealer conference that we held this year in Q1, our sequential SG&A growth would have been around 6%. And as Ryan alluded to, our expectation is that the fixed cost components of our SG&A should stay relatively flat for the remainder of the year, as we are closely monitoring our SG&A spend relative to the overall revenue performance. Our Q2 EBITDA declined 2.7% to 21.8 million, reflecting an EBITDA margin of 19.9%. Sequentially, EBITDA was up approximately 64% after normalizing for the dealer conference in Q1, and our incremental EBITDA margin in the quarter was a little over 51%.

Barry Wood: Sequentially, our SG&A expense was essentially flat from Q1, but if you normalize for the costs related to our 2024 dealer conference that we held this year in Q1, our sequential SG&A growth would have been right around 6%.

Barry Wood: And as Ryan alluded to, our expectation is that the fixed cost components of our SG&A should stay relatively flat for the remainder of the year as we're closely monitoring our SG&A spend relative to the overall revenue performance. Our Q2 EBITDA declined 2.7% to $21.8 million, reflecting an EBITDA margin of 19.9%. Sequentially, EBITDA was up approximately 64% after normalizing for the dealer conference in Q1, and our incremental EBITDA margin in the quarter was a little over 51%.

Barry Wood: And as Ryan alluded to, our expectation is that the fixed cost components of our SG&A should stay relatively flat for the remainder of the year as we're closely monitoring our SG&A spend relative to the overall revenue performance.

Barry Wood: Our Q2 EBITDA declined 2.7% to $21.8 million, reflecting an EBITDA margin of 19.9%.

Barry Wood: sequentially ebita was up approximately sixty four percent after normalizing for the for the dealer conference in q one and our incremental ebit a margin in the quarter was a little over fifty one percent

Barry Wood: Our Q2 net income declined 4.5% to 15 million, which reflects a net income margin of 13.7%, and our EPS for the quarter was 54 cents per share. And Ryan mentioned our strong cash flow performance in the quarter, resulting mainly from our work around reducing our inventory days on hand, and we saw significant improvement in our cash conversion cycle as a result. We did use some of our excess cash to pay down our revolver, and ended the quarter in a net debt zero position. And obviously, our future deal cadence will influence our future debt position, but we're financially well positioned either way that goes.

Barry Wood: Our Q2 net income declined 4.5% to $15 million, which reflects a net income margin of 13.7%, and our EPS for the quarter was $0.54 per share. Ryan mentioned our strong cash flow performance in the quarter, resulting mainly from our work around reducing our inventory days on hand, and we saw a significant improvement in our cash conversion cycle as a result. We did use some of our excess cash to pay down our revolver and ended the quarter in a net debt-zero position.

Barry Wood: Our Q2 net income declined 4.5% to $15 million.

Barry Wood: which reflects a net income margin of 13.7% and our EPS for the quarter was $0.54 per share.

Barry Wood: And Ryan mentioned our strong cash flow performance in the quarter, resulting mainly from our work around reducing our inventory days on hand, and we saw significant improvement in our cash conversion cycle as a result.

Ryan Pape: We did use some of our excess cash to pay down our revolver and ended the quarter in a net debt zero position. And obviously our future deal cadence will influence our future debt position, but we're financially well positioned.

Barry Wood: And obviously, our future deal cadence will influence our future debt position, but we're financially well positioned. Either way, that goes. So all in all, a good quarter for us, and we're optimistic the momentum will continue. And with that, operator, we'll open the call to questions. Thank you very much.

Barry Wood: So all in all, good quarter for us, and we're optimistic that the momentum will continue.

Barry Wood: Either way, that goes. So all in all, a good quarter for us, and we're optimistic that the momentum will continue. And with that, operator, we'll open the call up for questions.

Operator: And with that operator, we'll open a call up for questions. Thank you very much.

Operator: Thank you very much. We have now opened the floor to questions.

Operator: We now have opened the floor for questions. If you have any questions, please press star one on your phone keypad now. A confirmation tone will indicate that your line is in the key. You may press star two if you would like to remove your question from the key. Participants using speaker equipment. It may be necessary to pick up your handset before you press the keys. Please wait a moment whilst we pull for questions. Thank you.

Speaker Change: Thank you very much. We now have opened the floor for questions. If you have any questions please press star 1 on your phone keypad now.

Operator: If you have any questions, please press star 1 on your phone keypad now. A confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For any participants using speaker equipment, it may be necessary to pick up your handset before you press the key. Please wait a moment whilst we poll for Chris. Thank you. Your first question is coming from Steve Dyer of Craig Hallam. Steve, your line is live. Thanks

Operator: A confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For any participants using speaker equipment, it may be necessary to pick up your handset before you press the keys. Please wait a moment whilst we poll for questions.

Steve Dyer: Your first question is coming from Steve Dyer of Craig Hallam. Steve, your line is live. Thanks, good morning, guys, and nice quarter. Thanks, Steve. I just want to dig in a little bit on your OEM business. First, as it relates to Rivian, I noticed they had a special running throughout the quarter at various times in the quarter where you'd get a free Xpel wrap if you met certain qualifications, bought a certain vehicle, etc.

Speaker Change: thank you your first question is coming from steve diiaer of craig helallen steve your line is life

Steven Dyer: Thanks. Good morning, guys. A nice quarter. Thanks, Steve. I just want to dig in a little bit on your OEM business. First, as it relates to Rivian, I noticed they had a special running throughout the quarter at various times in the quarter where you'd get free Xpel wrap if you met sort of certain qualifications, bought a certain vehicle, etc. I'm kind of curious if, you know, what color you could give us around that, maybe the success you're seeing, the thought process around that, and then maybe, you know, is that something you'll see you do again?

Speaker Change: thanks good morning guys a nice quarter

Ryan Pape: Yeah, we have been running a promotion with them for a full stealth or matte wrap, and this is really an incentive that they're offering in conjunction with us. And, you know, my understanding is it's been quite well received and helpful to them and well received by the market. So I think we're, you know, we're willing partners with everybody we work with to do things like that. You know, there continues to be interest in the matte film, just from a personalization standpoint. And from my understanding, it's been a good program for both sides.

Ryan Pape: sixteen

Speaker Change: I just want to dig in a little bit on your OEM business. First as it relates to Rivian, I noticed they had a special running throughout the quarter at various times in the quarter where...

Ryan Pape: Great. And then the OEM referral program, I mean, as you're

Speaker Change: you get free expel rap if you met sort of certain qualifications about the certain vehicle etc curious what

Steve Dyer: I'm kind of curious if you know what color you could give us around that, maybe the success you're seeing, the thought process around that, and then maybe you know, is that something you'll see you do again. Yeah, we have been running a promotion with them for a full stealth or MAT wrap, and this is really an incentive that they're offering in conjunction with us. And my understanding is it's been quite well received and helpful to them and well received by the market. So I think we're a willing partner with everybody we work with to do things like that.

Speaker Change: Color, you could give us around that, maybe the success you're seeing, the thought process around that, and then maybe, you know, is that something you'll see you do again?

Ryan Pape: yeah we have been running a promotion with them for a full stealthterm or mat rap

Speaker Change: And this is really an incentive that they're offering in conjunction with us.

Ryan Pape: And, you know, my understanding is it's been quite well-received and helpful to them and well-received by the market. So, I think we're, you know, we're willing to partner with everybody we work with to do things like that. You know, there continues to be...

Steve Dyer: It continues to be interesting in the MAT film just from really a personalization standpoint, and from my understanding, it's been a good program for both sides. Great.

Ryan Pape: interest in in the mmaap film just from really a personalization standpoint and from from mis understanding it's it's been a good program for both sides

Steve Dyer: And then the OEM referral program, I mean, is your thought on that that's going to be sort of ultra-lunchery, smaller volume guys, or is the idea there that you're going to be with the big OEMs as well? Kind of still would love any color as to what you're seeing around OEMs' desire appetite to vertically integrate this versus continue to run that through the dealer channel like to have. Well, I think that we see it's Steve, kind of all of the above. If you look at every element in the channel, be it the aftermarket, the dealerships, and the OEMs, they all have relative strengths and weaknesses.

Ryan Pape: right

Speaker Change: And then the OEM referral program, I mean, is your thought on that, that that's going to be sort of ultra-luxury, smaller volume?

Speaker Change: guys, or is the idea there that you're going to be, you know, with the big OEMs as well? Kind of still would love, you know, any color as to what you're seeing around OEMs' desire or appetite to vertically integrate this.

Ryan Pape: Well, I think that we see it, Steve, kind of all of the above. If you look at every element in the channel, be it the aftermarket, the dealerships, and the OEMs, they all have relative strengths and weaknesses, right? So the OEMs obviously have a reach to everyone, and that's valuable, but you may be limited in your ability or capacity to install the product either in one location, or you may not be able to do it through a dealership channel, or you may have a service center model like the EV guys do, and so this is really another option to sell the product and reach more people, and it's a way to use our amazing customer base that want So I don't look at anything we're doing, including that program, as this is the way or this is the only way.

Speaker Change: versus, you know, continue to run it through the dealer channel like they have.

Ryan Pape: Well, I think that we see it, Steve, kind of all of the above. If you look at every element in the channel, be it the aftermarket, the dealerships and the OEMs, they all have relative strengths and weaknesses, right?

Steve Dyer: So the OEMs obviously have a reach to everyone, and that's valuable, but you may be limited in your ability or capacity to install the product either in one location or you may not be able to do it through a dealership channel, or you may have a service center model like the EV guys do. And so this is really another option to sell the product and reach more people. And it's a way to use our amazing customer base that want to participate in wholesale work, which is effectively what that is, like they might do for a dealership, but through another means of reaching those customers.

Ryan Pape: You know, the OEMs obviously have...

Ryan Pape: reach to everyone and that's valuable.

Ryan Pape: But you may be limited in your ability or capacity to install the product either in one location or you may not be able to do it through a dealership channel or you may have a

Ryan Pape: service center model like the guys do. And so this is really another option to

Ryan Pape: Sell the product and reach more people and it's a it's a way to use

Ryan Pape: You know, our amazing customer base that want to participate in wholesale work.

Speaker Change: which is effectively what that is is like they might do for for a dealership but

Ryan Pape: through another means of reaching those customers.

Steve Dyer: So I don't look at anything we're doing, including that program, as this is the way, or this is the one way. I think it's another tool in the tool belt to grow awareness and to grow the tank. And I think you look at the opportunity in front of us, and there are people that we can naturally bring through the aftermarket. There's the enthusiast buyer that's already in the aftermarket that knows to do that. A program like this is a way to bridge the gap for a consumer that really doesn't know about the products and doesn't know about the aftermarket.

Ryan Pape: I don't look at anything we're doing, including that program, as...

Ryan Pape: I think it's another tool in the toolbox to grow awareness and to grow the TAM, and I think you look at the opportunity in front of us, and there are people that we can naturally bring through the aftermarket. There's the enthusiast buyer that's already in the aftermarket that knows how to do that. A program like this is a way to kind of bridge the gap for a consumer that really doesn't know about the products and doesn't know about the aftermarket. It's a way to sort of connect them in an indirect way to the aftermarket that's very efficient.

Ryan Pape: You know, this is the way, or this is the one way, I think.

Ryan Pape: It's another...

Ryan Pape: tool in the tool belt to grow awareness and to grow the TAM. And I think, you know, you look at the opportunity in front of us and.

Rose Vera, and my line had dropped.

Operator: Welcome to Xpel Inc. 2nd quarter 2024 earnings call. At this time all participants are in a listen only mode, and a question and answer session will follow the formal presentation. If anyone should acquire operator assistance during the conference, please press star zero on your phone keypad. Please note this conference is being recorded.

Ryan Pape: there are people that we can naturally bring through the aftermarket there's the enthusiast

Speaker Change: buyer that's already in the aftermarket that knows to do that, you know, a program like this is a way to kind of bridge the gap for.

Ryan Pape: a consumer that really doesn't know about the products and doesn't know about the aftermarket. It's a way to sort of connect them in an indirect means to the aftermarket.

Steve Dyer: So a way to sort of connect them in an indirect means to the aftermarket that's very efficient. You know, it's going to be obviously far less expensive to do than trying to reach them through advertising, and it's coming through a credible source. And so I think there's applications for this for the OEMs like we're piloting now, potentially even through dealerships to pull people sort of back through and get a second fight at the Apple for a new car buyer, even though we haven't done that yet. And then for others who have the ability to reach a qualified, potential customer of ours to leverage their reach to generate more business for everyone.

John Nesbett: I will now turn the conference over to your host, John Nesbett, IMS Investor relations. You may begin.

Ryan Pape: That's going to be obviously far less expensive to do than trying to reach them through advertising, and it's coming from a credible source, and so I think there are applications for this for the OEMs, like we're piloting now, potentially even through dealerships to pull people sort of back through and get a second bite at the apple for a new car buyer, even though we haven't done that yet, and then for others who have the ability So it's really additive to what we're doing; it's not saying there's a fundamental shift in the strategy either way.

Ryan Pape: Very efficient, you know, it's going to be obviously far less expensive to do than trying to reach them through

John Nesbett: Good morning and welcome to our conference call to discuss Xpel's financial results for the 2nd quarter of 2024. On the call today, Ryan Pape, Xpel's president and chief executive officer and Barry Wood, Xpel's senior vice president and chief financial officer will provide an overview of the business operations and review the company's financial results. Immediately after the prepared comments, we will take questions from our call participants.

Speaker Change: through advertising and it's coming through a credible source and so i think there's applications for this for oem s like we're piloting now

Ryan Pape: potentially even through dealerships to pull people.

Ryan Pape: sort of back through and get a second fight at the apple for a new car buy even though we haven't done that yet and then for others who have the ability to reach a qualify potential customer of ours

John Nesbett: I'm not taking a moment to read the safe harbor statement. During the course of this call, we will make certain fully looking statements regarding Xpel Inc, and its business, which may include but not be limited to anticipated use of proceeds from capital transactions, expansion into new markets, and execution of the company's gross strategy. Such statements are based on our current expectations and assumptions, which are subject to known and unknown risk factors, and uncertainties that could cause actual results to be materially different from those expressed in these statements.

Ryan Pape: to leverage their reach to generate more business for everyone. So it's really additive to what we are doing. It's not saying there is a shift fundamentally in the strategy either way.

Steve Dyer: So it's really additive to what we're doing. It's not saying there's a shift fundamentally in the strategy either way. Thank you. That's helpful.

Steven Dyer: Got it. Thank you. That's helpful.

Steve Dyer: A couple of product questions. One, you touched a little bit on Stealth, and I love my Stealth, Matt Raab. I think it's awesome. Are you guys seeing, you know, sort of outsized traction with that particular product across more than just Ruby? And I guess that's the first question.

Steven Dyer: Thank you, that's helpful. A couple product questions. One, you touched a little bit on stealth and I love my stealth, Matt Raab, I think it's awesome. Are you guys

Steven Dyer: A couple of product questions. One, you touched on stealth, and I love my stealth, Matt Raab. I think it's awesome. Are you guys... I'm seeing, you know, sort of outsized traction with that particular product across more than just Rivian. I guess that's the first question, and then... The second question, as it relates to the window, is that just window PPF, basically? And then my understanding is most windshields are ready, and have sort of the darkest tint they can have. So, I mean, is that primarily just for rock chips and so forth?

Steven Dyer: And then seeing, you know, sort of outsized traction with that particular product across more than just Rivian. I guess that's the first question and then...

Steve Dyer: And then the second question, as it relates to the window, is that just window PPF basically? And then my understanding is most windshields already. We have sort of the darkest tint they can have. So, I mean, is that primarily just for rock chips and so forth? Sure. So, yeah, to your first question. I mean, we see continued interest. And I would say growing interest nominally, but it's continued for some time in the map film, the Stealth film overall. And potentially even permutations of that, it's sort of analogous in a way to those that might want to change the color of their car with colored films, which we're pursuing as well, but I think it appeals differently.

John Nesbett: Some of these factors are discussed in detail in our most recent form 10K, including under item 1A risk factors filed with the Securities and Exchange Commission. Xpel undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Steven Dyer: The second question, as it relates to the window, is that just window PPF basically? And then, my understanding is most windshields already have sort of the darkest tint they can have. So, I mean, is that primarily just for rock chips and so forth?

Ryan Pape: Sure, so yeah, to your first question, I mean, we see a continued interest, and I would say a growing interest nominally, but it's continued for some time in the map film, the stealth film overall, and you know, potentially even permutations of that. It's sort of analogous in a way to those that might want to change the color of their car with, you know, the colored films, which we're pursuing So we continue to see interest in that. And it's not, you know, the Rivian program we're working with them is just one example of that. It's certainly not a Rivian-specific phenomenon.

John Nesbett: Okay, with that, I will now turn the call over to Ryan. Please go ahead, Ryan. Thank you, John, and good morning for me as well.

Ryan Pape: Sure, so yeah, to your first question, I mean, we see a continued interest, and I would say a growing interest nominally, but it's continued for some time in the...

Ryan Pape: Welcome to the second quarter, 2024 call. Q2 was a record revenue quarter for us. Revenue growing 7.5% to 109.9 million. Our US business grew just under 10% to 64.9 million. While this was a significant improvement from the 1.9% year-over-year growth in the first quarter for the US, overall, the aftermarket remains off its trend from the prior year as we discussed in the first quarter. However, while the sentiment was universally negative in the first quarter, the second quarter has been a bit more positive.

Ryan Pape: The Map Film, Stealth Film, overall, and potentially even permutations of that. It's sort of analogous in a way to those that might want to change the color of their car with…

Speaker Change: You know colored films which which we're pursuing as well, but I think it it appeals differently So we continue to see interest in that and it's not you know the Rivian

Steve Dyer: So we continue to see interest in that. And it's not the Rivian program we're working with them. It's just one example about certainly not a Rivian-specific phenomenon. We see that across the board. In terms of the windshield film, yeah, what we're launching is really designed around protecting the windshield from damage and crappy chips and things like that. But there is the ability already to have a windshield film on the interior of the car for the same reasons you would buy window film for heat rejection and UV rejection and things like that. We're doing so as legal.

Ryan Pape: Program we're working with them is just one example of that. It's certainly not a Rivian-specific phenomenon. We see that across the board.

Ryan Pape: We see that across the board. In terms of the windshield film, you know, what we're launching is really designed around protecting the windshield from damage and cracking chips and things like that. There is the ability already to have a windshield film on the interior of the car for the same reasons you would buy window film for, you know, heat rejection and UV rejection and things like that. We're doing so because it is legal.

Ryan Pape: In terms of the...

Ryan Pape: We saw April up more significantly given some of the headwinds in the first quarter, and the feedback from our customers has definitely been more mixed versus all negative to start the year. So I think that's good. Our dealership business continued to perform well, growing a little over 30% for the quarter. A little apparent impact from the well-disgust CDK software issue, as far as we can tell, but probably some impact. Obviously, there's lots of talk on the macro, consumer sentiment, et cetera, which we're not going to speculate on, but the first half of last year was stronger than the second half of last year.

Ryan Pape: Windshield film. Yeah, what we're launching is really designed around that.

Ryan Pape: protecting the windshield from damage and cracking the chips and things like that.

Ryan Pape: There is the ability already to...

Ryan Pape: have a windshield film on the interior of the car for the same reasons you would buy window film for...

Ryan Pape: You know, heat rejection and UV rejection and things like that, we're doing so is legal. So, this is really to serve a completely different...

Steve Dyer: So this is really to serve a completely different purpose. And you know, many people have experienced now that the windshields have become more and more expensive over time, dramatically so as they have more integrated components. And so the ROI on windshield protection at the consumer level has really increased over time as the costless windshields have grown disproportionately, certainly relative to what the cost will be to protect it. So I think there's a there's probably the best value prop for windshield film now than there's ever been. So we're excited to get it out. Right. Thank you for taking my questions.

Ryan Pape: So this is really going to serve a completely different purpose. And, you know, many people have experienced now that windshields have become more and more expensive over time, dramatically so, as they have more integrated components. And so the ROI on windshield protection at the consumer level has really increased over time as the cost of those windshields has grown disproportionately, certainly relative to what the cost will be to protect it. So I think there's probably the best value proposition for windshield film now than there's ever been. So we're excited to get it out.

Ryan Pape: purpose. And, you know, many people have experienced now that windshields have become more and more expensive over time, dramatically so as they have more integrated components. And so

Ryan Pape: So going forward, we will lap the slower part of last year. Our China business posted revenue of 4.4 million, which was a 45.7% decline compared to the same period in the prior year. The sell-in versus sell-through dynamic continues to hide a lot of the work we're doing there. We launched in the quarter additional product line that drove our in-country versus sell-in, PPF sales unit volume buyer distributor up substantially on a unit-term basis over the prior year, given the positioning of the product to the mid-tier in China where we've historically not participated.

Ryan Pape: the ROI on windshield protection.

Ryan Pape: At the consumer level, it has really increased over time as the cost of those windshields have grown disproportionately.

Ryan Pape: certainly relative to what the cost will be to protect it. So I think there's probably the best value prop for windshield film now than there's ever been, so we're excited to get it out.

Steven Dyer: Thank you for taking my questions. I'll pass them along.

Steve Dyer: I'll pass it along. Thank you, Steve. Thank you very much.

Steven Dyer: Great. Thank you for taking my questions. I'll pass it along.

Jeffrey Sinderen: Thank you very much. Your next question is coming from Jeff Van Sinderen of Bee Riley. Jeff, your line is live.

Jeff Van Sinderen: Your next question is coming from Jeff Van Sinderin of B. Riley. Jeff, your line is Life.

Speaker Change: Thank you, Steve.

Speaker Change: Thank you very much. Your next question is coming from Jeff Van Sinderen of B. Reilly. Jeff, your line is live.

Jeffrey Sinderen: Good morning, everyone, and let me add my congratulations on strong metrics, especially after the toughness in Q1. I guess considering new product launches and the new OEM referral program, can you speak a little bit more about what's based in your revenue guidance as far as what you see as the key underlying components there to drive growth for the remainder of the year?

Jeff Van Sinderen: Good morning, everyone. Let me add my congratulations on a strong metrics, especially after some toughness and Q1. I guess considering new product launches, the new OEM Referral Program. Can you speak a little bit more about what's baked into your revenue guidance as far as what you see the key underlying components there to drive growth for the remainder of the year. Yeah, Jeff, I think that, you know, our method of projecting forward is, you know, looking at our current customer performance, you know, which obviously varies dramatically customer to customer just based in large part on their own growth desires plus the overall dynamic of the market plus our expectation for new customers and then projecting that forward.

Ryan Pape: This is a good dynamic for the market. Much like our business, we're working with our distributor to streamline and reduce inventory in country, especially as we modify our product line and go to market. So we'll continue to experience this choppiness this year, but we will ultimately reach a more stable revenue pattern through either our management of inventory in country for the benefit of our distributor or the acquisition of the distributor as we've done in other markets.

Jeffrey Sinderen: Good morning, everyone, and let me add my congratulations on strong metrics, especially after some

Jeffrey Sinderen: oughness in q oneum

Jeffrey Sinderen: I guess considering new product launches, the new OEM referral program, can you speak a little bit more about what's baked into your revenue guidance as far as what you see as the key underlying components there to drive growth for the remainder of the year?

Ryan Pape: Yeah, Jeff, I think that, you know, our method of projecting forward is, you know, looking at our current customer performance, which obviously varies dramatically from customer to customer, just based in large part on their own growth desires, plus the overall dynamics of the market, plus our expectation for new customers, and then projecting that forward. In terms of new products, the referral program, we're not really baking in much for those because, you know, they're in their infancy, and other products are yet to be launched.

Ryan Pape: Overall, though, our additional product here serves to increase our China Tam substantially over time. And this is a pattern for other low labor cost markets that we intend to pursue in Southeast Asia, India, and elsewhere. Our rest of the world revenue, excluding US and China, we're 16.1% in the quarter, Connell Europe from 17.2%, which is a little bit lower than we've seen in previous quarters. We see that market a little bit weaker than the previous trend, like we saw in the US earlier.

Ryan Pape: Yeah.

Ryan Pape: Jeff, I think that, you know, our method of projecting forward is...

Ryan Pape: you know, looking at our current customer performance, you know, which obviously

Ryan Pape: Barry's dramatically

Speaker Change: Customer to customer. Just based in large part on their own growth desires plus the overall dynamic of the market. Plus our expectation for new customers and then projecting that forward in terms of new product referral program.

Jeff Van Sinderen: In terms of new product referral program, we're not really baking in much for those because, you know, they're in their infancy and the other products yet to be launched. So I think those, you know, relatively speaking, are our upside for us, but given that they're new and they're sort of time limited and how much how much we'll get, you know, that's probably not after moving the needle substantially. actually.

Ryan Pape: We're not really baking in much for those because they're in their infancy and the other products yet to be launched.

Ryan Pape: But the growth dynamics there, different market is still in its infancy, so it'll perform differently than what we see in the US for sure. All in all, we still feel good about our revenue growth guidance of 8% to 10% for the year, although as we remind everyone, we're still looking backwards to look forwards. Obviously, the current macro uncertainty doesn't aid the accuracy of that process. But June and July, we're record revenue months for us.

Ryan Pape: So I think those, you know, relatively speaking, are upside for us, but given that they're new and they're sort of time limited and how much we'll get, you know, they're probably not apt to move the needle.

Ryan Pape: So I think those, you know, relatively speaking, are upside for us, but given that they're new and they're sort of time-limited and how much we'll get, you know, they're probably not apt to move the needle substantially.

Jeff Van Sinderen: Okay, fair enough. And then if we get circle back to China for a minute, if you don't mind just maybe any more color there around what you're seeing, the new product launch. And then where else might you take that new product? Yeah, I think, you know, what our work around the world has shown us is, you know, the dynamics in markets that are low labor costs are different. And these are more the emerging markets in China, Southeast Asia, India, perhaps spots in Latin America are a flip from the rest of the world. And the rest of the world, labor is the number one element of cost of goods of the installed product; in some of these other countries, that's not necessarily the case.

Ryan Pape: Okay, fair enough. And then if we could circle back to China for a minute, if you don't mind, maybe some more color there around what you're seeing, the new product launch, and then where else might you take that new product?

Speaker Change: Okay, fair enough. And then if we could circle back to China for a minute, if you don't mind, just maybe any more color there around what you're seeing, the new product launch, and then where else might you take that new product?

Ryan Pape: August tends to be a little bit lower due to time off and plant shutdowns in Europe. For Q3, we expect US to trend slightly higher than Q2, and we expect higher Q3 revenue in China than the entire first half of the year. So assuming that plays out as expected and based on what we know, and could obviously change, but that would quote us at 112 to 114.9 revenue for the third quarter.

Ryan Pape: Yeah, I think, you know, what our work around the world has shown us is, you know, the dynamics in markets that have low labor costs are different. And these are more emerging markets, China, Southeast Asia, India, perhaps spots in Latin America are aflip from the rest of the world and the rest of the world.

Ryan Pape: Yeah, I think what our work around the world has shown us is the dynamics in markets that are low labor costs are different.

Ryan Pape: And these are more of the emerging markets, China, Southeast Asia, India, perhaps spots in Latin America, are a flip from the rest of the world. And the rest of the world...

Ryan Pape: On the product side, we're really excited about the launch of our windshield protection films. That's going to be late Q3, early Q4. Product has been the most asked for product from consumers over time, and we're finally ready to meet this demand. And it's a win in two ways. One, more content for vehicles, which benefits us and our installer base. But also, it gives us an opportunity to attract a whole new set of customers who are interested in something else, which is the windshield damage protection.

Operator: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio podcast. He is a licensed financial professional in both the U.S. and Israel. Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio podcast. He is a licensed financial professional in both the U.S. and Israel. His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered at www.profile-financial.com.

Speaker Change: labor is the number one element of cost of goods of the installed product and some of these other countries

Jeff Van Sinderen: And so having a bifurcated product strategy to be more competitive in the markets where labor costs is lower and the resulting installation needs to be priced accordingly to the market, you know, requires a differentiated product strategy. And so I think, you know, cut it to our team who we dispatched around the world now in the Asian India over the past year for really helping to formulate the strategy going forward. So I think, you know, in China there is an existing business that is more along those lines where we catered only to the most premium segment.

Speaker Change: That's not necessarily the case and so having a bifurcated product strategy

Operator: to be more competitive

Speaker Change: in the markets where labor cost is lower and the resulting installation needs to be priced accordingly to the market, you know, requires a differentiated product strategy. And so I think, you know, credit to our team who we

Ryan Pape: And that's ultimately a referral source for the other product. So really excited about that product launch. The customers we have who have been using it and starting with it are very, very pleased with it. So we have high expectations for that. Also, we've launched a new OEM and partner referral program utilizing our independent installer network. And under this program, the partner will refer their customers to an e-commerce site that we run that allows the end consumer to purchase installation of products on their car directly from us from expel.

Speaker Change: dispatched around the world now in Tej and India over the past year for really helping to formulate the strategy going forward. So I think you know China in China there is an existing business that is

Ryan Pape: We collect payment, route the job to the nearest participating installer, pay the installer promptly, and depending on the setup, you may compensate the referral through rebate or other structure. And this can be scaled up or scaled down in terms of participating installers, geographies, and products quite easily. We've launched our first pilot program using this system with a U OEM to us. And we have interest behind it from several others. The program has utility beyond the OEMs with other industry partners that are in a position to refer automotive buyers to us.

Speaker Change: more along those lines where we've catered only to the most premium segment.

Jeff Van Sinderen: And, you know, we recognize that there's more opportunity there for us to go much deeper in the market, given this is really the first step to do so.

Speaker Change: And, you know, we recognize that there's more opportunity there for us.

Speaker Change: to go much deeper in the market, and this is really the first step to do so, but not the last step. And then I think, you know, all of our lessons from China and these other markets will be repeated.

Jeff Van Sinderen: But, but not the last step. And then I think, you know, all of our lessons from China and these other markets will be will be repeated. And and influence our decisions earlier in life. You know, if you look at what we're doing in India, where we have a direct presence in India now much earlier in life and are looking at acquisitions in other Asian countries to a similar vein. So I think it puts us on a track for making the China business hopefully substantially larger over time.

Speaker Change: and influence our decisions earlier in life. You know, if you look at what we're doing in India, where we have a direct presence in India now much earlier in life and are looking at acquisitions in other Asian countries to a similar vein. So I think it...

Speaker Change: It puts us on the track for making the China business hopefully substantially larger over time and then also good lessons there that we can adopt and adapt in other markets that are earlier in their development cycle than China is.

Jeff Van Sinderen: And then also good lessons there that we can adopt and adapt in other markets that are earlier in their development cycle than China is.

Jeff Van Sinderen: Okay.

Jeffrey Sinderen: Okay. And then I wanted to turn to kind of a vehicle coverage question on PPF or whatever type of film. You're obviously expanding that potential with the new windshield film, and I guess I'm thinking about how the stats are looking on how much film you're getting on given vehicles. I'm not sure exactly how you look at that or crunch those numbers, but is there a way to sort of look at the attach rate broadly and say, hey, are we getting more parts of the car covered, more parts of the vehicle covered? I'm just wondering if we're seeing trends there, particularly in the U.S.

Jeff Van Sinderen: And then I wanted to turn to kind of a vehicle coverage question on PPS or whatever type of film. You're obviously expanding that potential with the new windshield film. And I guess I'm thinking about how the stats are looking on how much film you're getting on given vehicles. Not sure exactly how you look at that or crunch those numbers. But is there a way to sort of look at the attach rate broadly to, hey, we're getting more, you know, more parts of the car cover more parts of the vehicle cover. Just wonder if we're seeing over time the trend has been certainly more PPS film per car in the aftermarket covering more.

Ryan Pape: And our team's done an amazing job launching the program. We look forward to building on it, evolving and talking more about it in the future. But this is another way to increase the pool of people we can reach who wouldn't normally participate in the aftermarket. So something we think can be quite valuable for the network, over time.

Jeffrey Sinderen: Okay, and then I wanted to turn to kind of a vehicle coverage question on PPF or whatever type of film.

Jeffrey Sinderen: You're obviously expanding that potential with the new windshield film.

Jeffrey Sinderen: And I guess I'm thinking about how the stats are looking on how much film you're getting on given vehicles, not sure exactly how you look at that or crunch those numbers, but is there a way to sort of look at the attach rate broadly and say, hey, we're getting more.

Ryan Pape: Another bright spot for the quarter was our gross margin performance, 43.5%. Obviously, we get a little help with customer mix, but continue to be pleased with the execution on the plan to increase margins over time. We'll see some downward pressure on margin when China returns to more normal levels as we do with our other distribution markets, but our view is we should be able to offset most, if not all of that, and continue to have room to improve that over time.

Jeffrey Sinderen: You know, more parts of the car covered, more parts of the vehicle covered, just wondering if we're seeing trends there, particularly in the U.S.

Ryan Pape: Yeah, Jeff, I mean, over time, the trend has been more PPF film per car in the aftermarket, you know, covering more. And then, for us as a company, the trend has been more content per car overall as we've added new product lines over time. And I think that that stands to reason, whether it's window film or ceramic coating or now windshield film. On the other hand, though, in the dealership space, you know, we're also focused on getting some amount of paint protection film on more units, even if it's a smaller amount, which is actually sort of counter-cyclical to what you're seeing in the aftermarket, because we know that if we can get smaller amounts of film on today, they have the potential to grow, to be more content per vehicle in the future.

Ryan Pape: Yeah, Jeff, I mean, we are. So over time, the trend has been certainly...

Ryan Pape: more PPF film per car in the aftermarket, you know, covering more.

Ryan Pape: SG&A expenses grew 20, 25% during the quarter to 28.7 million. As I mentioned on the last call, we're focused on maintaining the growth of SG&A. We're focused on optimizing and better utilizing the dollars for our expending rather than cutting it. That remains our position today. We have plenty of SG&A line-out items we invested in over the past few years, including things like the product quality manufacturing teams, our investment in HR, people and systems necessary for the growth of our service business, and we expect to see leverage on these by reducing those line-out items on a percent of revenue basis over time.

Jeff Van Sinderen: And then for us as a company, the trend has been more content per car overall as we've added new product lines over time. And I think that that stands to reason whether it's in the film or surrender coding. Now windshield film. On the other hand, though, in the dealership space, you know, we're also focused on getting some amount of paid protection film on more units, even if it's a smaller amount, which is actually sort of counter-cyclical to what you're seeing in the aftermarket because we know that if we can get smaller amounts of film on today, they have the potential to grow to be more content per vehicle in the future.

Ryan Pape: And then for us as a company, the trend has been more content per car overall as we've added new product lines over time. And I think that stands to reason whether it's window film or ceramic coating.

Ryan Pape: now Windshield Film. On the other hand, though, in the dealership space...

Ryan Pape: We're also focused on getting some amount of paint protection film on more units, even if it's a smaller amount, which is actually sort of counter-cyclical to what you're seeing in the aftermarket, because we know that if we can get...

Ryan Pape: Smaller amounts of film on today, they have the potential to grow to be more content per vehicle in the future. So, we're kind of, you could say if you look at the business overall, we're kind of...

Ryan Pape: So we're kind of, you could say if you look at the business overall, we're kind of working in opposite ways. One is about more content per vehicle, and one is about more vehicles with less content. But if you have that vision over a long enough period of time, you can kind of see where they might merge in the middle eventually. So we're actively doing both, I think, to your question.

Jeff Van Sinderen: So we're kind of, you could say if you look at the business overall, we're kind of working at opposite ways. One is about more content per vehicle, and one is about more vehicles with less content.

Ryan Pape: So, absent some serious macro deterioration, we will overcome the burden of those now through additional revenue growth both organic and organic. We see a very clear path to do that going forward into the future. Again, not trying to undo the good work we've done via SG&A reduction.

Ryan Pape: working at opposite ways. One is about more content per vehicle and one is about more vehicles with less content. But if you if you have that vision over a long enough period of time, you can kind of see where they where they might merge in the middle eventually. So we're actively doing both, I think, to your question.

Jeff Van Sinderen: But if you have that vision over a long enough period of time, you can kind of see where they might merge in the middle eventually. So we're actively doing both, I think, to your question.

Jeff Van Sinderen: Thank you. Okay, great to hear.

Jeffrey Sinderen: Okay, great to hear. I'll take the rest offline. Thanks for taking the time to answer my questions.

Jeff Van Sinderen: I'll take the rest of the line. Thanks for taking my questions. Thanks, Jeff. Thank you very much.

Ryan Pape: Another highlight to the quarter was our cash flow performance came in at almost 26.9 million, which is just higher than Q2 last year, which was by far our highest cash flow quarter in history. So, you know, kind of a long time coming and very important. We've made progress on inventory in terms of absolute dollar and days on hand reduction from Q1 in the start of the year and borrowing any unforeseen issues that come up in the future.

Jeffrey Sinderen: Okay, great to hear. I'll take the rest offline. Thanks for taking my questions.

Ryan Pape: Thank you very much. Well, we appear to have reached the end of our question and answer session. I will now hand it back over to the management for their closing remarks.

John Nesbett: Well, we appear to have reached the end of our question-and-answer session. I want to hand it back over to the management for their closing remarks. I want to thank everybody for joining us today and thank our team for a lot of hard work this quarter. That was a great day. Thank you very much, everyone.

Jeff: Thanks, Jeff.

Ryan Pape: Thank you very much. Well, we appear to have reached the end of our question and answer session. I will now hand it back over to the management for their closing remarks.

Ryan Pape: I want to thank everybody for joining us today and thank our team for a lot of hard work this quarter. Have a great day!

Ryan Pape: I want to thank everybody for joining us today and thank our team for a lot of hard work this quarter. Have a great day.

Operator: Thank you very much, everyone. This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Operator: This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. Thanks.

Operator: Thank you very much everyone. This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Ryan Pape: We should be able to continue to generate solid cash flow from quarter to quarter. And we will be most focused on our days on hand, inventory number going forward versus the absolute inventory dollars. And over the balance of this year, our ongoing work in China will aid our inventory turns in cash flow conversion over time as well as that sell-in sell-through dynamic is not only challenging from a revenue pattern, but a very inefficient form of inventory and supply chain standpoint as well.

Ryan Pape: On acquisition front, we did close two acquisitions recently in Jude, the close on the purchase of protective dome solutions or PFS based in Orange County, California. On PFS, amazing brand. It has been an amazing brand ambassador for X-Bell. But separate and above from how they're traditionally known in the automotive space, PFS has developed a substantial marine model for protection and application of variety of products into the marine channel. And we intend to make that available in a structured way to our installer base over the next year for our installers that see that as a viable part of their business. We see marine as another adjacent market and complimentary market worth developing.

Ryan Pape: And this is the first part of the investment to help kickstart that. Our line tells you is the principle of that business is joined us as our director of marine to spearhead the initiative.

Ryan Pape: And as you know, It's all about the team in terms of what we can accomplish, so we're glad to grow in that direction Just this week we closed on a small acquisition of our distributor in India. At the end of last year, we established our own operations in India as we previously talked about and our distributors business will merge in with this operation. And as we discussed in the past, we want to be direct in direct presence and in the top car markets of the world.

Ryan Pape: And this acquisition helps us further check that box. We expect to complete another four or five distributor acquisitions and key markets in Asia and Latin America over the next year. As we complete these, we will have a direct presence in the majority of the top 20 car markets in the world. So certainly we're adding incremental SGA and operational complexity to do so, but our direct presence in these markets continues to give us a multitude of advantages in our go-to market.

Ryan Pape: Obviously, when we're selling directly to our customers, we can more easily tailor the product offering supply chain elements be the most efficient. And offering our offering to our OEMs, inclusive of global warranty service is only benefited by our international presence. And separately, we're actively looking to expand by decentralizing some of our European based OEM operations into other countries through our international subsidiaries, either in dedicated facilities or ports. And this wouldn't be possible without our presence. So this decentralization may let us be more competitive that could improve quality and ultimately can be increased capacity where real estate is an issue by getting closer to the customer.

Ryan Pape: So good quarter for us. And again, I want to thank our team for all their hard work. I know that will be possible without them.

Barry Wood: And with that, we'll turn it over to Barry. Thanks, Ryan. And good morning, everyone. You know, as Ryan mentioned, our total revenue grew 7.5%. But I think that China noise kind of massed the solid performance in the US. Ryan referred to the fact that our US business posted a rather anemic 1.9% growth in Q1. So it was really nice to see the US return to near double digit growth in Q2. And this was on a tough comp as Q2 was the US highest revenue quarter last year.

Barry Wood: So we were we were certainly encouraged by that. Looking a little bit more detail on the product lines combined product and cut bank revenue increased 2.8% or solid US performance again was mostly offset with the impacts from China, excluding China combined product and cut bank revenue increased 7.8% in the quarter. And sequentially combined product and cut bank revenue grew 24.1%. Our window film product line revenue grew 8.4% quarter over quarter 22 million, which represented 20% of our total revenue, excluding China total window film revenue grew 18.6%.

Barry Wood: And sequentially total window film revenue grew 51.3%. Our Q2 vision product line revenue, which is included in our total window film revenue. Devinu, grew 29.6% to 3.1 million and represented 14.1% of our total window film revenue and 2.8% of our total revenue. Our OEM revenue grew 23.6% in the quarter and represented 4.1% of total revenue. And our total installation revenue, which combines product and service, grew 33.9% in the quarter and represented approximately 21% of total revenue.

Barry Wood: And this was really buoyed by strong performance in our OEM and dealership services businesses. Interestingly, our corporate own stores after normalizing for acquisitions grew 8% right around 8%, which was relatively consistent with the overall performance of the aftermarket. You know, as we mentioned before, our corporate stores sort of act as a good, important check for us on particularly in the aftermarket. Our Q2 SG&A expense grew 20.5% to 28.7 million and represented 26.1% of revenue.

Barry Wood: However, we did hold our 2023 annual dealer conference in Q2 of last year. So if you reminder, these dealer conference costs primarily impact our sales and marketing expense line in our income statement. Sequentially, our SG&A expense was essentially flat from Q1, but if you normalize for the costs related to our 2024 dealer conference that we held this year in Q1, our sequential SG&A growth would have been around 6%. And as Ryan alluded to, our expectation is that the fixed cost components of our SG&A should stay relatively flat for the remainder of the year is where closely monitoring our SG&A spend relative to the overall revenue performance.

Barry Wood: Our Q2 EBITDA declined 2.7% to 21.8 million, reflecting an EBITDA margin of 19.9%. Sequentially, EBITDA was up approximately 64% after normalizing for the for the dealer conference in Q1, and our incremental EBITDA margin in the quarter was a little over 51%. Our Q2 net income declined 4.5% to 15 million, which reflects a net income margin of 13.7%, and our EPS for the quarter was 54 cents per share. And Ryan mentioned our strong cash flow performance in the quarter, resulting mainly from our work around reducing our inventory days on hand, and we saw significant improvement in our cash conversion cycle as a result.

Barry Wood: We did use some of our excess cash to pay down our revolver, and ended the quarter in a net debt zero position. And obviously, our future deal cadence will influence our future debt position, but we're financially well positioned either way that goes.

Barry Wood: So all in all, good quarter for us, and we're optimistic that the momentum will continue.

Operator: And with that operator, we'll open a call up for questions.

Operator: Thank you very much. We now have opened the floor for questions. If you have any questions, please press star one on your phone keypad now. A confirmation tone will indicate that your line is in the key. You may press star two if you would like to remove your question from the key. Participants using speaker equipment. It may be necessary to pick up your handset before you press the keys. Please wait a moment whilst we pull for questions.

Operator: Thank you.

Steve Dyer: Your first question is coming from Steve Dyer of Craig Hallam. Steve, your line is live. Thanks, good morning guys and nice quarter.

Ryan Pape: Thanks Steve.

Steve Dyer: I just want to dig in a little bit on your OEM business. First, as it relates to Rivian, I noticed they had a special running throughout the quarter at various times in the quarter where you'd get a free Xpel wrap if you met certain qualifications, bought a certain vehicle, etc.

Ryan Pape: I'm kind of curious if you know what color you could give us around that, maybe the success you're seeing, the thought process around that, and then maybe you know, is that something you'll see you do again. Yeah, we have been running a promotion with them for a full stealth or MAT wrap, and this is really an incentive that they're offering a conjunction with us. And my understanding is it's been quite well received and helpful to them and well received by the market.

Ryan Pape: So I think we're a willing partner with everybody we work with to do things like that. It continues to be interesting in the MAT film just from really a personalization standpoint, and from my understanding, it's been a good program for both sides. Great.

Steve Dyer: And then the OEM referral program, I mean, is your thought on that that's going to be sort of ultra-lunchery, smaller volume guys, or is the idea there that you're going to be with the big OEMs as well? Kind of still would love any color as to what you're seeing around OEMs desire appetite to vertically integrate this versus continue to run that through the dealer channel like to have. Well, I think that we see it's Steve kind of all of the above.

Ryan Pape: If you look at every element in the channel, be it the aftermarket, the dealerships and the OEMs, they all have relative strengths and weaknesses. So the OEMs obviously have a reach to everyone, and that's valuable, but you may be limited in your ability or capacity to install the product either in one location or you may not be able to do it through a dealership channel or you may have a service center model like the EV guys do.

Ryan Pape: And so this is really another option to sell the product and reach more people. And it's a way to use our amazing customer base that want to participate in wholesale work, which is effectively what that is, like they might do for a dealership, but through another means of reaching those customers.

Steve Dyer: So I don't look at anything we're doing, including that program as this is the way, or this is the one way, I think it's another tool in the tool belt to grow awareness and to grow the tank. And I think you look at the opportunity in front of us, and there are people that we can naturally bring through the aftermarket, there's the enthusiast buyer that's already in the aftermarket that knows to do that.

Steve Dyer: A program like this is a way to bridge the gap for a consumer that really doesn't know about the products and doesn't know about the aftermarket. So a way to sort of connect them in an indirect means to the aftermarket that's very efficient. You know, it's going to be obviously far less expensive to do than trying to reach them through advertising and it's coming through a credible source. And so I think there's applications for this for the OEMs like we're piloting now, potentially even through dealerships to pull people sort of back through and get a second fight at the Apple for a new car buyer, even though we haven't done that yet.

Steve Dyer: And then for others who have the ability to reach a qualified, potential customer of ours to leverage their reach to generate more business for everyone. So it's really additive to what we're doing. It's not saying there's a shift fundamentally in the strategy either way. Thank you. That's helpful.

Steve Dyer: A couple of product questions. One, you touched a little bit on Stealth, and I love my Stealth, Matt Raab. I think it's awesome. Are you guys seeing, you know, sort of outsized traction with that particular product across more than just Ruby? And I guess that's the first question. And then the second question, as it relates to the window, is that just window PPF basically? And then my understanding is most windshields already. We have sort of the darkest tint they can have. So, I mean, is that primarily just for rock chips and so forth? Sure.

Ryan Pape: So, yeah, to your first question. I mean, we see continued interest. And I would say growing interest nominally, but it's continued for some time in the map film, the Stealth film overall. And potentially even permutations of that, it's sort of analogous in a way to those that might want to change the color of their car with colored films, which we're pursuing as well, but I think it appeals differently. So we continue to see interest in that.

Ryan Pape: And it's not the Rivian program we're working with them. It's just one example about certainly not a Rivian specific phenomenon. We see that across the board. In terms of the windshield film, yeah, what we're launching is really designed around protecting the windshield from damage and crappy chips and things like that. But there is the ability already to have a windshield film on the interior of the car for the same reasons you would buy window film for heat rejection and UV rejection and things like that.

Ryan Pape: We're doing so as legal. So this is really to serve a completely different purpose. And you know, many people have experienced now that the windshields have become more and more expensive over time dramatically so as they have more integrated components. And so the ROI on windshield protection at the consumer level has really increased over time as the costless windshields have grown disproportionately, certainly relative to what the cost will be to protect it.

Ryan Pape: So I think there's a there's probably the best value prop for windshield film now than there's ever been. So we're excited to get it out. Right. Thank you for taking my questions. I'll pass it along. Thank you, Steve. Thank you very much.

Jeffrey Sinderen: Your next question is coming from Jeff Van Sinderin of B Riley. Jeff, your line is life.

Ryan Pape: Good morning, everyone. Let me add my congratulations on a strong metrics, especially after some toughness and Q1. I guess considering new product launches, the new OEM referral program. Can you speak a little bit more about what's baked into your revenue guidance as far as what you see the key underlying components there to drive growth for the remainder of the year. Yeah, Jeff, I think that, you know, our method of projecting forward is, you know, looking at our current customer performance, you know, which obviously varies dramatically customer to customer just just based in large part on their own growth desires plus the overall dynamic of the market plus our expectation for new customers and then projecting that forward.

Ryan Pape: In terms of new product referral program, we're not really baking in much for those because, you know, they're in their infancy and the other products yet to be launched. So I think those, you know, relatively speaking, are our upside for us, but given that they're new and they're sort of time limited and how much how much we'll get, you know, that's probably not after moving the needle substantially, actually. Okay, fair enough.

Ryan Pape: And then if we get circle back to China for a minute, if you don't mind just maybe any more color there around what you're seeing, the new product launch. And then where else might you take that new product? Yeah, I think, you know, what what our work around the world has shown us is, you know, the dynamics in markets that are low labor costs are different. And these are more the emerging markets in China, Southeast Asia, India, perhaps spots in Latin America are a flip from the rest of the world.

Ryan Pape: And the rest of the world, labor is the number one element of cost of goods of the installed product in some of these other countries that's not necessarily the case. And so having a bifurcated product strategy to be more competitive in the markets where labor costs is lower and the resulting installation needs to be priced accordingly to the market, you know, requires a differentiated product strategy. And so I think, you know, cut it to our team who we dispatched around the world now in the Asian India over the past year for really helping to formulate the strategy going forward.

Ryan Pape: So I think, you know, China, in China there is an existing business that is more along those lines where we catered only to the the most premium segment. And, you know, we recognize that there's more opportunity there for us to go much deeper in the market, given this is really the first step to do so. But but not the last step. And then I think, you know, all of our lessons from China and these other markets will be will be repeated.

Ryan Pape: And and influence our decisions earlier in life, you know, if you look at what we're doing in India where we we have a direct presence in India now much earlier in life and are looking at acquisitions in other Asian countries to a similar vein. So I think it it puts us on a track for making the China business hopefully substantially larger over time. And then also good lessons there that we can adopt and adapt in other markets that are earlier in their development cycle than China is.

Ryan Pape: Okay.

Ryan Pape: And then I wanted to turn to kind of a vehicle coverage question on on PPS or whatever type of film. You're obviously expanding that potential with the new windshield film. And I guess I'm thinking about how the stats are looking on how much film you're getting on given vehicles. Not sure exactly how you look at that or crunch those numbers. But is there a way to sort of look at the attach rate broadly to, hey, we're getting more, you know, more parts of the car cover more parts of the vehicle cover.

Ryan Pape: Just wonder if we're seeing over time the trend has been certainly more PPS film per car in the after market covering more. And then for us as a company, the trend has been more content per car overall as we've added new product lines over time. And I think that that stands to reason whether it's in the film or surrender coding. Now windshield film. On the other hand though in the dealership space, you know, we're also focused on getting some amount of paid protection film on more units, even if it's a smaller amount, which is actually sort of counter-cyclical to what you're seeing in the after market because we know that if we can get smaller amounts of film on today, they have the potential to grow to be more content per vehicle in the future. So we're kind of, you could say if you look at the business overall, we're kind of working at opposite ways. One is about more content per vehicle and one is about more vehicles with less content.

Ryan Pape: But if you have that vision over a long enough period of time, you can kind of see where they might merge in the middle eventually. So we're actively doing both, I think, to your question. Thank you. Okay, great to hear. I'll take the rest of the line. Thanks for taking my questions. Thanks Jeff. Thank you very much.

Operator: Well, we appear to have reached the end of our question and answer session.

Ryan Pape: I want our hand it back over to the management for their closing remarks. I want to thank everybody for joining us today and thank our team for a lot of hard work this quarter. That was a great day. Thank you very much everyone.

Operator: This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day.

Operator: Thanks.