XPEL Inc (XPEL, Financial), a global leader in protective films and coatings, released its 8-K filing on May 2, 2024, detailing its financial performance for the first quarter ended March 31, 2024. Despite a revenue increase of 5.0% year-over-year to $90.1 million, the company's net income and earnings per share (EPS) fell significantly below analyst expectations, highlighting a challenging quarter, particularly in the U.S. market.
Company Overview
XPEL Inc is renowned for its high-quality protective films and coatings, which include automotive paint protection film, surface protection film, and architectural and automotive window films. The company leverages a robust network of trained installers and proprietary DAP software to ensure superior customer service and product quality, primarily generating its revenue from the U.S.
Financial Performance Insights
The first quarter saw XPEL achieving a gross margin of 42.0%, slightly up from the previous year. However, net income plummeted by 41.7% to $6.7 million, translating to an EPS of $0.24, down from $0.41 in Q1 2023. These figures fell short of the estimated EPS of $0.31 and estimated net income of $8.43 million. The decline in profitability was exacerbated by $1.6 million in costs from the company’s annual dealer conference and was further impacted by a slowing aftermarket in the U.S. and port delays affecting sales.
Operating expenses surged by 36.2% to $28.6 million due to the dealer conference and increased sales and marketing efforts, which now represent 11.5% of revenue. EBITDA also declined by 31.5% to $11.7 million, or 13.0% of revenue, reflecting the operational and market challenges faced during the quarter.
Geographical and Segment Performance
While U.S. revenue saw a modest increase of 1.9% to $52.0 million, revenue from China dropped dramatically by 78.2% to $1.5 million. However, other regions showed robust growth, with Canada, Continental Europe, the United Kingdom, the Middle East/Africa, Asia Pacific, and Latin America collectively growing by 30.2%. This geographic diversification helped mitigate some of the declines seen in major markets.
Outlook and Management Commentary
Despite the downturn, XPEL's management remains cautiously optimistic. CEO Ryan Pape noted some momentum returning in April and expects this trend to continue throughout the year. However, the company has revised its annual revenue growth projection downward to 8-10% from the initial 15%.
Overall, XPEL faces significant challenges in its primary market, the U.S., but its diversified global presence and the gradual recovery in other segments may help stabilize its performance in upcoming quarters.
Investor Relations and Future Projections
Investors and stakeholders are encouraged to follow the upcoming conference call scheduled for today at 11:00 a.m. Eastern Time, which will further discuss the Q1 results and provide more insights into the company’s strategies and outlook for 2024.
For more detailed information, please refer to the full financial statements and management discussion in XPEL’s Quarterly Report on Form 10-Q, expected to be filed with the SEC by May 9, 2024.
Explore the complete 8-K earnings release (here) from XPEL Inc for further details.
