Release Date: February 26, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- XPEL Inc (XPEL, Financial) achieved a revenue growth of over 6% in 2024, reaching $420.4 million, despite challenging macroeconomic conditions.
- The company's US region saw a revenue increase of 6.2% in the fourth quarter, with dealership services revenue growing around 9%.
- XPEL Inc (XPEL) reported a gross margin improvement of 120 basis points over 2023, reaching 42.2% for the year.
- The company successfully completed distributor acquisitions in Japan, Thailand, and India, enhancing its global presence.
- XPEL Inc (XPEL) launched a new windshield protection film product, generating $1.5 million in revenue in just one month of sales.
Negative Points
- XPEL Inc (XPEL) faced significant challenges in China, with revenue declining from $16.6 million in Q4 2023 to $9.2 million in Q4 2024.
- The company's OEM revenue declined slightly due to changes in the Rivian program, impacting quarterly results.
- SG&A expenses grew by 17.4% in the fourth quarter, driven by acquisition-related costs and increased marketing spend.
- XPEL Inc (XPEL) experienced a 25.7% decline in net income for the quarter, with EPS dropping to $0.32 per share.
- The company is facing uncertainties related to tariffs, currency fluctuations, and interest rates, which could impact future performance.
Q & A Highlights
Q: Can you provide more details on the sell-through dynamics in China and the outlook for making it a direct business?
A: Ryan Pape, CEO: The sell-in versus sell-through dynamic in China has stabilized, with inventory levels for new products being much lower and selling through more rapidly. We are managing inventory more effectively, and the outsized impact seen in previous quarters is no longer present. As for making China a direct business, it remains a top strategic priority, but no additional details are available at this time.
Q: What is the outlook for gross margins and operating expenses in Q1, and how are you planning to mitigate potential tariffs?
A: Ryan Pape, CEO: We expect gross margins to remain around 42%, with some pressure from the strong dollar. The business environment is uncertain due to potential tariffs and currency impacts. We have built optionality into our supply chain to mitigate these risks, but the actual impact will depend on future developments.
Q: Can you share your thoughts on the launch and marketing of the colored films?
A: Ryan Pape, CEO: We are excited about the launch of colored films, which presents a good opportunity for us. The introduction of different types of colored films is something our customers want, and it is easier to market visually appealing products. Our marketing team is enthusiastic about this launch.
Q: How do you plan to manage sales and marketing expenses in 2025, and what should we expect in terms of marketing spend as a percentage of revenue?
A: Ryan Pape, CEO: Sales and marketing expenses include sales team compensation, marketing, and third-party commissions. We aim to grow marketing spend from 3% to potentially 3.5% of revenue in 2025. The size of our sales force in the US and Canada will remain relatively flat, with a focus on reorganizing to better serve dealership and aftermarket customers.
Q: Is the new manufacturing location intended to mitigate tariffs located in the US?
A: Ryan Pape, CEO: We have manufacturing capabilities in three countries, including the US. This allows us to manage potential tariffs by ensuring domestic capacity and addressing retaliatory tariffs against US-made products. We can adjust the production mix based on future developments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
