XPEL XPEL Inc

XPEL, Inc. (Nasdaq: XPEL) (the "Company"), a global provider of protective films and coatings, announced consolidated results1 for the first quarter and year ended March 31, 2024.

First Quarter 2024 Overview:

• Revenue increased 5.0% to $90.1 million compared to the first quarter of 2023.
• Gross margin of 42.0% for the quarter.
• Net income decreased 41.7% to $6.7 million, or $0.24 per basic and diluted share, versus net income of $11.4 million, or $0.41 per basic and diluted share in the first quarter of 2023. These results include approximately $1.6 million in costs related to the Company’s annual dealer conference. The 2024 dealer conference was held in the first quarter, while the 2023 conference took place in the second quarter. Normalizing for these costs, net income would have decreased 30.7% and EPS would have been $0.29 per share.
• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) decreased 31.5% to $11.7 million, or 13.0% of revenue compared to $17.1 million, or 19.9% of revenue in the first quarter of 2023. Normalizing for the annual dealer conference, EBITDA would have declined 22.1% and EBITDA margin would have been 14.8%.2

Ryan Pape, President and Chief Executive Officer of XPEL, commented, “Clearly, the first quarter was a challenging quarter for the Company, particularly in the US, where we saw a continued trend of a slowing aftermarket especially compared to the strength of the first half of 2023. Additionally, port delays reduced sales of two popular vehicle brands for our products which further impacted our US results. We did see some momentum return in our April numbers and we are optimistic that momentum will continue as we progress throughout the year.”

Financial Highlights for the First Quarter 2024:

Summary consolidated financial information for the three months ended March 31, 2024 and 2023 (unaudited, dollars in thousands):

 

Three Months Ended March 31,

% Change

 

 

2024

 

 

%

of Total Revenue

 

 

2023

 

%

of Total Revenue

 

2024 vs. 2023

Total revenue

$

90,104

 

 

100.0

%

 

$

85,842

 

100.0

%

 

5.0

%

Gross margin

 

37,876

 

 

42.0

%

 

 

35,960

 

41.9

%

 

5.3

%

Operating Expenses

 

28,647

 

 

31.8

%

 

 

21,029

 

24.5

%

 

36.2

%

Operating income

 

9,229

 

 

10.2

%

 

 

14,931

 

17.4

%

 

(38.2

)%

Net income

 

6,666

 

 

7.4

%

 

 

11,433

 

13.3

%

 

(41.7

)%

EBITDA2

 

11,700

 

 

13.0

%

 

 

17,073

 

19.9

%

 

(31.5

)%

Net cash (used in) provided by operating activities

$

(4,959

)

 

n/a

 

 

$

695

 

n/a

 

 

n/a

 

Geographical Revenue Summary

 

Three Months Ended

March 31,

 

%

 

% of Total Revenue

 

 

2024

 

 

2023

 

Inc (Dec)

 

2024

 

 

2023

 

United States

$

52,048

 

$

51,077

 

1.9

%

 

57.8

%

 

59.5

%

China

 

1,450

 

 

6,647

 

(78.2

)%

 

1.6

%

 

7.7

%

Canada

 

11,080

 

 

8,592

 

29.0

%

 

12.3

%

 

10.0

%

Continental Europe

 

10,216

 

 

7,960

 

28.3

%

 

11.3

%

 

9.3

%

United Kingdom

 

3,486

 

 

3,091

 

12.8

%

 

3.9

%

 

3.6

%

Middle East/Africa

 

5,143

 

 

3,496

 

47.1

%

 

5.7

%

 

4.1

%

Asia Pacific

 

3,750

 

 

2,645

 

41.8

%

 

4.2

%

 

3.1

%

Latin America

 

2,931

 

 

2,173

 

34.9

%

 

3.2

%

 

2.5

%

Other

 

—

 

 

161

 

(100.0

)%

 

0.0

%

 

0.2

%

Total

$

90,104

 

$

85,842

 

5.0

%

 

100.0

%

 

100.0

%

Overall Revenue

• Total revenue grew 5.0% year-over-year ("YoY").
• US revenue grew 1.9% YoY to $52.0 million.
• China revenue declined 78.2% YoY to $1.5 million.
• Rest of World revenue (excluding US and China) grew 30.2% YoY.

Product and Service Revenue

• Total product revenue decreased 0.7% YoY. This decrease was due to lower demand in the U.S., primarily in the after-market channel, and lower sales to XPEL's China distributor. China revenue was the highest in our history in the fourth quarter 2023. Consequently, Q1 2024 China sales were negatively impacted as our distributor sold through the inventory purchased in Q4 last year.
• Total window film decreased 2.9% YoY and represented 16.1% of total revenue. This decline was due mainly to lower revenues into China. Excluding China, total window film revenue grew 10.3%. Architectural window film revenue increased 33.1% to $1.8 million.
• Total service revenue increased 25.5% YoY. The increase was due mainly to increases in the Company's dealership services business resulting from increased car counts, increased content per vehicle and from our OEM business, which increased 57.6% YoY to $4.6 million.
• Total installation revenue (labor and product combined) grew 34.7% YoY and represented 22.1% of total revenue. This increase was due primarily to increased demand in XPEL's dealership services and OEM businesses.
• Adjusted product revenue (combining cutbank credits revenue and product revenue) decreased 0.7% YoY.

Other Financial Information

• Gross margin percentage was 42.0% and 41.9% in the three months ended March 31, 2024 and 2023, respectively.
• Total operating expenses grew 36.2% YoY.
  • Normalizing for annual dealer conference expenses, total operating expenses grew 28.6% YoY. Sequentially, after normalizing for annual dealer conference costs, total operating expenses increased 1.3%.
  • Sales and marketing expenses grew 55.7% YoY and represented 11.5% of revenue. Normalizing for annual dealer conference expenses, sales and marketing expenses would have grown 31.7% YoY.
  • General and administrative expenses grew 27.2% YoY and represented 20.3% of revenue.
• Net income declined 41.7% YoY.
• EBITDA declined 31.5% YoY2.

Operating Cash Flows

• Cash flows used in operations was $5.0 million in the first quarter 2024.
• While overall inventory increased during the quarter, raw materials and work-in-progress inventory declined substantially as expected as the Company continues to manage days on hand downward throughout the rest of the year.

2024 Outlook

• Annual revenue growth projection is revised downward to 8-10% from 15%.

Please see the information under "Forward-looking Statements" below regarding certain cautionary statements relating to our 2024 Outlook.

Conference Call Information

The Company will host a conference call and webcast today, May 2, 2024 at 11:00 a.m. Eastern Time to discuss the Company’s first quarter 2024 results.

To access the live webcast, please visit the XPEL, Inc. website at www.xpel.com/events-presentations.

To participate in the call by phone, dial 888-506-0062 approximately five minutes prior to the scheduled start time. International callers please dial (973) 528-0011. Callers should use access code: 871439.

A replay of the teleconference will be available until June 1, 2024 and may be accessed by dialing (877) 481-4010. International callers may dial (919) 882-2331. Callers should use conference ID: 50361.

About XPEL, Inc.

XPEL is a leading provider of protective films and coatings, including automotive paint protection film, surface protection film, automotive and architectural window films, and ceramic coatings. With a global footprint, a network of trained installers and proprietary DAP software, XPEL is dedicated to exceeding customer expectations by providing high-quality products, leading customer service, expert technical support and world-class training. XPEL, Inc. is publicly traded on Nasdaq under the symbol “XPEL”.

1 The results summarized above for 2024 are preliminary and unaudited. As the Company completes its quarter-end financial close processes and finalizes its financial statements for the first quarter of 2024, it is possible that the Company may identify items that require it to make adjustments to the preliminary information set forth above, and those adjustments could be material. Full first quarter 2024 financial information will be included in the filing of the Company’s Quarterly Report on Form 10-Q with the Securities and Exchange Commission which is anticipated on or prior to May 9, 2024.

2 See "Non-GAAP Financial Measure" and "Reconciliation of Non-GAAP Financial Measure" below.

Forward-looking Statements

This release includes forward-looking statements (within the meaning of Section 27A of the Securities act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended) regarding XPEL, Inc. and its business, which may include, but is not limited to, anticipated use of proceeds from capital transactions, expansion into new markets, execution of the company's growth strategy and outlook. Often, but not always, forward-looking statements can be identified by the use of words such as "plans," "is expected," "expects," "scheduled," "intends," "contemplates," "anticipates," "believes," "proposes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may," "could," "would," "might" or "will" be taken, occur or be achieved. Such statements are based on the current expectations and assumptions of the management of XPEL. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements expressed or implied by the forward-looking statements. These risks, uncertainties and other factors relate to, among others: competition, a prolonged or material contraction in automotive sales and production volumes, disruption in our supply chain, technology that could render our products obsolete, changes in the way vehicles are sold, our brand and reputation, cyber events and other legal and regulatory developments. There are several risks, uncertainties, and other important factors, many of which are beyond the Company’s control, that could cause its actual results to differ materially from the forward-looking statements contained in this press release, including those described in the “Risk Factors” section of Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other documents filed from time to time with the SEC by XPEL and available on XPEL's website at www.xpel.com. Although XPEL has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. No forward-looking statement can be guaranteed. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and XPEL undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Non-GAAP Financial Measure

To aid in the understanding of XPEL's ongoing business performance, XPEL uses EBITDA, a non-GAAP financial measure. EBITDA is defined as net income (loss) plus interest expense, net, plus income tax expense plus depreciation and amortization expense. EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. It is not a measurement of XPEL's financial performance under GAAP and should not be considered as an alternative to revenue or net income, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly title measures. For a full reconciliation of EBITDA to comparable GAAP measure, refer to the reconciliation titled "Reconciliation of Non-GAAP Financial Measure."

XPEL, Inc.

Consolidated Statements of Income

(In thousands except per share data)

 

 

Three Months Ended

March 31,

 

 

2024

 

 

2023

 

Revenue

 

 

 

Product revenue

$

66,852

 

$

67,308

 

Service revenue

 

23,252

 

 

18,534

 

Total revenue

 

90,104

 

 

85,842

 

 

 

 

 

Cost of Sales

 

 

 

Cost of product sales

 

42,135

 

 

42,180

 

Cost of service

 

10,093

 

 

7,702

 

Total cost of sales

 

52,228

 

 

49,882

 

Gross Margin

 

37,876

 

 

35,960

 

 

 

 

 

Operating Expenses

 

 

 

Sales and marketing

 

10,391

 

 

6,675

 

General and administrative

 

18,256

 

 

14,354

 

Total operating expenses

 

28,647

 

 

21,029

 

 

 

 

 

Operating Income

 

9,229

 

 

14,931

 

 

 

 

 

Interest expense

 

473

 

 

523

 

Foreign currency exchange loss (gain)

 

272

 

 

(9

)

 

 

 

 

Income before income taxes

 

8,484

 

 

14,417

 

Income tax expense

 

1,818

 

 

2,984

 

Net income

$

6,666

 

$

11,433

 

 

 

 

 

Earnings per share

 

 

 

Basic

$

0.24

 

$

0.41

 

Diluted

$

0.24

 

$

0.41

 

Weighted Average Number of Common Shares

 

 

 

Basic

 

27,630

 

 

27,616

 

Diluted

 

27,637

 

 

27,626

 

XPEL, Inc.

Consolidated Balance Sheets

(In thousands except share and per share data)

 

 

(Unaudited)

 

(Audited)

 

March 31, 2024

 

December 31, 2023

Assets

 

 

 

Current

 

 

 

Cash and cash equivalents

$

8,614

 

 

$

11,609

 

Accounts receivable, net

 

28,569

 

 

 

24,111

 

Inventory, net

 

110,171

 

 

 

106,509

 

Prepaid expenses and other current assets

 

5,578

 

 

 

3,529

 

Income tax receivable

 

—

 

 

 

696

 

Total current assets

 

152,932

 

 

 

146,454

 

Property and equipment, net

 

17,624

 

 

 

16,980

 

Right-of-use lease assets

 

15,471

 

 

 

15,459

 

Intangible assets, net

 

33,938

 

 

 

34,905

 

Other non-current assets

 

863

 

 

 

782

 

Goodwill

 

37,664

 

 

 

37,461

 

Total assets

$

258,492

 

 

$

252,041

 

Liabilities

 

 

 

Current

 

 

 

Current portion of notes payable

$

63

 

 

$

62

 

Current portion lease liabilities

 

3,946

 

 

 

3,966

 

Accounts payable and accrued liabilities

 

27,611

 

 

 

32,444

 

Income tax payable

 

201

 

 

 

—

 

Total current liabilities

 

31,821

 

 

 

36,472

 

Deferred tax liability, net

 

2,459

 

 

 

2,658

 

Other long-term liabilities

 

682

 

 

 

890

 

Borrowings on line of credit

 

24,000

 

 

 

19,000

 

Non-current portion of lease liabilities

 

12,814

 

 

 

12,715

 

Non-current portion of notes payable

 

293

 

 

 

317

 

Total liabilities

 

72,069

 

 

 

72,052

 

Commitments and Contingencies (Note 11)

 

 

 

Stockholders’ equity

 

 

 

Preferred stock, $0.001 par value; authorized 10,000,000; none issued and outstanding

 

—

 

 

 

—

 

Common stock, $0.001 par value; 100,000,000 shares authorized; 27,631,097 and $27,630,025 issued and outstanding, respectively

 

28

 

 

 

28

 

Additional paid-in-capital

 

13,176

 

 

 

12,546

 

Accumulated other comprehensive loss

 

(2,071

)

 

 

(1,209

)

Retained earnings

 

175,290

 

 

 

168,624

 

Total stockholders’ equity

 

186,423

 

 

 

179,989

 

Total liabilities and stockholders’ equity

$

258,492

 

 

$

252,041

 

XPEL, Inc.

Consolidated Statements of Cash Flows

(In thousands)

 

 

Three Months Ended March 31,

 

 

2024

 

 

 

2023

 

Cash flows from operating activities

 

 

 

Net income

$

6,666

 

 

$

11,433

 

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 

 

 

Depreciation of property, plant and equipment

 

1,333

 

 

 

972

 

Amortization of intangible assets

 

1,410

 

 

 

1,161

 

Gain on sale of property and equipment

 

(18

)

 

 

(9

)

Stock compensation

 

630

 

 

 

303

 

Provision for credit losses

 

89

 

 

 

74

 

Deferred income tax

 

(157

)

 

 

(115

)

 

 

 

 

Changes in assets and liabilities:

 

 

 

Accounts receivable

 

(4,763

)

 

 

(6,606

)

Inventory, net

 

(3,878

)

 

 

(3,886

)

Prepaid expenses and other current assets

 

(2,325

)

 

 

(2,512

)

Income taxes receivable and payable

 

904

 

 

 

2,360

 

Accounts payable and accrued liabilities

 

(4,850

)

 

 

(2,480

)

Net cash (used in) provided by operating activities

 

(4,959

)

 

 

695

 

Cash flows used in investing activities

 

 

 

Purchase of property, plant and equipment

 

(2,017

)

 

 

(2,055

)

Proceeds from sale of property and equipment

 

—

 

 

 

12

 

Acquisition of a business, net of cash acquired

 

(757

)

 

 

—

 

Development of intangible assets

 

(340

)

 

 

(321

)

Net cash used in investing activities

 

(3,114

)

 

 

(2,364

)

Cash flows from financing activities

 

 

 

Net borrowings on revolving credit agreement

 

5,000

 

 

 

2,000

 

Repayments of notes payable

 

(15

)

 

 

(77

)

Net cash provided by financing activities

 

4,985

 

 

 

1,923

 

Net change in cash and cash equivalents

 

(3,088

)

 

 

254

 

Foreign exchange impact on cash and cash equivalents

 

93

 

 

 

20

 

(Decrease)/Increase in cash and cash equivalents during the period

 

(2,995

)

 

 

274

 

Cash and cash equivalents at beginning of period

 

11,609

 

 

 

8,056

 

Cash and cash equivalents at end of period

$

8,614

 

 

$

8,330

 

 

 

 

 

Supplemental schedule of non-cash activities

 

 

 

Non-cash lease financing

$

952

 

 

$

1,237

 

Issuance of common stock for vested restricted stock units

 

57

 

 

 

—

 

Supplemental cash flow information

 

 

 

Cash paid for income taxes

$

1,152

 

 

$

748

 

Cash paid for interest

$

430

 

 

$

517

 

Reconciliation of Non-GAAP Financial Measure

EBITDA is a non-GAAP financial measure. EBITDA is defined as net income (loss) plus interest expense, net, plus income tax expense plus depreciation expense and amortization expense. EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. It is not a measurement of our financial performance under GAAP and should not be considered as alternatives to revenue or net income, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses. EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our operating results as reported under GAAP.

EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of ongoing operations and other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure.

EBITDA Reconciliation (in thousands)

 

 

(Unaudited)

 

Three Months Ended March 31,

 

 

2024

 

 

2023

Net Income

$

6,666

 

$

11,433

Interest

 

473

 

 

523

Taxes

 

1,818

 

 

2,984

Depreciation

 

1,333

 

 

972

Amortization

 

1,410

 

 

1,161

EBITDA

$

11,700

 

$

17,073

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240501310931/en/

For more information: Investor Relations: John Nesbett/Jennifer Belodeau IMS Investor Relations Phone: (203) 972-9200 Email: xpel@imsinvestorrelations.com