Xpel, Inc. ((XPEL)) has held its Q4 earnings call. Read on for the main highlights of the call.
In the latest earnings call, Xpel, Inc. conveyed a mixed sentiment, highlighting robust growth in regions outside of China and successful product launches. However, the company is grappling with significant challenges in the Chinese market, OEM revenue declines, and increased SG&A expenses amidst uncertain macroeconomic conditions, including tariffs and foreign exchange impacts.
Revenue Growth Excluding China
XPEL reported a solid fourth quarter with a 10.5% revenue growth excluding China, showcasing strong performance in other regions. This growth underscores the company’s ability to thrive despite the challenges faced in the Chinese market.
Gross Margin Improvement
The company’s gross margin improved to 42.2% for the year, marking a 120 basis point increase over 2023. This improvement reflects effective cost management and operational efficiency, contributing positively to the company’s financial health.
Strong Window Film Product Line Growth
XPEL’s window film product line experienced a remarkable 32.9% growth in the quarter, driven by automotive growth of 31.7% to $14.3 million. The partnership with Tint World significantly contributed to this success, highlighting the strength of strategic collaborations.
Successful Launch of Windshield Protection Film
The launch of the new windshield protection film in Q4 was met with strong market reception, generating $1.5 million in revenue in just one month. This success indicates a promising future for this product line.
Dealer Conference Record Attendance
XPEL’s dealer conference attracted over 700 attendees from 38 countries, setting an all-time record. This high level of engagement demonstrates strong interest and commitment from partners worldwide.
China Market Challenges
Revenue from China decreased significantly from $16.6 million in Q4 2023 to $9.2 million, impacted by difficult comparisons and ongoing inventory management issues. This decline highlights the challenges XPEL faces in this crucial market.
OEM Revenue Decline
OEM revenue saw a slight decline due to changes in the Rivian program, which negatively impacted the quarter. The company is transitioning to new product offerings to mitigate this impact.
SG&A Expense Increase
SG&A expenses rose by 17.4% to $31.4 million in the quarter, driven by acquisition-related costs, marketing, and R&D. This increase has affected overall profitability, prompting the company to implement cost-saving measures.
Net Income and EPS Decline
Net income for the quarter declined by 25.7% to $8.9 million, with EPS at $0.32 per share. Significant foreign exchange losses have impacted earnings, reflecting the challenges of operating in a volatile economic environment.
Inventory and Tariff Concerns
XPEL faced increased inventory levels due to new manufacturing scale-up and tariff concerns, leading to potential operational challenges and increased costs. The company is addressing these issues to optimize operations.
Forward-Looking Guidance
Looking ahead, XPEL, Inc. remains focused on optimizing operations and capital deployment for future growth. The company achieved a 6% revenue growth for the year, reaching $420.4 million, with plans for geographic expansion and product diversification. Despite macroeconomic challenges, XPEL is committed to expanding services, especially in new car dealerships, and launching new products to drive growth.
In conclusion, Xpel, Inc.’s earnings call reflected a mix of optimism and caution. While the company celebrates strong growth in certain regions and successful product launches, it continues to navigate challenges in the Chinese market and increased expenses. The forward-looking guidance suggests a strategic focus on expansion and diversification, aiming for sustained growth in the coming years.