XPEL, Inc. recently held its second quarter 2024 earnings call, providing insight into its financial performance and strategic initiatives. The call, led by Ryan Pape, President and CEO, and Barry Wood, Senior Vice President and CFO, highlighted a record-breaking quarter with a 7.5% revenue growth to $109.9 million, underscoring the company's resilience and adaptability amidst market challenges.
Key Themes and Trends
XPEL's Q2 performance was marked by a robust U.S. business, which grew just under 10% to $64.9 million. Despite the aftermarket remaining off its trend from the prior year, XPEL's U.S. business showed signs of recovery, with April experiencing a significant uptick. This positive momentum is attributed to a more positive sentiment in the second quarter compared to the first.
However, the company's China business faced a 45.7% decline compared to the same period in the prior year. This decline is partly attributed to the sell-in versus sell-through dynamic and the launch of a new product line targeting the mid-tier market in China. Despite the challenges, XPEL remains optimistic about its China business, viewing it as an opportunity to expand its Total Addressable Market (TAM) in low labor cost markets, such as Southeast Asia, India, and other emerging markets.
Strategic Initiatives and Investments
XPEL's strategic initiatives include the launch of its windshield protection films, which is expected to be a game-changer in the market. This product, which is highly anticipated by consumers, is set to launch in late Q3 or early Q4, and is expected to attract a whole new set of customers interested in windshield damage protection. Additionally, XPEL's OEM and partner referral program, utilizing its independent installer network, is a strategic move aimed at reaching new customers and expanding its reach in the market.
XPEL's acquisition strategy continues to be a key driver of its growth, with two recent acquisitions in California and India. These acquisitions are part of XPEL's strategic goal of establishing a direct presence in the top car markets of the world, enhancing its go-to-market capabilities and enabling more efficient supply chain management.
Financial Highlights
XPEL's financial performance was marked by a 43.5% gross margin, reflecting the company's focus on increasing margins over time. Despite some downward pressure on margins due to China's performance, XPEL remains optimistic about its ability to offset this and continue to improve margins. SG&A expenses grew 20.5% to $28.7 million, with a focus on optimizing and better utilizing existing SG&A investments rather than cutting costs. XPEL's cash flow performance was particularly impressive, with $26.9 million in cash flow, marking a significant improvement over the same period last year.
Conclusion
XPEL's second quarter earnings call highlighted the company's ability to navigate market challenges while seizing opportunities for growth. With a focus on expanding its product offerings, strategic acquisitions, and a direct presence in key markets, XPEL is well-positioned to capitalize on the evolving automotive aftermarket landscape. The launch of its windshield protection films and the OEM referral program are particularly noteworthy, underscoring the company's commitment to innovation and customer-centric strategies. XPEL's strong financial performance, coupled with its strategic initiatives, bodes well for its future growth prospects.