XPEL, Inc. Q4 FY2024 earnings call

• 2024 was challenging with macro headwinds, but Q4 saw improvement in customer sentiment. - Dealership business: Still has opportunities with pre-installed options, focus on dealership sales organization to drive business. - OEM: Rivian program changes impacted Q4, but referral program and discussions with OEMs ongoing. - China: Sell-in/sell-through dynamic normalized, focus on direct presence in key markets. - SG&A: Grew 17.4% in Q4, with workforce reduction in February and review of expense structure. - Product launches: Windshield protection film launched, architectural film improvements, colored film portfolio in Q2, DAP platform enhancements. - Dealer conference: Record attendance, focus on redoubling efforts for excellent service.

US Region: Q4 revenue was $59.1 million, growing 6.2% in the quarter. Dealership services revenue grew ~9%, but average units protected in some dealerships declined/flat due to inventory returning to normal. OEM: Q4 revenue declined slightly due to Rivian program changes, but excluding that, grew ~16%. China Region: $9.2 million, consistent with expectations, with a baseline run rate of $8 to $9 million for new products, Q1 affected by Chinese New Year. Gross Margin: Full year 42.2%, Q4 40.6% due to mix and inventory monetization. Revenue contribution percentages not explicitly stated in the transcript but segments are discussed by performance.

• 2025 is pivotal for refining strategy, focusing on services business in new car dealership space. - Pending China, largely complete with distributor acquisitions in key markets. - Mixed outlook with positive sentiment in aftermarket but uncertainties like inflation, interest rates, tariffs. - Focus on optimizing expense structure while driving growth in respective markets.

• Macro headwinds in aftermarket impacting revenue growth. - Inventory dynamics in US dealerships affecting dealership services revenue. - Strong dollar impacting gross margin. - Tariff uncertainties creating supply chain and market uncertainties. - Fragmented nature of services business targets and regulatory scrutiny on competitive products.

Q: Jeff Van Sinderen asked about China sell-throughs and timing of direct business.

A: Ryan Pape responded that sell-in/sell-through dynamic is normalized, and ongoing work in China is a top strategic priority but no specific timing given for direct business.

Q: Jeff Van Sinderen then asked about gross margin, Q1 OpEx, and tariffs.

A: Ryan discussed gross margin outlook around 42% full year, uncertainty around tariffs and their mitigation, and color film launch plans.

Q: Matthew Raab asked about sales and marketing spend and manufacturing location for tariffs.

A: Ryan talked about sales and marketing components, noting salesforce in US/Canada is relatively flat, and manufacturing location for tariffs is in the US with international capacity to mitigate risks