Total revenue up 19.5%, Product up 15.9% driven mainly by 30% growth in window film which is growing faster than PPF which shows that XPEL is taking market share in a mature market and creating a strong ecosystem. PPF attach continues to grow and has a long, long runway with only HSD% attach rate and another lever to pull in content/vehicle. Service revenue up 34.6%. XPEL is retiring the old DAP software to roll out the DAP NEXT. They are really creating a strong ecosystem around installers building software not to just measure and cut film but manage invoices and payroll.
OEM biz grew 50% y/y to $3.5m, once they become the default attach rates start to soar. The luxury share of the US car market reached an all time high in the quarter. Pape mentioned the vertical expansion into marine and aircraft which, while far off and nascent, is exciting to see.
Gross margins 41.9% (incremental GM 59%) which was especially strong. This was driven by a decline in lower margin China revenue (-25% COVID impact still lingering) so we could see this number come back down as China rebounds. China will improve throughout the year and will finish ~flat with ‘22 Which is why I don’t think they raised margin guidance. The bright spot is that (it looks like) we finally found the bottom in service gross margins which should be ~60% going forward as we see continued operating leverage.
Also good to note that customer concentration is coming down. Largest customer down to 7.7% of revenues from 12.3% last year. Growing the customer base as consumer awareness of PPF goes up.
Leverage on S&M (down to 7.8% of revenue) is great to see. EBIT Margins up to 17.4% (35% incremental EBIT margins) and should be higher as China comes back and allows them to leverage G&A expense which is at its highest % of revenue over the last 5 years. UFCF for the quarter was $1.1m as A/R increased and A/P went down. Pape mentioned we are at peak inventory and we should see WC unwind throughout the year which leads to strong cash generation.
During the quarter they acquired a dealership services business for $5.3m (look like it was at book value considering little change in GW or 1.2x sales) as they execute on getting closer to the consumer to increase PPF preloading. Actively seeing XPEL get back into M&A and deploying cash at great ROIICs with a strong pipeline.
Mgmt left 20-25% rev guide unchanged and guided to $100m+ in revenue in Q2. (see my model attached for my revised estimates) but I am at $391m in 2023 revenue 42% GM and $2.12 in UFCF for the year.
$XPEL looks expensive, is expensive but is not as expensive as it looks. You’ve got EBITDA growing 44%+ y/y at 30%+ incremental margins with no share dilution.
Thanks for sharing. I was invested and sold as it rocked due to fear about cyclicality. But I really like the progress of the company. At the moment it looks quiet reasobale priced. Probably I will restart a position, although I dont feel that great with such non-relevant cyclical product.
What are your thoughts after the strong 2Q23 results? Co. is still guiding 20-25% rev growth for FY23 with improving cash flow (controlled WC with inventory procurement levelling off).
Can you talk about the 10% sales exposure to China and if there's any risk of things getting worse from here (ie if they lose a distributor)? Also, do you have any insights into the international growth path for XPEL, esp in Australia, Latam, India as they highlighted?
XPEL Q1’23 quarter review:
Total revenue up 19.5%, Product up 15.9% driven mainly by 30% growth in window film which is growing faster than PPF which shows that XPEL is taking market share in a mature market and creating a strong ecosystem. PPF attach continues to grow and has a long, long runway with only HSD% attach rate and another lever to pull in content/vehicle. Service revenue up 34.6%. XPEL is retiring the old DAP software to roll out the DAP NEXT. They are really creating a strong ecosystem around installers building software not to just measure and cut film but manage invoices and payroll.
OEM biz grew 50% y/y to $3.5m, once they become the default attach rates start to soar. The luxury share of the US car market reached an all time high in the quarter. Pape mentioned the vertical expansion into marine and aircraft which, while far off and nascent, is exciting to see.
Gross margins 41.9% (incremental GM 59%) which was especially strong. This was driven by a decline in lower margin China revenue (-25% COVID impact still lingering) so we could see this number come back down as China rebounds. China will improve throughout the year and will finish ~flat with ‘22 Which is why I don’t think they raised margin guidance. The bright spot is that (it looks like) we finally found the bottom in service gross margins which should be ~60% going forward as we see continued operating leverage.
Also good to note that customer concentration is coming down. Largest customer down to 7.7% of revenues from 12.3% last year. Growing the customer base as consumer awareness of PPF goes up.
Leverage on S&M (down to 7.8% of revenue) is great to see. EBIT Margins up to 17.4% (35% incremental EBIT margins) and should be higher as China comes back and allows them to leverage G&A expense which is at its highest % of revenue over the last 5 years. UFCF for the quarter was $1.1m as A/R increased and A/P went down. Pape mentioned we are at peak inventory and we should see WC unwind throughout the year which leads to strong cash generation.
During the quarter they acquired a dealership services business for $5.3m (look like it was at book value considering little change in GW or 1.2x sales) as they execute on getting closer to the consumer to increase PPF preloading. Actively seeing XPEL get back into M&A and deploying cash at great ROIICs with a strong pipeline.
Mgmt left 20-25% rev guide unchanged and guided to $100m+ in revenue in Q2. (see my model attached for my revised estimates) but I am at $391m in 2023 revenue 42% GM and $2.12 in UFCF for the year.
$XPEL looks expensive, is expensive but is not as expensive as it looks. You’ve got EBITDA growing 44%+ y/y at 30%+ incremental margins with no share dilution.
Someone loved your analysis and linked it in a post at Jika ! I don't want to insert a spammy link but you can visit it at jika dot io
Thanks for sharing. I was invested and sold as it rocked due to fear about cyclicality. But I really like the progress of the company. At the moment it looks quiet reasobale priced. Probably I will restart a position, although I dont feel that great with such non-relevant cyclical product.
Hi Ben, great article on XPEL.
What are your thoughts after the strong 2Q23 results? Co. is still guiding 20-25% rev growth for FY23 with improving cash flow (controlled WC with inventory procurement levelling off).
Can you talk about the 10% sales exposure to China and if there's any risk of things getting worse from here (ie if they lose a distributor)? Also, do you have any insights into the international growth path for XPEL, esp in Australia, Latam, India as they highlighted?
Thanks!