XPEL, Inc. (NASDAQ:XPEL) Q4 2022 Earnings Call Transcript

It’s really all about China and getting the full reset there and getting much closer to the business and trying to remove some of the volatility of it and just knowing where we are and where we want to go with it.

Jeff Van Sinderen: And as we think about that, do you think that the growth rate of window film and automotive or dealer services and some of those other things will grow at a similar rate to PPF this year or faster rate or slower, how are you thinking about that?

Ryan Pape: Well, I — it really depends, right? So we are kind of agnostic to a certain extent, because we are trying to grow all sources of revenue as fast as we know how. And so in some sense, you could have an opportunity with the dealership that starts as a product sale, like, you are mentioning, that turns into a labor sale, because they decide that it doesn’t make sense for them to do labor. So that — and those — the trade-off between those two, that’s really up to the customer, we are not the ones planning for that. So I think we will see growth across all the categories of product. Some the smaller product lines at a higher rate on the larger product lines and then subject to any adjustments to that if we buy things and convert product to service revenue.

Jeff Van Sinderen: And then I think you said, you are targeting 200 basis points of gross margin improvement for the year. I am just wondering, any thoughts on kind of what the quarterly progression might look like? Do you think it’s going to be smooth, do you think it’s more back or second half loaded?

Ryan Pape: It’s probably more second half loaded, just knowing how things typically go, because you have got inventory in the pipeline and other decisions that either have been made or things that take a while to see the benefit of. So, probably, second half loaded is more likely. I think if we were at that 200-basis-point exit run rate. That would be good. And if we can do it sooner, it’s certainly possible that I think we want to make sure we get that at a minimum.

Jeff Van Sinderen: Okay. Thanks for taking my question and best of luck for the rest of the quarter.

Ryan Pape: Thanks, Jeff.

Operator: Okay. The next question is coming from Tim Moore with EF Hutton. Please proceed.

Tim Moore: Thanks and I appreciate the granularity on the fourth quarter sales, it was nice for Barry to point out that the PPF sales on standalone item and we should be including cutbank revenue and some installation labor revenue growth it’s pretty strong. It was safe to hear about the preloaded penetration for your paint protection film as that keeps trending positively. Were you getting any feedback or any type of relay on maybe more non-enthusiast customers purchasing paint protection film last year in 2022, was there any indication that?

Ryan Pape: Yeah. Well, I mean, clearly, that’s something that we are very focused on as a company for our longer term future, because we know that there’s a huge middle of the market that are not the enthusiast buyer that aren’t going to learn about paint protection film themselves. We have to reach them. We have either reaching them via advertising, which is probably pretty expensive and not a super primary route to the market or through dealerships where or OEMs where they have access to that customer. Given the nature of our dealership business with what we have acquired and then grown, it is sort of overwhelmingly not enthusiasts makes and models, it is much broader in its scope than sort of the business we have through the aftermarket just by its nature and how it came to be.