Paint Protection Goodness

A quick update for people interested in Xpel, a small cap steady compounder with an interesting business and a great management team in a secular growing niche of the automotive industry.

XPEL reported quarterly earnings. The stock went up in dramatic fashion as the stock (and temporarily the business) was beaten up earlier in the year with inflation worries, China sales impacts, and a general supply issue with new vehicles taking longer than feared.

Some highlights for the quarter:

• Revenue up 22% yoy

• Gross margin increased to 39.3%

• EBITDA up 26.6%

There were still headwinds with a higher US dollar and slower growth from China. Inventory was relatively flat and they predict this will peak prior to end of the year. They made comments that they intend to get back to putting cash flow towards acquisitions again in the future.

The OEM deals with the first one with Rivian recently announced is another tailwind for the long term.

The most interesting thing to me beyond these numbers and forecasts was a comment/question that was asked regarded “pre-loaded” product.

The ever-slight shift from an offering to something that is a premium preloaded extra that slowly becomes normalized for a buyer while being extra profit for the car dealer is an amazing opportunity for longer term secular growth in paint protection (a-la Xpel). It changes Xpel to being something you COULD get to something you normally just get and don’t think about purchasing (to some extent).

Beyond that thought, the near term prospects look good for the business as the company is projecting meeting the 40% gross margin target before the end of the year.

That’s it for now, check back soon for more. As always, follow me on twitter and please share this with anyone who might interested in my work.