Google Finance
Filing
Apr. 12, 2017
Q4 2016
Current Price: $2.00
1.Basic Information
(1) History
3M is the first who creates protection screen film for airplanes and military use. XPEL was originally a distributor of 3M and use it on automobile. It created its own software to cut the film at real time and adding new models with fast online update. Gradually it created its own film and stop using 3M's. Its film seems better than the 3M's on aging issue which it doesn't change to yellow after several years. The company grow very well in last several years. On early 2016, 3M sued XPEL for patent infringement, at Mar. 2017, the lawsuit solved with XPEL paying license fee to 3M going forward.
(2) Business related:
The company's main business model is partner with independent installers (70%) and dealers (30%). It receives a fixed monthly fees for offering free cutting machine with software and free training for installer.
The company seems maintained very good relations with installers and offer marketing support for installers as well. It hosted several dealer conference yearly which trains the installers. This seems worked very well.
It target high end new vehicle owners who cares more about the protection of their cars. Usually it seems cost $1500 to $2500 for a full car protection. It seems very profitable business for the installer. Its major market is in US. It seems taken around 30% of total market shares.
The company is totally a US company and the stock is trading at CVE in USD$. Finance is in USD$. Kind of a pretty weird setup.
(3) Management.
Ryan Pape is the current CEO of the company, he seems was with the company since 2004 and was promoted to CEO role at 2009. His main strength seems on marketing side.
(4) Debt and Credit facility.
At Dec. 2016, the company has $1.8m cash. $3m loan, $1.5m vendor loan. Net debt around $2.7m. After the 2m shares issuing. Net debt should be close to zero.
(5) Insider holding, options, Insider trading info, share buy back.
Richard K. Crumly, a individual investor who owns 5m shares which is also on the board. Don't know much about him.
Mark Adams, CEO of Sozo Global, a MLM company, owns 2.1m shares. Also on the board. Sozo is a private company and seems in trouble. Very interesting.
(6) Employee numbers
(7) Industry comparison.
SunTek: The quality seems very close to Xpel's.
3M: It seems 3M's film has a reputation changing into yellow after exposure to sunlight after a long time.
(8) Major events
1) Early 2017, the company issued 2m shares in private placement for $1.43/share. As explained by the CEO, this is mainly used as a weapon to fight the 3M lawsuit to show that it has the money for lawyer. Most of them were sold to insiders.
2. Financial data.
3. Valuation
1) The company's share was down to below $1 during the 3M lawsuit and now is back to $2. Currently, the market cap is around $58m including the 2m shares issued at $1.43. The company's gross margin is close to 27%. SG&A is around 20%. Before tax income 7%. After tax 5%. Using 2016 data, this translates into only $2.5m real income which makes the P/E ratio more than 20 times. Not really cheap.
2) It indicated the license fee to 3M will be minimal. In a long-term, I feel its net margin can back to 7% with the lawsuit solved. If in 3 to 4 years its revenue can grow to $100m, using 7m net income, 15 P/E. It can support a $100m market cap which translates into $3.5/share price.
3)Given its size and high growth rate, it is a good target for acquisition by the big companies.
4. Risk
1) It seems harder to grow its revenue at the current rate. The auto industry also seems at peak since the financial crisis. It needs to grow at 20% rate to get to the $100m revenue mark at 3 to 4 years.
2) It might now as profitable as I wished. The gross margin might be below 30%. SG&A might go above 20%.
3) Also currently it doesn't need to issue new shares. It might do so to support growth in the future.
5. Conclusion
The company is managed very well and very competitive. The price is acceptable for a growth company but I wish it could be cheaper.
6.Links
https://vimeo.com/channels/xpel/49604671
https://www.eventbrite.com/e/xpel-dealer-conference-2017-tickets-29837844797#
May 27, 2018
Price US$3.3. Cap $88m. Share: 28m.
(1) The company solved the litigation with 3M last year with some royalty payment which according to the company has minimal effect on the company's profit.
(2) In Q4 2017 and Q1 2018, the company achieved record revenue growth. Especially in Q1 2018, it achieved revenue of $25m and net income of $2m, both are greatly unexpected. Also the company's sales in China had a big breakthrough which in Q1 2018 accounts for 30% of its total sales.
(3) Based on Q1 2018 number, it should be able to achieve $100m revenue and $8m income in 2018. Which is much earlier than I had estimated.
(4) Going forward, I think the company may able to double revenue to $200m by 2020. With an income of $15m. It could support much higher market cap to $300m to $400m if the growth and the income can be achieved.
Price US$3.3. Cap $88m. Share: 28m.
(1) The company solved the litigation with 3M last year with some royalty payment which according to the company has minimal effect on the company's profit.
(2) In Q4 2017 and Q1 2018, the company achieved record revenue growth. Especially in Q1 2018, it achieved revenue of $25m and net income of $2m, both are greatly unexpected. Also the company's sales in China had a big breakthrough which in Q1 2018 accounts for 30% of its total sales.
(3) Based on Q1 2018 number, it should be able to achieve $100m revenue and $8m income in 2018. Which is much earlier than I had estimated.
(4) Going forward, I think the company may able to double revenue to $200m by 2020. With an income of $15m. It could support much higher market cap to $300m to $400m if the growth and the income can be achieved.
