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spk01: Greetings. Welcome to the Expel Inc. fourth quarter and year-end conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, John Nesbitt of IMS Investor Relations. You may begin.
spk03: Good morning and welcome to our conference call to discuss Expel's financial results for fourth quarter and full year 2022. On the call today, Ryan Pape, Expel's President and Chief Executive Officer, and Barry Wood, Expel's Senior Vice President and Chief Financial Officer, will provide an overview of the business operations and review the company's financial results. Immediately after the prepared comments, we will take questions from call participants. Take a moment to read the safe harbor statement. During the course of this call, make certain forward-looking statements regarding Expel Inc. and its business, which may include, but not be limited to, anticipated use of proceeds from capital transactions, expansion into new markets, and execution of the company's growth strategy. Often, but not always, forward-looking statements can be identified by the use of words such as plans, is expected, expects, scheduled, intends, contemplates, anticipates, believes, proposes, or variations, including negative variations of such words or phrases, or states of certain actions, Events or results may, could, would, might, or will be taken, occur or be achieved. Such statements are based on current expectations of management of ExPel. Forward-looking events and circumstances discussed in this call may not occur by certain specified dates or at all and could differ materially as a result of known and unknown risk factors and uncertainties affecting the company, performance, and acceptance of the company's products, economic factors, competition, the equity markets generally, and many other factors beyond the control of ExPel. Although Expel is attempting to identify important factors that could cause actual actions, events, results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events, or results to differ from those anticipated, estimated, or intended. No forward-looking statement can be guaranteed, accepted, or required by applicable securities laws. Forward-looking statements speak only as of the date for which they are made. Expel takes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information future events, or otherwise. Okay, with that, I'll now turn the call over to Ryan Pitt. Go ahead, Ryan.
spk06: Thanks, John, and good morning, everyone, and welcome from me to our 2020 year-end conference call as well. Overall, 2022 was a great year for us at Expel. Revenue grew 25%. We accomplished our goal of exiting the year at a gross margin run rate of 40%. Net income grew 31%, and EBITDA grew 39%. We want to always drive operating leverage as we grow, and we were able to accomplish that this year. Clearly, we ran into some unexpected headwinds in Q4 in China, which I'll talk about in a minute, but almost every other region had a very solid quarter led by the U.S., which continues to perform exceptionally well with 31.6% growth in the quarter. Q4 revenue grew 11.9% to 78.5 million. Net income grew 34.7% and EBITDA grew 32.4%. So good operating leverage there. And as we discussed during the last call, our forecast for China in Q4 was less than Q3. And normally Q4 is a strong quarter for China and a slower quarter for the rest of the world sequentially. So we expected lower growth overall for Q4. The sudden reversal of COVID policies and the reopening in China, which we believe ultimately is very positive news, was clearly disruptive to the quarter. In operating the business, we require payment up front from our distributor in China. However, our distributor extends terms in country to our dealers. So the prospect of reduced economic activity, which was widely feared at the reopening, but didn't materialize necessarily to the extent that was feared, could oppose significant cash flow constraints on the distributor. And then similarly, like us, the distributors maintain higher inventory throughout COVID going on three years, concerned both about the broader supply chain issues as we've been, but also the China-specific issue of the threat of unplanned port closures that would prevent product from arriving even if it was available from us. So as a result of this uncertainty and with inventory to spare given the reopening, our distributor requested and we agreed toward the end of the year to eliminate several orders that were planned. And ultimately, it's easier and better for us to absorb that than to ask them to take it under the circumstances. So as a result, Q4 revenue was reduced by approximately 3.5 million from our estimate in Q3. Q4 China sales came in at 6.2 million, which was a 50% decline from Q4 2021. And obviously that's significant considering Q4 has historically been the highest quarter for China, while it's seasonally a lower quarter for most other regions, which normally peak in Q2 or Q3. So all that said, I think there's a lot to be positive about regarding the China market. Removing the uncertainty of these restrictions is good news. As we see it, and our distributors equally positive in their outlook. As an example, they'll now be hosting their large dealer conference this spring, which our team will be in attendance for. And like ours in the U.S., these conferences are historically well attended and important events. and have not been held in a meaningful way since COVID started. It's been difficult for us in conjunction with distributor to decide when is the right time to invest further in the market up to now. And we've had plans to expand our corporate team into China to better support the distributor, to get us better market intelligence, to support the car dealership and 4S groups, and our OEM relationships, which are asking us about China. But with the uncertainty over the past several years, we've not moved forward on those plans, but we plan to now. We've also held off on product introductions in China, like our architectural film in its entirety, for similar reasons. Uncertainty that prevented our distributor from hiring additional staff, from taking on additional inventory, things that you just were unwilling or was unwise to do under the circumstances, but we do plan to execute on those in 2023. So, you know, overall, I'm encouraged about our opportunities here for China in 2023 and beyond, and about our team's ability to re-engage, to travel to support the operation, as we've always done. I plan to visit as soon as practical, and I think we can use this as a great opportunity to go much deeper on the current state of the market and make sure we're providing the distributor and all of the dealers in China what they need. Absent the challenges in China, most of our other regions had solid quarters. As I mentioned, the U.S. market, which is our largest market, continues to be a bright spot. Revenue grew 31.6% in the quarter to $47.6 million. New car inventory continues to improve, and it remains to be seen the ultimate impact of higher interest rates will be on new car sales, but new car buyers seem to still be resilient at this point, most likely because of pent-up demand. And we continue to see new car dealerships trading down from what is 100% margin, market price adjustment, to more tangible products such as ours. And as a result, we've seen some of the highest revenue from dealership services we've ever seen in January and February of this year, which is not always the strongest months of the year. So that's good news. Canada, Europe, UK regions saw continued growth for the quarter. Most of the other regions outside of the U.S. did see lower growth on a percentage basis than they did in Q3. Q3 was just red hot across the board, so you feel that a little bit. But overall, very solid performance in really all of those other regions. Our revenue, like Q3, in Canada, U.K., and Europe, It continues this ongoing FX impact that we've seen all of last year due to the ongoing strength of the dollar. So on a constant currency basis, we're valuing this year or last year at prior year's exchange rates. For the quarter, revenue and gross margin were both impacted by approximately $2 million. Latin America region had a great quarter, as mentioned on the call. And we've gone direct, much more direct in the Middle East and eliminated another layer of distribution. We're excited about the opportunities there. There was a quarter, slight quarter over quarter decline in the Middle East, but this was really about timing of large orders into distribution versus smaller orders direct to customers. So as we are prone to do, we know that that model tends to work better for us. And so we're happy to continue to expand that there. Our last acquisitions of consequence were done in Q4 2021, so we've fully lapped those now. So effectively, even in the U.S. business, while you wouldn't know it from 36-plus percent growth, there's a slight drag on Q4 with the dealership-focused tent net one-armor business actually being down versus the prior year, given new vehicle availability and the markets that it serves. So that may have cost us as much as 200 basis points of revenue, actually, in the U.S. or Q4. So, you know, thinking about Q1, we're still seeing momentum, especially in the U.S., despite this uncertain environment. Automakers still seem to be optimistic, even in the face of recessionary fears and rising interest rates. In January, new vehicle sales were off to a good start. And in some respects, you know, January and February for us feel a little bit stronger than the end of the year. So, you know, obviously we'd like that trend to continue. Now, we don't expect much change in China revenue in Q1. Q1 is typically the slowest quarter of the year for China. We have a Chinese New Year holiday. And as they've expressed their desire to return to lower days on hand of inventory on a go-forward basis, that's what we do. So putting that together, we expect Q1 revenue to be in the $83 to $84 million range. That's about 17% year-over-year growth in aggregate, with China down approximately 20% year-over-year, and most of our other regions, like the U.S., obviously growing 20%, 20% plus. One area where I was particularly pleased was our gross margin performance during the year. We've been talking this whole year and even prior about our ability to exit Q4 with a 40% gross margin run rate. We were able to do that. We had a one-time... $400,000 inventory write-off. Otherwise, we would have been right at 40% for the quarter, actually. A couple other points on gross margin. We did put a price increase in some of our regions during the quarter for product, really not for services, which helped offset some of the cost increases we've seen and some of the non-billed material COGS items. And when our China volume is low, historically, it's been more accretive to gross margin percentage because China's a lower margin market for us with distribution. But as China has become a smaller percentage of sales and as the U.S. has continued to have grown, that effect is certainly much less pronounced today and you don't really see it. And we have, over the short term, fixed costs embedded in gross margin, like production labor, the cost of designing patterns for the VAP, equipment depreciation, et cetera, that have to be earned through, especially when you have an abnormally low revenue quarter like Q4. So implicit in that kind of 40% exit run rate is actually some negative impact to gross margin. Otherwise, we would have been even slightly higher in a more normal quarter. So good, great progress, good work by the team. We're very pleased with that. So Q4 gross margin grew 25.7% to 31 million. It's translated, as I said, to gross margin percentage 39.6 and plus that 400Ks right at 40%. We'll also note that our Q4 2021 gross margin percentage was 35.2%, so tremendous improvement in 2022. And our 2022 full-year gross margin percentage finished at 39.4 versus 2021 at 35.7, so obviously a tremendous improvement there. And we still have runway to improve this, really driving from all the things that we've discussed, the focus on cost, product mix, channel mix, et cetera. You know, it's an open question based on where we see the most growth of how high it can go in coming years. But another 200 basis point improvement by the end of 2023 is certainly not beyond the realm of possibility and what we're actually expecting to exit the year on. We see higher SG&A as a percent of revenue this quarter. And lower revenue certainly contributes to that as we have built in fixed costs, obviously. We did incur approximately $300,000 in severance costs. And we also incurred $400,000 in compensation costs related to a previous acquisition. Technically, it was not eligible to be paid on the earn out as the targets were not achieved under the terms of the original purchase agreement for various reasons. However, we accomplished a lot of other things sort of tangential to the So in the spirit of the deal, we thought it was the right thing to do for the business, so we've incurred that expense. We've traded some gross margin for SG&A costs, but we know we can earn through the SG&A over time and in the higher revenue quarters. As an example of how this works, when we do acquisitions such as our distributor we acquired in Australia, shipping expense to Australia that was previously awash in cost of goods because the former distributor paid it, is now fully present in SG&A as it's an internal transfer shipment. So you see that grow is SG&A, but actually offset in the form of improved gross margin. So all of these things that we do, there's a slight collateral effect where to a small degree we trade gross margin, increased gross margin for higher SG&A expense, but the net effect is still that we can grow the leverage of the business. Q4 EBITDA grew 32.4% to 13.2 million, collecting an EBITDA margin of 16.8%. So good leverage in the quarter, even with all the other things we mentioned that impacted us. Our year-end inventory finished approximately 80 million. This was actually up about 11 million from Q3. A reduced China volume obviously contributed to that. But, you know, there is still momentum in our inventory purchasing. And much as I've pushed the team to reduce this days on hand faster, we've honored many handshake commitments to our vendors who have accelerated their production for us when we were more concerned about supply chain and total inventory dollars over the past few years. So we've been fortunate to have had the support of these vendors to prioritize our business, sometimes at the expense of others over the past three years. you know, down from every component of the product down to the corrugate suppliers, which resulted in us effectively never being out of stock of anything, which is something competitors couldn't necessarily claim. So as we reduce the days of inventory on hand, you know, it's imperative that we maintain the relationships that have helped get us there. So, you know, the team has slowed me down a little bit on that, which just means this just takes a bit longer to work through. But it's the right move. And given the revenue growth we expect this year, inventory probably doesn't go lower than $75 million, but it still means we do not expect to commit substantial cash flow to inventory this year like we did in 2021 or 2022. And we're planning across all product categories for reduced days on hand. So over the course of the year, this should more than offset the increase normally required to support the growth in revenue, albeit on a slightly slower schedule than we had initially hoped. We've had really good success with the acquisition of our Australian business. Revenue is now trending at more than double from the prior year period when looking month over prior year month. We've also reduced selling prices in the country by double digits on our paint protection film to better align with the market price and drive growth over unit economics, which sometimes distributors can prioritize. So it's a great example of where our direct approach pays dividends And again, we're looking at a market like Australia, which is a fraction of the revenue of Canada, but only 10 million fewer people. So I think we see why this will be successful. So with that, we're looking at several other countries with similar dynamics to enter for 2023 with a similar strategy in mind. We intend to complete a number of acquisitions in 2023, similar to those we've done before, especially as we're reducing costs our days on hand in inventory and stop committing our cash flow to working capital at the same rate we have. We released a new version of our DAPP platform, DAPP Next. This is in beta to all of our customers now. As we talked about previously, this is a rewrite of our core DAPP system that will support more of the business operations of our customers with the goal of making them more efficient and providing incrementally that much more value to them. So updates roll out weekly and will continue going forward. Much of the work as part of this beta release is around updating the core functionality and then move on to more of the new features as we go forward. But the team's done a great job and a lot of effort put into this and a lot more to come. We've done some things in the fourth quarter that are painful today, as I discussed, but they're the right thing for the business long term, and we wouldn't have it any other way. Overall, I think there's a lot to be positive about this coming year, even in light of sort of the macro uncertainty. As I said, all of our regions continue to display momentum, especially the U.S. There's positive news coming out of China as we get through Q1, and we should start to see a lot of good things happening, particularly product expansion plans there. Our architectural window film business continues to grow. We have a long runway in that product segment. OEM business, which is about 3% of revenue today, had a good year setting up for a great 2023, and we have a variety of expansion opportunities within the current book of business and then new projects that are contemplated. Much of our view into the future is extrapolating trends we see in the present, which is a limit to our forecasting. But at this point, we're looking at 20 to 25% organic revenue growth for the year. As I mentioned earlier, we fully lapped our significant acquisition. So there's no inorganic component to our growth at this point without considering future acquisitions that we may do this year. course anything can change we've had a good start to the year and as I mentioned earlier we expect gross margin to improve around 200 basis points throughout the year to get us to that sort of ending run rate again of 200 basis point improvements and we expect SG&A in the 22% range that's plus or minus a percent probably this should give us significant leverage and drive earnings growth for the year while allowing us to invest in the business substantially we're increasing our our marketing spend on a percent of revenue basis, but we can do that within that range and still generate significant leverage for 2023. So overall, fourth quarter notwithstanding, I'm very pleased with our performance this year. The teams worked incredibly hard. You can imagine the number of moving pieces with everything we're doing. And I really thank them, and we're excited about this coming year. So with that, I'll turn it over to Barry, and then we'll take some questions. Barry, go ahead.
spk05: Thanks, Ryan, and good morning, everyone. I just want to cover off a couple more items on our top line performance. If you look at the product lines, paint protection film was flat during the quarter. But as we've discussed in the past, cut bank revenue is just a required accounting reclassification. So it makes sense when you look at PPF to combine cut bank revenue with our PPF line and our external reporting to get a full picture of PPF. combined paint protection film and cut bank revenue grew a little over four percent in the quarter so the significant china decline quarter over quarter had a good size impact here our window film product line continued to perform well with revenue growing 33.7 percent quarter over quarter at 11.7 million this is down sequentially from q3 which is expected as this product line does have some fairly consistent with Q2 and Q3 being the highest quarters. On a year-to-date basis, our window film product line grew 41.7%. Our Q4 vision product line, which is our architectural window film, revenue grew 95% to $1.2 million. And on a year-to-date basis, vision revenue grew 98% to $5.7 million. And also, as Ryan mentioned, our OEM business had a great year. with revenue growing approximately 64% to $10.2 million. Our total installation revenue, combining product and service, grew 27% in a quarter and represented 17.4% of total revenue. And on a year-to-date basis, total installation revenue grew 77% and represented 15.7% of revenue. Same-store sales growth for the quarter was 18% and 40% on a year-to-date basis. Our Q4 SG&A expense grew 25% to $20.2 million and represented 25.7% of revenue, as we talked about before. And I would echo Ryan's comments on SG&A that there is no doubt that we have certain fixed costs built into our SG&A infrastructure that when we have a down revenue quarter like Q4, we certainly feel it. Despite that, and Ryan mentioned this also, we still saw some nice operating leverage in the quarter, and remain very confident that our expense cadence will continue to provide great future returns. Our Q4 EBITDA grew 32.4% to $13.2 million, reflecting an EBITDA margin of 16.8%. And if you assume China would have been expected run rate and normalizing for the items Ryan mentioned, EBITDA margin would have been at approximately 18%. And on a year-to-date basis, EBITDA grew 38%, and our EBITDA margin was 18.9%. Our Q4 net income grew 34.7%, to $8.4 million, reflecting net income margin of 10.6%, and our EPS was $0.30 per share. If you factor in China and normalize for the other items, net income margin would have been approximately 12.1%, and EPS would have been $0.36 per share. Cash flow from ops for the quarter was 2.4 million, which was a good result in light of the inventory increase we saw in the quarter. And we expect to continue to generate strong cash flow in the long term, but near term cash flow could moderate as inventory in the channel continues to level out. But regardless of all that and really solid, you know, solid performance for the year, and we're set up to have a great performance in 2023. Now with that operator, we'll turn the call over for questions.
spk01: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, that's star 1 if you have a question or a comment. The first question is coming from Steve Dyer with Craig Hallam. Steve, please proceed.
spk00: Thanks. Good morning, guys. A lot of good detail in the prepared remarks, which is always appreciated. Within the auto space in general, it sounds like dealer business continues to do really, really well. I guess, could you help us sort of see or know what you're seeing there in terms of adding dealers? Are they just sort of buying in more to kind of the profitability opportunities in selling this stuff? Are you seeing greater attach rates? Are you seeing greater number of preloaded vehicles versus not? Any color there would be great. Sure.
spk06: Steve, yeah, I think it's a little bit of all of the above. The dealership business, especially the end of the year into the beginning of this year, has really been a bright spot for us. And by a lot of the metrics, we're seeing some of the best performance that we've had. And so some of that is related to just the return of inventory where we have revenue in some parts of the business preload, as you mentioned, that's more coupled to inventory. So we stand to benefit from that. But we are adding for all of the various product lines, we are adding a large number of dealers. And we've seen very good momentum with this. And it's not the exclusive reason, but one of the reasons we have heard more than once is that as you're in this environment where the market adjustments are under pressure and have to go away because the inventory is back, that's cut out this 100% gross margin opportunity for these dealers. And they need to trade that down to still generate the gross margin dollars, but to give the customer something for it instead of just that. So we're definitely seeing that in quite a few of those cases. And then we've also had success, and really this has been true since we did the acquisition of Permaplate in 2021, of adding more products and more content per vehicle too within the current relationships that we have. And that could be introducing paint protection film at some level. If there was only a window film before, it could be upsell to a higher line of window film. It could be door cups and door edge guard protection and things like that that might be preloaded. So it is a bright spot, and it's really all of the above, all the things that you mentioned.
spk00: Got it. Thank you. Sounds like acquisitions are sort of back more front burner this year. Can you sort of help lay out directions or generalities as to what we should expect?
spk06: Yeah, no. I think we've got a pretty good carryover from last year on things we were working on that just couldn't come to fruition for one reason or another. But the things we're going to see really at the top of the list are International distribution, we use the example on the call today of Australia and how we see in a case, you know, at almost no fault of anyone, but where the third-party distribution, you can run out of alignment with the goals of the distributor versus our goals. And, you know, our goal is not to maximize every unit of profit in a market, but some independent business might be. So definitely more international activity for other key markets. We might want to enter. That would be one dealership services, everything that you just asked about Steve. There are other smaller companies doing some of these things like what perma plate did. And we think it makes sense to add to that business. We get some economies of scale by doing so. So that's clearly on the table. And then lastly, sort of looking at installation and the, in the broader context, installers and things, and looking at, you know, is acquisition an appropriate way to fill what we perceive to be gaps in our network markets with lower performance and things like that, where you need some type of inorganic movement to change that, which has been core to that strategy. So really the three of those is what we're focused on, and that's what I would expect to see this year.
spk00: Perfect. Helpful. And then I guess just as a, As a way of kind of following up on that in terms of how to pay for it, a little bit of net debt right now, nothing big, but with interest rates going up and it doesn't sound like there's a lot of cash you can wring from working capital per se. How do you think about sort of funding that roadmap this year?
spk06: Well, obviously we'll be looking at our overall debt situation. It's a good time to reevaluate that. So that's ongoing. So there's some opportunity to improve that. just in terms of the cost of capital on that side. And then for us, really, you know, without huge CapEx commitments, and we're probably set even for us to have a lower CapEx here than we've had in the past few, even though the number's not great. But the big one is if we stop investing in inventory, you know, for the type of deals we do, and then with modest leverage, we should have ample cash to do a number of these things. That's really the That's really the key. It's not predicated upon reducing inventory dramatically. And as we mentioned, you've got $5 to $10 million max of inventory reduction we could see this year. It's more about just not committing the rest of the cash flow to inventory. And that with a little debt, and if we can do that with a bit more attractive structure than we have today with our current facilities, then I think we're in good shape for what we want to do.
spk00: Got it. All right. Thanks, as always, guys. Best of luck.
spk07: Thanks, Steve.
spk01: Once again, if you have a question or a comment, please indicate so by pressing star 1 on your touchtone phone. The next question comes from Jeff Van Sinderen with B Reilly. Please proceed.
spk04: Good morning, everybody. I wanted to just I guess get your sense on the one-time items. Are those probably behind us at this point? I know you can't see too far in the future, but as far as the next couple quarters where the P&L should be clean of those?
spk06: Yeah, Jeff. I mean, they are. I think if you look at us from a historical standpoint, when we've called things out historically as one-time, we – We tend to mean it. We don't bury every quarter with a laundry list of one-time things that individually are but in aggregate aren't. So, you know, subject to what we don't know, right? But we call those out because that's truly what they were.
spk04: Okay. And then just thoughts around reacceleration of PPF in 2023. Okay.
spk06: Well, I mean, the key for us is really China, right? That's what drives all the numbers you're saying more than anything and the oscillations in that. You know, over time with acquisitions, we convert some of our product sales with the businesses we bought into service revenue. So if you look at it over kind of a longer period of time, you actually see that we've done that quite a bit because we tend to, have an affinity to buy our existing customers versus people that aren't customers of ours, right or wrong. So really the, if you look at, you know, the fourth quarter, I think our, you know, US PPF sales were up 6.3, $6.4 million year over year. China was down 6.5 plus or minus. So, you know, that kind of wiped that out, but you know, ignoring even the, the installation component of the business, which is very mentioned is now grown to be a substantial percentage. Um, you know, it's really, it's really all about China and getting the full reset there and getting much closer to the business and, and trying to remove some of the volatility of it and, and just knowing where we are and where we want to go with it.
spk04: And as we think about that, um, Do you think that the growth rate of window film in automotive or dealer services and some of those other things will grow at a similar rate to PPF this year or a faster rate or slower? How are you thinking about that?
spk06: Well, I mean, it really depends, right? So we're kind of agnostic to a certain extent because we're trying to grow all sources of revenue as fast as we know how. And so in some sense, you could have an opportunity with a dealership that starts as a product sale, like you're mentioning, but turns into a labor sale because they decide that it doesn't make sense for them to do the labor. So the trade-off between those two, that's really up to the customer. We're not the ones planning for that. So I think we'll see growth across all the categories of products. some of the smaller product lines at a higher rate than the larger product lines, and then subject to any adjustments to that if we buy things and convert product to service revenue.
spk04: And then I think you said you're targeting 200 basis points of gross margin improvement for the year. I'm just wondering any – 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-end or second-half loaded?
spk06: It's probably more second-half loaded, just knowing how things typically go because you've 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 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, but I think we want to make sure we hit that at a minimum.
spk04: Okay, fair enough. Thanks for taking my questions, and best of luck for the rest of the quarter.
spk00: Thanks, Jeff.
spk01: Okay, the next question is coming from Tim Moore with EF Hutton. Please proceed.
spk02: Thanks, and I appreciate the granularity on the fourth quarter sales. It was nice for Barry to point out that the PPF sales aren't a standalone item, and we should be including cupcake revenue and some installation labor. Revenue growth is pretty strong. It was nice 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, any indication of that?
spk06: Yeah. Well, I mean, clearly that's something that we're very focused on as a company, you know, for our longer term future, because we know that there's a huge, uh, 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 market, or through dealerships or OEMs, where they have access to that customer. Given the nature of our dealership business, with what we've acquired and then grown, it is sort of overwhelmingly not enthusiastically 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. So when we're talking about those dealerships starting to adopt paint protection film in some capacity, you know, no matter how small or how big the coverage, it's almost certainly touching consumers disproportionately that don't fit that enthusiast set. And that's you know, one of the reasons that we've invested in these businesses and one of the reasons that we're doing this, because that is a direct goal of this. So when you hear us talk about any, any kind of attachment of paint protection film into those, those, the dealerships we touch with that dealership services, yeah, it's almost certainly beyond the scope of the traditional enthusiast buyer.
spk02: Great. That's, that's fantastic color to heal. And just given how big that market is, it's just gigantic. Um, You know, on pricing, I know you mentioned last quarter and you had a remark earlier about, you know, price hikes taken. Is it fair to assume that you might have only been able to take pricing for maybe 50% to 60% of your markets since you probably couldn't take it in China or a few distributor markets? And what I'm getting at is, you know, Can that provide an additional pricing power for next year in those other markets you're not taking into account?
spk06: Yeah, I think you're right in that it's probably hit less than 50% of the customer base in the quarter or for the portion of it in the quarter, but it actually probably hit even less of the revenue because it was really product-oriented and not service-oriented. The pricing on the service side is just handled in a completely different way. So from a customer base, you're probably directionally accurate. And then from a total revenue base is probably even less than that. It's probably in the thirties that it actually 30% of revenue that it touched in some way. So, yeah, we, we, you know, the, the, we'll, we're continuing to look at that. You know, we have been more restrained in pricing than our competitive set. for a variety of intentional reasons. So that is a further opportunity for us this year that we haven't made firm decisions on, but the strategy to do what we did and then leave the rest available to us was intentional and is something for us this year.
spk02: Great. That's helpful, Ryan. What about just on the Rivian relationship? I believe that started ramping up slowly probably in October. Can you give us maybe an update on that and those – I remember there were three European direct OEM programs that you're doing. How are those going?
spk06: Yeah, so the Rivian program did start in terms of our work at our facility near their plant, and then it's been successful, and we're in the ramp-up stage now, and that's a combination of getting all the vehicles on the schedule that we need and then having our team available to do the installations. I think the The initial feedback is quite positive and provided we can get the full allocation of vehicles. I think there's interest in potential interest from both sides in expanding this. It's had a higher than expected take rate from the yen buyer. So I think it's positive all the way around and we just need to collectively then scale it up to its full potential. So I think we're super pleased with that relationship. There was a delay in getting that going last year until October, and that cost us substantially with that delay, but we were ultimately happy to do it and glad that we did it, and it's now something to build on. With respect to Europe, yes, we have projects today with three different OEMs in Europe, Those are in some stage of discussions on possible expansion, and that could be additional vehicles or just expanding the number of units of the same maker model that we touch. And then there are other manufacturers with different types of projects that we're in the process of talking to. And these things have a long sales cycle, just as the ones we have now did. usually coincide with a new model introduction or something. So there continues to be strong interest, and there's interest in China and other things where we're talking about needing to invest further there and our willingness to do that. So I think overall it's a bright spot, and we expect to continue to grow that.
spk02: Great. That color is very helpful. Just as a quick follow-up question to Rivian, for your 20 to 25% organic sales guidance for this year, does that include a decent chunk from Rivian or, you know, are you modeling that 10 million or less?
spk06: I would say we're relatively conservative. I mean, in, in, from that standpoint, you know, Rivian's done a great job of scaling their production and the number of vehicles, but you know, that has to continue for us to get to our full potential there. And so we're not, um, We're being very pragmatic, to say the least, in terms of our modeling there. Great.
spk02: My last question is just, have you seen or put more team and managers devoted to cross-selling window tinting and PPF? Are you seeing that benefiting you lately?
spk06: Sure. Well, I mean, the number one thing that we do is the way we pay our team. We don't... discriminate between, you know, product or service. We're, we're trying to align on, um, growing gross profit dollars in every channel and for every customer type. And so that creates inherently a strong incentive to cross sell. And the team knows that we want, uh, the end customer to be able to have an all Excel experience with all of our products. And so, um, We know, especially in the aftermarket, that many times we have customers that are buying all three products, paint protection, film, coatings, and we want them to have an all Expel experience. So there's really, you know, when the team knows that as something to our core and to our brand, and then you incentivize them where all of those dollars count and from their time, you know, more revenue dollars and more gross margin dollars out of one location is more efficient than spreading yourself thin and having more places to visit. And it's in keeping with our strategy. So I think we're 100% aligned on that goal.
spk02: Great. Thanks, Ryan. And that's it for my questions. Thank you.
spk01: We've reached the end of the question and answer session, and I will now turn the call over to management for closing remarks.
spk06: I want to thank everyone. We had a great year. Most importantly, I want to thank our team who's worked exceptionally hard and continues to do so today. So thank you, and we'll speak to everyone next quarter.
spk01: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
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