XPEL, Inc. (XPEL) Q4 2014 Earnings Report, Transcript and Summary

Greetings, and welcome to the XPEL Technologies’ Fourth Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr. John Nesbett of IMS. Thank you, Mr. Nesbett. You may now begin.

Good morning and welcome to our conference call to discuss XPEL Technologies’ financial results for the 2014 fourth quarter and year end. On the call today we’ve Ryan Pape, XPEL’s President and Chief Executive Officer who will review the company’s financial results and provide an overview of the business operations. Immediately after his prepared remarks, we’ll take questions from call participants. I’d like to take a moment now to read the safe harbor statement. During the course of this call, we’ll make certain forward-looking statements regarding XPEL Technologies Corp and its business, which may include but not be limited to anticipated use of proceeds from any capital transactions, expansions 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 planned, is expected, expects, scheduled, intends, contemplates, anticipates, believes, proposes or variations of such words or phrases or state that certain actions, events, results may, could, would, might or will be occur or be achieved. Such statements are based on the current expectations of the management of XPEL. The forward-looking events or circumstances discussed in this call may occur by certain specified dates or not at all, and could differ materially as a result of known and unknown risks factors and uncertainties affecting the company's performance and acceptance of the company’s products, economic factors, competition, the equity markets generally and other factors beyond the control of XPEL. Although XPEL has attempted to identify important factors that could cause actual results, events or results to differ materially from those described in the forward-looking statements, there maybe other factors that could cause actions, events or results to differ from those anticipated, estimated or intended. No forward-looking statement can be guaranteed except as required by applicable security laws, forward-looking statements speak only as of the date in which they are made. And XPEL undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Okay with that concluded, I’d now like to turn the call over to Ryan Pape. The floor is yours, Ryan.

Thanks John, and good morning and welcome to our inaugural earnings conference call. I trust that all and most of you got a chance to review our fourth quarter and full-year 2014 which were released earlier this morning. We’ve strong fourth-quarter performance and that concluded a year of great progress for the company. We had obviously significant revenue growth. We broadened our international presence, and continued the development of our distribution channels. Through our sales and marketing efforts, we are seeing car dealerships, installers and car enthusiasts alike recognize that XPEL is the premier paint protection film. And as a result our training classes which are a good proxy for our business are as full as they have ever been, and we are seeing the flow of new customers into the industry is really at an all-time high. So first, we’ll run through the financials and then I'll provide a broader overview of the operations. Revenue in the fourth quarter grew 53% to $7.6 million as compared to right about $5 million in the fourth quarter of 2013. We are pleased with this revenue performance and like I said it caps off a very strong year. Revenues were down a bit sequentially from the third quarter into the fourth; due primarily to the reduction in orders from Parasol Canada who reduced inventory prior to our acquisition of them which we consummated in February; and as a result of a reduction in ordering out of China, which I'll speak to a bit later. Now it’s important to note that as the numbers get bigger, the revenue growth percentage we’ve seen you know will moderate somewhat, a non-aggressive reduction from the great growth we’ve seen this year. But it's probably unrealistic to consistently deliver growth in excess of 50% as we become larger. With that said, you know we’re still focused on growth, and we’re driving strong, and we complete at very strong momentum in the business. We had a gross margin of 31.2% compared to gross margin of 31.7% in the prior period. We think this is still a solid gross margin, it’s consistent with what we’ve been seeing. Now we’re seeing a little pressure on gross margins due to the strong US dollar, and we'll talk about that a little bit more later as well. SG&A expense increased in the quarter to 25.5% of sales from 24.4% in the fourth quarter of the prior year. And we’ve been investing a lot to grow the business and the continued investment on the SG&A side reflects our intention to build a much larger business. And it's taken many forms, obviously we’ve had a big investment in sales and marketing. We’ve a new IT, both you know sort of internal with our ERP system for our global expansion, as well as the largest investment we’ve made in our DAP software in a number of years. And we’ve had legal and accounting costs associated with the international acquisitions. And we had some legal and accounting related to the European operation in the fourth quarter. And then for the Canadian acquisition, we had legal and accounting split between the fourth quarter and then the first quarter of 2015. So you know I think it's important that when we look at these SG&A expenses, we keep this in a historical context. And if you look at say even four years ago, and we had cut the company to the bone really to stay alive. And in the four years since we’ve been hiring you know largely for the growth, but frequently in our opinion playing catch up as to get to a robust organization we need. And we are now at a point where you know we feel that we’ve caught up, and we’re really just planning for the future from an employee, systems and infrastructure standpoint. So our costs have grown a bit faster than revenues recently, but you know as we’ve kind of said before we do not expect them to grow as fast as revenues in the future. We achieved net income in the fourth quarter of $1.5 million or about $0.06 a share as compared to a net income of $281,000 or $0.011 a share in the same period of 2013. Important to note, net income in the fourth quarter had a $1.1 million tax gain due to a change in estimate. And the change in estimated tax expense resulted from a re-characterization of losses on the sale of two subsidiaries which the company filled in 2007 and 2008. And that the re-characterization was from a capital loss to an operating loss which enabled us to offset income tax expense in 2014 and a little bit for 2015 to carry forward. So you know, important to note that this is a real cash savings to the company in terms of dollars not out the door, so we are really happy about that. Our balance sheet remained strong, working capital $5.2 million, $7.4 million in shareholders equity. We had a great foundation to grow the business with that, and certainly for those who follow the company see you know we’ve got a high level of inventory, which is really important to be able to turn large orders, and make sure we’re well in supply. So we are pleased with that as well. I'll flip a little bit now to the operations. Like we said, we’ve made substantial investments in the second half of the year to support our existing growth that we’ve seen this year, and then our future growth. We’ve added training capacity to the US business which is critical, because we see a continued shift in the new customers that we’re acquiring to those without previous paint protection film experience. So if they lack that experience coming in, then our ability to provide training and increase that training capacity is even more important than it has been historically. We’ve substantially expanded our kit design team which are the patterns that we put in our DAP software, that are used to cut the film, to provide patterns for more vehicles. But also to increase the coverage on existing vehicles where now on certain models, we’re designing full car coverage. And we’ve seen demand for that grow in the US and then in certain particular international geographies where full car coverage is really in demand. So by leveraging what we’ve historically been very good at, we think that will bode very well for us in those markets. So again talking about how this impacts the SG&A expense, you know nearly doubling our design team which is what we’ve done is expensive in the period which we have done it, which is at the end of last year. But it likely won’t happen again or if it does, doubling that over again is tens or twenties of million dollars of revenue away. So these are really investments for the future. We’ve expanded our headquarters-based finance and operations team. And this is to manage the back-office of our international expansion in a centralized fashion. So in the midterm, centralizing this will provide significant savings versus duplicating those functions in Canada and in Europe. And it also strengthens control and strengthens our ability to manage that operationally. And we’ve invested significantly in an ERP system that will manage the global operations and all that's fully in place as of the second half of last year. We continue to spend heavily on sales and marketing. We’re averaging numerous events in the field each month in addition to our print and online advertising. So this has proven to be a really effective strategy to drive sales and awareness through our different channels. But as important, it also increases the stickiness of our installer relationships. Because what we’re saying is, as part of our value proposition that when you are associated with XPEL, we do business and no one else does that like we do. It’s an example that a lot of people may be aware of. We recently exhibited at the Barrett-Jackson Auto Auction in Scottsdale. It’s a great demographic for our product, and it was incredibly well received. I think relative to the sales and marketing, when you look at it sort of again in terms of where we’ve been, and where we’re going, it's worth noting that going into 2012 we spent basically nothing on marketing and advertising, both from a direct expense and a headcount standpoint. But now ending 2014, we’ve increased that to a few percentage points of revenue over that two-year period. So you know while we expect sales and marketing you know to continue to increase with revenue, it's a lot less painful than when you are starting from a marketing budget of zero, which is really what's happened over this past two-plus-year period. As many of you are aware, international expansion is a key component of our growth, and we’ve made great strides towards increasing that business and our geographical reach over the past six months. During the fourth quarter, we opened our UK facility so we are providing sales support and distribution and training in Europe ourselves. And we believe both as it pertains to Europe and Canada and even in the US, that we want to move closer to the customer. And that's a key core operating principle for our business in general, and the UK operation helps us do that in Europe. We must have the ability to support our customers directly in these key geographies to bring them the same unmatched value proposition that we’ve for our customers in the US, and doing this in Europe offers that. So while that operation opens in October, we just began training classes in February of this year. And we need to build our facility, train staff, but already we’re very encouraged by the level of participation in these training classes. So we’re beginning to create the sales funnel in Europe like we’ve had in the US for a long time. And those that have followed how it works in the US know that it's not a short sales cycle. But the key is that we’ve always got to have the customers leaving the process while new ones are entering. So you’ve got a constant queue, and that is starting to build in Europe. While the operation in Europe is operating at a modest profit, it will take several iterations of our lead to training to sales cycle, before we see the substantial revenue growth we expect. But all the indications are that we’ll see it. Following the close of the fourth quarter, we announced our acquisition of Parasol Canada. It’s a distributor of XPEL Paint Protection, other window tints, and a few other related products in Canada. Working through distributors is an important part of the strategy for us. But we believe that in key markets, we need to sell direct and like I said earlier move even closer to the customer. And Canada is certainly a key market for us, and the acquisition brings a sales force that's dedicated to XPEL. And that's really substantial as you know eliminating the risk of selling through distribution, where you know one day the distributor may decide that they want to focus on unrelated products or they might decide that they want to promote competitive products. So a certain scale and for certain markets and particularly in the Canadian market, you know we’ve determined that not only does the acquisition allow us to grow in Canada, it also protects what we have. So we're selling direct in Canada now, like we do in the US. We’re working to integrate the US and Canadian operations really into one region, and that's to take the best practices from both and use them on both sides of the border. And then also by operating it together, you know we think that's a really smart use of the overhead and the SG&A dollars to do that. And finally on the international front, we’ve taken a hard look at our distribution in China, and what the right strategic options are for us to move forward and grow that. It’s a very important market for us. I’ve personally been in China twice in the past three or four months. And we made the sort of hard decision to remove several of our underperforming distributors. So our products have been available in China since 2009 at a small scale and sales from China represented approximately 7% of our revenue last year. So it's not a new market for us, but with the rationalization we reduced the number of distributor we’re working with in China. And this in the fourth quarter has temporarily reduced sales, and we felt a little of that on the revenue side. But we’ve got to look at what is the best strategic and structural setup for China, and we firmly believe that few resources for our product in China will create more value. It will give us more control, and ultimately in the mid-term it will result in substantially more volume. Anecdotally, we had two months in the fourth quarter without any revenue from China as part of this rationalization. So if you look at the sales out of China, and you look at the Parasol revenue, where they had an incentive to reduce their inventory slightly going into the acquisition. If we had kept Parasol and China revenue at the Q3 levels, we’d have had modest sequential growth from the third quarter into the fourth quarter, which you know if we can get any sequential growth from third quarter to fourth quarter, that's a win. Fourth quarter historically starts at you know a bit of a seasonal low from the fourth quarter into the first quarter. In 2013, we had good sequential growth going into the fourth quarter. Years prior to that, it kind of bounces back and forth, so overall we’re fairly happy with what that means and these are strategic decisions for the future of the business. We had a number of questions recently that as a US-based exporter, obviously we’re exposed to the downside of the rising US dollar, where our distributors who buy from us in US dollars, and then sell in their local currency, they find their gross margin under pressure. And that results in either a lower margin for them, higher prices for their customers or we’ve got to lower our margin to sell to them to create a margin for them. I think, you know a couple of points on this, you know we’re not alone in dealing with this in our industry. The majority of the world’s supply of quality paint protection film originates in the US. So everyone is dealing with this, we’re all in the same boat. So we saw some impact from that in the fourth quarter, and we'll see a little impact in 2015. But that said, our outside US sales are integral to our growth and we think that the direct presence in two of the largest markets, and Canada being the largest market and Europe being the greatest opportunity puts us in a better position to manage through the strong dollar than we would be if we were just selling through distributors in those markets. So you know if you kind of walk through it just a bit, our international sales are still approximately 37% of our overall sales as of the fourth quarter, and Canada is a large chunk of that. So in Canada when you look at the impact of currency, we continue to get our existing margin at sort of the XPEL Tech level, that we’ve always had. But the currency and the strength of the US dollar tends to reduce the incremental margin we would capture with the acquisition, either until the exchange rate changes or prices in Canada increase. And both of those are possible in the same pressures we see with the strong dollar in Canada, so do our competitors. So the effect of currency as it pertains to Canada is just that it makes the acquisition less accretive. It doesn’t lower our overall margin for the Canadian business from a historical level. Generally in Europe, we'll get the same margin we always get through selling through distribution. But the impact of the currency reduces the additional margin that we expect to get by eliminating distribution and selling directly. And again you know that's remedied by change in exchange rate over time and/or rising prices. And all of that is under constant analysis to determine you know what is the best strategy for the company. When you look at the Middle East and China which obviously are two other big regions for us internationally, the impact of the currency is really minimal. The respective currencies are either run with the dollar or pegged to the dollar. So we don't see a substantial impact or pressure there. In other markets, so outside Middle East, China, Canada, Europe where they are impacted, you know South Africa being an example where they are under a lot of pressure and will probably be forced to reduce margin a little bit in those markets. But that's the smallest part of the international business, they are the smallest volume. So when we look at the year as a whole, you know I would say that you know nothing pleases me more than the success of our marketing program. It’s worth noting that the marketing program is not acquisition marketing where if the marketing stops, so do the sales. That's not what we’re doing. The marketing is at the foundation of our brand for the products we sell today and the products that we’ll sell in the future. And we see the benefit of this all the time and it's really a cross-functional marketing. So and just one example, we recently had a customer who purchased a high-end vehicle. And the dealer he bought it from installed another really inferior paint protection film on this new car. And it was inferior, both in the property of the film. It was inferior in the installation, the job that was done. So he was really unhappy with it. After he visited us at one of our events that we’re doing in the field and he recognized, you know how poor the product was. So he visited one of our company-owned locations to have the product replaced with XPEL film. So already just by having our presence at the events, we’ve now you know countered a misperception about the product and also turned that into revenue. But as a repeat customer of this dealership, he returned to buy another car for a family member. He demanded XPEL film on the car instead of what they were selling. And he told them that, he didn't care what they needed to do to get it, upto and including doing a dealer trade from another store that already carried XPEL film, where it could have it on the car. So as a result, the dealership management contacted our sales team to say, how do we get the XPEL film. And as a result, we’ve an opportunity to win a multi-unit dealership group. And this is a real-life example of the marketing dollars at work and it’s how our consumer marketing efforts translate into new B2B accounts. So we think it's a win-win-win. We come out ahead on that all the way. We’re continuing to seriously investing in new product development. And during 2015, we expect to introduce new products and this will be both enhancements to our paint protection film line, and also new products that the company has not offered before. So we are very excited about that, and hoping to leverage our marketing with the new products. So we’ve made measurable progress growing the company. We believe the performance in the fourth quarter was strong. We believe the international expansion is the right strategy, that all of that has positioned us for continued growth. I’d like to thank our employees. Obviously we’ve added to the team quite a bit this year, but everyone here will certainly testify that they are working hard and everyday, and that there is a lot of work to do. And I’d also like to thank our shareholders for their support. And we will open it for some questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. Thank you. Our first question comes from [Adam Goldfein], a private investor. Please go ahead.

My first question is about SG&A. And you did address it during your comments, but I thought I heard you say Q4 you had SG&A was 24% of revenue. I had it at 21.8. Is my math wrong?

I think if you're looking at the financial statements, then you are certainly correct. It may just be an error in my notes here.

Okay so that was for the full year I'm looking at. So I guess if I look at the past you know SG&A as a percentage of revenue went, you know was declining as I would expect to get the benefits of operational leverage. This year was the first time that it increased. So my question is and you know you gave some of the reasons, but I guess my question is what would be the expectation going forward to several years into the future, do you have a goal or an expectation for what SG&A expense will be as a percentage of revenue?

We do not have a goal in terms of you know what we expect. I think you know candidly when you look at the revenue growth we’ve had, you know this is a business where if we grow 60% or 70% or 50% you know that 50% or 70% you know more boxes of film that need to go out the door. So it’s taken a lot to keep up with that growth, and you know we’ve sort of eagerly thrown resources at that to make sure that we can deliver the sales; because we only get one opportunity to make that sale with the prospective new customer. So I don't have a target percentage for you, because we are not looking out that far. But it’s certainly a reasonable conclusion to think that the SG&A expense should not continue to rise with revenue as a lot of the increases to SG&A are really just building a foundation of the team that will serve us for a lot more revenue.

Okay, so going forward I guess you would expect that SG&A should decline as a percentage of revenue then?

You know we would expect it to decline over time. I can't tell you whether you should expect that in the first quarter or second-quarter or third-quarter, but that should be the trend.

So my next question is, do you have any estimate of what percentage XPEL has of the paint protection film market?

We’ve some internal numbers that we operate on, but there’s really little to no market research about paint protection film. And our computers are not in a position to release financials that would give us any guidance on really how much they are selling. So it’s obviously something we look at to try and benchmark what we’re doing and estimate the opportunity. But it's not a metric that I am comfortable releasing, because it's just an internally-drive number.

Okay, so do you think you are the market leader or not in terms of the market share?

I can't say for market share because we really just don't know. I think we’re the market leader certainly in terms of how we’re positioned and how we’re perceived.

Okay, yeah that I've heard. Any feeling for how your major competitors -- my impression was that there was you know a large difference in quality that occurred, maybe I think when the ULTIMATE film came out. Do you know if the perceived difference -- or is the competition catching up at all, or are you seeing any -- them getting any closer?

Yeah, I mean if you look at when the ULTIMATE product was launched as compared to all the other paint protection films on the market, and then you look at what's available today. There’s no question that the competitive products are better. So there’s really two components to that though, one; you know we’re hoping to launch, we’ve the next-generation of our film this year, which we’re really excited about. But the other side is you know while it’s nice to have a vastly superior product to all of your computers and certainly you know everyone will want to take that if they can. But just sort of the anecdote that I just gave about a customer who received a paint protection film that was of poor quality, you know arguably you know that does as much harm as having the vastly superior product does us good. Because it creates a perception that as an industry and as a class of products, that the product is somehow inferior. So really you know I welcome better products in the industry. I hope all the products are better, and I'm glad that some of them are better in particular. And that they have displaced other providers’ really inferior products, because it helps elevate the class of paint protection film. And I'm confident that even with other quality products in the market, the way we go to market is so different that we can easily still differentiate ourselves even as products are better.

Okay, you had mentioned the new UK office as sort of your beachhead in Europe. Are you planning on establishing something similar in Continental Europe or is UK close enough to the rest?

The UK is certainly close enough for sort of an operational headquarters. If you look at what we are doing in the US, we have and in Canada, we have inventory deployed at multiple you know strategic locations around the country just for a quick access to product. And I would anticipate that we’ll do that in Europe as well.

Okay, did you give a breakout? I heard a few numbers, like you said 37% of international. Could you just give if you could, a breakout of like how much is the US versus Canada versus Europe or you know --?

Yeah of course for competitive reasons, the only breakout that we gave is a percentage that's outside the US. And certainly that will be revised with the Canadian acquisition coming on board for 2015. So I don't have a region-by-region breakout for you.

Do you have an estimate of how much market penetration the paint protection film has as a percentage of new cars sales? I've heard the number of like 4% or something like that and you were hoping as an industry to get up to something to like 10%, is that around right?

The number that sort of, the consensus has sort of reached really if you look at the US market, is that 4%-5% number. Again without anybody really studying the market, it's hard to say how accurate that is. But I think that it’s probably not too far off, and I think, you know absolutely a key to growth in the industry and through our growth is that the market for paint protection film expands, and that that penetration rate increases and every indication is that, that's happening.

[Operator Instructions]. And the next question is from [Sean Marconi], a private investor. Please go ahead.

I just have a question regarding the reduction of installation facilities in China, and your new exclusive relationship working with Exquisite. From my due diligence, I’d love to have about 90 installation facilities. Can you touch a little more on that, and how all those people get trained?

Yeah, so what we’ve done in China is we’ve gone through a process to try and evaluate what is the best strategy, and that's still ongoing. And what has been determined is that several of the other distributors that we had were not adding value, and were really just competing with the others on price. So that resulted in the termination of a couple of distributors, and then you know ET is the only one that's remained. So slightly different than exclusive agreements or the exclusive by default at the moment, and we’re still evaluating a lot of options for the market. So relative to the training I think and to them, they are not principally in the business of doing installations. They sell to installers and new-car dealerships and things through a network of provincial distributors around the country. But it's not their installation facilities, and so the training is obviously just as critical in China as it is anywhere else. And we’ve got to offer training and through provincial level distributors offer training to local installers, and those who want to come into the market.

And then as you continuously market your brand and build the XPEL brand on a global basis, I found it pretty interesting that you're getting into window tinting and selling XPEL-branded window tint film. Is that something, I mean obviously you guys are focused on the paint protection film market. But is that something that you guys are going to continue to pursue as a revenue growth driver?

Yeah, that's one of the strategic areas that we’re looking at, we’ve actually been investing in and working on. We think that you know the paint protection film is a really hard product to be able to train and grow new customers. And we’re really good at it, so we're really happy about that. Window tint is a bit more commoditized, but the industry is enormous. So it’s sort of a natural fit for us to look at bringing in window tint on the back of paint protection film where we’ve won the hard business, and now we can get the easier sale. So it's something we’re looking at and we’ve spent quite a bit of time and money on that project. And I would expect to see us do more of that in the coming year.

Okay, and then one last question and I'll jump back in the queue since there’s a bunch of people that would like to ask questions. How many suppliers or how many people in the US manufacture paint protection film?

Well, there’s a number of different providers of paint protection films in the US. And the supply chain among them, you know has some differences and some commonality. But there’s probably you know 10 different brands active in the US and of one varying degree or another.

Okay, and would it ever make sense for XPEL to manufacture their own film and how? So is that always something that will just be outsourced?

No, we are open to you know any and all opportunities, certainly as you look at gross margin and trying to weigh margin versus CapEx and other risks. But you know we’ve a long-term view of the industry and we’re interested in and open to and actively look at all possible you know avenues strategically for the business.

Thank you. The next question is from [Max Bolanski] of [indiscernible]. Please go ahead.

As an investor, I would like to just ask you a question going forward. There seems to be a -- you know this is not a criticism but a lack of investor awareness of this company. Do you have any plans to increase investor awareness and/or take this company off the TSX Venture, move it to the [States], and increase liquidity also?

Sure, I think a great question, Max. Relative to just awareness of the company, I think you know we’ve retained IMS to help us with that. I think probably you’ve noticed the increase in the quality of the releases. And obviously you know this being our first conference call which has been planned out for 4 or 5 months shows that we’re serious about getting that message out. So we think that's an initial you know very positive step. We’re asked a long time, a lot of the time about US listing, again to create more liquidity and generate more awareness. You know it’s absolutely something that we want to do. You know being small, having this growth we’ve been focused on our still limited resources on sort of the day-to-day on getting these acquisitions done, and now on completing the integration so that we’re a well-oiled machine. But you know personally as a shareholder I am well aware of the benefits of the US listing, and believe strongly in it. It’s something that is of definite interest to the company. I just cannot provide an exact timeframe at this point.

I'll ask another quick question. What are your expansion plans as far as company-owned stores in the United States? I know you’ve got what is it, four or five of them now? Is there a plan to roll more out?

Sure, so we’ve five locations now. And you know one of the strategies behind those locations was to address a lack of independent installers in certain markets, where there was just literally no one doing the work, and we wanted to come in and do it. The other side was that you know we learned a lot from doing that. Our location in San Antonio is probably one of the top grossing paint protection film installation centers in the world. And San Antonio by many measures relative to paint protection film is sort of an average market. It’s not a good market, but we’ve done it exceptionally well. But as important to that with those locations what they really become is the service centre for that local area. So I'll give you an example, we’ve a location in Houston. Well, we’ve a location in Houston, and that means we’ve inventory in Houston. That means we have salespeople in Houston. That means we’re able to invest in doing a large exhibition at the Houston Auto Show. All of that for the benefit of all of the installers in Houston, because obviously our one location could never satisfy a metro of that size. So what we’ve have seen is that you know while the installation business in Houston is good, the greatest benefit to the company is what we’ve been able to do in support of all of the other installers in that market. And the aggregate films sold in that metro is much higher as a result. So we look at that, we do not have any other locations planned. But we look at it opportunistically and think if it makes sense, if there is a unique need or a unique opportunity we would continue to pursue it as we’ve these others. But we don't have any planned at this point.

Thank you. The next question is from Marco [indiscernible] of Deutsche Bank. Please go ahead.

I just wanted to ask you a quick question about your international sales and just your international growth strategy. You mentioned that 37% of sales in Q4 came from international. I was wondering what your long-term targets for the international markets are? And where do you see that growth heading? Right now, internationally how fast do you think your sales can grow?

I don't know if I can say how fast I think they could grow, but I think from everything that we see, there’s nothing that we see about this product that is specific to the US. We think it really is a global product and there’s global demand. Particularly globally, there is different regions that you know need the product more than others, which is a key contributor. Obviously in the Middle East, the conditions warrant the product in a way that you don't have in mid-America. And that's a positive trend, and so over the long term we think that the percentage of sales overall as a percentage of the total will continue to increase. I think that's a trend that will continue. It’s one that we’re really focused on. So you know the actual international growth rate versus domestic growth rate I think over you know a sort of relatively short period of time is sort of hard to say. Because sometimes these things happen in fits and starts, but we do expect that the international component of the business as a percentage of the total will continue to increase. And I think you know it ultimately could exceed half the business.

Just one quick follow-up. I was wondering in terms of your new products that you're going to be launching in 2015, will those be paint protection products or will you be expanding into other products like window tinting?

We’re planning to upgrade and launch new paint protection film products as well as really enter the market in some other areas.

Thank you. The next question is from Ian Cassel of MicroCapClub. Please go ahead.

My question relates to sort of the products that you are going to be coming out with in 2015, in particular the new or the better paint protection films. Can you talk a little bit about some of the new attributes or added attributes of those films?

I'd love to, but not at this point. We’re are still sort of finalizing the line up. And also we’d like to hold any competitive advantage as long as possible is I am sure you can understand.

Thank you. I’d now like to turn the conference back over to management for any closing remarks.

Yeah, I’d just like to thank everyone. We had good participation, and thank you for participating. And we look forward to speaking with you next quarter.