Greetings, and welcome to the XPEL Technologies Third Quarter 2015 Earnings Release. At this time, all participants are in a listen-only mode. A brief 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 Jennifer Belodeau. Thank you. Please go ahead.

Thank you. Good morning and welcome to our conference call to discuss XPEL Technologies’ financial results for 2015 third quarter and first nine months. On the call today, Ryan Pape, XPEL’s President and Chief Executive Officer, will review the company’s financial results and provide an overview of the business operations and future growth strategies. Immediately after his prepared comments, we’ll take questions from our call participants. I’d like to take a moment to read the Safe Harbor statement. During the course of this call, we will make certain forward-looking statements regarding XPEL Technologies Corp. and its business, which may include but not are not 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 planned, is expected, expects, scheduled, intends, contemplates, anticipates, believes, proposes or variations including negative variations of such words and phrases or state that certain actions, events or results may, could, would, might, or will be taken, occur or be achieved. Such statements are based on the current expectations of the management of XPEL. The 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 risks 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 XPEL. Although XPEL has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in the 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. Except as required by applicable securities laws, forward-looking statements speak only as of the date on 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. With that out of the way, I’ll now turn the call over to Ryan. Go ahead, Ryan.

Thanks, Jen, and good morning and welcome to our third quarter earnings conference call. I hope all of you got a chance to review the earnings release that we put out earlier this morning. We’ll start just by reviewing the financials and then talk a bit more about the operations. For the third quarter, revenue grew to 10.9 million, which was a 29% increase compared to the third quarter in 2014 and a 38% increase for the nine-month period to 30.3 million. So, due to our increasing international exposure in the UK, but mainly in Canada, we’ve begun presenting key numbers on a constant currency basis, which we feel will help investors clearly understand the trends in our operations on an apples-to-apples basis irrespective of the macro-currency environment. The constant currency numbers are a non-IFRS measure and they represent the results as they would have been using the prior year’s exchange rates. So on a constant currency basis, revenue increased 35% for the third quarter and it increased 42% for the nine-month period. So you can see that foreign currency continues to affect our results. On a revenue side looking at our different geographical regions, we’ll see that the third quarter was a mixed bag in terms of regional performance. In the U.S., the business was consistent. It was consistent with the second quarter, and we would expect that because Q2 and Q3 are typically very similar in the United States and one or the other can be stronger typically. In China, we saw sales near parity with the previous year. This was for the first time this year, which is an improvement sequentially from the second quarter and what we’ve been expecting as we worked through our reformulated distribution strategy. We’ve reduced the number of distributors in China to…

Thank you. [Operator Instructions]. Our first question comes from the line of Erin Lanni [ph] who is a private investor. Please proceed with your question.

Yes. Good morning, Ryan. My first question is on the SG&A front. I was wondering if you could explain the quarter-over-quarter increase. I know you said about 50,000 of that was marketing. What would the balance of 200,000 be? Thank you.

Sure. We saw approximately $30,000 in increased personnel expense related to net new employees or other adjustments. We had some expense as a true-up accrual related to some other incentive plans for our different employees relative to how they’re paid. So we saw some expense there. And then the rest of the expense sequentially from the second to third quarter was split more widely across a variety of categories, so not any one thing in particular.

Okay, thanks. And second question was on the rest of world. You mentioned that the growth looks a lot like Q2. I was wondering though are we talking about – was it an actual year-over-year increase or was it a decrease?

Sure. So when we’re talking about the growth rate relative to the business, the only year-over-year decline that we’ve seen in any region ever in the past, say, 18 months was in China relative to the reorganization of the distribution. And there we actually saw on a year-over-year basis a net decline in sales. In any other region and in sort of that rest of the world, what we’re talking about is a change in the growth rate. And second quarter and third quarter in sort of the rest of the world had a lower growth rate than we saw in the first quarter and in the fourth quarter back into last year. But it’s not a decline in sales, it’s just a reduction in the growth rate for that rest of the world segment.

Perfect. I’ll get back in the queue.

Thank you.

Thank you. Our next question comes from the line of Andy Preikschat with Edgebrook Partners . Please proceed with your question.

Hello, Ryan. Can you talk about how many installers you are training per week in the U.S., Canada, and Europe right now?

We don’t normally break it out per week. Typically, we have – in the U.S. we have a capacity of 8 to 10 installers or 8 to 10 people per week and that varies weekly. Canada is training a little differently and the UK has a similar setup but slightly less capacity. Just to speak to it generally, overall the training classes have been full. Our training class offered in our headquarters here in San Antonio, first, after Thanksgiving was full this morning. So we’re still seeing strong interest from the net new installers to the business or from existing installers who were training up additional people.

So what growth rate would that imply on your existing installer base if we were to annualize that current training?

I’m not sure that that’s necessarily the way that we would look at it because you’ve got net new people in the business, then you have additional installers as part of an existing business and depending on what that person is doing, they may have a disproportionate effect on the growth rate of their own organization. So if someone is brand new to the business, they might be limited by more than just their training capacity, they may need sales experience, and they’re getting a new business up and running whereas an additional installer plugged into an established operation might be able to have a more meaningful impact, so we don’t see a direct connection between the number of people in the training class and a measurable way that that impacts the growth rate, but overall we do know that getting additional trained installers is key to continue growth of the industry and of our business whether they’re new to the industry or they’re going into an existing operation.

Okay. Could you share a bit more about how the window tint is going and when that could see 10% of sales?

So when we look at the window tint, when you look at sort of the history on the paint protection side, we won a lot of business historically and still do on converting customers from competitive product. And on the window tint side, that works similarly as it did on the paint protection film side historically, which is – it’s a rather drawn out sales process because we’ll talk about the product with our existing customers, then we’ll sample the product, then the customer will evaluate the product, then they may purchase some and work it into their daily operation, and then with the goal being that after that they’ve switched all of their business to us. So to look at a given customer and say, if we worked them hard, could that be a three-month cycle or longer, it could be depending on where in the season that we did them. So that’s ongoing now with our existing customer base. We’re trying to win that business. I think it’s going to be into the middle of next year before we get a critical mass around the window film. At what point does that hit or exceed 10% of revenue, it’s just too early for me to say at this point.

That’s all I had. Thank you.

Thank you.

[Operator Instructions]. Our next question comes from the line of William Maginn [ph] who is a private investor. Please go ahead with your questions.

Hi, Ryan. Can you talk about flexing power for your international distributors? Do you know if they’re able to go back at this point, go back to their my kit and increase prices to basically fix the impact of the stronger USC [ph]?

It’s a good question. I think the answer may depend and it sort of depends if you’re looking at independent distribution, it sort of depends a lot on the dynamics of their particular business. Do they rely solely on paint protection film to run their distribution business or were they more diversified and they’re doing other things, which may create other opportunities for them? I think the best way that I can answer it is what an independent distributor might do has to look at how we approach it ourselves in our international subsidiaries. And at this point looking at Canada specifically and our extension in UK is similar although they have not faced quite the currency challenge the Canadian dollar has, but we look at it and we did a price increase in the spring, approximately 5% depending on who you were and what you were buying. And we look at it now and obviously since then we’ve given that price increase back likely with continued sequential decline with the Canadian dollar. But we look at it and we’re trying to build a long-term business, we’re trying to take market share, we’re trying to grow the business. And so we take a sort of cautious view near term at raising prices as much as you would need to, to create a meaningful impact to the bottom line because it’s not clear that doing that is in our best long-term interest. Now that said, as we get pass the end of the year and take stock of sort of where we are on the FX side and consider making further adjustments. But I guess if we look at it and we’re fairly cautious in terms of what we want to do, especially in Canada with some challenge at the macroeconomic level, I would suspect that a lot of our international distributors who are in essence exposed to the same thing would have similar caution.

Okay, thanks. And that 5% increase effected in spring, was there a meaningful impact with regard to just volumes after you increase the price, do you notice reduced volume or it was fairly easy to pass on the pricing?

I would say there was not a meaningful impact of volumes. The market accepted that fairly well. You look at it in context, if you were to receive a 5% annual increase in this type of business that’s typically pretty high. So that was not a small amount to be absorbed by the market, but I do think it was absorbed fairly well and that’s why as we get passed the first of the year, we’ll be reevaluating and take stock of where we are in terms of pricing.

Okay. Can you share some of the specifics related to your customer base? If we talk about how many customers you have this year versus last year? And churn rate, is that something you could be comfortable discussing?

Well, in a sense no because what we don’t have in terms of a metric that we want to share is something we find incredibly meaningful in terms of number of customers. The number of customers continues to increase. It always increases. It increases month over month. But when you look at the profile of who our customers are, there is an incredibly sort of long tail in terms of the distribution of how much they buy and what their volume is. And the reason is that you can have a customer who runs a sizable operation and does only pain protection film. That could be in the U.S., that could be a top 20, top 10 customer of ours and obviously then they have large volume. On the other hand, because of the nature of this product, it’s also something that can be sold as an add-on in many other types of businesses. And so there are many customers that have substantially smaller volume. So, the total number of customers continues to grow. We have other metrics where we segment customers and look at how many in one bucket or another, but I don’t think that those are particularly relevant to share at this point because there’s a lot of noise in sort of how we classify those customers.

Okay. And how about churn rate in your key customer base, is that something you track?

We do and our churn rate is very low. We have really great customer loyalty and we continue to do that. In fact, even those that we may lose because it does happen obviously, we see a substantial sort of boomerang effect where some will say, well, I like XPEL but I got to go try something else, maybe it’s cheaper, maybe it’s this, maybe it’s that. And we see a lot of those customers come back. Again, just sort of based on the ordering patterns that are customers have given that wide distribution, we don’t have a good churn metric to share because it’s such a wide distribution. However, when we look at our top customers and look at our top percentage of customers, we’re tracking those specifically to make sure that we’re still getting the order value from them and the churn rate is low on those and those constitute a large portion of the revenues.

Okay. Maybe a couple other questions. You talked about an inflection point with your deal flow that you’re in early talks with certain OEM groups or is it dealership groups. Can you expand on that what’s going on there?

Well, if you look at where the business is traditionally, this would be your independent installers and dealerships. And that’s the bread and butter piece of the business and that’s who we add continuously and who we work through the training process. When you look at who else could theoretically take the product and run with it in terms of adding it as an accessory, you have groups that customize vehicles, you’ve got the special edition vehicles and you have OEMs that want to take paint protection film and offer it. These are what we kind of consider these high profile type accounts because they’re not independent installers and they’re not dealerships. They really fit another part of the industry and that’s --

That was the OEMs at the factory level or the dealership level…

No, we don’t look at this product as really suitable for a factory level. There is some paint protection film installed at the factory on those vehicles, small pieces and really high ware [ph] areas and that’s really a commodity business. So we run across those opportunities every now and then and if it hits our sweet spot, we’ll pursue it. But we’re talking about not at the factory level but others that are selling vehicles or customizing vehicles that could add XPEL as an option. And there’s a real value of what we’re saying because there’s a difference in us trying to call on and knock down doors and raise our hand to get noticed where now these potential customers are coming to us. And so it’s a validation of the strategy. But that will evolve over time and we’ll see how good of a fit our product is for any of these partners.

And my last question is on window tints, do you have a sense of how big the market is at the wholesale level in the U.S.?

We do. It’s substantially larger than paint protection, likely several hundred million dollars.

Okay. And do you know who are the biggest players in terms of market share?

Overall, I think that the largest player has to be Eastman Chemical and their associated brands and companies they’ve acquired a number of different brands under their umbrella. And so I think I just assume they have the largest market share.

All right. That’s it from me. Thank you. Keep up the good job.

Thank you.

Thank you. Our next question comes from the line of Erin Lanni [ph] who is a private investor. Please proceed with your question.

Yes. Just more of a high level question here. In order to bring the business to the next level in terms of sales, is there anything different that you’ll have to do whether it’s operational or bringing in new talent eventually? Thank you.

Sure. So I think on our side there’s always an opportunity to continue to increase our sales team, and this is relationship selling and this is not a one-off sale, this is someone that – a customer that we want to bring – that we want to order every day or every week or every month or on a reoccurring basis. So the more people we add on that side, the more relationships we can build and we can get that sort of reoccurring revenue. I think if you look at it high level, there’s opportunities to sell the product maybe not in other verticals but if you look in the fleet business or other aspects of the automotive business that we don’t currently touch, it’s likely to think that we’d look to bring in other people with experience in that skill set. But aside from sort of that kind of specific domain in sales experience that we don’t see a big gap or something that needs to change operationally. Now on the other hand, the way we look at it as we look at the profile of our customer and you have dealerships, like we mentioned but on the independent installer side, these are independent businesses and they’re typically small businesses. And so they have their own challenge and opportunity. So one of the things we continually look at is what are their paint points, what prevents them from growing faster, what prevents them from scaling their businesses more because at the end of the day, if they scale their business, we’ll continue to scale ours and what else can we be doing to address challenges they have that may be sort of nontraditional or maybe outside the scope of what we do today. But that’s sort of just a long-term process to evaluate that and work that into our portfolio as it makes sense.

Okay. That’s it from me. Thanks, Ryan.

Thank you.

Thank you. We have no further questions at this time. I’d like to turn the call back to Mr. Pape for closing remarks.

Okay. Well, we appreciate everyone’s participation and we look forward to talking next quarter. Thank you.

This concludes today’s teleconference. You may disconnect your lines at this time and thank you for your participation.