Greetings and welcome to the XPEL, Inc. Year End 2018 Earnings 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. It is now my pleasure to introduce your host, John Nesbett of IMS Investor Relations. Thank you, Mr. Nesbett, you may begin.

Good morning and welcome to our conference call to discuss XPEL's financial results for 2018. On the call today Ryan Pape, XPEL's President and Chief Executive Officer; and Barry Wood, XPEL's 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 our call participants. Let's take a moment to read the Safe Harbor statement. During the course of this call, we'll make certain forward-looking statements regarding XPEL, 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 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 risk factors and uncertainties affecting the company 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 actions, events, or results to differ materially from those described in forward-looking statements. There may be 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 securities laws, forward-looking statements speak only as of the date on which they were made and XPEL undertakes 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 will now turn the call over to Ryan. Go ahead, Ryan.

Thanks John and good morning everyone. Welcome to our year end 2018 conference call as well. Today is a milestone day in the history of our company. As most of you know by now, we took the first step towards a U.S. listing with today's filing of the Form 10 with the SEC. Barry will walk you through more of the details on that and the related timelines later, but today's filing of the Form 10 effectively means that we've requested to register our securities in the U.S. pursuant to the 1934 Act. We also applied for a listing on NASDAQ Capital Market under the symbol XPEL. It's been a long time coming for the company and I'm excited that we're finally here. To become an SEC issuer, we're required to issue our financial statements in accordance with accounting principles generally accepted in the U.S. or U.S. GAAP. Prior to today's filing, financial statements previously issued by the company were stated in accordance with International Financial Reporting Standards or IFRS. In Layman's terms, we had to switch accounting standards in order to register our securities in the U.S. And that's obviously a lot of work, and congrats to our finance team for getting that done. So, therefore, any numbers we talk to today relating to our results are now U.S. GAAP-based numbers. With that, let's talk about what was clearly an outstanding year for XPEL. Our revenues for Q4 grew 33.1% to $26.8 million, reflecting continued strong growth for the company. As we alluded to on previous calls, we expected our revenue growth to moderate as we went through last year and did in Q4. Given that, I was pleased with our Q4 performance. Revenues from China represented 26.1% of our total Q4 revenue, reflecting continued moderation of that mix.…

Thanks Ryan and good morning everyone. Before I talk a little more on our results, I would like to walk you through our filing process leading up to today's announcement. As Ryan mentioned, we filed a registration statement on Form 10 to register our securities in the U.S. pursuant to the 1934 Exchange Act because we're seeking to list our common stock on NASDAQ under the symbol XPEL. To be clear, this is not an S-1 filing as we do not need to raise capital at this time. As required by the 1934 Act, the Form 10 necessitates inclusion of financial statements audited in accordance with U.S. GAAP. Because we're designated as an emerging growth company under the JOBS Act of 2012, we're only required to submit two years of audited financials in the Form 10. As most of you know, our previous financial statements were under IFRS. Given that, we had to go through an IFRS to U.S. GAAP conversion for our 2017 and 2018 financial statements. And once that was completed, our U.S.-based auditor, Baker Tilly, had to re-audit our U.S. GAAP-converted 2017 financial statements as well as audit our 2018 U.S. GAAP financial statements. In addition, since we're currently still a Canadian reporting company, we requested and were granted an exemption by the Ontario Securities Commission, which allows us to file U.S. GAAP-based financial statements in Canada instead of the otherwise required IFRS-based financial statements. As a condition to granting this exemption request, the Ontario Securities Commission has required us to file U.S. GAAP-based 2018 interim or quarterly financial statements on SEDAR no later than April 30th. This effectively means that we have to quarterize, if you will, our audited 2018 annual GAAP financial statements, meaning that our IFRS to U.S. GAAP adjustments, which were determined on…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Adam Goldstein, Private Investor. Please proceed with your question.

Hi. Thanks for taking my question. I just want to make sure I understood. Ryan, you said there will be a decline in revenue in the first quarter of 2019. Was that a decline in comparison to the first quarter of 2018 or in comparison to Q4 of 2018?

No, we're speaking year-over-year.

Wow. So, that -- there'll be a year-over-year decline in revenue. That's the first time I think I've ever seen that.

Yes. Well, I mean, we're -- we don't know the exact number as we just finished March just a few days ago, which is our -- the biggest month of the first quarter typically seasonally. But when we're sort of normalizing our volume into China instead of sort of building volume and building product out in the channel, as we did in the first half of last year and just sort of equalizing to demand coming off tripling the volume essentially last year as we did, that will have a very modest result and a very modest decline in revenue in the first quarter from the first quarter of 2018. And that's despite, really, strong performance elsewhere. So, part of that is that, obviously, the growth in China on a year-over-year basis has moderated, like we talked about in Q4 and it's just -- it was really exceptional last year, so we have a big comparison to make there.

Okay. And one more -- my follow-up, I guess, is will there -- I noticed there's no more disclosure on net income based on geographic segment like there used to be. Did I just miss it or is that the case, that's no longer going to be disclosed?

That's correct, Adam. This is Barry. We are under U.S. GAAP. We effectively have one segment. So, on a go-forward basis, that's the way we'll present.

Okay. I've got another -- I'll put myself back in the queue. I've got a few more questions.

Sure.

Yes, and I would -- I'd add to that -- to Barry's remark there. So, you will notice on the U.S. GAAP presentation, we have revenue by geography rather than a segment presentation in the IFRS financials. And I can tell you that while looking at the IFRS segment net income may seem particularly useful to us internally, that particular metric is not that useful because you've got transfer pricing mechanisms and sort of arbitrarily assigned profit around the world. So, while on the surface I think losing that sort of segment net income may be a loss, I don't think it's really as useful as it would seem. And instead, the geographic breakdown sort of mandated in the U.S. presentation, like we have now on a revenue basis, I think is actually more useful, in fact.

[Operator Instructions] Our next question comes from the line of Jason Hirschman [ph], a Private Investor. Please proceed with your question.

Hi guys. Great year and congratulations on the pending uplisting to NASDAQ. I've got a question for you today. I was wondering, perhaps, if you can comment a little bit more on the opportunities that you see in 2019 and a little bit into the future in other areas of Asia-Pacific, specifically Japan and Korea.

Sure Jason. Yes, I think we've all talked extensively about the success in China over the past year and the growth, but I think it highlights a very good point, which is that by any metric, many of these other markets in Asia correspondingly are substantially under-penetrated or underperforming as you see it. Japan is a particularly good example. I mean for the size of that economy, our sales there, relatively speaking, historically are very small. And so one of our areas of focus over the past six months, really, in leveraging our team in Taiwan has been Japan specifically. And so we have real high expectations for Japan, as an example, and other markets around Asia that we're able to spend more time and devote more local resources to. And all of these markets are different. China has a certain profile and a unique draw to the product and a unique way to go to market and these other markets are -- they're different. And we have to sort of cater to them and have the right partners or distributors or direct presence. But you mentioned Japan, that's one that we are particularly focused on among other points in the region.

Just one follow-up question is that you've given some commentary on China for Q1 2019. Could you give a little more commentary, perhaps, on Continental Europe and how that's developing so far?

Yes, we've been pleased coming out of Q4. Like I mentioned, we've seen sort of growth rates decline there, sort of, kind of watching how that's going to behave. Europe, we still see great opportunity. Our flow of customers in terms of new leads and new opportunities continues to be strong as ever along with a lot of other unique projects. One of the things we're seeing there is Tesla, as an example, which we do very well in, in terms of our attachment rate to Teslas sold. Many of them are just now on Model 3, just now reaching Europe for the first time. Shipments just started recently. So, that's a net positive for us, along with all of our other initiatives there. So, we're very bullish on Europe going forward and I think we have a lot of opportunity there.

Great. Thank you very much.

Thanks Jason.

There are no further questions in the queue. I would like to hand the call back to management for closing comments.

I'd like to thank everybody for joining us today on our year end call and we look forward to speaking with you next time. Thank you.