Good day, ladies and gentlemen, and welcome to the XPEL Inc. Second Quarter 2021 Earnings Call. After the presentation, there will be a question-and-answer session. [Operator instructions] It is now my pleasure to turn the floor over to Mr. John Nesbett of IMS Investor Relations. Sir, the floor is yours.

Good morning and welcome to our conference call to discuss XPEL's financial results for 2021 second quarter. On the call today we have Ryan Pape, XPEL's President and Chief Executive Officer; and Barry Wood, XPEL's Senior Vice President and Chief Financial Officer, who will provide an overview of the business operations and review the company's financial results. Immediately, after the prepared remarks, we will take questions from our call participants. I will 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 as expected, expects, schedules, 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 results 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's 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 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 of 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, I'd now turn the call over to Ryan. Go ahead, Ryan.

Great John, thank you and good morning as well. Welcome to the second quarter 2021 call. I think obviously Q2 was an amazing quarter for us. Certainly exceeded our expectations going into the quarter. Revenue grew 92% to a record $68.7 million. Sequentially, revenue grew 32.5% from our previous record revenue in the first quarter of this year. Year over year growth rate was impacted positively by the COVID impacts of last year, but it was very strong by any measure and even independent of that. As you may recall, the US and most of our other regions, other than China saw significant COVID impacts in Q2 of last year but again it was strong across the board and strong across all of our regions, even factoring that. In Canada, we had a great quarter posting a record $8.9 million in revenue. As you mentioned, a Q1, there was about a $1million of quarterly sales into the dealership channel that were pushed from Q1 to Q2, but even with that great performance and continental Europe and UK also had record quarters. Continental Europe grew 80% to $5.2 million in us dollar terms and UK grew over 200% year over year looking at the impact from previous year's lockdowns. Really happy with this region looking for ways to continue to invest both in Europe broadly, and then in the UK organically and via acquisition. Our Asia Pacific region, which excludes China, another good spot past the $2 million quarterly revenue in US dollar terms first time in history. This is still an area that we're very much focused on investing in. We think it's a very small region for us, has a lot of opportunity going forward. Seeing some COVID impact there if you're following the news, s we watched that,…

Thanks Ryan and good morning, everyone. Obviously Q2 was just an outstanding quarter or by almost any measure, just starting even with our revenue growth of 92% to $68.7 million, which was a record. And as Ryan alluded to, we had a relatively easy comp due to the impacts of COVID last year. And as you may recall, we saw revenue declines in several of our regions, including the U.S. in Q2 last year due to COVID. But even with that, our Q2 performance still exceeded our expectations and most of this growth was organic. There's approximately $2.2 million of acquisition related new net revenue in the quarter from our recent acquisitions, including PermaPlate. So, it was just a great grassroots performance for the company. And on a year-to-date basis, our revenue grew 87.9%. Product revenue grew 89.5% to approximately $58.7 million in the quarter and 89.4% to $103.6 million for the first half of the year and in this category, paint protection film grew 86.6% to $45.2 million in the quarter and grew 84.1% for the first half of the year. And our window film product continues to outperform growing 86.1% to $11.1 million in the quarter, and doubling to $18.2 million for the first half of the year. We also saw a record quarter in our other revenue category, which consists of our fusion product line, plotter sales and tools and accessories to support film installation. So this growth makes sense, given the performance in the film lines. Q2 2021 service revenue, more than doubled for the quarter and grew 79.3% for the first half of the year. Total installation revenue from our company owned installation centers and our OEM segment grew 124% representing 9.3% of our total revenue for the quarter. And on a year-to-date basis, total…

[Operator instructions] We'll take our first question from Steve Dyer with Craig Hallum.

Thanks. Good morning guys. Thanks for taking the question. Wondering, obviously new car sales pinch point given inventory, but does not seem to be slowing you guys down in the least. Do you feel or do you have any evidence that the take rates are increasing on the vehicles being sold or a greater percentage of square feet or square inches on the vehicle?

Yeah. Steve, thanks. Yeah, I think the macro trend for us for a long time has been take rate or attach rate to new cars sold has gone up in terms of number of units attached, certainly in most all the markets that we're in. And then, within that trend over time has been certainly on paint protection film, more coverage, more material per car. So those are the two biggest factors that have had us, sort of disconnected from the overall cycle for a long time. I think that, like we're talking about, seeing July sales down on sequentially from June and I think we've probably hit the point where we feel and our dealers feel a little bit the pressure from inventory thought maybe we'd see that last quarter some, but we didn't see it at all. So maybe we're seeing a little of that now, but that's still with backstop of more cars getting film on it and more film per car. So, we see that a little bit, but it's certainly not a driving factor for our business, but the inventory pinch.

Got it. Thanks. And then you talked a little bit about maybe some pre-buying or some inventory build just, I guess, fearing or trying to get in front of a price increase. Have you talked about, or thought about taking a price increase in the back half of the year or it doesn't seem like your cogs are impacted at all, but everything else seems to be going up in price?

I think I lost the last part of your question, Steve, but yeah, we're going to be, we'll be looking at pricing in the second half of the year. We were seeing different costs increase as everyone is from product to logistics, to everything in between. So it certainly hasn't had a significant impact in Q2. And to the extent there is impact, we plan to mitigate that through increases in the channel as necessary. So no pricing is certainly a factor across everything that I think everyone's doing. But it's not one that we expect to have a detrimental impact to the margin or operating performance of the business at this point.

Last one for me. And then I'll hand it over. You talk about continuing to be active on the M&A front PermaPlate I think was on the larger side of what you've done. As you look at your funnel, is there anything sort of bigger yet, or would you anticipate continuing to be sort of tuck-ins and sort of more easily integrated acquisitions?

Sure. So yeah, in what we're working on in the next six to nine months there's nothing in there individually that's larger than that PermaPlate film acquisition. So a lot of tuck-ins may be still larger for us than our historical average, but between that and the size of Permitplate, that's really kind of where we're focused right now.

[Operator instructions] We'll go next to Jeff Van Sinderen with B. Riley.

Hi, good morning, everyone. Just wondering if you could give us a little more color on what you're seeing in China and the near term outlook there.

Well, I think our view is China's been very strong. The car business in China has been strong. We've been doing exceptionally well. So I think, from that standpoint, things have been going great in China. I think what we're watching is just more lockdown pressure with increased COVID prevalence. There's been a lot of talk about that, and I think that creates some maybe near term uncertainty that we didn't have before. But that's really purely speculation at this point. I think aside from that we've had great results and the overall dynamics there have been quite positive.

Okay, good. And then anything new to add on the integration Permitplate? I know you touched on it a bit, but just wondering if there's anything you've found there so far that was either positive or negative that was maybe, I don't know, some positive surprise, negative surprise. And then any thoughts on how I guess if your strategy has evolved at all based on what you've seen so far?

No, I think, operationally it's largest acquisition we've done, but also largest acquisition by far in terms of number of people. So we're pretty well advanced on our plan to integrate and there's operational and financial integration, which has really gone exceptionally well and is largely complete in many ways. And now we've got the task of just integrating our sales teams that's really all in the US so that we've got the, the coverage that we need to take our product into all of these potential customers and make use of the whole team that we have now, and that's really ongoing and will be throughout the rest of the year. I think it's demonstrated that our team quite capable of handling what was a larger acquisition for us. So I think that certainly gives us confidence going forward as we look at other opportunities, if we get to ones that are at that size or larger. It was really good from that standpoint, I think it is a related business, but it is different in many ways going in and selling a high volume service to a lot of mid range car dealerships. That's not something that we've done a lot of. But we very much think it's an important part of the strategy and an important part of our kind of multichannel approach to how we go to market. So the team has been great, a lot of really, really good people on board. So I think we've been very pleased with how that's going.

Okay. Terrific. And then if I could just squeeze in one more, just wondering I guess how you're thinking about architectural over the next couple of quarters.

Yeah. We didn't talk about that a whole lot today, but we've been going through a whole process of integration this first half of the year with [indiscernible] acquisition. We've got significant enhancements to the product line, product lines grown quite a lot, and that's in the process of being rolled out and then some added elements in how we go to market there. Obviously we've got the channel of installers and on the back of our business that many are familiar with. But that line of business adds other go to market in terms of how we sell the product other potential referral sources, other potential influencers to drive that business. And so adding those into our, to our plan where that's different from what we've done historically, that's been a key area of focus for us this year. So, we're still seeing, you know, that, that revenue double, double upon double, and hit records every month. So I think very pleased with that on our path to where we're going with it.

Great to hear thanks and best of luck in Q3.

And there appear to be no further questions at this time. I'd like to turn the call back over to management for closing remarks.

I'd like to thank everybody for making time today and thanks to our team who's done an amazing job this quarter. It has to be said that when you increase your revenue year over year, the way we have, that's a lot of work and a lot of things that have to be done and done well every day to make that possible. So very much thanks to them and look forward to speaking to everyone next quarter. Thank you,

Ladies and gentlemen, that does conclude today's conference. We appreciate your participation. You may disconnect at this time and have a great day.