XPEL Inc

Previous wording

The Company began as a software company designing vehicle patterns used to produce cut-to-fit protective film for the painted surfaces of automobiles. In 2007, we began selling automotive surface and paint protection film products to complement our software business. In 2011, we introduced our ULTIMATE protective film product line which, at the time was the industry’s first protective film with self-healing properties. The ULTIMATE technology allows the protective film to better absorb the impacts from rocks and other road debris, thereby fully protecting the vehicle. The film is described as “self-healing” due to its ability to return to its original state after damage from surface scratches. The launch of the ULTIMATE product catapulted the Company into several years of strong revenue growth.

Current wording

ULTIMATE protective film product line which, at the time was the industry’s first protective film with self-healing properties. The ULTIMATE technology allows the protective film to better absorb the impacts from rocks and other road debris, thereby fully protecting the vehicle. The film is described as “self-healing” due to its ability to return to its original state after damage from surface scratches. The launch of the ULTIMATE product catapulted the Company into several years of strong revenue growth.

Previous wording

The following table is a reconciliation of Net income to EBITDA for the three and six months ended June 30, 2024 and 2023 (in thousands):

Current wording

The following table is a reconciliation of Net income to EBITDA for the three and nine months ended September 30, 2024 and 2023 (in thousands):

Previous wording

The following table summarizes the Company’s consolidated results of operations for the three and six months ended June 30, 2024 and 2023 (in thousands):

Current wording

The following table summarizes the Company’s consolidated results of operations for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands):

Previous wording

The following table summarizes revenue results for the three and six months ended June 30, 2024 and 2023 (in thousands):

Current wording

The following table summarizes revenue results for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands):

Previous wording

Because many of our international customers require us to ship their orders to freight forwarders located in the United States, we cannot be certain about the ultimate destination of the product. The following table represents our estimate of sales by geographic regions based on our understanding of ultimate product destination based on customer interactions, customer locations and other factors for the three and six months ended June 30, 2024 and 2023 (in thousands):

Current wording

Because many of our international customers require us to ship their orders to freight forwarders located in the United States, we cannot be certain about the ultimate destination of the product. The following table represents our estimate of sales by geographic regions based on our understanding of ultimate product destination based on customer interactions, customer locations and other factors for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands):

Previous wording

Product Revenue. Product revenue for the three months ended June 30, 2024 increased 2.8% over the three months ended June 30, 2023. Product revenue represented 75.7% of our total revenue compared to 79.1% in the three months ended June 30, 2023. Revenue from our paint protection film product line increased 1.5% over the three months ended June 30, 2023. Paint protection film sales represented 52.1% and 55.3% of our total consolidated revenues for the three months ended June 30, 2024 and 2023, respectively. The total increase in paint protection film sales was due to increased demand for our film products across multiple regions mostly offset by lower sales into China. Sales into China continue to be negatively impacted as our distributor continues to work through excess inventory levels accumulated in the fourth quarter of last year.

Current wording

Product Revenue. Product revenue for the three months ended September 30, 2024 increased 7.2% over the three months ended September 30, 2023. Product revenue represented 77.0% of our total revenue compared to 79.0% in the three months ended September 30, 2023. Revenue from our paint protection film product line increased 2.7% over the three months ended September 30, 2023. Paint protection film sales represented 53.6% and 57.4% of our total consolidated revenues for the three months ended September 30, 2024 and 2023, respectively. The total increase in paint protection film sales was due to increased demand for our film products across multiple regions offset by lower sales into China. Sales into China continue to be negatively impacted as our distributor continues to work through excess inventory levels accumulated in the fourth quarter last year.

Previous wording

Revenue from our window film product line grew 8.4% for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Window film sales represented 20.0% and 19.9% of our total consolidated revenues for the three months ended June 30, 2024 and 2023, respectively. This increase was driven by continued demand resulting from increased product adoption in multiple regions. Architectural window film revenue increased 29.6% compared to the three months ended June 30, 2023, to $3.1 million, and represented 14.1% of total window film revenue and 2.8% of total revenue for the three months ended June 30, 2024. This increase was due mainly to increased product awareness and adoption in many of our regions.

Current wording

Revenue from our window film product line grew 20.6% for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Window film sales represented 20.1% and 18.3% of our total consolidated revenues for the three months ended September 30, 2024 and 2023, respectively. This increase was driven by continued demand resulting from increased product adoption in multiple regions. Architectural window film revenue increased 6.2% compared to the three months ended September 30, 2023, to $2.9 million, and represented 12.6% of total window film revenue and 2.5% of total revenue for the three months ended September 30, 2024. This increase was due mainly to increased product awareness and adoption in multiple regions.

Previous wording

Other product revenue for the three months ended June 30, 2024 decreased 5.8% compared to the three months ended June 30, 2023 due primarily to a decrease in our ceramic coating product revenue. Revenue for our FUSION product line for the three months ended June 30, 2024 was $1.7 million compared to $1.8 million for the three months ended June 30, 2023.

Current wording

Other product revenue for the three months ended September 30, 2024 increased 11.6% compared to the three months ended September 30, 2023 due primarily to continued growth in revenue from our FUSION product line. Revenue for our FUSION product line for the three months ended September 30, 2024 was $1.7 million compared to $1.5 million for the three months ended September 30, 2023.

Previous wording

Geographically, outside of China, we experienced continued growth in most of our regions including 9.7% growth in the US region. These increases were primarily due to increasing product awareness and adoption.

Current wording

Geographically, we experienced continued growth in most of our regions including 9.4% growth in the US region. These increases were primarily due to increasing product awareness and adoption.

Previous wording

Product revenue for the six months ended June 30, 2024 increased 1.2% over the six months ended June 30, 2023. Product revenue represented 75.0% of our consolidated revenue compared to 78.8% in the six months ended June 30, 2023. Revenue from our paint protection film product line increased 0.3% over the six months ended June 30, 2023. Paint protection film sales represented 53.2% and 56.4% of our consolidated revenues for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Product revenue for the nine months ended September 30, 2024 increased 3.3% over the nine months ended September 30, 2023. Product revenue represented 75.7% of our consolidated revenue compared to 78.9% in the nine months ended September 30, 2023. Revenue from our paint protection film product line increased 1.1% over the nine months ended September 30, 2023. Paint protection film sales represented 53.3% and 56.8% of our consolidated revenues for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Revenue from our window film grew 3.6% compared to the six months ended June 30, 2023. Window film sales represented 18.3% and 18.8% of our total consolidated revenues for the six months ended June 30, 2024 and 2023, respectively. This increase was driven by continued demand resulting from increased product adoption in multiple regions partially offset by weakness in China during the first quarter of this year. Architectural window film revenue increased 30.9% compared to the six months ended June 30, 2023 to $4.9 million and represented 13.3% of total window film revenue and 2.4% of total revenue. This increase was driven by increased demand for our architectural window films resulting from increased product awareness and adoption.

Current wording

Revenue from our window film grew 9.5% compared to the nine months ended September 30, 2023. Window film sales represented 18.9% and 18.6% of our total consolidated revenues for the nine months ended September 30, 2024 and 2023, respectively. This increase was driven by continued demand resulting from increased product adoption in multiple regions. Architectural window film revenue increased 20.7% compared to the nine months ended September 30, 2023 to $7.7 million and represented 13.1% of total window film revenue and 2.5% of total revenue. This increase was driven by increased demand for our architectural window films resulting from increased product awareness and adoption.

Previous wording

Geographically, we saw revenue growth in most regions during the six months ended June 30, 2024. These increases were due primarily to increased product awareness and attach rates.

Current wording

Geographically, we saw revenue growth in most regions during the nine months ended September 30, 2024. These increases were due primarily to increased product awareness and attach rates.

Previous wording

Service revenue grew 25.2% over the three months ended June 30, 2023. Within this category, software revenue increased 28.8% over the three months ended June 30, 2023. This increase was due to an increase in total subscribers to our DAP software. Cutbank credit revenue increased 1.8% from the three months ended June 30, 2023 which is comparable to the associated growth in paint protection film revenue. Installation labor revenue increased 33.9% over the three months ended June 30, 2023 due mainly to increased demand across our dealership services and OEM networks.

Current wording

Service revenue grew 20.2% over the three months ended September 30, 2023. Within this category, software revenue increased 23.5% over the three months ended September 30, 2023. This increase was due to an increase in total subscribers to our DAP software. Cutbank credit revenue was essentially flat from the three months ended September 30, 2023 which is comparable to the associated changes in paint protection film revenue. Installation labor revenue increased 27.4% over the three months ended September 30, 2023 due mainly to increased demand across our dealership services and OEM networks.

Previous wording

Service revenue for the six months ended June 30, 2024 grew 25.3% over the six months ended June 30, 2023. Within this category, software revenue grew 30.5% over the six months ended June 30, 2023. This increase was due to an increase in total subscribers to our DAP software. Cutbank credit revenue increased 0.8% over the six months ended June 30, 2023 which is comparable to associated growth in paint protection film revenue. Installation labor revenue increased 34.3% over the six months ended June 30, 2023 due mainly to increased demand across our dealership services and OEM networks.

Current wording

Service revenue for the nine months ended September 30, 2024 grew 23.5% over the nine months ended September 30, 2023. Within this category, software revenue grew 28.0% over the nine months ended September 30, 2023. This increase was due to an increase in total subscribers to our DAP software. Cutbank credit revenue increased 0.4% over the nine months ended September 30, 2023 which is comparable to associated changes in paint protection film revenue. Installation labor revenue increased 31.9% over the nine months ended September 30, 2023 due mainly to increased demand across our dealership services and OEM networks.

Previous wording

Total installation revenue (labor and product combined) increased 33.9% over the three months ended June 30, 2023. This represented 21.1% and 16.9% of our total consolidated revenue for the three months ended June 30, 2024 and 2023, respectively. These increases were primarily due to increased demand across our dealership services and OEM networks. Total installation revenue increased 34.3% over the six months ended June 30, 2023. This represented 21.5% and 17.0% of our total consolidated revenue for the six months ended June 30, 2024 and 2023, respectively. These increases were primarily due to increased demand across our dealership services and OEM networks. Adjusted product revenue, which combines the cutbank credit revenue service component with product revenue, increased 2.8% over the three months ended June 30, 2023. Adjusted product revenue increased 1.2% over the six months ended June 30, 2023.

Current wording

Total installation revenue (labor and product combined) increased 27.4% over the three months ended September 30, 2023. This represented 20.0% and 17.2% of our total consolidated revenue for the three months ended September 30, 2024 and 2023, respectively. These increases were primarily due to increased demand across our dealership services and OEM networks. Total installation revenue increased 31.9% over the nine months ended September 30, 2023. This represented 21.0% and 17.1% of our total consolidated revenue for the nine months ended September 30, 2024 and 2023, respectively. These increases were primarily due to increased demand across our dealership services and OEM networks. Adjusted product revenue, which combines the cutbank credit revenue service component with product revenue, increased 6.8% over the three months ended September 30, 2023. Adjusted product revenue increased 3.2% over the nine months ended September 30, 2023.

Previous wording

Product costs for the three months ended June 30, 2024 increased 3.5% over the three months ended June 30, 2023. Cost of product sales represented 46.6% and 48.5% of total revenue in the three months ended June 30, 2024 and 2023, respectively. Cost of service revenue grew 24.1% during the three months ended June 30, 2024. For both product and service, cost of sales increased commensurate with the related growth in revenue. Refer to the Gross Margin section below for discussion of this cost relative to revenue.

Current wording

Product costs for the three months ended September 30, 2024 increased 4.0% over the three months ended September 30, 2023. Cost of product sales represented 47.8% and 50.5% of total revenue in the three months ended September 30, 2024 and 2023, respectively. Cost of service revenue grew 18.3% during the three months ended September 30, 2024. For both product and service, cost of sales increased commensurate with the related growth in revenue. Refer to the Gross Margin section below for discussion of this cost relative to revenue.

Previous wording

Product costs for the six months ended June 30, 2024 increased 1.8% over the six months ended June 30, 2023. Cost of product sales represented 46.7% and 48.8% of total revenue in the six months ended June 30, 2024 and 2023, respectively. Cost of service revenue grew 27.4% during the six months ended June 30, 2024. For both product and service, cost of sales increased commensurate with the related growth in revenue. Refer to the Gross Margin section below for discussion of this cost relative to revenue.

Current wording

Product costs for the nine months ended September 30, 2024 increased 2.6% over the nine months ended September 30, 2023. Cost of product sales represented 47.1% and 49.4% of total revenue in the nine months ended September 30, 2024 and 2023, respectively. Cost of service revenue grew 24.1% during the nine months ended September 30, 2024. For both product and service, cost of sales increased commensurate with the related growth in revenue. Refer to the Gross Margin section below for discussion of this cost relative to revenue.

Previous wording

Gross margin for the three months ended June 30, 2024 grew approximately $3.9 million, or 8.8%, compared to the three months ended June 30, 2023. For the three months ended June 30, 2024, gross margin represented 43.5% of revenue compared to 43.0% for the three months ended June 30, 2023.

Current wording

Gross margin for the three months ended September 30, 2024 grew approximately $6.4 million, or 15.4%, compared to the three months ended September 30, 2023. For the three months ended September 30, 2024, gross margin represented 42.5% of revenue compared to 40.4% for the three months ended September 30, 2023.

Previous wording

Gross margin for the six months ended June 30, 2024 grew approximately $5.8 million, or 7.2%, compared to the six months ended June 30, 2023. For the six months ended June 30, 2024, gross margin represented 42.9% of revenue compared to 42.5% for the six months ended June 30, 2023.

Current wording

Gross margin for the nine months ended September 30, 2024 grew approximately $12.2 million, or 10.0%, compared to the nine months ended September 30, 2023. For the nine months ended September 30, 2024, gross margin represented 42.7% of revenue compared to 41.8% for the nine months ended September 30, 2023.

Previous wording

The following table summarizes gross margin for product and services for the three and six months ended June 30, 2024 and 2023 (in thousands):

Current wording

The following table summarizes gross margin for product and services for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands):

Previous wording

Product gross margin for the three months ended June 30, 2024 increased approximately $0.6 million, or 1.8%, over the three months ended June 30, 2023 and represented 38.4% and 38.7% of total product revenue for the three months ended June 30, 2024 and 2023, respectively. This decrease in product gross margin percentage was primarily due to lower product revenue and increases in non-bill of material costs contained with in product cost of goods sold.

Current wording

Product gross margin for the nine months ended September 30, 2024 increased approximately $3.9 million, or 4.5%, over the nine months ended September 30, 2023 and represented 37.8% and 37.4% of total product revenue for the nine months ended September 30, 2024 and 2023, respectively. The increases in product gross margin and gross margin percentage were primarily due to decreases in product costs and improved operating leverage.

Previous wording

June 30, 2024 and 2023, respectively. This increase in service gross margin percentage was primarily due to operating leverage across our installation networks.

Current wording

Service gross margin increased approximately $2.7 million, or 21.6%, over the three months ended September 30, 2023. This represented 57.7% and 57.0% of total service revenue for the three months ended September 30, 2024 and 2023, respectively. These increases in service gross margin and service gross margin percentage were primarily due to operating leverage across our installation networks.

Previous wording

Service gross margin increased approximately $3.3 million, or 26.0%, over the three months ended June 30, 2023. This represented 59.7% and 59.3% of total service revenue for the three months ended

Current wording

Service gross margin increased approximately $8.3 million, or 23.1%, over the nine months ended September 30, 2023. This represented 58.0% and 58.2% of total service revenue for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Sales and marketing expenses for the three months ended June 30, 2024 increased 26.2% compared to the same period in 2023. We incurred approximately $1.5 million in costs in the prior year quarter related to our annual dealer conference. Normalizing for these costs, sales and marketing expense increased approximately 55%. This increase was due to increased personnel and marketing costs incurred to support the ongoing growth of the business as the Company increased its marketing efforts to dealerships and end customers. These expenses represented 9.4% and 8.0% of total consolidated revenue for the three months ended June 30, 2024 and 2023, respectively.

Current wording

Sales and marketing expenses for the three months ended September 30, 2024 increased 37.6% compared to the same period in 2023. This increase was primarily due to increased personnel and marketing costs including additional sponsorships and increased marketing efforts to dealerships and end customers. These expenses represented 9.4% and 7.5% of total consolidated revenue for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

For the six months ended June 30, 2024, sales and marketing expenses increased 39.4% compared to the same period in 2023. This increase was due to increased personnel and marketing costs incurred to support the ongoing growth of the business. These expenses represented 10.3% and 7.9% of total consolidated revenue for the six months ended June 30, 2024 and 2023, respectively.

Current wording

For the nine months ended September 30, 2024, sales and marketing expenses increased 38.8% compared to the same period in 2023. This increase was due to increased personnel and marketing costs incurred to associated with ongoing growth in multiple markets as the Company increased its marketing efforts to dealerships and end customers. These expenses represented 10.0% and 7.8% of total consolidated revenue for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

General and administrative expenses grew approximately $2.7 million, or 17.5% over the three months ended June 30, 2023. This increase in cost was due primarily to increases in personnel, occupancy costs and professional fees to support our ongoing growth. These costs represented 16.7% and 15.3% of total consolidated revenue for the three months ended June 30, 2024 and 2023, respectively.

Current wording

General and administrative expenses grew approximately $2.7 million, or 16.8% over the three months ended September 30, 2023. This increase in cost was due primarily to increases in personnel, occupancy costs and professional fees. These costs represented 16.7% and 15.7% of total consolidated revenue for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

General and administrative expenses grew approximately $6.6 million, or 22.1% over the six months ended June 30, 2023. This increase in cost was due primarily to increases in personnel, occupancy costs and professional fees to support our ongoing growth. These costs represented 18.3% and 16.0% of total consolidated revenue for the six months ended June 30, 2024 and 2023, respectively.

Current wording

General and administrative expenses grew approximately $9.4 million, or 20.3% over the nine months ended September 30, 2023. This increase in cost was due primarily to increases in personnel, occupancy costs and professional fees. These costs represented 17.8% and 15.9% of total consolidated revenue for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Income tax expense for the three months ended June 30, 2024 decreased $0.6 million from the three months ended June 30, 2023. Our effective tax rate was 18.8% for the three months ended June 30, 2024 compared with 20.6% for the three months ended June 30, 2023. The decrease in the effective tax rate was due primarily to tax benefits associated with increased research and development expenditures.

Current wording

Income tax expense for the three months ended September 30, 2024 increased $0.2 million from the three months ended September 30, 2023. Our effective tax rate was 20.0% for the three months ended September 30, 2024 compared with 20.4% for the three months ended September 30, 2023.

Previous wording

Income tax expense for the six months ended June 30, 2024 decreased $1.8 million from the same period in 2023, Our effective tax rate was 19.6% for the six months ended June 30, 2024 compared with 20.6% for the six months ended June 30, 2023.

Current wording

Income tax expense for the nine months ended September 30, 2024 decreased $1.5 million from the same period in 2023, Our effective tax rate was 19.8% for the nine months ended September 30, 2024 compared with 20.5% for the nine months ended September 30, 2023.

Previous wording

Net income for the three months ended June 30, 2024 decreased 4.5% to $15.0 million.

Current wording

Net income for the three months ended September 30, 2024 increased 9.1% to $14.9 million.

Previous wording

Net income for the six months ended June 30, 2024 decreased 20.1% to $21.7 million.

Current wording

Net income for the nine months ended September 30, 2024 decreased 10.4% to $36.6 million.

Previous wording

Our primary sources of liquidity are available cash and cash equivalents, cash flows provided by operations, and borrowings under our credit facilities. As of June 30, 2024, we had cash and cash equivalents of $15.0 million. For the six months ended June 30, 2024, cash provided by operations was $21.9 million. We currently have $117.3 million of credit available to us under our credit facilities. We expect available cash, internally generated funds, and borrowings from our committed credit facilities to be sufficient to support working capital needs, capital expenditures (including acquisitions), and our debt service obligations. We are focused on continuing to generate positive operating cash to fund our operational and capital investment initiatives. We believe we have sufficient liquidity to operate for at least the next 12 months from the date of filing this report.

Current wording

Our primary sources of liquidity are available cash and cash equivalents, cash flows provided by operations, and borrowings under our credit facilities. As of September 30, 2024, we had cash and cash equivalents of $21.0 million. For the nine months ended September 30, 2024, cash provided by operations was $41.5 million. We currently have $128.3 million of credit available to us under our U.S. and Canadian credit facilities. We expect available cash, internally generated funds, and borrowings from our committed credit facilities to be sufficient to support working capital needs, capital expenditures (including acquisitions), and other obligations. We are focused on continuing to generate positive operating cash to fund our operational and capital investment initiatives. We believe we have sufficient liquidity to operate for at least the next 12 months from the date of filing this report.

Previous wording

Operating activities. Cash provided by operations for the six months ended June 30, 2024 was $21.9 million compared to $27.4 million during the six months ended June 30, 2023. This reduction in cash flows from operating activities was due mainly to reduced profitability in the current year.

Current wording

Operating activities. Cash provided by operations for the nine months ended September 30, 2024 was $41.5 million compared to $38.5 million during the nine months ended September 30, 2023. This increase in cash flows from operating activities was mainly due reductions in inventory purchases during the year offset by other changes in working capital.

Previous wording

Investing activities. Cash used in investing activities totaled approximately $10.6 million during the six months ended June 30, 2024 compared to $8.3 million during the six months ended June 30, 2023. This increase was due primarily to higher acquisition-related payments during 2024.

Current wording

Investing activities. Cash used in investing activities totaled approximately $13.0 million during the nine months ended September 30, 2024 compared to $10.2 million during the nine months ended September 30, 2023. This increase was due primarily to higher acquisition-related payments during 2024.

Previous wording

Financing activities. Cash flows used in financing activities during the six months ended June 30, 2024 totaled $8.1 million compared to cash flows provided by financing activities during the same period in the prior year of $13.1 million. This change was due primarily to the timing of repayments on our credit facility.

Current wording

Financing activities. Cash flows used in financing activities during the nine months ended September 30, 2024 totaled $19.2 million compared to $26.2 million during the same period in the prior year. This change was due primarily to the timing of repayments on our credit facility, which was fully repaid at September 30, 2024.

Previous wording

Debt and contingent obligations as of June 30, 2024 and December 31, 2023 totaled approximately $11.9 million and $19.9 million, respectively.

Current wording

Debt and contingent obligations as of September 30, 2024 and December 31, 2023 totaled approximately $1.4 million and $19.9 million, respectively.

Previous wording

The Company has a revolving credit facility providing for secured revolving loans and letters of credit in an aggregate amount of up to $125 million, which is subject to the terms of a credit agreement dated April 6, 2023 (the "Credit Agreement"). As of June 30, 2024 and December 31, 2023, the Company had outstanding balances of $11 million and $19 million under the Credit Agreement, respectively.

Current wording

The Company has a revolving credit facility providing for secured revolving loans and letters of credit in an aggregate amount of up to $125 million, which is subject to the terms of a credit agreement dated April 6, 2023 (the "Credit Agreement"). As of September 30, 2024, no balance was outstanding under the Credit Agreement. At December 31, 2023, the Company had an outstanding balance of $19 million under the Credit Agreement.

Previous wording

Borrowings under the Credit Agreement bear interest, at XPEL’s option, at a rate equal to either (a) Base Rate or (b) Adjusted Term SOFR. In addition to the applicable interest rate, the Credit Agreement includes a commitment fee ranging from 0.20% to 0.25% per annum for the unused portion of the aggregate commitment and an applicable margin ranging from 0.00% to 0.50% for Base Rate Loans and 1.00% to 1.50% for Adjusted Term SOFR Loans. At June 30, 2024, these rates were 8.5% and 6.4%, respectively. Both the margin applicable to the interest rate and the commitment fee are dependent on XPEL’s Consolidated Total Leverage Ratio. The Credit Agreement's maturity date is April 6, 2026. All capitalized terms in this description of the Credit Agreement that are not otherwise defined in this report have the meaning assigned to them in the Credit Agreement.

Current wording

Borrowings under the Credit Agreement bear interest, at XPEL’s option, at a rate equal to either (a) Base Rate or (b) Adjusted Term SOFR. In addition to the applicable interest rate, the Credit Agreement includes a commitment fee ranging from 0.20% to 0.25% per annum for the unused portion of the aggregate commitment and an applicable margin ranging from 0.00% to 0.50% for Base Rate Loans and 1.00% to 1.50% for Adjusted Term SOFR Loans. At September 30, 2024, these rates were 8.0% and 6.3%, respectively. Both the margin applicable to the interest rate and the commitment fee are dependent on XPEL’s Consolidated Total Leverage Ratio. The Credit Agreement's maturity date is April 6, 2026. All capitalized terms in this description of the Credit Agreement that are not otherwise defined in this report have the meaning assigned to them in the Credit Agreement.