XPEL, Inc.

Previous wording

•Technology cold render the need for some or our products obsolete.

Current wording

•Technology could render the need for some or our products obsolete.

Previous wording

Our strategy initially centered on how best to serve and grow our network of independent installers in the US and Canada and to sell products internationally through independent distributors while simultaneously building and enhancing eh XPEL brand. This "best-in-class" service strategy was then extended to new car dealerships and OEMs. Internationally, while our initial market entry was primarily through indirect distribution, we desire to ultimately sell directly to the majority of the top twenty-five car markets in the world which is an important element of our acquisition strategy.

Current wording

Our strategy initially centered on how best to serve and grow our network of independent installers in the US and Canada and to sell products internationally through independent distributors while simultaneously building and enhancing the XPEL brand. This "best-in-class" service strategy was then extended to new car dealerships and OEMs. Internationally, while our initial market entry was primarily through indirect distribution, we desire to ultimately sell directly to the majority of the top 25 car markets in the world which is an important element of our acquisition strategy.

Previous wording

The following table is a reconciliation of Net income to EBITDA for the three months ended March 31, 2025 and 2024 (in thousands):

Current wording

The following table is a reconciliation of Net income to EBITDA for the three and six months ended June 30, 2025 and 2024 (in thousands):

Previous wording

The following table summarizes the Company’s consolidated results of operations for the three months ended March 31, 2025 and 2024 (in thousands):

Current wording

The following tabled summarize the Company’s consolidated results of operations for the three and six months ended June 30, 2025 and 2024 (dollars in thousands):

Previous wording

The following table summarizes revenue results for the three months ended March 31, 2025 and 2024 (in thousands):

Current wording

The following tables summarize revenue results for the three and six months ended June 30, 2025 and 2024 (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 months ended March 31, 2025 and 2024 (dollars 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 summarized 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, 2025 and 2024 (dollars in thousands):

Previous wording

Revenue from our window film product line grew 28.1% during the three months ended March 31, 2025 and represented 18.0% of our consolidated first quarter 2025 revenue. This product line includes automotive, architectural and windshield protection films. Automotive window film revenue grew 16.2% to $15.0 million for the three months ended March 31, 2025 and represented 80.8% of total window film revenue and 14.5% of total consolidated revenue for the three months ended March 31, 2025. This increase was due to continued channel focus, increased product adoption in multiple regions and increased demand. Architectural window film revenue for the three months ended March 31, 2025 increased 9.6% to $1.7 million and represented 9.3% of total window film revenue and 1.7% of total consolidated first quarter revenue. Our windshield protection film revenue for the three months ended March 31, 2025 was $1.8 million and represented 9.9% of total window film revenue and 1.8% of total consolidated first quarter revenue. Our windshield protection film product was launched during the fourth quarter 2024.

Current wording

Revenue from our window film product line grew 27.0% for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. Window film sales represented 22.4% and 20.0% of our total consolidated revenues for the three months ended June 30, 2025 and 2024, respectively. This increase was driven by continued demand resulting from increased product adoption in multiple regions for automotive window film. Our windshield protection film revenue for the three months ended June 30, 2025 was $2.1 million and represented 7.5% of total window film revenue and 1.7% of total consolidated second quarter revenue. Our windshield protection film product was launched during the fourth quarter 2024.

Previous wording

Product Revenue. Product revenue increased 17.7% for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 and represented 75.9% of our consolidated first quarter 2025 revenue. Within this category, revenue from our paint protection film product line increased 15.2% as compared to the prior year and represented 54.4% of total consolidated revenue for the three months ended March 31, 2025. This increase was driven primarily by increased paint protection film sales into China as prior excess inventory levels at our China distributor began to normalize.

Current wording

Product revenue for the six months ended June 30, 2025 increased 15.6% over the six months ended June 30, 2024. Product revenue represented 75.9% of our consolidated revenue compared to 75.0% in the six months ended June 30, 2024. Revenue from our paint protection film product line increased 12.0% over the six months ended June 30, 2024. Paint protection film sales represented 52.1% and 53.2% of our consolidated revenues for the six months ended June 30, 2025 and 2024, respectively.

Previous wording

Service revenue. Service revenue consists of revenue from fees for DAP software access, cutbank credit revenue, which represents the value of pattern access provided with eligible product revenue, revenue from the labor portion of installation sales in our Company-owned installation centers, labor revenue from our dealership services and OEM businesses, and revenue from training services provided to our customers. During the three months ended March 31, 2025, service revenue grew 7.9% compared to the three months ended March 31, 2024.

Current wording

Service revenue. Service revenue consists of revenue from fees for DAP software access, cutbank credit revenue, which represents the value of pattern access provided with eligible product revenue, revenue from the labor portion of installation sales in our Company-owned installation centers, revenue from our dealership services business and revenue from training services provided to our customers.

Previous wording

Total installation revenue (labor and product combined) for the three months ended March 31, 2025 increased 11.6% over the three months ended March 31, 2024. Adjusted product revenue, which combines the cutbank credit revenue service component with product revenue, increased by 16.2% from the three months ended March 31, 2024 due mainly to the same factors described above.

Current wording

Total installation revenue (labor and product combined) increased 17.9% over the three months ended June 30, 2024. This represented 22.0% and 21.2% of our total consolidated revenue for the three months ended June 30, 2025 and 2024, respectively. These increases were primarily due to increased demand across our dealership services and OEM networks. Total installation revenue increased 14.8% over the six months ended June 30, 2024. This represented 21.6% and 21.5% of our total consolidated revenue for the six months ended June 30, 2025 and 2024, 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 12.9% over the three months ended June 30, 2024. Adjusted product revenue increased 14.4% over the six months ended June 30, 2024.

Previous wording

Cost of sales consists of product costs and the costs to provide our services. Product costs consist of material costs, certain personnel costs, shipping costs, warranty costs and other costs related to providing products to our customers. Cost of service includes the labor costs associated with installation of product in our Company-owned facilities and across our dealer-service network, costs of labor associated with pattern design for our film-cutting software and the costs incurred to provide training for our customers. Product costs in the three months ended March 31, 2025 increased 15.0% over the three months ended March 31, 2024, commensurate with the growth in product revenue. Cost of service revenue grew 13.6% during the three months ended March 31, 2025.

Current wording

Cost of sales consists of product costs and the costs to provide our services. Product costs consist of material costs, personnel costs related to warehouse personnel, shipping costs, warranty costs and other related costs to provide products to our customers. Cost of service includes the labor costs associated with installation of product in our installation facilities, costs of labor associated with pattern design for our cutting software and the costs incurred to provide training for our customers.

Previous wording

The following table summarizes gross margin for product and services for the three months ended March 31, 2025 and 2024 (in thousands):

Current wording

The following tables summarize gross margin for product and services for the three and six months ended June 30, 2025 and 2024 (dollars in thousands):

Previous wording

Product gross margin for the three months ended March 31, 2025 increased $5.6 million, 22.5% compared to the same period in the prior year. The increase in product gross margin percentages was primarily due to decreases in product costs and improved operating leverage.

Current wording

Product gross margin for the six months ended June 30, 2025 increased approximately $10.2 million, or 18.1%, over the six months ended June 30, 2024 and represented 38.5% and 37.7% of total product revenue for the six months ended June 30, 2025 and 2024, 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

Service gross margin increased approximately $0.5 million, or 3.5%, over the three months ended March 31, 2024. This represented 54.3% and 56.6% of total service revenue for the three months ended March 31, 2025 and 2024, respectively. The decrease in service gross margin percentage was primarily due to a higher mix of dealership related installations.

Current wording

Service gross margin increased approximately $1.0 million, or 6.1%, over the three months ended June 30, 2024. This represented 56.5% and 59.7% of total service revenue for the three months ended June 30, 2025 and 2024, respectively. The decrease in service gross margin was primarily due to a higher mix of dealership related installations.

Previous wording

Sales and Marketing expenses for the three months ended March 31, 2025 increased $1.5 million, or 14.3%, compared to 2024. These expenses represented 11.4% and 11.5% of consolidated revenue for the three months ended March 31, 2025 and 2024, respectively. This increase was due mainly to increased personnel costs and costs associated with your annual dealer conference held during the first quarter 2025.

Current wording

Sales and marketing expenses for the three months ended June 30, 2025 increased 15.4% compared to the same period in 2024. 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 9.5% and 9.4% of total consolidated revenue for the three months ended June 30, 2025 and 2024, respectively.

Previous wording

General and administrative expenses grew approximately $2.6 million, or 14.5%, during the three months ended March 31, 2025 over the three months ended March 31, 2024. These costs represented 20.1% and 20.3% of consolidated revenue for the three months ended March 31, 2025 and 2024, respectively. The increase in these expenses was due mainly to increases in severance-related personnel, occupancy, and information technology costs.

Current wording

General and administrative expenses grew approximately $4.0 million, or 21.5% over the three months ended June 30, 2024. This increase in cost was due primarily to increases in personnel, occupancy costs and professional fees. These costs represented 17.9% and 16.7% of total consolidated revenue for the three months ended June 30, 2025 and 2024, respectively.

Previous wording

Income tax expense for the three months ended March 31, 2025 increased $0.9 million from the three months ended March 31, 2024. Our effective tax rate was 23.9% for the three months ended March 31, 2025 compared with 21.4% for the three months ended March 31, 2024. The increase in our effective rate was primarily due to an increase in foreign taxes associated with our China operations.

Current wording

Income tax expense for the three months ended June 30, 2025 increased $0.6 million from the three months ended June 30, 2024. Our effective tax rate was 20.3% for the three months ended June 30, 2025 compared with 18.8% for the three months ended June 30, 2024. The increase in our effective rate was primarily due to an increase in foreign taxes associated with our China operations.

Previous wording

Net income for the three months ended March 31, 2025 increased by $1.9 million, or 28.8%, to $8.6 million.

Current wording

Net income for the three months ended June 30, 2025 increased 7.8% to $16.2 million.

Previous wording

The primary source of liquidity for our business is available cash and cash equivalents, cash flows provided by operations and borrowing capacity under our credit facilities. As of March 31, 2025, we had cash and cash equivalents of $23.5 million. For the three months ended March 31, 2025, cash provided by operations was $3.2 million, and as of March 31, 2025 we had approximately $128.1 million in funds available under our credit facilities. We expect to continue to have sufficient access to cash to support working capital needs, pay for capital expenditures (including acquisitions), and to pay interest and service debt. We believe we have the ability and sufficient resources to meet these cash requirements by using available cash, internally generated funds and borrowings under committed credit facilities. 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 this quarterly report.

Current wording

The primary source of liquidity for our business is available cash and cash equivalents, cash flows provided by operations and borrowing capacity under our credit facilities. As of June 30, 2025, we had cash and cash equivalents of $49.6 million. For the six months ended June 30, 2025, cash provided by operations was $31.1 million and as of June 30, 2025 we had $128.3 million in funds available under our credit facilities. We expect to continue to have sufficient access to cash to support working capital needs, pay for capital expenditures (including acquisitions), and to pay interest and service debt. We believe we have the ability and sufficient resources to meet these cash requirements by using available cash, internally generated funds and borrowings under committed credit facilities. 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 this quarterly report.

Previous wording

Operating Activities. Cash provided by operations totaled approximately $3.2 million for the three months ended March 31, 2025, compared to operating cash outflows of $5.0 million for the three months ended March 31, 2024. This increase in cash flows from operating activities was mainly due to an increase in net income and other changes in working capital.

Current wording

Operating activities. Cash provided by operations totaled $31.1 million for the six months ended June 30, 2025, compared to $21.9 million during the six months ended June 30, 2024. This increase in cash flows from operating activities was mainly due to an increase in net income and other changes in working capital.

Previous wording

Investing Activities. Cash used in investing activities totaled approximately $1.6 million during the three months ended March 31, 2025 compared to $3.1 million during the three months ended March 31, 2024. This decrease was due primarily to a reduction in fixed asset purchases and acquisitions during the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Current wording

Investing activities. Cash used in investing activities totaled approximately $2.9 million during the six months ended June 30, 2025 compared to $10.6 million during the six months ended June 30, 2024. This decrease was due primarily to a reduction in fixed asset purchases and acquisitions during 2025.

Previous wording

Financing Activities. Cash used in financing activities during the three months ended March 31, 2025 totaled approximately $0.2 million compared to cash inflows of $5.0 million in the prior year. This decrease was due to additional borrowings under our credit facility during the three months ended March 31, 2024.

Current wording

Financing activities. Cash used in financing activities during the six months ended June 30, 2025 totaled $0.3 million compared to $8.1 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 in 2024.

Previous wording

1.00% to 1.50% for Adjusted Term SOFR Loans. At March 31, 2025, these rates were 7.5% and 5.4%, 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 facility 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 June 30, 2025, these rates were 7.5% and 5.4%, 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 facility that are not otherwise defined in this report have the meaning assigned to them in the Credit Agreement.

Previous wording

The Company also has a CAD $4.5 million revolving credit facility through HSBC Bank Canada, and is maintained by XPEL Canada Corp., a wholly-owned subsidiary of XPEL. This Canadian facility is utilized to fund the Company's working capital needs in Canada. This facility bears interest at HSBC Canada Bank’s prime rate plus 0.25% per annum and is guaranteed by the parent company. As of March 31, 2025 and December 31, 2024, no balance was outstanding on this line of credit.

Current wording

The Company also has a CAD $4.5 million revolving credit facility through a financial institution in Canada, and is maintained by XPEL Canada Corp., a wholly-owned subsidiary of XPEL. This Canadian facility is utilized to fund the Company's working capital needs in Canada. This facility bears interest at the Royal Bank of Canada’s prime rate plus 0.25% per annum and is guaranteed by the parent company. As of June 30, 2025 and December 31, 2024, no balance was outstanding on this line of credit.