XPEL, Inc.

Previous wording

•A material disruption from our contract manufacturers or suppliers or our inability to obtain a sufficient supply from alternate suppliers could cause us to be unable to meet customer demands or increase our costs.

Current wording

•A material disruption from our contract manufacturers or suppliers, or our inability to obtain a sufficient supply of products from alternate suppliers, could cause us to be unable to meet customer demands or increase our costs.

Previous wording

•A significant percentage of our revenue is generated from our business in China, a market that is associated with certain risks.

Current wording

Risks Related to Our Business in China

Previous wording

The Company is a supplier of protective films, coatings and related services primarily to the automobile aftermarket, new car dealerships and automobile OEMs. The majority of our revenue is derived from the sale of our automotive products and related services while the remainder of our revenue is derived from non-automotive products including architectural window film and marine and flat surface protection films.

Current wording

We are a supplier of protective films, coatings and related services primarily to the automobile aftermarket, new car dealerships and automobile original equipment manufacturers, or OEMs. The majority of our revenue is derived from the sale of our automotive products and related services while the remainder of our revenue is derived from non-automotive products including architectural window film and marine and flat surface protection films.

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. As paint protection film technology improved and became more durable, awareness and adoption of paint protection film continued to increase driving significant industry growth over the last several years. Initial adoption of paint protection film came primarily from luxury car enthusiasts in the United States and Canada. These enthusiasts were primarily served by a growing automotive aftermarket of independent installers of automotive paint protection and window films. Internationally, nascent demand began to build as awareness and adoption in the United States and Canada continued to increase. Over the last few years, new car dealership interest in our products has increased due to their exposure to the aftermarket installer network while OEM interest in the product increased through their exposure to the new car dealerships who had been selling the product.

Current wording

The Company began as a software company designing vehicle patterns used to produce cut-to-fit protective film for headlights and painted surfaces of automobiles. In 2007, we began selling automotive paint protection film products to complement our software business. As paint protection film technology improved and became more durable, awareness and adoption of paint protection film has continued to increase, driving significant industry growth over the last several years. Initial adoption of paint protection film came primarily from luxury car enthusiasts in the United States and Canada. These enthusiasts were primarily served by a growing automotive aftermarket of independent installers of automotive paint protection and window films. Internationally, nascent demand began to build as awareness and adoption in the United States and Canada continued to increase. Over the last few years, new car dealership interest in the product has increased due to their exposure to the aftermarket installer network, while OEM interest in the product increased through their exposure to the new car dealerships who were selling the product.

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 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.

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 has primarily been 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. To that end, we have acquired distributors in several international markets including India, Thailand, Japan and, most recently, China.

Previous wording

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

Current wording

The following table is a reconciliation of Net Income to EBITDA for the three months ended March 31, 2026 and 2025 (in thousands):

Previous wording

EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of ongoing operations; and other companies in our industry may calculate EBITDA differently than we do, limiting their usefulness as comparative measures.

Current wording

EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of ongoing operations; and other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure.

Previous wording

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

Current wording

The following tables summarize the Company’s consolidated results of operations for the three months ended March 31, 2026 and 2025 (dollars in thousands):

Previous wording

The following tables summarize revenue results for the three and nine months ended September 30, 2025 and 2024 (dollars in thousands):

Current wording

The following tables summarize revenue results for the three months ended March 31, 2026 and 2025 (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 summarized 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, 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 months ended March 31, 2026 and 2025 (dollars in thousands):

Previous wording

Product Revenue. Product revenue for the three months ended September 30, 2025 increased 9.8% over the three months ended September 30, 2024. Product revenue represented 76.1% of our total revenue compared to 77.0% in the three months ended September 30, 2024. Revenue from our paint protection film product line increased 4.9% over the three months ended September 30, 2024. Paint protection film sales represented 50.7% and 53.6% of our total consolidated revenues for the three months ended September 30, 2025 and 2024, respectively. The total increase in paint protection film sales was due to increased demand for our film products across multiple regions.

Current wording

Product Revenue. Product revenue for the three months ended March 31, 2026 increased 12.7% over the three months ended March 31, 2025. Product revenue represented 75.6% of our total revenue compared to 75.9% in the three months ended March 31, 2025. Revenue from our paint protection film product line increased 9.3% over the three months ended March 31, 2025. Paint protection film sales represented 52.5% and 54.4% of our total consolidated revenues for the three months ended March 31, 2026 and 2025, respectively. The total increase in paint protection film sales was due to increased demand for our film products across multiple regions.

Previous wording

Revenue from our window film product line grew 22.2% for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Window film sales represented 22.0% and 20.1% of our total consolidated revenues for the three months ended September 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 September 30, 2025 was $1.9 million and represented 6.8% of total window film revenue and 1.5% of total consolidated third quarter revenue. Our windshield protection film product was launched during the fourth quarter 2024.

Current wording

Revenue from our window film product line grew 24.8% for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. Window film sales represented 19.8% and 18.0% of our total consolidated revenues for the three months ended March 31, 2026 and 2025, respectively. This increase was driven by continued demand resulting from increased product adoption in multiple regions for automotive window film led by our China and APAC regions resulting primarily from increasing our direct presence is these regions.

Previous wording

Geographically, we experienced continued growth in most of our regions during the three months ended September 30, 2025 including 44.0%, 28.8%, and 11.2% in Asia-Other, EU/UK/Africa, and China, respectively. The increases in Asia-Other and EU/UK/Africa were driven primarily by increased product adoption and increased demand. The increase in China was driven primarily by increased demand and incremental direct revenue resulting from the completion of our acquisition of our China distributor late in the third quarter 2025. Revenue from our Canada region declined 10.0% primarily due to economic instability and uncertainty in the region.

Current wording

Geographically, we experienced continued growth in most of our regions during the three months ended March 31, 2026 including 44.4%, 25.1%, 19.0%, and in China, Asia-Other, and EU/UK/Africa, respectively. The increase in China was driven primarily by increased demand and incremental direct revenue resulting from the completion of our acquisition of our China distributor late in the third quarter of 2025. The increases in Asia-Other and EU/UK/Africa were driven primarily by increased product adoption and increased demand. Revenue from our Canada region declined 10.9% primarily due to timing of distributor sales. Normalizing for this timing, revenue would have grown 5.7%.

Previous wording

Service revenue grew 15.7% over the three months ended September 30, 2024. Within this category, software revenue increased 8.2% over the three months ended September 30, 2024. This increase was due to an increase in total subscribers to our DAP software. Installation labor revenue increased 16.9% over the three months ended September 30, 2024 due mainly to increased demand across our dealership services and OEM networks.

Current wording

Service revenue grew 14.1% over the three months ended March 31, 2025. Installation labor revenue increased 23.9% over the three months ended March 31, 2025 due mainly to increased demand across our dealership services and OEM networks. Cutbank credit revenue declined due primarily to a reduction in the estimated fair value of a cutbank credit.

Previous wording

Total installation revenue (labor and product combined) increased 21.3% over the three months ended September 30, 2024. This represented 21.9% and 20.0% of our total consolidated revenue for the three months ended September 30, 2025 and 2024, respectively. These increases were primarily due to increased demand across our dealership services and OEM networks. Total installation revenue increased 17.1% over the nine months ended September 30, 2024. This represented 21.8% and 21.1% of our total consolidated revenue for the nine months ended September 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 9.0% over the three months ended September 30, 2024. Adjusted product revenue increased 12.4% over the nine months ended September 30, 2024.

Current wording

Total installation revenue (labor and product combined) increased 24.3% over the three months ended March 31, 2025. This represented 23.7% and 21.5% of our total consolidated revenue for the three months ended March 31, 2026 and 2025, 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 10.2% over the three months ended March 31, 2025.

Previous wording

Product costs for the nine months ended September 30, 2025 increased 13.0% over the nine months ended September 30, 2024. Cost of product sales represented 47.0% and 47.1% of total revenue in the nine months ended September 30, 2025 and 2024, respectively. Cost of service revenue grew 18.2% during the nine months ended September 30, 2025. Refer to the Gross Margin section below for discussion of this cost relative to revenue.

Current wording

Product costs for the three months ended March 31, 2026 increased 8.1% over the three months ended March 31, 2025. Cost of product sales represented 44.6% and 46.7% of total revenue in the three months ended March 31, 2026 and 2025, respectively. Cost of service revenue grew 20.0% during the three months ended March 31, 2026. Refer to the Gross Margin section below for discussion of this cost relative to revenue.

Previous wording

Gross margin for the three months ended September 30, 2025 grew approximately $4.5 million, or 9.4%, compared to the three months ended September 30, 2024. For the three months ended September 30, 2025, gross margin represented 41.8% of revenue compared to 42.5% for the three months ended September 30, 2024.

Current wording

Gross margin for the three months ended March 31, 2026 grew approximately $7.3 million, or 16.7%, compared to the three months ended March 31, 2025. For the three months ended March 31, 2026, gross margin represented 43.7% of revenue compared to 42.3% for the three months ended March 31, 2025.

Previous wording

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

Current wording

The following tables summarizes gross margin for product and services for the three months ended March 31, 2026 and 2025 (dollars in thousands):

Previous wording

Product gross margin for the three months ended September 30, 2025 increased approximately $2.6 million, or 8.0%, over the three months ended September 30, 2024 and represented 37.3% and 37.9% of total product revenue for the three months ended September 30, 2025 and 2024, respectively. The decrease in gross margin percentage was due primarily to an increase in product costs primarily related to transient vendor price increases.

Current wording

Product gross margin for the three months ended March 31, 2026 increased approximately $6.1 million, or 20.1%, over the three months ended March 31, 2025 and represented 41.0% and 38.5% of total product revenue for the three months ended March 31, 2026 and 2025, respectively. The increase in gross margin percentage was due primarily to decreases in product costs, favorable changes in product mix and improved operating leverage.

Previous wording

Service gross margin increased approximately $1.9 million, or 12.5%, over the three months ended September 30, 2024. This represented 56.1% and 57.7% of total service revenue for the three months ended September 30, 2025 and 2024, respectively. The decrease in service gross margin was primarily due to a higher mix of dealership related installations.

Current wording

Service gross margin increased approximately $1.3 million, or 9.2%, over the three months ended March 31, 2025. This represented 52.0% and 54.3% of total service revenue for the three months ended March 31, 2026 and 2025, respectively. The decrease was primarily due to the reduction in the estimated fair value of a cutbank credit. Excluding this reduction, service gross margin was 54.6%.

Previous wording

Sales and marketing expenses for the three months ended September 30, 2025 increased 29.7% compared to the same period in 2024. This increase was primarily due to increased personnel and marketing costs associated with ongoing growth in multiple markets as the company increased the number of sponsorships and increased marketing efforts to dealerships and end customers. These expenses represented 11.0% and 9.4% of total consolidated revenue for the three months ended September 30, 2025 and 2024, respectively.

Current wording

Sales and marketing expenses for the three months ended March 31, 2026 increased 27.7% compared to the same period in 2025. This increase was primarily due to increased personnel and marketing costs associated with ongoing growth in multiple markets as the Company increased the number of sponsorships and increased marketing efforts to dealerships and end customers. These expenses represented 12.9% and 11.4% of total consolidated revenue for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

General and administrative expenses grew approximately $3.0 million, or 15.8% over the three months ended September 30, 2024. This increase in cost was due primarily to increases in personnel, occupancy costs and acquisition-related professional fees. These costs represented 17.4% and 16.7% of total consolidated revenue for the three months ended September 30, 2025 and 2024, respectively.

Current wording

General and administrative expenses grew approximately $2.2 million, or 10.3% over the three months ended March 31, 2025. This increase in cost was due primarily to increases in personnel, occupancy costs and professional fees. Total General and Administrative expenses represented 19.6% and 20.1% of total consolidated revenue for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

Income tax expense for the three months ended September 30, 2025 decreased $0.2 million from the three months ended September 30, 2024. Our effective tax rate was 21.1% for the three months ended September 30, 2025 compared with 20.0% for the three months ended September 30, 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 March 31, 2026 increased $0.1 million from the three months ended March 31, 2025. Our effective tax rate was 20.9% for the three months ended March 31, 2026 compared with 23.9% for the three months ended March 31, 2025. The decrease in our effective rate was primarily due to a higher proportion of foreign earnings taxed at lower rates.

Previous wording

Net income for the three months ended September 30, 2025 decreased 11.8% to $13.1 million.

Current wording

Net income for the three months ended March 31, 2026 increased 22.4% to $10.5 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 September 30, 2025, we had cash and cash equivalents of $64.5 million. For the nine months ended September 30, 2025, cash provided by operations was $64.3 million and as of September 30, 2025 we had $128.2 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

Our primary sources of liquidity are available cash and cash equivalents, cash flows provided by operations and borrowing capacity under our credit facilities. As of March 31, 2026, we had cash and cash equivalents of $45.1 million. For the three months ended March 31, 2026, cash provided by operations was $7.4 million and as of March 31, 2026 we had $128.2 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 $64.3 million for the nine months ended September 30, 2025, compared to $41.5 million during the nine months ended September 30, 2024. This increase in cash flows from operating activities was mainly due to an increase in accounts payable and other accrued liabilities due to normal payment cycle timing and other changes in working capital.

Current wording

Operating activities. Cash provided by operations totaled $7.4 million for the three months ended March 31, 2026, compared to $3.2 million during the three months ended March 31, 2025. This increase in cash flows from operating activities was mainly due to the timing of income tax payments and increases in accounts payable and other accrued liabilities offset by increases in inventory related to planned seasonal volume increases.

Previous wording

Investing activities. Cash used in investing activities totaled approximately $20.8 million during the nine months ended September 30, 2025 compared to $13.0 million during the nine months ended September 30, 2024. This increase was due primarily to an increase in acquisitions during 2025.

Current wording

Investing activities. Cash used in investing activities totaled approximately $9.9 million during the three months ended March 31, 2026 compared to $1.6 million during the three months ended March 31, 2025. This increase was due primarily to an increase in deposits related to our supply chain initiatives.

Previous wording

Financing activities. Cash used in financing activities during the nine months ended September 30, 2025 totaled $0.4 million compared to $19.2 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 in 2024.

Current wording

Financing activities. Cash used in financing activities during the three months ended March 31, 2026 totaled $3.6 million compared to $0.2 million during the same period in the prior year. This change was due primarily to the purchase of treasury shares during 2026.

Previous wording

Debt and contingent obligations as of September 30, 2025 and December 31, 2024 totaled approximately $25.3 million and $2.1 million, respectively.

Current wording

Debt and contingent obligations as of March 31, 2026 and December 31, 2025 totaled approximately $18.2 million and $20.0 million, respectively.

Previous wording

We expect to fund ongoing operating expenses, capital expenditures, acquisitions, interest payments, tax payments, credit facility maturities, future lease obligations, and payments for other long-term liabilities with cash flow from operations and borrowings under our credit facility. In the short-term, we are contractually obligated to make lease payments and make payments on contingent liabilities related to certain completed acquisitions. In the long-term, we are contractually obligated to make lease payments, for contingent liabilities, and for repayment of borrowings on our line of credit. We believe that we have sufficient cash and cash equivalents, as well as borrowing capacity, to cover our estimated short-term and long-term funding needs.

Current wording

We expect to fund ongoing operating expenses, capital expenditures, acquisitions, interest payments, tax payments, credit facility maturities, future lease obligations, and payments for other long-term liabilities with cash flow from operations and borrowings under our credit facility. In the short-term, we are contractually obligated to make lease payments and make payments on contingent liabilities related to certain completed acquisitions. In the long-term, we are contractually obligated to make lease payments, for contingent liabilities, and for repayment of borrowings on our line of credit. In addition, if an opportunity presents itself, we may increase our borrowing under available credit arrangements or sell debt or equity securities, although we may not be able to complete any such financing on terms acceptable to us or at all. We believe that we have sufficient cash and cash equivalents, as well as borrowing capacity, to cover our estimated short-term and long-term funding needs.

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 September 30, 2025, these rates were 7.3% and 5.3%, 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 September 11, 2028.

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 March 31, 2026, these rates were 6.8% and 4.7%, 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 September 11, 2028.

Previous 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 September 30, 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 (approximately $3.2 million USD as of March 31, 2026) 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 March 31, 2026 and December 31, 2025, no balance was outstanding on this line of credit.