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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38858

XPEL, INC.

(Exact name of registrant as specified in its charter)

Nevada

20-1117381

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

711 Broadway St., Suite 320

San Antonio

Texas

78215

(Address of Principal Executive Offices)

(Zip Code)

Registrant's telephone number, including area code: (210) 678-3700

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	XPEL	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The registrant had 27,672,747 shares of common stock outstanding as of August 8, 2025.

TABLE OF CONTENTS


			Page
Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Income			2
Condensed Consolidated Statements of Comprehensive Income			3
Condensed Consolidated Statement of Changes in Equity			4
Condensed Consolidated Statement of Cash Flows			5
Notes to Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			16
Item 3. Quantitative and Qualitative Disclosures About Market Risk			27
Item 4. Controls and Procedures			27

Part II - Other Information
Item 1. Legal Proceedings			29
Item 1A. Risk Factors			29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			29
Item 3. Defaults Upon Senior Securities			30
Item 4. Mine Safety Disclosures			30
Item 5. Other Information			30
Item 6. Exhibits			31

Signatures			31

Part I. Financial Information

Item 1. Financial Statements

XPEL, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)


	(Unaudited)		(Audited)
	June 30, 2025		December 31, 2024
Assets
Current
Cash and cash equivalents	$	49,591	$	22,087
Accounts receivable, net	38,122		29,146
Inventory, net	104,129		110,904
Prepaid expenses and other current assets	5,474		5,314
Income tax receivable	—		893
Total current assets	197,316		168,344
Property and equipment, net	16,875		17,735
Right-of-use lease assets	20,138		19,490
Intangible assets, net	32,491		34,562
Deferred tax asset, net	1,257		—
Other non-current assets	3,456		1,350
Goodwill	46,538		44,126
Total assets	$	318,071	$	285,607
Liabilities
Current
Current portion of notes payable	$	69	$	63
Current portion lease liabilities	5,396		4,666
Accounts payable and accrued liabilities	38,955		36,789
Income tax payable	205		—
Total current liabilities	44,625		41,518
Deferred tax liability, net	—		469
Other long-term liabilities	1,492		1,810

Non-current portion of lease liabilities	16,159		16,126
Non-current portion of notes payable	137		229
Total liabilities	62,413		60,152
Commitments and Contingencies (Note 11)
Stockholders’ equity
Preferred stock, $0.001 par value; authorized 10,000,000; none issued and outstanding	—		—
Common stock, $0.001 par value; 100,000,000 shares authorized; 27,669,848 and 27,651,773 issued and outstanding, respectively	28		28
Additional paid-in-capital	17,085		15,550
Accumulated other comprehensive loss	(362)		(4,236)
Retained earnings	238,989		214,113
	255,740		225,455
Non-controlling interest	(82)		—
Total stockholders’ equity	255,658		225,455
Total liabilities and stockholders’ equity	$	318,071	$	285,607

See notes to condensed consolidated financial statements.

XPEL, INC.

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Revenue
Product revenue	$	94,795	$	83,200	$	173,507	$	150,052
Service revenue	29,918		26,717		55,011		49,969
Total revenue	124,713		109,917		228,518		200,021

Cost of Sales
Cost of product sales	58,190		51,274		106,630		93,409
Cost of service	13,006		10,778		24,475		20,871
Total cost of sales	71,196		62,052		131,105		114,280
Gross Margin	53,517		47,865		97,413		85,741

Operating Expenses
Sales and marketing	11,862		10,280		23,737		20,671
General and administrative	22,357		18,399		43,258		36,655
Total operating expenses	34,219		28,679		66,995		57,326

Operating Income	19,298		19,186		30,418		28,415

Interest expense	7		392		83		865
Foreign currency exchange (gain)/loss	(1,039)		275		(1,275)		548

Income before income taxes	20,330		18,519		31,610		27,002
Income tax expense	4,122		3,486		6,816		5,303
Net income	16,208		15,033		24,794		21,699
Net loss attributed to non-controlling interest	(82)		—		(82)		—
Net income attributable to stockholders of the Company	$	16,290	$	15,033	$	24,876	$	21,699

Earnings per share attributable to stockholders of the Company
Basic	$	0.59	$	0.54	$	0.90	$	0.79
Diluted	$	0.59	$	0.54	$	0.90	$	0.79
Weighted Average Number of Common Shares
Basic	27,666		27,635		27,660		27,633
Diluted	27,673		27,637		27,675		27,637

See notes to condensed consolidated financial statements.

XPEL, INC.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Other comprehensive income
Net income	$	16,208	$	15,033	$	24,794	$	21,699
Foreign currency translation	3,047		(295)		3,874		(1,157)
Total Comprehensive income	19,255		14,738		28,668		20,542
Total Comprehensive income attributable to:
Stockholders of the Company	19,337		14,738		28,750		20,542
Non-controlling interest	(82)		—		(82)		—
Total comprehensive income	$	19,255	$	14,738	$	28,668	$	20,542

See notes to condensed consolidated financial statements.

XPEL, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(In thousands)


Stockholders' Equity - Three Months Ended June 30,
	Common Stock			Additional Paid-in-Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Equity attributable to Stockholders of the Company		Non-Controlling Interest		Total Stockholders’ Equity
	Shares	Amount
Balance as of March 31, 2024	27,631	$	28	$	13,176	$	175,290	$	(2,071)	$	186,423	$	—	$	186,423
Net income	—	—		—		15,033		—		15,033		—		15,033
Foreign currency translation	—	—		—		—		(295)		(295)		—		(295)
Stock-based compensation	7	—		750		—		—		750				750
Balance as of June 30, 2024	27,638	28		13,926		190,323		(2,366)		201,911		—		201,911

Balance as of March 31, 2025	27,662	28		16,136		222,699		(3,409)		235,454		—		235,454
Net income	—	—		—		16,290		—		16,290		(82)		16,208
Foreign currency translation	—	—		—		—		3,047		3,047		—		3,047
Stock-based compensation	8	—		949		—		—		949		—		949

Balance as of June 30, 2025	27,670	$	28	$	17,085	$	238,989	$	(362)	$	255,740	$	(82)	$	255,658


Stockholders' Equity - Six Months Ended June 30,
	Common Stock			Additional Paid-in-Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Equity attributable to Stockholders of the Company		Non-Controlling Interest		Total Stockholders’ Equity
	Shares	Amount
Balance as of December 31, 2023	27,630	$	28	$	12,546	$	168,624	$	(1,209)	$	179,989	$	—	$	179,989
Net income	—	—		—		21,699		—		21,699		—		21,699
Foreign currency translation	—	—		—		—		(1,157)		(1,157)		—		(1,157)
Stock-based compensation	8	—		1,380		—		—		1,380		—		1,380
Balance as of June 30, 2024	27,638	28		13,926		190,323		(2,366)		201,911		—		201,911

Balance as of December 31, 2024	27,652	28		15,550		214,113		(4,236)		225,455		—		225,455
Net income	—	—		—		24,876		—		24,876		(82)		24,794
Foreign currency translation	—	—		—		—		3,874		3,874		—		3,874
Stock-based compensation	18	—		1,535		—		—		1,535		—		1,535

Balance as of June 30, 2025	27,670	$	28	$	17,085	$	238,989	$	(362)	$	255,740	$	(82)	$	255,658

See notes to condensed consolidated financial statements.

XPEL, INC.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Six Months Ended June 30,
	2025		2024
Cash flows from operating activities
Net income	$	24,794	$	21,699
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment	3,093		2,804
Amortization of intangible assets	3,059		2,852
Loss/(Gain) on sale of property and equipment	7		(28)
Stock compensation	1,696		1,467
Provision for credit losses	181		189
Deferred income tax	(1,902)		(862)

Changes in assets and liabilities:
Accounts receivable, net	(7,841)		(5,754)
Inventory, net	7,911		8,766
Prepaid expenses and other current assets	(1,899)		(1,309)
Income taxes receivable and payable	1,052		(587)
Accounts payable and accrued liabilities	966		(7,299)
Net cash provided by operating activities	31,117		21,938
Cash flows used in investing activities
Purchase of property, plant and equipment	(1,946)		(3,828)
Proceeds from sale of property and equipment	15		—
Acquisition of businesses, net of cash acquired	(184)		(5,928)
Development of intangible assets	(788)		(841)
Net cash used in investing activities	(2,903)		(10,597)
Cash flows from financing activities
Net payments on revolving line of credit	—		(8,000)
Restricted stock withholding taxes paid in lieu of issued shares	(161)		(87)
Repayments of notes payable	(98)		(31)
Net cash used in financing activities	(259)		(8,118)
Net change in cash and cash equivalents	27,955		3,223
Foreign exchange impact on cash and cash equivalents	(451)		152
Increase in cash and cash equivalents during the period	27,504		3,375
Cash and cash equivalents at beginning of period	22,087		11,609
Cash and cash equivalents at end of period	$	49,591	$	14,984

Supplemental schedule of non-cash activities
Non-cash lease financing	$	2,840	$	5,038
Issuance of common stock for vested restricted stock units	$	521	$	462
Supplemental cash flow information
Cash paid for income taxes	$	7,457	$	6,798
Cash paid for interest	$	89	$	844

See notes to condensed consolidated financial statements.

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. INTERIM FINANCIAL INFORMATION

The accompanying (a) condensed consolidated balance sheet as of December 31, 2024, which has been derived from audited financial statements, and (b) unaudited interim condensed consolidated financial statements as of June 30, 2025 and for the three and six months ended June 30, 2025 and 2024 have been prepared by XPEL, Inc. (“XPEL” or the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Pursuant to these rules and regulations, certain financial information and footnote disclosures normally included in the financial statements have been condensed or omitted. However, in the opinion of management, the financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position, results of operations and cash flows of the interim periods presented. Operating results for the interim periods presented are not necessarily indicative of results to be expected for the full year or for any other interim period, due to variability in customer purchasing patterns and seasonal, operating and other factors.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the SEC on February 28, 2025 (the "Annual Report") and with the Management's Discussion and Analysis of Financial Condition and Results of Operations section appearing elsewhere in this Report.

2. SIGNIFICANT ACCOUNTING POLICIES

Nature of Business - The Company is based in San Antonio, Texas and sells, distributes, and installs protective films and coatings, including automotive paint protection film, surface protection film, automotive and commercial/architectural window films and ceramic coatings. The Company was incorporated in the state of Nevada, U.S.A. in October 2003.

Basis of Presentation - The condensed consolidated financial statements are prepared in conformity with United States Generally Accepted Accounting Principles ("U.S. GAAP") and include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated. The functional currency for the Company is the United States ("U.S.") Dollar. The assets and liabilities of each of its wholly-owned foreign subsidiaries are translated into U.S. dollars using the exchange rate at the end of the balance sheet date. Revenues and expenses are translated at the average exchange rates for the period. Gains and losses from translations are recognized in foreign currency translation included in accumulated other comprehensive loss in the accompanying consolidated balance sheets.

Segment Reporting - The Company's chief operating decision maker (“CODM”) is its Chief Executive Officer. During the three months ended June 30, 2025, the Company restructured its reporting to the CODM to include financial information from geographically segmented business units. The Company's CODM reviews geographically segmented data as well as consolidated results on a monthly basis to evaluate performance and make resource allocation decisions. Each geographical segment exhibits similar economic characteristics, shares common products and services, has similar customer types, and uses similar distribution methods. As a result, these segments have been aggregated into a single reportable segment in accordance with the aggregation criteria under ASC 280, Segment Reporting.

Goodwill - Goodwill represents the excess purchase price over the fair value of tangible net assets acquired in acquisitions after amounts have been allocated to intangible assets. Goodwill is tested for impairment at the reporting unit level on an annual basis (at December 31) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. During the three months ended June 30, 2025, the Company restructured its

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

reporting to the CODM leading to the creation of additional reporting units. With the change in its operating segments, the Company reallocated goodwill across its reporting units, utilizing a relative fair value approach. The Company recognized no goodwill impairment during the three and six months ended June 30, 2025, and there is no significant accumulated impairment of goodwill from prior periods. Refer to Note 6, Goodwill for more information related to goodwill.

Use of Estimates - The preparation of these condensed consolidated financial statements in conformity with U.S. GAAP requires management to make judgments and estimates and form assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and underlying assumptions are reviewed on an ongoing basis. Actual outcomes may differ from these estimates under different assumptions and conditions.

Accounts Receivable - Accounts receivable are shown net of allowances for expected credit losses of $0.1 million and $0.2 million as of June 30, 2025 and December 31, 2024, respectively. The Company evaluates the adequacy of its allowances by analyzing the aging of receivables, customer financial condition, historical collection experience, the value of any collateral and other economic and industry factors. Actual collections may differ from historical experience, and if economic, business or customer conditions deteriorate significantly, adjustments to these reserves may be required. When the Company becomes aware of factors that indicate a change in a specific customer’s ability to meet its financial obligations, the Company records a specific reserve for credit losses.

Provisions and Warranties - We provide a warranty on our products. Liabilities under the warranty policy are based on a review of historical warranty claims. Adjustments are made to the accruals as claims and data experience warrant. Our liabilities for warranties as of June 30, 2025 and December 31, 2024 were $0.8 million and $0.7 million, respectively. The following tables present a summary of our accrued warranty liabilities, which are recorded within the Company's accounts payable and accrued liabilities, for the six months ended June 30, 2025 and the twelve months ended December 31, 2024 (in thousands):


	2025
Warranty liability, January 1	$	738
Warranties assumed in period	619
Payments	(602)
Warranty liability, June 30	$	755


	2024
Warranty liability, January 1	$	422
Warranties assumed in period	1,551
Payments	(1,235)
Warranty liability, December 31	$	738

Recent Accounting Pronouncements Issued and Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures”, which makes certain updates to income tax disclosures. This standard becomes effective for annual periods

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

beginning after December 15, 2024, with early adoption permitted. We do not anticipate that the implementation of this standard will have a material impact on our financial statements.

In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses”, which makes certain updates to the presentation of expenses. This standard becomes effective for annual reporting periods beginning after December 15, 2026 and interim reports beginning after December 15, 2027, with early adoption permitted. We are assessing the effect that the adoption of this standard will have on our financial statements.

Recent Developments

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain businesses. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company is currently assessing its impact on the consolidated financial statements.

3. REVENUE

Revenue recognition

The Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods and services to a customer, in an amount that reflects the consideration that it expects to receive in exchange for those goods or services. This is achieved through applying the following five-step model:

•Identification of the contract, or contracts, with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations in the contract

•Recognition of revenue when, or as, the Company satisfies a performance obligation

The Company generates substantially all of its revenue from contracts with customers, whether formal or implied. Sales taxes collected from customers are remitted to the appropriate taxing jurisdictions and are excluded from sales revenue as the Company considers itself a pass-through conduit for collecting and remitting sales taxes, with the exception of taxes assessed during the procurement process of select inventories. Shipping and handling costs are included in cost of sales.

Revenue from product and services sales is recognized when control of the goods, or benefit of the service, is furnished to the customer. This occurs at a point in time, typically upon shipment to the customer or completion of the service. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.

Based upon the nature of the products the Company sells, its customers have limited rights of return and those that do occur are immaterial. Discounts provided by the Company to customers at the time of sale are recognized as a reduction in sales as the products are sold.

Warranty obligations associated with the sale of our products are assurance-type warranties that are a guarantee of the product’s intended functionality and, therefore, do not represent a distinct performance obligation within the context of the contract. Warranty expense is included in cost of sales.

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

We apply a practical expedient to expense direct costs of obtaining a contract when incurred because the amortization period would be one year or less.

Under its contracts with customers, the Company stands ready to deliver product upon receipt of a purchase order. Accordingly, the Company has no performance obligations under its contracts until its customers submit a purchase order. The Company does not enter into commitments to provide goods or services that have terms greater than one year. In limited cases, the Company does require payment in advance of shipping product. Typically, product is shipped within a few days after prepayment is received. These prepayments are recorded as contract liabilities on the condensed consolidated balance sheet and are included in accounts payable and accrued liabilities (Note 9). As the performance obligation is part of a contract that has an original expected duration of less than one year, the Company has applied the practical expedient under the Accounting Standards Codification Topic 606 ("ASC 606") to omit disclosures regarding remaining performance obligations.

When the Company transfers goods or provides services to a customer, payment is due, subject to normal terms, and is not conditional on anything other than the passage of time. Typical payment terms range from due upon receipt to due within 30 days, depending on the type of customer and relationship. At contract inception, the Company expects that the period of time between the transfer of goods to the customer and when the customer pays for those goods will be less than one year, which is consistent with the Company’s standard payment terms. Accordingly, the Company has elected the practical expedient under ASC 606 to not adjust for the effects of a significant financing component. As such, these amounts are recorded as receivables and not contract assets.

The following table summarizes transactions within contract liabilities for the three and six months ended June 30, 2025 (in thousands):


Balance, December 31, 2024	$	821
Revenue recognized related to payments included in the December 31, 2024 balance	(757)
Payments received for which performance obligations have not been satisfied	1,341
Effect of foreign currency translation	3
Balance, March 31, 2025	1,408
Revenue recognized related to payments included in the March 31, 2025 balance	(1,345)
Payments received for which performance obligations have not been satisfied	1,810
Effect of foreign currency translation	266
Balance, June 30, 2025	$	2,139

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The table below sets forth the disaggregation of revenue by product category for the periods indicated below (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Product Revenue
Paint protection film	$	62,666	$	57,315	$	119,106	$	106,326
Window film	27,959		22,018		46,594		36,567
Other	4,170		3,867		7,807		7,159
Total	$	94,795	$	83,200	$	173,507	$	150,052

Service Revenue
Software	$	2,180	$	1,991	$	4,299	$	3,919
Cutbank credits	4,523		4,782		8,195		8,799
Installation labor	22,448		19,458		41,098		36,165
Training and other	767		486		1,419		1,086
Total	$	29,918	$	26,717	$	55,011	$	49,969

Total	$	124,713	$	109,917	$	228,518	$	200,021

4. PROPERTY AND EQUIPMENT, NET

Property and equipment consists of the following (in thousands):


	June 30, 2025		December 31, 2024
Furniture and fixtures	$	4,902		$	4,451
Computer equipment	5,543			5,202
Vehicles	1,134			1,075
Equipment	6,132			6,018
Leasehold improvements	13,631			11,878
Plotters	5,457			5,005
Construction in Progress	739			1,346
Total property and equipment	37,538			34,975
Less: accumulated depreciation	20,663			17,240
Property and equipment, net	$	16,875		$	17,735

Depreciation expense for the three months ended June 30, 2025 and 2024 was $1.6 million and $1.5 million, respectively. For the six months ended June 30, 2025 and 2024, depreciation expense was $3.1 million and $2.8 million, respectively.

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

5. INTANGIBLE ASSETS, NET

Intangible assets consists of the following (in thousands):


	June 30, 2025		December 31, 2024
Trademarks	$	1,499	$	1,386
Software	8,397		7,720
Trade name	2,623		2,638
Contractual and customer relationships	43,393		42,827
Non-compete	438		424
Other	729		693
Total at cost	57,079		55,688
Less: Accumulated amortization	24,588		21,126
Intangible assets, net	$	32,491	$	34,562

Amortization expense for the three months ended June 30, 2025 and 2024 was $1.5 million and $1.4 million, respectively. For the six months ended June 30, 2025 and 2024, amortization expense was $3.1 million and $2.9 million, respectively.

6. GOODWILL

The following table summarizes goodwill transactions for the six months ended June 30, 2025 and the twelve months ended December 31, 2024 (in thousands):


	2024
Balance at December 31, 2023	$	37,461
Additions and purchase price allocation adjustments	7,762
Foreign exchange	(1,097)
Balance at December 31, 2024	$	44,126

	2025
Balance at December 31, 2024	$	44,126
Additions and purchase price allocation adjustments	1,074
Foreign exchange	1,338
Balance at June 30, 2025	$	46,538

7. INVENTORIES

The components of inventory are summarized as follows (in thousands):


	June 30, 2025		December 31, 2024
Raw materials	$	7,470	$	18,686
Work in process	1,426		2,662
Finished goods	95,233		89,556
	$	104,129	$	110,904

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

8. DEBT

REVOLVING FACILITIES

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, 2025 and December 31, 2024, the Company had no outstanding balances under the Credit Agreement.

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 Agreement, that are not otherwise defined in this report, have the meaning assigned to them in the Credit Agreement.

Obligations under the Credit Agreement are secured by a first priority perfected security interest, subject to certain permitted encumbrances, in all of XPEL’s material property and assets.

The terms of the Credit Agreement include certain affirmative and negative covenants that require, among other things, XPEL to maintain legal existence and remain in good standing, comply with applicable laws, maintain accounting records, deliver financial statements and certifications on a timely basis, pay taxes as required by law, and maintain insurance coverage, as well as to forgo certain specified future activities that might otherwise encumber XPEL. The Credit Agreement provides for two financial covenants, as follows:

As of the last day of each fiscal quarter:

1.XPEL shall not allow its Consolidated Total Leverage Ratio to exceed 3.50 to 1.00, and

2.XPEL shall not allow its Consolidated Interest Coverage Ratio to be less than 3.00 to 1.00

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.

As of June 30, 2025 and December 31, 2024, the Company was in compliance with all debt covenants.

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The following table presents significant accounts payable and accrued liability balances as of the periods ending (in thousands):


	June 30, 2025		December 31, 2024
Trade payables	$	26,365	$	26,316
Payroll liabilities	5,952		5,329
Contract liabilities	2,139		821
Acquisition holdback payments	665		651
Other liabilities	3,834		3,672
	$	38,955	$	36,789

10. FAIR VALUE MEASUREMENTS

ASC 820 prioritizes the inputs to valuation techniques used to measure fair value into the following hierarchy:

Level 1 – Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – Inputs other than the quoted prices in active markets that are observable either directly or indirectly, including: quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Unobservable inputs that are supported by little or no market data and require the reporting entity to develop its own assumptions.

Financial instruments include cash and cash equivalents, accounts receivable, accounts payable, our line of credit, and long-term debt. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, our line of credit, and short-term borrowings approximate fair value because of the near-term maturities of these financial instruments. The carrying value of the Company’s notes payable approximates fair value due to the relatively short-term nature and interest rates of the notes. The carrying value of the Company's long-term debt approximates fair value due to the interest rates being market rates.

The estimated fair value of debt is based on market quotes for instruments with similar terms and remaining maturities.

The Company has contingent liabilities related to future internal performance milestones. The fair value of these liabilities was determined using a Monte Carlo Simulation based on the probability and timing of certain future payments under these arrangements. These liabilities are accounted for as Level 3 liabilities within the fair value hierarchy.

Liabilities measured at fair value on a recurring basis as of the dates noted below are as follows (in thousands):


	June 30, 2025		December 31, 2024
Level 3:
Contingent Liabilities	$	2,076	$	1,816

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Valuation adjustments of level 3 contingent liabilities are reflected in general and administrative expenses in the Consolidated Statements of Income for the three and six months ended June 30, 2025.

11. COMMITMENTS AND CONTINGENCIES

In the ordinary course of business activities, the Company may be contingently liable for litigation and claims including those pertaining to customers, suppliers and former employees. Management believes that adequate provisions have been recorded in the accounts where required. Management also has determined that the likelihood of any class action or other litigation and claims having a material impact on our results of operations, cash flows or financial position is remote.

12. EARNINGS PER SHARE

We compute basic earnings per share by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share includes effect of granted incremental restricted stock units.

The following table reconciles basic and diluted weighted average shares used in the computation of earnings per share (in thousands except per share values):


	Three Months Ended June 30,				Six Months Ended June 30,
Numerator	2025		2024		2025		2024
Net income attributable to stockholders of the Company	$	16,290	$	15,033	$	24,876	$	21,699
Denominator
Weighted average basic shares	27,666		27,635		27,660		27,633
Dilutive effect of restricted stock units	7		2		15		4
Weighted average diluted shares	27,673		27,637		27,675		27,637
Earnings per share
Basic	$	0.59	$	0.54	$	0.90	$	0.79
Diluted	$	0.59	$	0.54	$	0.90	$	0.79

13. SEGMENT INFORMATION

The Company's chief operating decision maker (“CODM”) is its Chief Executive Officer. During the three months ended June 30, 2025, the Company restructured its reporting to the CODM to include financial information from geographically segmented business units. The Company's CODM reviews geographically segmented data as well as consolidated results on a monthly basis to evaluate performance and make resource allocation decisions. Each geographical segment exhibits similar economic characteristics, shares common products and services, has similar customer types, and uses similar distribution methods. As a result, these segments have been aggregated into a single reportable segment in accordance with the aggregation criteria under ASC 280, Segment Reporting.

The CODM reviews balance sheet information on a consolidated basis which is reflected in the Company's Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024. The CODM uses gross margin and income from operations to evaluate return on total assets in deciding whether to invest in the development and expansion of our consolidated operations or into strategic transactions, such as acquisitions. Both metrics are also used to monitor budget versus actual results, perform competitive benchmarking analyses, and is considered in evaluating our executives’ compensation.

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table presents our significant expense categories included in our reported measure of segment profitability for the periods represented (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Total revenue	$	124,713	$	109,917	$	228,518	$	200,021
Less:
Direct product costs	58,190		51,274		106,630		93,409
Direct non-product costs	13,006		10,778		24,475		20,871
Gross margin	53,517		47,865		97,413		85,741
Less:
Personnel costs	15,129		12,757		29,374		25,440
Sales and marketing costs	3,074		3,179		6,758		6,993
Facility expenses	2,782		2,297		5,454		4,637
Depreciation and amortization	2,544		2,381		5,054		4,616
Travel and entertainment	1,767		1,726		4,517		4,079
Information technology	1,610		1,349		3,158		2,689
Professional fees	2,022		1,321		3,678		2,528
Shipping	1,529		1,356		2,678		2,396
Other	3,762		2,313		6,324		3,948
Income from operations	19,298		19,186		30,418		28,415
Interest expense	7		392		83		865
Income tax expense	4,122		3,486		6,816		5,303
Foreign currency exchange (gain)/loss	(1,039)		275		(1,275)		548
Net income	$	16,208	$	15,033	$	24,794	$	21,699

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis provides material historical and prospective disclosures intended to enable investors and other users to assess the financial condition and results of operations of XPEL, Inc. (“XPEL” or the “Company”). Statements that are not historical are forward-looking and involve risks and uncertainties discussed under the heading “Forward-Looking Statements” in this report and under “Business," "Risk Factors,” "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Financial Statements and Supplementary Data" in the Annual Report which is available on the SEC’s website at www.sec.gov.

Forward-Looking Statements

This quarterly report on Form 10-Q contains not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to the safe harbor created by those sections. In addition, the Company or others on the Company’s behalf may make forward-looking statements from time to time in oral presentations, including telephone conferences and/or web casts open to the public, in press releases or reports, on the Company’s internet web site, or otherwise. All statements other than statements of historical facts included in this report or expressed by the Company orally from time to time that address activities, events, or developments that the Company expects, believes, or anticipates will or may occur in the future are forward-looking statements, including, in particular, the statements about the Company’s plans, objectives, strategies, and prospects regarding, among other things, the Company’s financial condition, results of operations and business, and the outcome of contingencies, such as legal proceedings. The Company has identified some of these forward-looking statements in this report with words like “believe,” “can,” “may,” “could,” “would,” “might,” “forecast,” “possible,” “potential,” “project,” “will,” “should,” “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate,” “approximate,” “outlook,” or “continue” or the negative of these words or other words and terms of similar meaning. The use of future dates is also an indication of a forward-looking statement. Forward-looking statements may be contained in the notes to the Company’s condensed consolidated financial statements and elsewhere in this report, including under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Forward-looking statements are based on current expectations about future events affecting the Company and are subject to uncertainties and factors that affect all businesses operating in a global market as well as matters specific to the Company. These uncertainties and factors are difficult to predict, and many of them are beyond the Company’s control. Factors to consider when evaluating these forward-looking statements include, but are not limited to:

•We are highly dependent on the automotive industry. A prolonged or material contraction in automotive sales and production volumes could adversely affect our business, results of operations and financial condition.

•We currently rely on one distributor for our products in China.

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

•The loss of one or more of our key personnel or our failure to attract and retain other highly qualified personnel in the future, could harm our business.

•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.

•Our operating results can be adversely affected by inflation, changes in the cost or availability of raw materials, labor, energy, transportation and other necessary supplies and services.

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

•Changes in OEM accessorization strategies or production volumes could impact our business.

•Our accounting estimates and risk management processes rely on assumptions or models that may prove inaccurate.

•Our industry is highly competitive.

•Harm to our reputation or the reputation of one or more of our products could have an adverse effect on our business.

•Our revenue and operating results may fluctuate, which may make our results difficult to predict and could cause our results to fall short of expectations.

•Infringement of our intellectual property could impact our ability to compete effectively.

•If changes to our existing products or introduction of new products or services do not meet our customers’ expectations or fail to generate revenue, we could lose our customers or fail to generate any revenue from such products or services and our business may be harmed.

•We depend on our relationships with independent installers and new car dealerships and their ability to sell and service our products. Any disruption in these relationships could harm our sales.

•We may not be able to identify, finance and complete suitable acquisitions and investments, and any completed acquisitions and investments could be unsuccessful or consume significant resources.

•We may incur material losses and costs as a result of product liability and warranty claims.

•Our failure to satisfy international trade compliance regulations, and changes in U.S. government sanctions, could have a material adverse effect on us.

•We may seek to incur substantial indebtedness in the future.

•We cannot be certain that additional financing will be available on reasonable terms when required, or at all.

•Our variable rate indebtedness exposes us to interest rate volatility, which could cause our debt service obligations to increase significantly.

•General global economic and business conditions affect demand for our products.

•A public health crisis could impact our business.

•Economic, political and market conditions can adversely affect our business, financial condition and results of operations.

•Existing and potential new trade policies, such as tariffs, could adversely affect our operational costs and business.

We believe the items we have outlined above are important factors that could cause estimates included in our financial statements to differ materially from actual results and those expressed in a forward-looking statement made in this report or elsewhere by us or on our behalf. We have discussed these factors in more detail in the Annual Report and supplemented in this Report. These factors are not necessarily all of the factors that could affect us. Unpredictable or unanticipated factors that we have not discussed in this Report could also have material adverse effects on actual results. We do not intend to update our description of important factors each time a potential important factor arises, except as required by applicable securities laws and regulations. We advise our shareholders that they should (1) be aware that factors not referred to above could affect the accuracy of our forward-looking statements and (2) use caution when considering our forward-looking statements.

Company Overview

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.

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.

Strategic Overview

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.

Key Business Metric - Non-GAAP Financial Measures

Our management regularly monitors certain financial measures to track the progress of our business against internal goals and targets. We believe that the most important measure to the Company is Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”).

EBITDA is a non-GAAP financial measure. We believe EBITDA provides helpful information with respect to our operating performance as viewed by management, including a view of our business that is not dependent on (i) the impact of our capitalization structure and (ii) items that are not part of our day-to-day operations. Management uses EBITDA (1) to compare our operating performance on a consistent basis, (2) to calculate incentive compensation for our employees, (3) for planning purposes including the preparation of our internal annual operating budget, (4) to evaluate the performance and effectiveness of our operational strategies, and (5) to assess compliance with various metrics associated with the agreements governing our indebtedness. Accordingly, we believe that EBITDA provides useful information in understanding and evaluating our operating performance in the same manner as management. We define EBITDA as net income plus (a) total depreciation and amortization, (b) interest expense, net, and (c) income tax expense.

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):


	(Unaudited)						(Unaudited)
	Three Months Ended June 30,						Six Months Ended June 30,
	2025		2024		% Change		2025		2024		% Change
Net Income	$	16,208	$	15,033	7.8	%	$	24,794	$	21,699	14.3	%
Interest	7		392		(98.2)	%	83		865		(90.4)	%
Taxes	4,122		3,486		18.2	%	6,816		5,303		28.5	%
Depreciation	1,557		1,471		5.8	%	3,093		2,804		10.3	%
Amortization	1,475		1,442		2.3	%	3,059		2,852		7.3	%
EBITDA	$	23,369	$	21,824	7.1	%	$	37,845	$	33,523	12.9	%

Use of Non-GAAP Financial Measures

EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. It is not a measurement of our financial performance under GAAP and should not be considered as alternatives to revenue or net income, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses. EBITDA has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our operating results as reported under GAAP.

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.

Results of Operations

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):


	Three Months Ended June 30, 2025		% of Total Revenue		Three Months Ended June 30, 2024		% of Total Revenue		$ Change		% Change
Total revenue	$	124,713	100.0	%	$	109,917	100.0	%	$	14,796	13.5	%
Total cost of sales	71,196		57.1	%	62,052		56.5	%	9,144		14.7	%
Gross margin	53,517		42.9	%	47,865		43.5	%	5,652		11.8	%
Total operating expenses	34,219		27.4	%	28,679		26.1	%	5,540		19.3	%
Operating income	19,298		15.5	%	19,186		17.5	%	112		0.6	%
Other (income) expense	(1,032)		(0.8)	%	667		0.6	%	(1,699)		(254.7)	%
Income tax	4,122		3.3	%	3,486		3.2	%	636		18.2	%
Net income	$	16,208	13.0	%	$	15,033	13.7	%	$	1,175	7.8	%


	Six Months Ended June 30, 2025		% of Total Revenue		Six Months Ended June 30, 2024		% of Total Revenue		$ Change		% Change
Total revenue	$	228,518	100.0	%	$	200,021	100.0	%	$	28,497	14.2	%
Total cost of sales	131,105		57.4	%	114,280		57.1	%	16,825		14.7	%
Gross margin	97,413		42.6	%	85,741		42.9	%	11,672		13.6	%
Total operating expenses	66,995		29.3	%	57,326		28.7	%	9,669		16.9	%
Operating income	30,418		13.3	%	28,415		14.2	%	2,003		7.0	%
Other (income) expense	(1,192)		(0.5)	%	1,413		0.7	%	(2,605)		(184.4)	%
Income tax	6,816		3.0	%	5,303		2.7	%	1,513		28.5	%
Net income	$	24,794	10.8	%	$	21,699	10.8	%	$	3,095	14.3	%

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


	Three Months Ended June 30,				%		% of Total Revenue
	2025		2024		Inc (Dec)		2025		2024
Product Revenue
Paint protection film	$	62,666	$	57,315	9.3	%	50.2	%	52.1	%
Window film	27,959		22,018		27.0	%	22.4	%	20.0	%
Other	4,170		3,867		7.8	%	3.4	%	3.5	%
Total	$	94,795	$	83,200	13.9	%	76.0	%	75.7	%

Service Revenue
Software	$	2,180	$	1,991	9.5	%	1.7	%	1.8	%
Cutbank credits	4,523		4,782		(5.4)	%	3.6	%	4.4	%
Installation labor	22,448		19,458		15.4	%	18.0	%	17.7	%
Training and other	767		486		57.8	%	0.7	%	0.4	%
Total	$	29,918	$	26,717	12.0	%	24.0	%	24.3	%

Total	$	124,713	$	109,917	13.5	%	100.0	%	100.0	%


	Six Months Ended June 30,				%		% of Total Revenue
	2025		2024		Inc (Dec)		2025		2024
Product Revenue
Paint protection film	$	119,106	$	106,326	12.0	%	52.1	%	53.2	%
Window film	46,594		36,567		27.4	%	20.4	%	18.3	%
Other	7,807		7,159		9.1	%	3.4	%	3.6	%
Total	$	173,507	$	150,052	15.6	%	75.9	%	75.0	%

Service Revenue
Software	$	4,299	$	3,919	9.7	%	1.9	%	2.0	%
Cutbank credits	8,195		8,799		(6.9)	%	3.6	%	4.4	%
Installation labor	41,098		36,165		13.6	%	18.0	%	18.1	%
Training and other	1,419		1,086		30.7	%	0.6	%	0.5	%
Total	$	55,011	$	49,969	10.1	%	24.1	%	25.0	%

Total	$	228,518	$	200,021	14.2	%	100.0	%	100.0	%

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):


	Three Months Ended June 30,				%		% of Total Revenue
	2025		2024		Inc (Dec)		2025		2024
United States	$	70,380	$	64,902	8.4	%	56.4	%	59.0	%
Canada	14,254		13,274		7.4	%	11.5	%	12.1	%
North America	84,634		78,176		8.3	%	67.9	%	71.1	%
China	7,705		4,401		75.1	%	6.2	%	4.0	%
Asia Other	5,428		4,120		31.7	%	4.3	%	3.8	%
Asia Pacific	13,133		8,521		54.1	%	10.5	%	7.8	%
EU, UK, and Africa	17,360		15,261		13.8	%	13.9	%	13.9	%
India and Middle East	6,746		4,800		40.5	%	5.4	%	4.4	%
Latin America	2,840		3,159		(10.1)	%	2.3	%	2.8	%
Total	$	124,713	$	109,917	13.5	%	100.0	%	100.0	%


	Six Months Ended June 30,				%		% of Total Revenue
	2025		2024		Inc (Dec)		2025		2024
United States	$	128,453	$	116,950	9.8	%	56.2	%	58.5	%
Canada	$	23,680	$	24,354	(2.8)	%	10.4	%	12.1	%
North America	$	152,133	$	141,304	7.7	%	66.6	%	70.6	%
China	15,811		5,852		170.2	%	6.9	%	2.9	%
Asia Other	9,986		7,712		29.5	%	4.4	%	3.9	%
Asia Pacific	25,797		13,564		90.2	%	11.3	%	6.8	%
EU, UK, and Africa	32,362		29,167		11.0	%	14.2	%	14.6	%
India and Middle East	12,824		9,896		29.6	%	5.6	%	4.9	%
Latin America	5,402		6,090		(11.3)	%	2.3	%	3.1	%
Total	$	228,518	$	200,021	14.2	%	100.0	%	100.0	%

Product Revenue. Product revenue for the three months ended June 30, 2025 increased 13.9% over the three months ended June 30, 2024. Product revenue represented 76.0% of our total revenue compared to 75.7% in the three months ended June 30, 2024. Revenue from our paint protection film product line increased 9.3% over the three months ended June 30, 2024. Paint protection film sales represented 50.2% and 52.1% of our total consolidated revenues for the three months ended June 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.

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.

Other product revenue for the three months ended June 30, 2025 increased 7.8% compared to the three months ended June 30, 2024 due primarily to continued growth in revenue from our FUSION product line. Revenue for our FUSION product line for the three months ended June 30, 2025 grew 9.5% to $1.9 million compared to the three months ended June 30, 2024.

Geographically, we experienced continued growth in most of our regions during the three months ended June 30, 2025 including 75.1%, 31.7% and 40.5% in China, Asia-Other and Middle East/India, respectively. The increase in China was driven primarily by increased paint protection film sales into China as prior excess inventory levels at our China distributor began to normalize. The increases in Asia-Other and Middle East/India were driven primarily by increased production adoption and increased demand.

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.

Revenue from our window film grew 27.4% compared to the six months ended June 30, 2024. Window film sales represented 20.4% and 18.3% of our total consolidated revenues for the six months

ended June 30, 2025 and 2024, respectively. This increase was driven by continued demand resulting from increased product adoption in multiple regions. Our windshield protection film for the six months ended June 30, 2025 was $3.9 million and represented 8.4% of total window film revenue for the six months ended June 30, 2025 and 1.7% of total consolidated revenue for the six months ended June 30, 2025.

Other product revenue for the six months ended June 30, 2025 increased 9.1% compared to the six months ended June 30, 2024. This was due primarily to continued growth in revenue from our FUSION product line, which grew 7.2% to $3.3 million compared to the six months ended June 30, 2024.

Geographically, we saw growth in most region during the six months ended June 30, 2025. These increases were primarily due to increased product awareness and attach rates.

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.

Service revenue grew 12.0% over the three months ended June 30, 2024. Within this category, software revenue increased 9.5% over the three months ended June 30, 2024. This increase was due to an increase in total subscribers to our DAP software. Installation labor revenue increased 15.4% over the three months ended June 30, 2024 due mainly to increased demand across our dealership services and OEM networks.

Service revenue for the six months ended June 30, 2025 grew 10.1% over the six months ended June 30, 2024. Within this category, software revenue grew 9.7% over the six months ended June 30, 2024. This increase was due to an increase in total subscribers to our DAP software. Installation labor revenue increased 13.6% over the six months ended June 30, 2024 due mainly to increased demand across our dealership services and OEM networks.

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.

Cost of Sales

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.

Product costs for the three months ended June 30, 2025 increased 13.5% over the three months ended June 30, 2024. Cost of product sales represented 46.7% and 46.6% of total revenue in the three months ended June 30, 2025 and 2024, respectively. Cost of service revenue grew 20.7% during the three months ended June 30, 2025. Refer to the Gross Margin section below for discussion of this cost relative to revenue.

Product costs for the six months ended June 30, 2025 increased 14.2% over the six months ended June 30, 2024. Cost of product sales represented 46.7% and 46.7% of total revenue in the six months ended June 30, 2025 and 2024, respectively. Cost of service revenue grew 17.3% during the six months ended June 30, 2025. Refer to the Gross Margin section below for discussion of this cost relative to revenue.

Gross Margin

Gross margin for the three months ended June 30, 2025 grew approximately $5.7 million, or 11.8%, compared to the three months ended June 30, 2024. For the three months ended June 30, 2025, gross margin represented 42.9% of revenue compared to 43.5% for the three months ended June 30, 2024.

Gross margin for the six months ended June 30, 2025 grew approximately $11.7 million, or 13.6%, compared to the six months ended June 30, 2024. For the six months ended June 30, 2025, gross margin represented 42.6% of revenue compared to 42.9% for the six months ended June 30, 2024.

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):


	Three Months Ended June 30,				%		% of Category Revenue
	2025		2024		Inc (Dec)		2025		2024
Product margin	$	36,605	$	31,926	14.7	%	38.6	%	38.4	%
Service margin	16,912		15,939		6.1	%	56.5	%	59.7	%
Total	$	53,517	$	47,865	11.8	%	42.9	%	43.5	%


	Six Months Ended June 30,				%		% of Category Revenue
	2025		2024		Inc (Dec)		2025		2024
Product margin	$	66,877	$	56,643	18.1	%	38.5	%	37.7	%
Service margin	30,536		29,098		4.9	%	55.5	%	58.2	%
Total	$	97,413	$	85,741	13.6	%	42.6	%	42.9	%

Product gross margin for the three months ended June 30, 2025 increased approximately $4.7 million, or 14.7%, over the three months ended June 30, 2024 and represented 38.6% and 38.4% of total product revenue for the three months ended June 30, 2025 and 2024, respectively. The increases in gross margin and gross margin percentage were due primarily to sales mix, decreases in product costs and improved operating leverage.

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.

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.

Service gross margin increased approximately $1.4 million, or 4.9%, over the six months ended June 30, 2024. This represented 55.5% and 58.2% of total service revenue for the six months ended June 30, 2025 and 2024, respectively.

Operating Expenses

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.

For the six months ended June 30, 2025, sales and marketing expenses increased 14.8% compared to the same period in 2024. 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 10.4% and 10.3% of total consolidated revenue for the six months ended June 30, 2025 and 2024, respectively.

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.

General and administrative expenses grew approximately $6.6 million, or 18.0% over the six months ended June 30, 2024. This increase in cost was due primarily to increases in personnel, occupancy costs and professional fees. These costs represented 18.9% and 18.3% of total consolidated revenue for the six months ended June 30, 2025 and 2024, respectively.

Income Tax Expense

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.

Income tax expense for the six months ended June 30, 2025 increased $1.5 million from the same period in 2024, Our effective tax rate was 21.6% for the six months ended June 30, 2025 compared with 19.6% for the six 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.

Net Income

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

Net income for the six months ended June 30, 2025 decreased 14.3% to $24.8 million.

Liquidity and Capital Resources

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.

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.

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.

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.

Debt and contingent obligations as of June 30, 2025 and December 31, 2024 totaled approximately $2.3 million and $2.1 million, respectively.

Future Liquidity and Capital Resource Requirements

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.

Credit Facilities

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.

Obligations under the Credit Agreement are secured by a first priority perfected security interest, subject to certain permitted encumbrances, in all of XPEL’s material property and assets.

The terms of the Credit Agreement include certain affirmative and negative covenants that require, among other things, XPEL to maintain legal existence and remain in good standing, comply with

applicable laws, maintain accounting records, deliver financial statements and certifications on a timely basis, pay taxes as required by law, and maintain insurance coverage, as well as to forgo certain specified future activities that might otherwise encumber XPEL and certain customary covenants. The Credit Agreement provides for two financial covenants, as follows.

As of the last day of each fiscal quarter:

1.XPEL shall not allow its Consolidated Total Leverage Ratio to exceed 3.50 to 1.00, and

2.XPEL shall not allow its Consolidated Interest Coverage Ratio to be less than 3.00 to 1.00

Critical Accounting Estimates

There have been no material changes to the Company’s critical accounting estimates from the information provided in the Annual Report on Form 10-K.

Related Party Relationships

There are no family relationships between or among any of our directors or executive officers. There are no arrangements or understandings between any two or more of our directors or executive officers, and there is no arrangement, plan or understanding as to whether non-management stockholders will exercise their voting rights to continue to elect the current Board. There are also no arrangements, agreements or understandings between non-management stockholders that may directly or indirectly participate in or influence the management of our affairs.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We have operations that expose us to currency risk in the British Pound Sterling, the Canadian Dollar, the Euro, the Mexican Peso, the New Taiwanese Dollar, the Australian Dollar, the Indian Rupee, the Chinese Yuan Renminbi, the Japanese Yen, and the Thai Baht. Amounts invested in our foreign operations are translated into U.S. Dollars at the exchange rates in effect at the balance sheet date. The resulting translation adjustments are recorded as accumulated other comprehensive income, a component of stockholders’ equity in our consolidated balance sheets. We do not currently hedge our exposure to potential foreign currency translation adjustments.

Borrowings under our revolving lines of credit subject us to market risk resulting from changes in interest rates related to our floating rate bank credit facilities. For such borrowings, a hypothetical 200 basis point increase in variable interest rates may result in a material impact to our financial statements. We do not currently have any derivative contracts to hedge our exposure to interest rate risk. During each of the periods presented, we have not experienced a significant effect on our business due to changes in interest rates.

If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could adversely affect our business, financial condition and results of operations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established and maintain a system of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended ("Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosures.

Management, with the participation of our CEO and CFO, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, our CEO and CFO have each concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

From time to time, we are made parties to actions filed or have been given notice of potential claims relating to the ordinary conduct of our business, including those pertaining to commercial disputes, product liability, patent infringement and employment matters.

While we believe that a material impact on our financial position, results of operations or cash flows from any such future claims or potential claims is unlikely, given the inherent uncertainty of litigation, it is possible that an unforeseen future adverse ruling or unfavorable development could result in future charges that could have a material adverse impact. We do and will continue to periodically reexamine our estimates of probable liabilities and any associated expenses and receivables and make appropriate adjustments to such estimates based on experience and developments in litigation. As a result, the current estimates of the potential impact on our financial position, results of operations and cash flows for the proceedings and claims described in the notes to our consolidated financial statements could change in the future.

Item 1A. Risk Factors

Except as set forth below, there were no changes to the Risk Factors disclosed in Item 1A. Risk Factors of the Annual Report.

Existing and potential new trade policies, such as tariffs, could adversely affect our operations, costs and business.

President Donald Trump has issued a series of executive orders since taking office in January 2025, including executive orders regarding tariffs. While the possibility exists for delays, reductions or exemptions of the automotive and reciprocal tariffs, the potential impacts of these tariffs remain uncertain and may cause a significant impact on the future demand for vehicles by consumers. To the extent any such tariffs remain in place for a sustained period of time, or in the event a global or domestic recession results therefrom, the disposable income of consumers could be significantly reduced, which may result in consumers deciding to delay vehicle purchases, or forego them entirely, or decide to delay or forego the addition of vehicle accessories, each of which could adversely affect our results of operations and financial condition.

Additional actions taken by the U.S. that restrict or could impact the economics of trade — including additional tariffs, trade barriers, and other similar measures — could have the potential to further disrupt existing supply chains and trigger retaliatory efforts by other countries, including the imposition of tariffs, raising taxation, setting foreign exchange or capital controls, or establishing embargoes, sanctions, or other import/export restrictions, thereby negatively impacting our business, both directly and indirectly. These developments, or the perception that more of them could occur, may materially create, or increase business uncertainty and could adversely affect the global economy and stability of global financial markets, potentially reducing trade and depressing economic activity, including demand for our products. Such changes in international trade policies may result in direct impacts to our business or indirectly to our customers or suppliers through increased costs, changes in business prospects or operating results, which could adversely affect our financial condition. The extent of such impacts cannot be predicted at this time.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are being filed or furnished with this quarterly report on Form 10-Q:


Exhibit No.	Description	Method of Filing

31.1	Certification of Chief Executive Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

31.2	Certification of Chief Financial Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith

32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith

101	The following materials from XPEL’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2025, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the unaudited Consolidated Balance Sheets, (ii) the unaudited Consolidated Statements of Operations, (iii) the unaudited Consolidated Statements of Comprehensive Income, (iv) the unaudited Consolidated Statements of Equity, (v) the unaudited Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements	Filed herewith

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).	Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		XPEL, Inc. (Registrant)

	By:	/s/ Barry R. Wood
		Barry R. Wood
		Senior Vice President and Chief Financial Officer
August 8, 2025		(Authorized Officer and Principal Financial and Accounting Officer)

XPEL, Inc. 10-Q