xpel-20250331

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 March 31, 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 27,664,765 shares of common stock outstanding as of May 9, 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			25
Item 4. Controls and Procedures			26

Part II - Other Information
Item 1. Legal Proceedings			27
Item 1A. Risk Factors			27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			28
Item 3. Defaults Upon Senior Securities			28
Item 4. Mine Safety Disclosures			28
Item 5. Other Information			28
Item 6. Exhibits			29

Signatures			29

Part I. Financial Information

Item 1. Financial Statements

XPEL, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)


	(Unaudited)		(Audited)
	March 31, 2025		December 31, 2024
Assets
Current
Cash and cash equivalents	$	23,541	$	22,087
Accounts receivable, net	33,359		29,146
Inventory, net	115,306		110,904
Prepaid expenses and other current assets	6,093		5,314
Income tax receivable	—		893
Total current assets	178,299		168,344
Property and equipment, net	17,254		17,735
Right-of-use lease assets	19,240		19,490
Intangible assets, net	33,795		34,562
Deferred tax asset, net	235		—
Other non-current assets	1,555		1,350
Goodwill	44,444		44,126
Total assets	$	294,822	$	285,607
Liabilities
Current
Current portion of notes payable	$	65	$	63
Current portion lease liabilities	5,075		4,666
Accounts payable and accrued liabilities	34,377		36,789
Income tax payable	2,065		—
Total current liabilities	41,582		41,518
Deferred tax liability, net	—		469
Other long-term liabilities	1,826		1,810

Non-current portion of lease liabilities	15,809		16,126
Non-current portion of notes payable	151		229
Total liabilities	59,368		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; 27,661,587 and 27,651,773 issued and outstanding, respectively	28		28
Additional paid-in-capital	16,136		15,550
Accumulated other comprehensive loss	(3,409)		(4,236)
Retained earnings	222,699		214,113
Total stockholders’ equity	235,454		225,455
Total liabilities and stockholders’ equity	$	294,822	$	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 March 31,
		2025		2024
Revenue
Product revenue		$	78,712	$	66,852
Service revenue		25,093		23,252
Total revenue		103,805		90,104

Cost of Sales
Cost of product sales		48,439		42,135
Cost of service		11,470		10,093
Total cost of sales		59,909		52,228
Gross Margin		43,896		37,876

Operating Expenses
Sales and marketing		11,875		10,391
General and administrative		20,901		18,256
Total operating expenses		32,776		28,647

Operating Income		11,120		9,229

Interest expense		75		473
Foreign currency exchange (gain) loss		(235)		272

Income before income taxes		11,280		8,484
Income tax expense		2,694		1,818
Net income		$	8,586	$	6,666

Earnings per share
Basic		$	0.31	$	0.24
Diluted		$	0.31	$	0.24
Weighted Average Number of Common Shares
Basic		27,655		27,630
Diluted		27,676		27,637

See notes to condensed consolidated financial statements.

XPEL, INC.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)


	Three Months Ended March 31,
		2025		2024
Other comprehensive income
Net income		$	8,586	$	6,666
Foreign currency translation		827		(862)
Total comprehensive income		$	9,413	$	5,804

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 March 31
	Common Stock			Additional Paid-in-Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
Balance as of December 31, 2023	27,630	$	28	$	12,546	$	168,624	$	(1,209)	$	179,989
Net income	—	—		—		6,666		—		6,666
Foreign currency translation	—	—		—		—		(862)		(862)
Stock-based compensation	1	—		630		—		—		630
Balance as of March 31, 2024	27,631	28		13,176		175,290		(2,071)		186,423

Balance as of December 31, 2024	27,652	28		15,550		214,113		(4,236)		225,455
Net income	—	—		—		8,586		—		8,586
Foreign currency translation	—	—		—		—		827		827
Stock-based compensation	10	—		586		—		—		586
Balance as of March 31, 2025	27,662	$	28	$	16,136	$	222,699	$	(3,409)	$	235,454

See notes to condensed consolidated financial statements.

XPEL, INC.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Three Months Ended March 31,
	2025		2024
Cash flows from operating activities
Net income	$	8,586	$	6,666
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation of property, plant and equipment	1,535		1,333
Amortization of intangible assets	1,521		1,410
Gain on sale of property and equipment	—		(18)
Stock compensation	679		630
Provision for credit losses	73		89
Deferred income tax	(766)		(157)


Changes in assets and liabilities:
Accounts receivable	(3,915)		(4,763)
Inventory, net	(4,188)		(3,878)
Prepaid expenses and other current assets	(551)		(2,325)
Income taxes receivable and payable	2,954		904

Accounts payable and accrued liabilities	(2,700)		(4,850)
Net cash provided by (used in) operating activities	3,228		(4,959)
Cash flows used in investing activities
Purchase of property, plant and equipment	(1,003)		(2,017)
Proceeds from sale of property and equipment	2		—
Acquisition of a business, net of cash acquired	(42)		(757)
Development of intangible assets	(513)		(340)
Net cash used in investing activities	(1,556)		(3,114)
Cash flows from financing activities
Net borrowings on revolving credit agreement	—		5,000
Restricted stock withholding taxes paid in lieu of issued shares	(93)		—
Repayments of notes payable	(77)		(15)
Net cash (used in) provided by financing activities	(170)		4,985
Net change in cash and cash equivalents	1,502		(3,088)
Foreign exchange impact on cash and cash equivalents	(48)		93
Increase (Decrease) in cash and cash equivalents during the period	1,454		(2,995)
Cash and cash equivalents at beginning of period	22,087		11,609
Cash and cash equivalents at end of period	$	23,541	$	8,614

Supplemental schedule of non-cash activities
Non-cash lease financing	$	832	$	952
Issuance of common stock for vested restricted stock units	$	190	$	57
Supplemental cash flow information
Cash paid for income taxes	$	519	$	1,152
Cash paid for interest	$	89	$	430

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 and for the three months ended March 31, 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 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 - Management has concluded that our chief operating decision maker (“CODM”) is our chief executive officer. The Company’s CODM reviews the entire organization’s consolidated results on a monthly basis to evaluate performance and make resource allocation decisions. Management views the Company’s operations and manages its business as one operating segment.

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 $0.2 million and $0.2 million as of March 31, 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

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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. Liability under the warranty policy is based on a review of historical warranty claims. Adjustments are made to the accruals as claims and data experience warrant. Our liability for warranties as of March 31, 2025 and December 31, 2024 was $0.7 million and $0.7 million, respectively. The following tables present a summary of our accrued warranty liabilities for the three months ended March 31, 2025 and the twelve months ended December 31, 2024 (in thousands):


	2025
Warranty liability, January 1	$	738
Warranties assumed in period	202
Payments	(239)
Warranty liability, March 31	$	701


	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 beginning after December 15, 2024, with early adoption permitted. We do not anticipate 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.

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 present 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.

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

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 months ended March 31, 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

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


	Three Months Ended March 31,
		2025		2024
Product Revenue
Paint protection film		$	56,441	$	49,011
Window film		18,635		14,549
Other		3,636		3,292
Total		$	78,712	$	66,852

Service Revenue
Software		$	2,118	$	1,928
Cutbank credits		3,673		4,018
Installation labor		18,650		16,706
Training and other		652		600
Total		$	25,093	$	23,252

Total		$	103,805	$	90,104

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

ultimate product destination based on customer interactions, customer locations and other factors (in thousands):


	Three Months Ended March 31,
		2025		2024
United States		$	58,073	$	52,048
Continental Europe		11,148		10,216
Canada		9,426		11,080
China		8,107		1,450
Middle East/Africa		5,910		5,143
Asia Pacific		5,000		3,750
United Kingdom		3,579		3,486
Latin America		2,562		2,931

Total		$	103,805	$	90,104

4. PROPERTY AND EQUIPMENT, NET

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


	March 31, 2025		December 31, 2024
Furniture and fixtures	$	4,635		$	4,451
Computer equipment	5,402			5,202
Vehicles	1,087			1,075
Equipment	6,062			6,018
Leasehold improvements	12,954			11,878
Plotters	5,222			5,005
Construction in Progress	739			1,346
Total property and equipment	36,101			34,975
Less: accumulated depreciation	18,847			17,240
Property and equipment, net	$	17,254		$	17,735

Depreciation expense for the three months ended March 31, 2025 and 2024 was $1.5 million and $1.3 million, respectively.

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

5. INTANGIBLE ASSETS, NET

Intangible assets consists of the following (in thousands):


	March 31, 2025		December 31, 2024
Trademarks	$	1,442	$	1,386
Software	8,177		7,720
Trade name	2,694		2,638
Contractual and customer relationships	43,058		42,827
Non-compete	424		424
Other	700		693
Total at cost	56,495		55,688
Less: Accumulated amortization	22,700		21,126
Intangible assets, net	$	33,795	$	34,562

Amortization expense for the three months ended March 31, 2025 and 2024 was $1.5 million and $1.4 million, respectively.

6. GOODWILL

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


Balance at	2025
Balance at December 31, 2024	$	44,126
Additions	21
Foreign exchange	297
Balance at March 31, 2025	$	44,444

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

Purchase price accounting for acquisitions completed during the fourth quarter of the year ended December 31, 2024 has not yet been finalized pending the completion of valuation models related to the identified intangible assets and contingent consideration included in these transactions. Purchase price accounting for all prior periods and for acquired items not indicated above have been finalized without material adjustments.

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

7. INVENTORIES

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


	March 31, 2025		December 31, 2024
Raw materials	$	14,700	$	18,686
Work in process	657		2,662
Finished goods	99,949		89,556
	$	115,306	$	110,904

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 March 31, 2025 and December 31, 2024, the Company had no outstanding balances under this 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 March 31, 2025, these rates were 7.5% and 5.4%, respectively. Both the margin applicable to the interest rate and the commitment fee are dependent on XPEL’s Consolidated Total Leverage Ratio. The Credit Agreement's maturity date is April 6, 2026. All capitalized terms in this description of the credit facility that are not otherwise defined in this report have the meaning assigned to them in the Credit Agreement.

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

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

As of March 31, 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):


	March 31, 2025		December 31, 2024
Trade payables	$	24,635	$	26,316
Payroll liabilities	3,962		5,329
Contract liabilities	1,408		821
Acquisition holdback payments	668		651
Other liabilities	3,704		3,672
	$	34,377	$	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):

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)


	March 31, 2025		December 31, 2024
Level 3:
Contingent Liabilities	$	1,891	$	1,816

Increases and decreases in the fair value of level 3 contingent liabilities are reflected in general and administrative expenses in the Consolidated Statements of Income for the three months ended March 31, 2025.

11. COMMITMENTS AND CONTINGENCIES

In the ordinary course of business activities, the Company may be contingently liable for litigation and claims with 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 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 March 31,
Numerator	2025		2024
Net income	$	8,586	$	6,666
Denominator
Weighted average basic shares	27,655		27,630
Dilutive effect of restricted stock units	21		7
Weighted average diluted shares	27,676		27,637
Earnings per share
Basic	$	0.31	$	0.24
Diluted	$	0.31	$	0.24

XPEL, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

13. SEGMENT INFORMATION

Our CODM, who is our CEO, makes operating decisions and evaluates operating performance on the basis of the whole company, instead of on a segment basis. As a result, we have determined that we have a single reportable segment.

Our CODM assesses performance and decides how to allocate resources based on net income as reported in our consolidated statements of operations. The measure of segment assets is reported on the consolidated balance sheets as total assets. The CODM uses net income 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. Net income is also used to monitor budget versus actual results, perform competitive benchmarking analyses, and is considered in evaluating our executives’ compensation.

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 March 31,
	2025		2024
Total revenue	$	103,805	$	90,104
Less:
Direct product costs	48,439		42,135
Direct non-product costs	11,470		10,093
Personnel costs	14,245		12,683
Sales and marketing costs	3,684		3,814
Facility expenses	2,672		2,340
Depreciation and amortization	2,510		2,235
Travel and entertainment	2,750		2,353
Information technology	1,548		1,340
Professional fees	1,656		1,207
Shipping	1,149		1,040
Other	2,562		1,635
Income from operations	11,120		9,229
Interest expense	75		473
Income tax expense	2,694		1,818
Foreign currency exchange (gain)/loss	(235)		272
Net income	$	8,586	$	6,666

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 cold 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.

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

•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 eh XPEL brand. This "best-in-class" service strategy was then extended to new car dealerships and OEMs. Internationally, while our initial market entry was primarily through indirect distribution, we desire to ultimately sell directly to the majority of the top twenty-five car markets in the world which is an important element of our acquisition strategy.

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 months ended March 31, 2025 and 2024 (in thousands):


	(Unaudited)
	Three Months Ended March 31,
	2025		2024
Net Income	$	8,586	$	6,666
Interest	75		473
Taxes	2,694		1,818
Depreciation	1,535		1,333
Amortization	1,521		1,410
EBITDA	$	14,411	$	11,700

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.

Executive Summary

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


	Three Months Ended March 31, 2025		% of Total Revenue		Three Months Ended March 31, 2024		% of Total Revenue		$ Change		% Change
Total revenue	$	103,805	100.0	%	$	90,104	100.0	%	$	13,701	15.2	%
Total cost of sales	59,909		57.7	%	52,228		58.0	%	7,681		14.7	%
Gross margin	43,896		42.3	%	37,876		42.0	%	6,020		15.9	%
Total operating expenses	32,776		31.6	%	28,647		31.8	%	4,129		14.4	%
Operating income	11,120		10.7	%	9,229		10.2	%	1,891		20.5	%
Other (income) expenses	(160)		(0.2)	%	745		0.8	%	(905)		(121.5)	%
Income tax	2,694		2.6	%	1,818		2.0	%	876		48.2	%
Net income	$	8,586	8.3	%	$	6,666	7.4	%	$	1,920	28.8	%

Results of Operations

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


	Three Months Ended March 31,				% Change		% of Total Revenue
	2025		2024		Inc (Dec)		2025		2024
Product Revenue
Paint protection film	$	56,441	$	49,011	15.2	%	54.4	%	54.4	%
Window film	18,635		14,549		28.1	%	18.0	%	16.1	%
Other	3,636		3,292		10.4	%	3.5	%	3.7	%
Total	$	78,712	$	66,852	17.7	%	75.9	%	74.2	%

Service Revenue
Software	$	2,118	$	1,928	9.9	%	2.0	%	2.1	%
Cutbank credits	3,673		4,018		(8.6)	%	3.5	%	4.5	%
Installation labor	18,650		16,706		11.6	%	18.0	%	18.5	%
Training and other	652		600		8.7	%	0.6	%	0.7	%
Total	$	25,093	$	23,252	7.9	%	24.1	%	25.8	%

Total	$	103,805	$	90,104	15.2	%	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 geographic regions based on our understanding of ultimate product destination based on customer interactions, customer locations and other factors for the three months ended March 31, 2025 and 2024 (dollars in thousands):


	Three Months Ended March 31,				% Change		% of Total Revenue
	2025		2024		Inc (Dec)		2025		2024
United States	$	58,073	$	52,048	11.6	%	56.0	%	57.8	%
Continental Europe	11,148		10,216		9.1	%	10.7	%	11.3	%
Canada	9,426		11,080		(14.9)	%	9.1	%	12.3	%
China	8,107		1,450		459.1	%	7.8	%	1.6	%
Middle East/Africa	5,910		5,143		14.9	%	5.7	%	5.7	%
Asia Pacific	5,000		3,750		33.3	%	4.8	%	4.2	%
United Kingdom	3,579		3,486		2.7	%	3.4	%	3.9	%
Latin America	2,562		2,931		(12.6)	%	2.5	%	3.2	%
Total	$	103,805	$	90,104	15.2	%	100.0	%	100.0	%

Revenue

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

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

Other product revenue for the three months ended March 31, 2025 grew 10.4% to $3.6 million and represented 3.5% of total consolidated revenue. This increase was driven by an increase in demand for our non-film related products such as ceramic coating, plotters, chemicals and other film installation tools and accessories. Our FUSION ceramic coating product revenue grew 4.2% to $1.4 million.

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

Within the service revenue category, software revenue increased 9.9% from the three months ended March 31, 2024. This increase was due primarily to increases in customers subscribing to our software. Cutbank credit revenue decreased 8.6% from the three months ended March 31, 2024. This decrease was due primarily to the decrease in paint protection film revenue primarily in Canada. Total installation labor revenue increased 11.6% from the three months ended March 31, 2024.

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

Geographically, we experienced continued growth in most of our regions including 11.6% growth in the US region, our most mature market. These increases were primarily due to increased sales of automotive window film in the US and increased sales in China as our distributor continued to work through its prior excess inventory levels.

Cost of Sales

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

Gross Margin

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


	Three Months Ended March 31,				%		% of Category Revenue
	2025		2024		Inc		2025		2024
Product margin	$	30,273	$	24,717	22.5	%	38.5	%	37.0	%
Service margin	13,623		13,159		3.5	%	54.3	%	56.6	%
Total	$	43,896	$	37,876	15.9	%	42.3	%	42.0	%

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

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

Operating Expenses

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

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

Interest Expense

Interest expense for the three months ended March 31, 2025 decreased $0.4 million compared to the three months ended March 31, 2024. This decrease was due to the reduction in the amount of our debt facility throughout the quarter.

Income Tax Expense

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

Net Income

Net income for the three months ended March 31, 2025 increased by $1.9 million, or 28.8%, to $8.6 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 March 31, 2025, we had cash and cash equivalents of $23.5 million. For the three months ended March 31, 2025, cash provided by operations was $3.2 million, and as of March 31, 2025 we had approximately $128.1 million in funds available under our credit facilities. We expect to continue to have sufficient access to cash to support working capital needs, pay for capital expenditures (including acquisitions), and to pay interest and service debt. We believe we have the ability and sufficient resources to meet these cash requirements by using available cash, internally generated funds and borrowings under committed credit facilities. We are focused on continuing to generate positive operating cash to fund our operational and capital investment initiatives. We believe we have sufficient liquidity to operate for at least the next 12 months from the date of this quarterly report.

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

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

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

Debt obligations, including balances outstanding on committed credit facilities and contingent liabilities, totaled approximately $2.1 million as of March 31, 2025 and December 31, 2024.

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

1.00% to 1.50% for Adjusted Term SOFR Loans. At March 31, 2025, these rates were 7.5% and 5.4%, respectively. Both the margin applicable to the interest rate and the commitment fee are dependent on XPEL’s Consolidated Total Leverage Ratio. The Credit Agreement's maturity date is April 6, 2026. All capitalized terms in this description of the credit facility that are not otherwise defined in this report have the meaning assigned to them in the Credit Agreement.

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.

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

As of March 31, 2025 and December 31, 2024, the company was in compliance with all debt covenants.

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 March 31, 2025, formatted in 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

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
May 9, 2025		(Authorized Officer and Principal Financial and Accounting Officer)

SEC Form 10-Q filed by XPEL Inc.