XPEL, Inc. Q2 FY2025 earnings call

Regional Performance - U.S. region grew 8.4% to $70.4 million, with July being an all-time record for dealer service business. - Canada region recovered, with July hitting internal budget. - China revenue at $7.7 million, with strategy for the market being finalized. - Other regions: Europe, India, Middle East did well; Latin America declined due to distributor market timing. ### Financial Metrics - Gross margin 42.9% for Q2, up 6 basis points sequentially. - SG&A growth driven by overhead from distributor acquisitions and one-time costs. - EBITDA normalized grew 14.7% to $25 million. - Operating cash flow $28 million in Q2, ending with $50 million net cash. ### Initiatives - Personalization platform showing good momentum, driving volume growth and end consumer satisfaction. - Work on M&A with legal and due diligence costs, focusing on market expansion and direct presence. - Dealer service business as a bright spot, with growth faster than aftermarket channel and expansion opportunities in other markets.

In Q2 2025, XPEL had record revenue of $124.7 million, up 13.5% year-over-year. The U.S. region grew 8.4% to $70.4 million. Canada region saw 7.4% revenue growth. China revenue was $7.7 million, aligning with normalized cadence. Europe, India, and Middle East regions performed well, while Latin America had a revenue decline due to inconsistent timing in large distributor markets. Total product revenue increased 13.9% in the quarter, with the window film product line growing 27%, driven by automotive window tint (22.5%) and Windshield Protect. Service revenue increased 12% QoQ. Gross margin for the quarter was 42.9%, up 6 basis points sequentially. Year-to-date, revenue grew 14.2% to $228.5 million, gross margin was 42.6%, SG&A grew 19.3% to $34.2 million (27.4% of total revenue), and EBITDA grew 14.7% to $25 million (20% of revenue).

Revenue - Q3 revenue expected $117 million to $119 million. ### EBITDA - Normalized EBITDA grew 14.7% to $25 million. ### M&A - Advanced in M&A opportunities, seeing changing valuations and distressed opportunities. ### Growth - Personalization platform to continue investment for expanding use cases and reaching more consumers. ### China - Expected low double-digit growth in China in-country with potential from OEM and PDI channels.

Tariff Impact - Minimal impact expected, but short-term noise possible. ### M&A Risks - Integration risks of acquired distributors in Thailand and Japan. ### Macroeconomic Uncertainties - SAAR fluctuations and EV tax credit changes posing uncertainties.

Q: Any more color on the dealer service business trends?

A: Dealer service business is a bright spot, with Q2 growth faster than aftermarket channel, July being an all-time record, and expansion opportunities in other markets. Also, potential to layer referral and personalization platform for upselling.

Q: Delve into personalization platform initiatives?

A: The platform helps reach consumers online, presents product info, facilitates transactions, aims to increase attach rates and revenue for installers. Requires continued investment and partner development.

Q: Hints on M&A?

A: Focus on consolidating international distribution, particularly China and Brazil, with interest in dealership business, looking at both bolt-on and larger opportunities.

Q: U.S. market outlook?

A: Can't control SAAR, but focus on things we can control like increasing attach rates, winning competitive business, and serving customers regardless of SAAR fluctuations.

Q: China growth outlook?

A: Current in-country growth in China is low double digits, with significant upside from OEM and PDI channels through bid and tender processes.