Earnings call transcript: Xpel beats Q2 2025 forecasts, shares jump 13%

Xpel Inc. (XPEL) reported its second-quarter 2025 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of $0.59, compared to the forecasted $0.51. The company also exceeded revenue projections, reporting $124.7 million against an anticipated $119.97 million. Following the announcement, Xpel’s stock surged 12.98% in pre-market trading, reaching $37 per share. According to InvestingPro analysis, XPEL maintains a "GREAT" financial health score of 3.01, with current data suggesting the stock is undervalued relative to its Fair Value.

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Key Takeaways

• Xpel’s EPS and revenue exceeded forecasts, resulting in a 12.98% pre-market stock increase.
• The company reported a 13.5% year-over-year revenue growth, driven by strong product line performance.
• Gross margin improved to 42.9%, reflecting operational efficiency.
• Xpel is expanding its international presence, focusing on key markets such as China and Brazil.
• Future guidance suggests continued growth, particularly in the OEM and dealer channels.

Company Performance

Xpel demonstrated robust performance in Q2 2025, with a 13.5% increase in revenue year-over-year. The company’s strategic focus on expanding its product lines and enhancing its market presence has paid off, positioning it favorably against competitors. Notably, Xpel’s automotive window tint and total window film product lines saw significant growth, contributing to the overall revenue increase.

Financial Highlights

• Revenue: $124.7 million, up 13.5% year-over-year
• Earnings per share: $0.59, beating the forecast of $0.51
• Gross margin: 42.9%, up 6 basis points sequentially
• Net income: Increased by 7.8%, achieving a 13% margin
• Operating cash flow: $28 million generated
• Net cash position: $50 million at quarter’s end

Earnings vs. Forecast

Xpel’s EPS of $0.59 surpassed the expected $0.51, marking a 15.69% surprise. The revenue of $124.7 million also exceeded the forecast by 3.95%. This performance highlights Xpel’s ability to outperform market expectations consistently, with the magnitude of this quarter’s beat being notably significant compared to previous quarters.

Market Reaction

Following the earnings announcement, Xpel’s stock experienced a significant 12.98% increase in pre-market trading, reaching $37 per share. This movement reflects strong investor confidence, particularly given the stock’s previous close at $32.75. The stock’s performance aligns with its 52-week range of $24.25 to $48.58. InvestingPro data indicates the stock has shown high volatility, with a beta of 1.83, making it crucial for investors to monitor price movements carefully.

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Outlook & Guidance

Xpel provided optimistic guidance for the upcoming quarter, projecting revenue between $117 million and $119 million. The company anticipates low double-digit growth in China and is actively pursuing mergers and acquisitions to enhance its international distribution network. Xpel’s focus on expanding its OEM and dealer channels is expected to drive future growth.

Executive Commentary

CEO Ryan Pape highlighted Xpel’s competitive edge, stating, "We’re performing quite well in this environment relative to our competitors." He also emphasized the company’s strategic initiatives, saying, "The challenge has been awareness... we’re able to reach consumers in a form that is more comfortable." Pape reassured investors regarding the company’s M&A strategy, asserting, "We’re not going to be a footnote in history of doing bad M&A."

Risks and Challenges

• Tariff anxiety impacting the car market could pose a risk to sales.
• Fluctuations in the Seasonally Adjusted Annual Rate (SAAR) may affect market dynamics.
• The restructuring and M&A-related costs, such as the $1.6 million incurred, could impact short-term profitability.
• Expanding into international markets carries inherent risks, including regulatory challenges and market volatility.
• The company’s ability to maintain its growth trajectory in a competitive industry remains a critical challenge.

Q&A

During the earnings call, analysts inquired about Xpel’s M&A strategy, particularly its focus on international distribution. Executives highlighted the potential of the personalization platform to increase product attach rates. Questions also addressed the potential impacts of SAAR fluctuations and opportunities in China’s OEM and 4S business channels.

Full transcript - Xpel Inc (XPEL) Q2 2025:

Conference Operator: Good morning, and welcome to the XPEL Incorporated Second Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode and the floor will be opened for questions following the presentation. Please note this conference is being recorded. I will now turn the conference over to your host, John Nesbitt of IMS Investor Relations. John, the floor is yours.

John Nesbitt, Investor Relations, IMS Investor Relations: Good morning, and welcome to our conference call to discuss XPEL’s Second Quarter twenty twenty five Financial Results. On the call today, Ryan Pape, XPEL’s President and Chief Executive Officer and Barry Wood, XPEL’s Senior Vice President and Chief Financial Officer, will provide an overview of the business operations and review the company’s financial results. Immediately after the prepared comments, we will take questions from our call participants. A transcript of this call will be available on the company’s website after the call. Take a moment now to read the Safe Harbor statement.

During the course of this call, we’ll make certain forward looking statements regarding XPEL, Inc. And its business, which may include, but is not limited to, anticipated use of proceeds from capital transactions, expansion into new markets and execution of the company’s growth strategy. Such statements are based on our current expectations and assumptions, which are subject to known and unknown risk factors and uncertainties that could cause actual results to differ materially from those expressed in these statements. Some of these factors are discussed in detail in our most recent Form 10 ks, including under Item 1A Risk Factors filed with the SEC. XPEL undertakes no obligation to publicly update or revise any forward looking statements whether as a result of new information, future events or otherwise.

With that, we’ll now turn the call over to Ryan. Please go ahead, Ryan.

Ryan Pape, President and Chief Executive Officer, XPEL Incorporated: Thank you, John, and good morning as well, everyone, and welcome to our second quarter twenty twenty five call. We had a record quarter in Q2 with revenue growing 13.5% to $124,700,000 I think this exceeded our expectations going into the quarter and in the environment that we’re in. We had an easier comp in China, given the sort of orchestration of the revenue in the previous year. But even factoring that in, revenue growth would have been about 11% in a more normalized environment. So really good.

Think The U. S. Region grew 8.4% to $70,400,000 for the quarter, which was also a record and good. I think obviously Q2 in The U. S.

Was quite exciting, might say, in the sense it was punctuated by tariff anxiety to start. And for those who follow the car market, this jumped the USR in the first part of the quarter and then it slowed in the end as maybe some consumers to front run pricing fears in the new car market. Our view is really mixed as to whether that helped us, hurt us, or what the impact was. Obviously, we would prefer a more stable environment month to month, but I don’t think it was overwhelmingly positive for us because some of those gains at the front half of the quarter were given up in the second half. And if you look at the new Karsar the quarter, I think it was up modestly like 2%, 2.5% from prior year.

So I think this is just more of the same in terms of this choppy and uncertain environment that we’ve been in and expect to continue to be in. Canada region revenue grew 7.4% for the quarter. As we discussed previously, Canada started the year very slow, but this has been recovering. It was similar maybe to how The U. S.

Started in the prior year. July for Canada quite good, the most on track this year. I think we hit our internal budget for Canada for July, which was set last year. So that’s good. We’ve seen a pattern like this sort of ripple through all the markets in which we serve and it’s just something we have to deal with and stay the course and maintain what we’re doing in spite of the volatility.

China revenue came in at $7,700,000 This is sort of in the range we’ve been talking about in terms of the more normalized cadence revenue recognition we get now instead of this choppiness we’ve seen in the past. We’re finalizing our strategy for the China market. We expect to have more to discuss on that very soon. We also saw strong performance in our other remaining regions, Europe, India, Middle East, these all did well for us with exception of Latin America where we saw revenue decline quarter over quarter. This is really due to some large distributor markets in South America where the timing of revenue is inconsistent.

And we’re working to move to a direct sales model in the largest car markets of the world. And so as you look at a market like Brazil, that’s something that we’re focused on this year as well. We had a good first half of the year from revenue perspective, think, particularly in light of all the uncertainty and tariff noise. Q3 revenue should be in the $117,000,000 to $119,000,000 range, again, on what we know today. As you may recall, Q3 ’twenty four was our highest revenue quarter in history up until this quarter.

So it’s challenging comp, but we see Q2 and Q3 trade off year to year as the peak quarter of the year from a seasonality perspective. And then Q3 last year was the first quarter where we saw more stable revenue pattern in terms of our China revenue. So we’ll be lapping that a little bit, but we’re certainly glad that we have that predictability with all the changes we’ve been working through. Overall, I really think we’re performing quite well in this environment relative to our competitors and even others in the broader space. The team’s really executing, and I think everyone knows where see opportunity and where they need to work really hard.

It’s certainly a challenging environment, but we’re really executing well. I think on a global basis, our shift to a very focused decentralized P and L model around our various regional leaders is proving success and showing results. Things will remain volatile, but if we’ve got the right ownership of every area of the business and good leaders, they will solve the challenges that we see. So really, think I feel the best about the internal workings of the company right now than I have in probably two years. So we’re certainly excited about that.

Continued good performance at the gross margin line, quarter came in at 42.9%, which is up six basis points sequentially. This is down to prior year’s second quarter, mainly due to revenue mix where we had higher China, which is distributor revenue this year than last year. So pretty consistent. We still expect the opportunity to trend this gross margin upward going forward as we continue to work all the initiatives we have. We’ve talked about sort of tariff impact in terms of our business and that is expected to be minimal and we have the ability to work around that developing situation.

And I can’t rule out some short term noise in that as things happen, but I think as you see here, we have really stability in that front. And our overall architecture of the business is just not exposed to what we’re seeing on a broader scale. So still remain in a good position there. Our SG and A growth in the quarter is largely driven by overhead added in the second half of last year that’s embedded in our distributor acquisitions in Thailand and Japan. As we discussed, these are important markets for us to build a direct presence.

So obviously, we now have facilities and employees in country upon which to build a bigger base. Additionally, we did have about $1,600,000 in one time cost in SG and A for the quarter. Some of you may remember, we discussed this in the first quarter. We had some restructuring costs that we did to reorganize the business coming into this year. Some of those were born in Q1 and the remainder in Q2.

And then we also have quite substantial costs in the quarter related to legal and due diligence for M and A that we’ve been pursuing as we’ve discussed. And then we have some other costs for this quarter that will not reoccur, so $1,600,000 in total. If we normalize for those, EBITDA would have grown 14.7% to $25,000,000 or just right at about 20 percent of revenue, which is good. Generated just under $28,000,000 in operating cash flow in Q2, really driven by the strong results overall and then slight reduction in inventory. And we ended the quarter with approximately $50,000,000 net cash on the balance sheet.

So we’re advanced in a number of M and A opportunities. We’re starting to see some opportunity here in terms of valuations for things that we’ve been interested in. Many have asked, we’ve seen those be stubborn, I would say, given the overall macro situation. But we’re starting to see that change a little bit, starting to see a few distressed things that might be of interest to us. So I feel very strong about our plans in terms of capital allocation here for the rest of the year and going into next year.

This is a top focus of the company and the Board. But we’re also extremely prudent and extremely diligent. We’re not going to be a footnote in history of doing bad M and A and ruining a company. So I feel really good about the process that we’re going through on this, and that will continue. We’re seeing really good momentum with our personalization platform, and this is where we sell installations of products online and refer them to our installer network.

Volume continues to grow. In fact, it’s grown substantially even in the past two months. And we see a very good end consumer satisfaction. So we’re investing a lot in this to continue to drive it forward, to make it applicable to more use cases, and really serve as the ability to help drive attachment of our products and others. And this has been part of our ongoing investment in our DAP system.

It’s all run through the same platform. So I think this is really an emerging success story for us and one that we’re very focused on expanding use cases. Finally, product front, we’ve talked in recent quarters about a of new products. We’ve taken most of them to market. We’ll be launching a set of colored paint protection films in the end of this quarter, beginning of next.

We’ve talked about this previously. It’s nice adjacent product set for us and something we’re pursuing, and we’ll have features in the DAP and elsewhere to really help maximize this opportunity for our customers. I’m really excited about that. So all in all, a good quarter. Team’s doing excellent, and I look forward to a good second half of the year.

I’ll turn it over to you, Barry.

Barry Wood, Senior Vice President and Chief Financial Officer, XPEL Incorporated: Thanks, Ryan, and good morning, everyone. I just wanted to add just a little bit more color on the top line performance in the quarter. Our total product revenue increased 13.9%, while total service revenue increased 12% quarter over quarter. And on a year to date basis, revenue grew 14.2% to 228,500,000.0 Our total window film product line grew 27% in the quarter, driven primarily by our automotive window tint, which grew 22.5%. And our newest product, windshield protect, which is windshield protection film also contributed to that solid performance.

Our gross margin for the quarter grew 11.8% to $53,500,000 reflecting a gross margin percentage of 42.9%. On a year to date basis, our gross margin grew 13.6% to $97,400,000 That was a gross margin percentage of 42.6%. Our total SG and A expenses grew 19.3% to $34,200,000 quarter over quarter. This was right at about 27.4% of total revenue. Sequentially, SG and A was up 4.4% versus Q1.

If you normalize for the one time costs that Ryan alluded to, SG and A would have grown 13.7% quarter over quarter. Moving forward, our SG and A growth rate should moderate as we lap our acquisition related SG and A expenses that Ryan was talking about earlier in the second half of the year. On a year to date basis, SG and A grew 16.9% to $67,000,000 Brian talked about EBITDA for the quarter earlier, but also note that on a year to date basis, EBITDA grew 12.9 to $37,800,000 reflecting a 16.6% EBITDA margin. Net income for the quarter increased 7.8%, reflecting a 13% net income margin. Again, normalizing for the one time costs, net income would have grown 16.7% quarter over quarter.

EPS was $0.59 per share for the quarter. And again, normalizing for the one timers, EPS would have been $0.63 per share. And on a year to date basis, net income grew 14.3%, which reflects a 10.8 net income margin. And year to date, our EPS is $0.90 per share. So again, we’re pleased with the quarter and excited to see what the rest of the year holds.

And with that, operator, we’ll now open up the call for questions.

Conference Operator: Thank you very much, Barry. So we are now opening the floor for questions. Your first question is coming from Geoff Van Sinderen of B. Riley Securities. Geoff, your line is live.

Geoff Van Sinderen, Analyst, B. Riley Securities: Thanks and good morning. I guess the first question I had was, any more color you can share on the dealer service business trends?

Ryan Pape, President and Chief Executive Officer, XPEL Incorporated: Yeah, Jeff. Thanks for the question. I think this is continues to be a bright spot. We see revenue there growing faster than the aftermarket channel at present. And I think there’s a lot of reasons why that might be the case, but that trend certainly continued in Q2.

We have now in The US relative stability in terms of inventory, new car inventory. And I think there’s obviously the post COVID era created a lot of volatility. I think there was a lot of concern about tariff induced inventory challenges, which could impact us because we’re sometimes attaching product at the time it hits the dealership lot rather than when it’s sold. But that hasn’t really materialized in a super negative way. So we’ve been doing great.

I think July was an all time record in terms of number of vehicles and revenue and pretty much every other metric. And it’s something that we see expansion opportunities in other markets too. We’re working on with a couple of large groups in other countries for something similar. I think it’s been a bright spot. And then, we have the opportunity to, I think, over time to layer on our referral and personalization platform to help the dealers do even more upselling through that business.

So, bright spot overall.

Geoff Van Sinderen, Analyst, B. Riley Securities: Okay. And then just to follow-up a little bit on what you just hit on, maybe you can delve a little bit more into the personalization platform initiatives that you’re working on now and what we might see develop there.

Ryan Pape, President and Chief Executive Officer, XPEL Incorporated: Well, I think that the challenge, fundamental challenge of this business has been and is and have been one of awareness, where the products we sell, they’re virtually or actually invisible. They don’t market themselves going down the road. And you have an industry in the aftermarket that is a very sort of offline and analog business in the sense that most of the sales are made on the phone, or they’re made in points of presence in shops. And that’s good. They’re very effective at selling that way, but you also miss out on a lot of consumers where buying that way is maybe not what they’re thinking of first in an Amazon type world that we live in.

So with this platform, we’re able to reach through partnerships with OEMs and dealerships and others, consumers may be in a form that is more comfortable to some of them online. We can present a lot of product information. We can present video. We can really make a compelling reason to buy facilitate an online transaction and run that through the network. The ultimate goal of that is that it will we’re seeing it now but it will serve as a way to increase attach rates in participating vehicles and provide a really good source of revenue for our participating installers.

So I think it’s a way to ultimately grow the business and reach another set of consumers. And so the feedback’s been really good. It’s going to take continued investment on us and continued development with other partners that want to leverage it. But it’s, I think, a great opportunity for our industry.

Geoff Van Sinderen, Analyst, B. Riley Securities: Okay, that’s helpful. And then just finally, if I could ask, is there anything on mix, gross margin, OpEx considerations for second half that we should be aware of thinking about the quarterly progression?

Ryan Pape, President and Chief Executive Officer, XPEL Incorporated: No, I mean, trends we see, obviously, first quarter is usually the slowest quarter. Second, third are our peak revenue quarters of the year. Fourth quarter, we usually see a little sequential decline in The U. S. Business.

Our overall cost structure is pretty stable. Outside of the things we mentioned earlier on the call, the gross margin profile is consistent and absent something on the tariff side that would cause us unexpected issue. No, don’t really see any big movement on that for the rest of the year.

Geoff Van Sinderen, Analyst, B. Riley Securities: Okay, great. Thanks for taking my questions.

Ryan Pape, President and Chief Executive Officer, XPEL Incorporated: Thanks, Jeff.

Conference Operator: Thank you very much. Our next question is coming from Steve Dyer of Craig Hallum. Steve, your line is live.

Matthew Rob, Analyst, Craig Hallum: Hey, thanks. This is Matthew Rob on for Steve. Just want to start on M and A. Ryan, you have $50,000,000 of cash on the balance sheet, which I think is the most cash you’ve ever had as a public company. Sounds like you’ve got your eye on something or multiple somethings.

I guess any other hints you could give us at this point? And then maybe anything on sizing, looking at more bolt on or something larger?

Ryan Pape, President and Chief Executive Officer, XPEL Incorporated: Yes. I mean, think our approach has been remains pretty consistent with what we’ve talked about in the past. Our first order of business is really consolidating our international distribution because we can serve directly the markets we want to be in. We’ve largely done that. I think a few exceptions are China, Brazil, in terms of the top car markets of the world.

So obviously that remains an interest and something that we’re very active on. As we look at the dealership business, as was referenced in the earlier question, this is a way, again, another way to reach consumers where they are. The dealerships have tremendous volume. And so looking at M and A in that space that could bring more customers into the fold and more dealerships in the fold, so that’s a little more downstream. Those are the areas that we remain principally focused on.

And I think we really have two streams of thought. We’re looking at things that are more meaningful while also pursuing a cadence of smaller bolt on things. So I don’t expect us to be in a position where our cash position continues to build. That’s not what we’ve been working towards, and we remain on track on that. Obviously, we’re not to do things for the sake of doing them.

But we’re not going to be sitting here a year from now just seeing that cash position build. There are plenty of opportunities, and I think the opportunities that are out there are probably only getting more interesting to us in terms of the things we’re doing and then sort of relative valuations and then our ability to integrate them, which we’ve enhanced over time as well.

Matthew Rob, Analyst, Craig Hallum: Yep. Yep. Okay. And then thoughts on The U. S.

Market in the second half and as we get into 2026, wide range of estimates out there and what SAAR could be. I think July was actually pretty good. But then you have the EV tax credit going away at the end of Q3. So quite a few puts and takes there. I guess how do you feel that the business is positioned in that backdrop?

And then how do you think about growth in The U. S. Market as we look out over the next few quarters?

Ryan Pape, President and Chief Executive Officer, XPEL Incorporated: Well, I think you have two things. Obviously, we can’t sell products that go on new cars if new cars aren’t sold. So we watch the SAAR and the prognostications about that. But interest rates or anything else, our view is that no one really knows. And so we can’t really plan for that.

We have to just respond to it. But then the second piece of that is, what are the things that we can control? And we can create awareness to increase attach rates into whatever the SAAR is. We can win competitive business and take share no matter what the SAAR is. So, you you really have one part thing that we have no control over, and then two parts that we do have control over.

And so those are really the things that we’re focused on. And if SAR declines or the negative side of the estimates come in, we’ll deal with that. But I think the focus for us is on the things that we can’t control. And there’s plenty of things we can do to win business and increase attach rate and better serve our customers no matter what happens to the SAAR.

Matthew Rob, Analyst, Craig Hallum: Yes. Okay. And then switching over to China, you’ve now lapped the sell in, through adjustments you’ve made over the last few quarters. You also have a few quarters now under your belt with the improved product mix. How should we think about growth relative to the 8,000,000 to $9,000,000 a quarter run rate that we’ve seen in the last few quarters?

Ryan Pape, President and Chief Executive Officer, XPEL Incorporated: Yes. I mean, I think our overall current view on sort of the China in country growth with what we’re doing today is probably low double digits in terms of what we could see happen. There’s a whole other series of channels there in the OEM and PDI and 4S business, which historically the company and through our distribution has not pursued. But in the past year, we’ve really increased our efforts to pursue that business, including building the teams necessary to support it. And that really represents the substantial upside for the business over the next several years.

The volumes possible through that channel are significant, and that’s really what will unlock the growth versus the more traditional aftermarket sales in country. So I think the timing on that, there’s bid and tender processes and things that happen. So it’s really not something that’s quite as easy to model as maybe our traditional business. But if you just sort of look at the core of what we’re doing there, it’s a low double digit growth. And then augmented by that, as we see that accelerate and get more success in that channel.

Matthew Rob, Analyst, Craig Hallum: Okay. Thanks, guys. Appreciate it.

Ryan Pape, President and Chief Executive Officer, XPEL Incorporated: Thank you.

Conference Operator: Thank you very much. Well, we appear to have reached the end of our question and answer session. I will now turn the call back over to the management team for their closing remarks.

Ryan Pape, President and Chief Executive Officer, XPEL Incorporated: Yeah, I want to thank everybody for joining us and thank our team for doing such a great job. Have a great day, everyone.

Conference Operator: Thank you very much. This does conclude today’s conference call. You may disconnect your phone lines at this time and have a wonderful day. We thank you for your participation.

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