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- **Q3 Revenue Beats Expectations**: $125.4M (+11.1% YoY), driven by U.S. and EU growth. China acquisition adds near-term costs but sets up for 2026+ margin expansion.
- **Gross Margin Recovery Path**: 170bps pressure in Q3 from price increases, expected to reverse in Q4. China inventory sold at distributor cost, with full margin realization in 2026+.
- **Long-Term Investment Ambition**: $75-150M to be invested in manufacturing/supply chain, targeting 52-54% gross margin by 2028. Share buybacks on the table for excess cash.
- **Colored Films Breakthrough**: Early success suggests market expansion opportunity, with dealer embracement and OEM interest growing.

**【CEO Summary Section】**
- **Q3 Revenue Growth**: $125.4 million (+11.1% YoY), driven by U.S. region ($71.7 million, +11.1%) and EU (+28.8% YoY). China acquisition added SG&A expenses but positioned for long-term margin gains.
- **Gross Margin Challenges**: 170bps pressure from out-of-line price increases, expected to reverse in Q4. China inventory sold at distributor cost, limiting near-term margin benefit but setting up for 2026+ margin expansion.
- **Long-Term Strategy**: $75-150M investment in manufacturing/supply chain to target 52-54% gross margin by 2028, with operating margins in mid- to high 20s. Share buybacks considered for excess cash.
- **Product Rollout**: Colored films well-received, early signs of market expansion beyond share capture.

**【CFO Financial Commentary】**
- **Q3 Financials**: GAAP net income $13.1M (10.5% margin), EBITDA $19.9M (15.9% margin). Cash flow $33.2M, up from $19.6M YoY.
- **China Acquisition**: $53M consideration (cash, deferred payments, contingent), added $22M inventory. 2026+ benefits include $10M+ annual operating income from China.
- **Cost Structure**: SG&A +20.8% YoY ($35.7M), driven by China and other international investments. Focus on optimizing corporate costs while channel investments remain front-loaded.

**【Q&A Key Highlights】**
- **Price Increases Mitigation**: Out-of-line increases resolved, no tariff impact. Supply chain diversification to reduce future risks.
- **Colored Films Momentum**: Dealer embracement strong, potential for market growth beyond traditional aftermarket use cases.
- **2026 Margin Outlook**: Q1-Q2 '26 to see record gross margins as China inventory sold through and price increases reversed. Mid- to high 20s operating margin target by 2028.

XPEL, Inc. (XPEL) Q3 2025 Earnings Call Transcript

Revenue

Sales and Services Revenue

Financing Services Revenue

Other Revenue

Cost of Revenue

Cost of Goods and Services

Cost of Financing Services

Other Cost

Gross Profit

Other Operating Income

Operating Expenses

Selling, General and Administrative Expenses

Selling and Marketing Expenses

General and Administrative Expenses

Research and Development Expenses

Loss on Bad Debts

Loss on Impairment of Other Assets

Loss on Disposal of Assets

Other Operating Expenses

Operating Income

Non-Operating Income (Loss)

Income (Loss) from Affiliates

Income (Loss) from Associates

Income (Loss) from Joint ventures

Gain (Loss) on Other Investment

Gain (Loss) on Change in Fair Value

Gain (Loss) on Foreign Currency Exchange

Other Non-Operating Income (Loss)

Net Interest Expense

Interest Expense

Interest Income

Pretax Income From Continuing Operations

Income Tax Expense

Current Income Tax

Deferred Income Tax

Income Tax Adjustments

Net Income from Continuing Operations

Income from Discontinued Operations

Other Items Before Net Income

Net Income

Net Income Attributable to Minority Interests

Net Income Attributable to Owners of the Company

Preferred Stock Dividends

Other Adjustments

Net Income Attributable to Common Stockholders

Other Comprehensive Income

Total Comprehensive Income

Total Comprehensive Income Attributable to Minority Interests

Total Comprehensive Income Attributable to Owners of the Company

Basic EPS

Basic EPS from Continuing Operations

Basic EPS from Discontinued Operations

Diluted EPS

Diluted EPS from Continuing Operations

Diluted EPS from Discontinued Operations

XPEL

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