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XPEL, Inc. (XPEL)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $125.4M, up 11.1% YoY and above both company Q3 guidance ($117–$119M) and Wall Street consensus ($119.3M); EPS was $0.47, down YoY and below consensus ($0.52), as gross margin faced ~170 bps pressure from out-of-market supplier price increases and temporary margin dynamics from the China distributor acquisition .*
  • Management announced a $75–$150M investment plan in manufacturing/supply chain to lift gross margin to 52–54% and operating margin to mid–high-20% by end-2028—an explicit margin expansion path and potential medium-term re-rating catalyst .
  • Record operating cash flow ($33.2M) and strong US/EU performance offset weakness in Canada; window film revenue grew 22.2% YoY and installation revenue grew 21.3% YoY .
  • Q4 2025 revenue guidance is $123–$125M; management expects gross margin to recover beginning in Q4 and reach record levels in Q1–Q2 2026 as China inventory turns and mitigations fully take hold .

What Went Well and What Went Wrong

What Went Well

  • Record revenue with broad-based strength: US up 11.1% to $71.7M; EU/UK/Africa up 28.8% to $16.5M; Asia Pacific up 21.0% .
  • Window film and installations drove growth: window film +22.2% YoY; installation revenue +21.3% YoY; services +15.7% YoY .
  • Strong cash generation: operating cash flow $33.2M—highest quarter in company history .
  • Quote: “We have mitigated [supplier price increases] and expect gross margin to return to its normal trajectory beginning in the fourth quarter… We believe we are well positioned to drive leverage in our cost structure in the coming quarters” — Barry Wood, CFO .
  • Quote: “We have a goal of increasing gross margin… to around 52%–54% by the end of 2028… and operating margins in the mid to high twenties” — Ryan Pape, CEO .

What Went Wrong

  • Margin compression: gross margin fell to 41.8% (–70 bps YoY) as supplier price increases (non-tariff) reduced GM by ~170 bps and the China distributor acquisition created temporary margin recognition constraints until inventory turns .
  • Profitability down YoY: EBITDA $19.9M (–8.1% YoY), net income $13.1M (–11.8% YoY), diluted EPS $0.47 vs $0.54 last year .
  • SG&A elevated: +20.8% YoY to $35.7M (28.4% of revenue), including ~$1.3M acquisition-related SG&A and ~$0.8M bad debt/other costs; Canada continued to be soft; Latin America flat due to Brazil model transition .

Financial Results

Quarterly snapshot and sequential/YoY

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$103.8 $124.7 $125.4
Gross Margin (%)42.3% 42.9% 41.8%
EBITDA ($USD Millions)$14.4 $23.4 $19.9
EBITDA Margin (%)13.9% 18.7% 15.9%
Net Income ($USD Millions)$8.6 $16.2 $13.1
Diluted EPS ($USD)$0.31 $0.59 $0.47
Cash from Operations ($USD Millions)$3.2 $27.9 $33.2

YoY comparison (Q3 2025 vs Q3 2024)

MetricQ3 2024Q3 2025
Revenue ($USD Millions)$112.9 $125.4
Gross Margin (%)42.5% 41.8%
EBITDA ($USD Millions)$21.7 $19.9
Net Income ($USD Millions)$14.9 $13.1
Diluted EPS ($USD)$0.54 $0.47
Cash from Operations ($USD Millions)$19.6 $33.2

Actuals vs S&P Global consensus

MetricQ1 2025Q2 2025Q3 2025Q4 2025 (Est)
Revenue Actual ($USD Millions)$103.805 $124.713 $125.415 —
Revenue Consensus Mean ($USD Millions)97.3967*118.3677*119.2523*125.0137*
Surprise ($USD Millions)+6.41+6.35+6.16—
EPS Actual ($USD)$0.31 $0.59 $0.47 —
EPS Consensus Mean ($USD)0.265*0.46667*0.51667*0.44667*
Surprise ($USD)+0.045+0.123–0.047—

Values retrieved from S&P Global.*

Segment breakdown

Segment Revenue ($USD Millions)Q1 2025Q2 2025Q3 2025
Product Revenue$78.7 $94.8 $95.5
Service Revenue$25.1 $29.9 $30.0
Total Revenue$103.8 $124.7 $125.4

Geographic revenue (sequential view)

Region ($USD Millions)Q2 2025Q3 2025
United States$70.4 $71.7
Canada$14.3 $13.0
North America (Total)$84.6 $84.7
China$7.7 $10.1
Asia Other$5.4 $5.5
Asia Pacific (Total)$13.1 $15.6
EU, UK & Africa$17.4 $16.5
India & Middle East$6.7 $5.7
Latin America$2.8 $2.8
Total$124.7 $125.4

KPIs (YoY growth rates by quarter)

KPIQ1 2025Q2 2025Q3 2025
Window Film Revenue YoY Growth (%)28.1% 27.0% 22.2%
Installation Revenue YoY Growth (%)11.6% 17.9% 21.3%
Service Revenue YoY Growth (%)7.9% 12.0% 15.7%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ3 2025$117–$119M (as of Q2) Actual $125.4M Beat vs guidance
RevenueQ4 2025N/A$123–$125M New
Gross Margin TargetBy end-2028N/A52%–54% New
Operating Margin TargetBy end-2028N/AMid–high 20% New
Investment Plan2026–2027N/A$75–$150M in mfg/supply chain New
Capital ReturnOngoing$50M buyback authorized (May 2025) Repurchases “look attractive” given valuation Maintained/considering execution

Earnings Call Themes & Trends

TopicQ1 2025 (Prior)Q2 2025 (Prior)Q3 2025 (Current)Trend
Manufacturing/Supply Chain investmentFocus on delivering product; navigating tariff uncertainty One-time restructuring/legal/diligence costs related to acquisition strategy Explicit $75–$150M plan; GM target 52–54%, OM mid–high-20% by 2028 Accelerating strategic investment
China distributorNot discussedChina revenue +75% YoY Acquisition closed early Sept; integration underway; near-term GM drag until inventory turns; ~$22M inventory added Direct distribution; margin uplift post-turn
Aftermarket/dealer sentimentSolid start to year Record revenue regions; corporate stores a demand indicator Mixed global sentiment; dealers seeking profit add-ons; some bad-debt stress; broadly resilient Mixed but stabilizing
Product innovation (COLOR PPF)——COLOR PPF launched; SEMA live demos; strong early reception; potential market expansion New product catalyst
OEM programs——Existing programs below expectations due to OEM disruptions causing cost spikes; personalization platform scaling Improving process; growth driver
Tariffs/macroTariff uncertainty noted —Price increases impact non-tariff; macro affordability pressure; rate relief could help Headwinds mitigated
Software (DAP)——Continued DAP advancement to improve installer efficiency Ongoing execution

Management Commentary

  • “We had unfavorable price increases that were out of line with the market, which cost us about 170 basis points of gross margin in Q3… we expect to see that reverse starting in Q4 and into Q1.” — Ryan Pape, CEO .
  • “We have a goal of increasing gross margin by approximately 10 percentage points to around 52%–54% by the end of 2028… realizing operating margins in the mid to high twenties.” — Ryan Pape, CEO .
  • “We did have approximately $1.3M in added acquisition related SG&A and approximately $0.8M in bad debt and some other costs that are not expected to reoccur.” — Barry Wood, CFO .
  • “The Company delivered record revenue performance… We have mitigated [price increases] and expect gross margin to return to its normal trajectory beginning in the fourth quarter.” — Barry Wood, CFO .
  • “Share repurchases look particularly attractive at the moment given our view of the valuation.” — Ryan Pape, CEO .

Q&A Highlights

  • Supplier price increases and mitigation: management quantified ~170 bps GM impact; mitigation actions in place; GM recovery expected from Q4 onward .
  • COLOR PPF rollout: best product rollout in company history; potential to not only take share but expand market demand via dealer/OEM channel engagement .
  • Margin trajectory: near-term China inventory dynamics create partial margin recognition; record GM anticipated in Q1–Q2 2026 as full margin is recognized and mitigations complete .
  • Growth/assumptions: mid-teens organic revenue view sustained; dealership services acquisitions continue where available; cash returns considered given valuation .
  • Dealer sentiment: mixed globally; tougher retail auto environment pushes dealers to seek profit add-ons, which benefits XPEL’s offerings .

Estimates Context

  • Q3 2025: Revenue beat consensus by ~$6.2M; EPS missed by ~$0.05 due to GM compression and SG&A items (acquisition, bad debt). Coverage depth is limited (3 estimates for revenue/EPS) .*
  • Q1–Q2 2025: Both revenue and EPS beat; Q2 had one-time charges ($1.6M) affecting reported EBITDA/EPS; normalized metrics showed stronger underlying performance .
  • Forward: Company guides Q4 revenue $123–$125M vs consensus $125.0M; with GM recovery, models likely need to reflect higher near-term cash conversion and a medium-term margin uplift path (2026–2028) .*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue momentum and cash generation are robust; Q3 delivered a clean top-line beat and record CFO despite margin headwinds .
  • Near-term EPS miss is transitory: supplier pricing and China inventory accounting dynamics should unwind, with GM recovery starting in Q4 and potentially record GM in Q1–Q2 2026—positioning for estimate revisions on margins .
  • Strategic investments ($75–$150M) and direct distribution in key markets (China) support explicit margin expansion targets (GM 52–54%, OM mid–high-20% by 2028)—a medium-term re-rating thesis .
  • Product innovation (COLOR PPF) and personalization platform expand TAM and channel monetization, offering incremental growth drivers beyond core PPF .
  • Watch regional mix and SG&A leverage: Canada softness and SG&A investment should improve as new markets/services scale; expect better operating leverage in 2026 .
  • Capital returns: $50M buyback in place and repurchases “attractive” at current valuation—potential share count tailwind if executed .
  • Near-term trading setup: favorable into Q4 on GM recovery and strong cash flow; medium-term thesis hinges on successful manufacturing/supply chain investments and full margin recognition from China acquisition .