0001767258-25-000051
SEC filingRevenue grew 13.5% to $124.7M driven by window film and international expansion, with gross margin slightly contracting 60 bps to 42.9%.
For the three months ended June 30, 2025, XPEL reported total revenue of $124.7 million, a 13.5% increase from $109.9 million in the same period last year. The growth was broad-based with product revenue up 13.9% and service revenue up 12.0%. Gross profit increased 11.8% to $53.5 million, but gross margin contracted 60 basis points to 42.9% from 43.5%, primarily due to a higher mix of lower-margin installation services and dealership sales. Operating income grew only 0.6% to $19.3 million, as operating expenses rose 19.3% ($5.5 million) driven by increased sales and marketing costs (up 15.4%) and general and administrative expenses (up 21.5%). Net income increased 7.8% to $16.2 million, benefiting from lower net interest expense and a lower effective tax rate of 20.3% vs. 18.8%.
Product revenue, representing 76.0% of total revenue, grew 13.9% led by a 27.0% increase in window film sales ($27.96 million) and a 9.3% increase in paint protection film ($62.67 million). Paint protection film remains the largest category at 50.2% of revenue, down from 52.1% a year ago. The newer windshield protection film, launched in Q4 2024, contributed $2.1 million or 1.7% of total revenue. Service revenue grew 12.0% to $29.9 million, with installation labor up 15.4% and software revenue up 9.5% due to subscriber growth. Geographically, North America (US & Canada) grew 8.3%, while international markets outperformed: China surged 75.1%, Asia Other +31.7%, and India & Middle East +40.5%. The strong performance in China was attributed to normalization of inventory levels at the distributor.
No formal guidance was provided in the MD&A. Management highlighted continued investment in marketing and personnel to support growth across regions, particularly in international markets. The company expects to fund operations through cash flow and its $125 million revolving credit facility (currently undrawn). Key drivers include further adoption of paint protection and window film, expansion of the installation network, and growth in dealership services. Gross margin may face headwinds from a shift toward lower-margin installation services, but product margin improved 20 bps to 38.6% due to cost reductions and operating leverage. The effective tax rate increased due to higher foreign taxes in China, which may persist.
Cash and equivalents rose to $49.6M from $22.1M at year-end, driven by strong operating cash flow of $31.1M. Total debt is minimal at $0.2M (notes payable only), with no borrowings under the $125M revolver. Inventory decreased slightly to $104.1M from $110.9M, reflecting improved working capital management. Shareholders' equity increased to $255.7M, supported by retained earnings growth of $24.9M.
The Notes disclose no material purchase commitments or contractual obligations beyond normal trade payables and lease liabilities. The warranty liability stands at $0.8M, and contingent liabilities from acquisitions total $2.1M (Level 3). No off-balance-sheet arrangements were noted.
The company did not repurchase shares or pay dividends. Debt repayments were $98K in the first half of 2025, and no new debt was issued. Capital expenditures totaled $1.9M (from cash flow statement, not in Notes). The revolver remains undrawn, providing ample liquidity.
The company operates as a single reportable segment after restructuring in Q2 2025. The CODM reviews gross margin and operating income at the consolidated level. Revenue is disaggregated by product category: paint protection film ($62.7M in Q2), window film ($28.0M), and service revenue ($29.9M). No geographic segment data is provided at the note level.
Operating cash flow of $31.1M exceeded net income of $24.8M, indicating healthy cash conversion. The primary drivers were non-cash charges (depreciation, amortization, stock compensation) and a favorable working capital swing, notably a $7.9M decrease in inventory offset by a $7.8M increase in receivables. Capex intensity was low at 6.3% of CFO, resulting in strong free cash flow of $29.2M. The company returned no capital to shareholders via dividends or buybacks during the period. Investing activities included $1.9M in PP&E and $0.8M in intangible asset development, while financing outflows were minimal ($0.3M). The cash balance increased by $27.5M to $49.6M.