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XPEL
XPEL
#6103
Rank
$1.08 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$39.61
Share price
-1.05%
Change (1 day)
1.54%
Change (1 year)
๐ŸŽจ Paint & Coating
Categories
  1. XPEL
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2026 Q3

XPEL - 10-Q quarterly report FY2026 Q3


Text size:
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2026
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______.
Commission File Number: 001-38858
XPEL, INC.
(Exact name of registrant as specified in its charter)
XPEL Logo.jpg
Nevada
20-1117381
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
711 Broadway St., Suite 320
San Antonio
Texas
78215
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number, including area code: (210) 678-3700
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.001 per shareXPELThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes  x   No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes  ☐    No  ☒

The registrant had 27,516,898 shares of common stock outstanding as of November 6, 2026.





TABLE OF CONTENTS
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44
45


Part I. Financial Information
Item 1. Financial Statements
XPEL, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)

(Unaudited)
(Audited)
September 30, 2026December 31, 2025
Assets
Current
Cash and cash equivalents
$45,698 $50,864 
Accounts receivable, net59,081 49,846 
Inventory
132,195 122,755 
Prepaid expenses and other current assets6,105 6,651 
Income tax receivable1,300 581 
Total current assets
244,379 230,697 
Property and equipment, net
95,123 15,797 
Right-of-use lease assets19,811 21,561 
Intangible assets, net56,327 49,620 
Deferred tax asset, net1,572 — 
Other non-current assets7,190 5,574 
Goodwill71,225 59,277 
Total assets$495,627 $382,526 
Liabilities
Current
Short-term debt$1,792 $59 
Current portion lease liabilities5,466 6,094 
Accounts payable and accrued liabilities67,508 54,289 
Other short-term liabilities20,676 10,558 
Total current liabilities95,442 71,000 
Deferred tax liability, net— 120 
Other long-term liabilities8,343 9,511 
Non-current portion of lease liabilities15,573 16,710 
Long-term debt42,560 — 
Total liabilities161,918 97,341 
Commitments and Contingencies (Note 13)
Stockholders’ equity
Preferred stock, $0.001 par value; authorized 10,000,000; none issued and outstanding
— — 
Common stock, $0.001 par value; 100,000,000 shares authorized; 27,722,793 and 27,682,807 issued, respectively
28 28 
Additional paid-in-capital20,897 18,049 
Accumulated other comprehensive loss(1,141)(135)
Retained earnings310,064 265,339 
Treasury stock, 206,777 and 78,624 shares at cost, respectively
(8,937)(2,999)
Stockholders' equity320,911 280,282 
Non-controlling interest12,798 4,903 
Total stockholders’ equity333,709 285,185 
Total liabilities and stockholders’ equity$495,627 $382,526 


See notes to condensed consolidated financial statements.
1
XPEL, INC.
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share data)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2026202520262025
Revenue
Product revenue$108,715 $95,459 $309,103 $268,966 
Service revenue29,094 29,956 89,113 84,967 
Total revenue137,809 125,415 398,216 353,933 
Cost of Sales
Cost of product sales62,175 59,838 180,003 166,468 
Cost of service14,125 13,153 42,334 37,629 
Total cost of sales76,300 72,991 222,337 204,097 
Gross Margin61,509 52,424 175,879 149,836 
Operating Expenses
Sales and marketing14,997 13,794 45,546 37,531 
General and administrative25,434 21,879 73,029 65,136 
Total operating expenses40,431 35,673 118,575 102,667 
Operating Income21,078 16,751 57,304 47,169 
Interest expense408 1 674 83 
Other (income) expense(261)— (261)— 
Foreign currency exchange (gain) loss(243)110 (926)(1,164)
Income before income taxes21,174 16,640 57,817 48,250 
Income tax expense4,466 3,505 12,303 10,321 
Net income16,708 13,135 45,514 37,929 
Net income attributed to non-controlling interest367 195 789 113 
Net income attributable to stockholders of the Company$16,341 $12,940 $44,725 $37,816 
Earnings per share attributable to stockholders of the Company
Basic$0.59 $0.47 $1.62 $1.37 
Diluted$0.59 $0.47 $1.62 $1.37 
Weighted Average Number of Common Shares
Basic27,542 27,675 27,565 27,665 
Diluted27,638 27,701 27,650 27,683 

See notes to condensed consolidated financial statements.
2
XPEL, INC.
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2026202520262025
Other comprehensive income
Net income
$16,708 $13,135 $45,514 $37,929 
Foreign currency translation369 (481)(1,006)3,393 
Total comprehensive income17,077 12,654 44,508 41,322 
Total comprehensive income attributable to:
Stockholders of the Company16,710 12,459 43,719 41,209 
Non-controlling interest367 195 789 113 
Total comprehensive income$17,077 $12,654 $44,508 $41,322 

See notes to condensed consolidated financial statements.
3
XPEL, INC.
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
(In thousands)


Stockholders' Equity - Three Months Ended September 30,
Common Stock
Additional Paid-in-CapitalTreasury StockRetained
Earnings		Accumulated Other Comprehensive Income (Loss)Equity attributable to Stockholders of the CompanyNon-Controlling InterestTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance as of June 30, 2025
27,670 $28 $17,085 — $— $238,989 $(362)$255,740 $(82)$255,658 
Net income— — — — — 12,940 — 12,940 195 13,135 
Foreign currency translation— — — — — — (481)(481)— (481)
Stock-based compensation9 — 1,080 — — — — 1,080 — 1,080 
Minority interest contribution— — — — — — — — 4,462 4,462 
Balance as of September 30, 202527,679 $28 $18,165 — $— $251,929 $(843)$269,279 $4,575 $273,854 
Balance as of June 30, 2026
27,717 28 19,822 (147)(5,938)293,723 (1,510)306,125 12,431 318,556 
Net income— — — — — 16,341 — 16,341 367 16,708 
Foreign currency translation— — — — — — 369 369 — 369 
Stock-based compensation6 — 1,075 — — — — 1,075 — 1,075 
Purchase of treasury shares— — — (60)(2,999)— — (2,999)— (2,999)
Balance as of September 30, 202627,723 $28 $20,897 (207)$(8,937)$310,064 $(1,141)$320,911 $12,798 $333,709 

See notes to condensed consolidated financial statements.
4
XPEL, INC.
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
(In thousands)


Stockholders' Equity - Nine Months Ended September 30,
Common Stock
Additional Paid-in-CapitalTreasury StockRetained
Earnings		Accumulated Other Comprehensive Income (Loss)Equity attributable to Stockholders of the CompanyNon-Controlling InterestTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance as of December 31, 2024
27,652 $28 $15,550 — $— $214,113 $(4,236)$225,455 $— $225,455 
Net income— — — — — 37,816 — 37,816 113 37,929 
Foreign currency translation— — — — — — 3,393 3,393 — 3,393 
Stock-based compensation27 — 2,615 — — — — 2,615 — 2,615 
Minority interest contribution— — — — — — — — 4,462 4,462 
Balance as of September 30, 202527,679 $28 $18,165 — $— $251,929 $(843)$269,279 $4,575 $273,854 
Balance as of December 31, 2025
27,683 28 18,049 (79)(2,999)265,339 (135)280,282 4,903 285,185 
Net income— — — — — 44,725 — 44,725 789 45,514 
Foreign currency translation— — — — — — (1,006)(1,006)— (1,006)
Stock-based compensation40 — 2,848 — — — — 2,848 — 2,848 
Purchase of treasury shares— — — (128)(5,938)— — (5,938)— (5,938)
Minority interest contribution— — — — — — — — 7,106 7,106 
Balance as of September 30, 202627,723 $28 $20,897 (207)$(8,937)$310,064 $(1,141)$320,911 $12,798 $333,709 

See notes to condensed consolidated financial statements.
5
XPEL, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)

Nine Months Ended September 30,
20262025
Cash flows from operating activities
Net income$45,514 $37,929 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment5,104 4,733 
Amortization of intangible assets6,519 4,722 
Gain on sale of property and equipment(20)(11)
Stock compensation3,356 2,776 
Provision for credit losses1,110 859 
Deferred income tax(1,379)(2,727)
Changes in assets and liabilities:
Accounts receivable, net(9,487)(7,386)
Inventory, net(6,430)5,195 
Prepaid expenses and other current assets1,530 (308)
Income taxes receivable and payable(1,960)2,954 
Accounts payable and accrued liabilities15,393 15,535 
Net cash provided by operating activities59,250 64,271 
Cash flows used in investing activities
Purchase of property, plant and equipment(76,692)(2,934)
Proceeds from sale of property and equipment66 34 
Acquisition of businesses, net of cash acquired(12,430)(15,165)
Purchases of long term investments— (1,685)
Development of intangible assets(1,506)(1,036)
Net cash used in investing activities(90,562)(20,786)
Cash flows from financing activities
Borrowings of debt44,800 — 
Restricted stock withholding taxes paid in lieu of issued shares(509)(161)
Repayments of debt(506)(117)
Payments of deferred acquisition consideration(11,124)(147)
Purchase of treasury shares(5,938)— 
Net cash provided by (used in) financing activities26,723 (425)
Net change in cash and cash equivalents(4,589)43,060 
Foreign exchange impact on cash and cash equivalents(577)(650)
(Decrease) increase in cash and cash equivalents during the period(5,166)42,410 
Cash and cash equivalents at beginning of period50,864 22,087 
Cash and cash equivalents at end of period$45,698 $64,497 
Supplemental schedule of non-cash activities
Non-cash acquisition consideration$15,028 $33,537 
Non-cash lease financing$4,682 $4,396 
Issuance of common stock for vested restricted stock units$2,247 $848 
Non-cash minority interest contribution$7,106 $4,462 
Supplemental cash flow information
Cash paid for income taxes$14,234 $10,122 
Cash paid for interest$669 $89 
See notes to condensed consolidated financial statements.
6
XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1.    INTERIM FINANCIAL INFORMATION
The accompanying (a) condensed consolidated balance sheet as of December 31, 2025, which has been derived from our audited consolidated financial statements as of and for the year ended December 31, 2025, and (b) unaudited interim condensed consolidated financial statements as of September 30, 2026 and for the three and nine months ended September 30, 2026 and 2025 have been prepared by XPEL, Inc. (“XPEL” or the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Pursuant to these rules and regulations, certain financial information and footnote disclosures normally included in the financial statements have been condensed or omitted. However, in the opinion of management, the financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position, results of operations and cash flows of the interim periods presented. Operating results for the interim periods presented are not necessarily indicative of results to be expected for the full year or for any other interim period, due to variability in customer purchasing patterns and seasonal, operating and other factors.
These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC on February 27, 2026 (the "Annual Report") and with the Management's Discussion and Analysis of Financial Condition and Results of Operations section appearing elsewhere in this Report.
2.    SIGNIFICANT ACCOUNTING POLICIES
Nature of Business - The Company is based in San Antonio, Texas and manufactures, sells, distributes, and installs protective films and coatings, including automotive paint protection film, surface protection film, automotive and commercial/architectural window films and ceramic coatings. The Company was incorporated in the state of Nevada, U.S.A. in October 2003.
Basis of Presentation - The condensed consolidated financial statements are prepared in conformity with United States Generally Accepted Accounting Principles ("U.S. GAAP") and include the accounts of the Company and its majority-owned subsidiaries. Intercompany accounts and transactions have been eliminated. The functional currency for the Company is the United States ("U.S.") Dollar. The assets and liabilities of each of its majority-owned foreign subsidiaries are translated into U.S. dollars using the exchange rate at the end of the balance sheet date. Revenues and expenses are translated at the average exchange rates for the period. Gains and losses from translations are recognized in foreign currency translation included in accumulated other comprehensive loss in the accompanying consolidated balance sheets.
Segment Reporting - The Company's chief operating decision maker (“CODM”) is its Chief Executive Officer. The CODM reviews geographically segmented data as well as consolidated results on a monthly basis to evaluate performance and make resource allocation decisions. Each geographical segment exhibits similar economic characteristics, shares common products and services, has similar customer types, and uses similar distribution methods. As a result, these segments have been aggregated into a single reportable segment in accordance with the aggregation criteria under ASC 280, Segment Reporting.
Goodwill - Goodwill represents the excess purchase price over the fair value of tangible net assets acquired in acquisitions after amounts have been allocated to intangible assets. Goodwill is tested for impairment at the reporting unit level on an annual basis (at December 31) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company recognized no goodwill impairment during the three and nine
7
XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
months ended September 30, 2026 and 2025, and there is no significant accumulated impairment of goodwill from prior periods. Refer to Note 7, Goodwill for more information related to goodwill.
Use of Estimates - The preparation of these condensed consolidated financial statements in conformity with U.S. GAAP requires management to make judgments and estimates and form assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and underlying assumptions are reviewed on an ongoing basis. The more significant estimates include: residual values for leased assets, inventory valuation, fair values measurements used in impairment assessments, the fair value of assets acquired and liabilities assumed in business combinations and contingent liabilities included in the purchase price, warranty liability, post-sale discounts, credit losses and income taxes. Actual outcomes may differ from these estimates under different assumptions and conditions.
Accounts Receivable - Accounts receivable are shown net of allowances for expected credit losses of $1.0 million and $0.1 million as of September 30, 2026 and December 31, 2025, respectively. The Company evaluates the adequacy of its allowances by analyzing the aging of receivables, customer financial condition, historical collection experience, the value of any collateral and other economic and industry factors. Actual collections may differ from historical experience, and if economic, business or customer conditions deteriorate significantly, adjustments to these reserves may be required. When the Company becomes aware of factors that indicate a change in a specific customer’s ability to meet its financial obligations, the Company records a specific reserve for credit losses.
Property, Plant and Equipment - The following table presents geographic property, plant and equipment, net of accumulated depreciation, by region as of the dates set forth below (in thousands):
September 30, 2026December 31, 2025
United States$84,016 $11,056 
China7,083 127 
Canada1,887 2,440 
Europe1,115 1,243 
Other1,022 931 
Consolidated$95,123 $15,797 
Goodwill - The following table presents geographic goodwill by region as of the dates set forth below (in thousands):
September 30, 2026December 31, 2025
United States$26,262 $24,811 
China23,203 12,165 
Canada10,045 10,392 
Europe5,934 6,084 
Other5,781 5,825 
Consolidated$71,225 $59,277 
Intangible Assets - The following table presents geographic intangible assets, net by region as of the dates set forth below (in thousands):
8
XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2026December 31, 2025
China$28,746 $19,724 
United States20,197 20,164 
Canada3,267 3,948 
Europe2,073 3,488 
Other2,044 2,296 
Consolidated$56,327 $49,620 
Provisions and Warranties - We provide a warranty on our products. Liabilities under the warranty policy are based on a review of historical warranty claims. Adjustments are made to the accruals as claims and data experience warrant. Our liabilities for warranties as of September 30, 2026 and December 31, 2025 were $0.5 million and $0.3 million, respectively. The following tables present a summary of our accrued warranty liabilities, which are recorded within the Company's accounts payable and accrued liabilities, for the nine months ended September 30, 2026 and the twelve months ended December 31, 2025 (in thousands):
2026
Warranty liability, January 1$307 
Warranties assumed in period1,925 
Payments(1,738)
Warranty liability, September 30$494 
2025
Warranty liability, January 1$738 
Warranties assumed in period472 
Payments(903)
Warranty liability, December 31$307 
Tariff Recovery
During the three months ended September 30, 2026, the Company received $4.6 million of cash recoveries related to previously paid import tariffs on inventory purchases. The Company determined that the applicable recognition criteria for these recoveries had been satisfied and recognized the recoveries in a manner consistent with the original accounting for the related tariff costs. No receivable was recorded as the refunds were received during the period. The total recoveries recognized were recorded as a reduction of cost of goods sold for inventory previously sold. The Company continues to evaluate the potential impact of changes in tariff regulations, related legal proceedings, and refund procedures on its consolidated financial statements.
Recent Accounting Pronouncements Issued and Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, "Disaggregation of Income Statement Expenses (DISE)", which requires additional disclosure of the nature of expenses included in the income statement in response to longstanding requests from investors for more information about an entity’s expenses. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. This standard becomes effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. We are currently assessing the effect that the adoption of this standard will have on our financial statements.
In September 2025, the FASB issued ASU 2025-06, "Targeted Improvements to the Accounting for Internal-Use Software", to modernize the accounting for software costs. The new guidance amends the
9
XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
existing standard that refers to various stages of a software development project to align better with the current software development methods, such as agile programming. This standard becomes effective for annual reporting periods beginning after December 15, 2027 and interim periods within those annual reporting periods, with early adoption permitted. We are currently assessing the effect that the adoption of this standard will have on our financial statements.
In December 2025, the FASB issued ASU 2025-11, “Interim Reporting (Topic 270): Narrow Scope Improvements”. The guidance clarifies interim disclosure requirements and the applicability of Topic 270. This standard becomes effective for interim reporting periods with annual reporting periods beginning after December 15, 2027, with early adoption permitted. We are currently assessing the effect that the adoption of this standard will have on our financial statements.
In December 2025, the FASB issued ASU 2025-12, “Codification Improvements”. The update includes amendments made to 33 issues. This standard becomes effective for annual reporting periods beginning after December 15, 2026 and interim periods within those annual reporting periods, with early adoption permitted. We are currently assessing the effect that the adoption of this standard will have on our financial statements.
3.    ACQUISITIONS OF BUSINESSES
In May 2026, the Company acquired certain assets from a manufacturer in China (the "China Manufacturer") through the formation of a new majority-owned subsidiary, "NQL", in which the Company obtained a 75% controlling interest, for a purchase price of $21.0 million. The minority interest in this transaction was acquired primarily through a contribution of fixed assets. This acquisition was completed as part of our strategy to invest in the manufacturing and supply chain and to expand our manufacturing presence in China.
In August 2026, the Company acquired 100% of a business that manufactures vehicle graphics and related products. This acquisition was completed as part of our market expansion strategy. The purchase price of the acquisition was $6.5 million.
Transaction-related costs incurred in connection with these acquisitions were not material to the consolidated financial statements.
10
XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Our valuation models related to inventory and other working capital, identified tangible assets, identified intangible assets, and goodwill included in the acquisitions are not yet finalized and these figures are presented on a preliminary basis. Valuation of these items will be finalized within 12 months of each acquisition date. Accordingly, the total preliminary purchase price allocation for acquisitions completed during the nine months ended September 30, 2026, is as follows (in thousands):
Aggregate Purchase Price
Cash(1)$26,707 
Contingent consideration750 
$27,457 
Aggregate Allocation
Cash236 
Inventory and other working capital3,407 
Property and equipment2,021 
Operating lease assets529 
Customer Relationships(2)10,231 
Goodwill(3)13,046 
Operating lease liabilities(2,013)
$27,457 
(1)Total cash consideration is comprised of amounts paid on closing dates plus holdback amounts to be paid in the future.

(2)The weighted average useful life of acquired amortizable intangible assets is 9 years.

(3)The full value of this acquired goodwill is expected to be tax deductible.
The aggregate revenue and the net income from the acquisitions completed in the nine months ended September 30, 2026 that have been consolidated into our condensed consolidated financial statements were $8.7 million and $0.2 million, respectively. The following unaudited pro forma financial information presents our results, including expenses relating to the amortization of intangibles purchased, as if these acquisitions had occurred on January 1, 2026 and 2025, respectively (in thousands):
Nine Months Ended
September 30,
20262025
Revenue$417,108 $369,603 
Net income$47,104 $38,471 
The unaudited consolidated pro forma combined financial information does not purport to be indicative of the results which would have been obtained had the acquisitions been completed as of the beginning of the earliest period presented or of results that may be obtained in the future. In addition, this financial information does not include any benefits that may result from the acquisitions due to synergies that may be derived from the elimination of any duplicative costs.
During the nine months ended September 30, 2026, the Company recorded measurement period adjustments related to acquisitions. The adjustments were recognized in the current period in accordance with ASC 805 and had no material impact on the Company's results of operations for the current or prior periods.
11
XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Adjustments related to acquisitions completed in 2025 included an increase to the provisional fair value of customer relationships by approximately $1.6 million with a corresponding decrease to the provisional value of goodwill of approximately $1.6 million. These adjustments resulted from updated valuation information and refined appraisals received during the measurement period.
Adjustments related to acquisitions completed in 2026 were made during the three months ended September 30, 2026. For the China Manufacturer, preliminary valuations of property and equipment and inventory were reduced due to updated local appraisals, and the preliminary valuation of trademarks was updated based on revisions to our valuation models. These changes decreased the preliminary fair values of these items by approximately $9.9 million, $0.2 million, and $0.5 million, respectively. Revisions to our valuation models for customer relationships caused an increase in their preliminary fair value of approximately $2.2 million. In addition, purchase consideration decreased by approximately $0.4 million due to adjustments of the fair value of contingent liabilities associated with these transactions. The net effect of these adjustments was an increase to goodwill of approximately $7.9 million.
Purchase price accounting for acquisitions completed during the fourth quarter of the year ended December 31, 2025 is not yet finalized as the valuation models related to identified intangible assets and goodwill included in these acquisitions are not yet complete. We anticipate finalizing the accounting for these acquisitions within 12 months of the completion of each respective acquisition date.
4.    REVENUE
Revenue recognition
The Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods and services to a customer, in an amount that reflects the consideration that it expects to receive in exchange for those goods or services. This is achieved through applying the following five-step model:
•Identification of the contract, or contracts, with a customer
•Identification of the performance obligations in the contract
•Determination of the transaction price
•Allocation of the transaction price to the performance obligations in the contract
•Recognition of revenue when, or as, the Company satisfies a performance obligation
The Company generates substantially all of its revenue from contracts with customers, whether formal or implied. Sales taxes collected from customers are remitted to the appropriate taxing jurisdictions and are excluded from sales revenue as the Company considers itself a pass-through conduit for collecting and remitting sales taxes, with the exception of taxes assessed during the procurement process of select inventories. Shipping and handling costs are included in cost of sales.
Revenue from product and services sales is recognized when control of the goods, or benefit of the service, is furnished to the customer. This occurs at a point in time, typically upon shipment to the customer or completion of the service. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.
Based upon the nature of the products the Company sells, its customers have limited rights of return, and returns that have occurred have been immaterial. The Company offers certain customers discounts and rebates, including volume-based rebates tied to purchase thresholds over a specified period. Discounts and rebates are recognized as a reduction of revenue when the related sales are recognized. The Company estimates rebates at the time of sale using an expected value method, based on contractual terms, historical experience and each customer’s actual and projected purchases over the
12
XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
rebate period. The Company reassesses its estimates each reporting period and records adjustments as increases or decreases to revenue in the period in which they are identified.
Warranty obligations associated with the sale of our products are assurance-type warranties that are a guarantee of the product’s intended functionality and, therefore, do not represent a distinct performance obligation within the context of the contract. Warranty expense is included in cost of sales.
We apply a practical expedient to expense direct costs of obtaining a contract when incurred because the amortization period would be one year or less.
Under its contracts with customers, the Company stands ready to deliver product upon receipt of a purchase order. Accordingly, the Company has no performance obligations under its contracts until its customers submit a purchase order. The Company does not enter into commitments to provide goods or services that have terms greater than one year. In limited cases, the Company does require payment in advance of shipping product or providing service. Typically, product is shipped within a few days after prepayment is received. Additionally, in some cases, customers pay for services in advance of their performance. These prepayments are recorded as contract liabilities on the condensed consolidated balance sheet and are included in accounts payable and accrued liabilities (Note 10). In some cases, the Company receives advance payments from customers that may elect to have installation work performed either at a Company-owned location or at a third-party installation site. In either of these cases, the Company recognizes contract liabilities for the advance payments received. When the installation work is performed at a Company-owned location, the Company recognizes revenue upon completion of the installation. When the work is completed at a third-party location, the Company pays the third-party installer for their work performed. As the Company's performance obligations are part of contracts that have original expected duration of less than one year, the Company has applied the practical expedient under the Accounting Standards Codification Topic 606 ("ASC 606") to omit disclosures regarding remaining performance obligations.
When the Company transfers goods or provides services to a customer, payment is due, subject to normal terms, and is not conditional on anything other than the passage of time. Typical payment terms range from due upon receipt to due within 30 days, depending on the type of customer and relationship. At contract inception, the Company expects that the period of time between the transfer of goods to the customer and when the customer pays for those goods will be less than one year, which is consistent with the Company’s standard payment terms. Accordingly, the Company has elected the practical expedient under ASC 606 to not adjust for the effects of a significant financing component. As such, these amounts are recorded as receivables and not contract assets.
The following table summarizes transactions within contract liabilities for the three and nine months ended September 30, 2026 (in thousands):
13
XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Balance, December 31, 2025$4,795 
Revenue recognized and payments made related to amounts included in the December 31, 2025 balance(4,604)
Payments received for which performance obligations have not been satisfied8,296 
Effect of foreign currency translation(11)
Balance, March 31, 2026$8,476 
Revenue recognized and payments made related to amounts included in the March 31, 2026 balance(8,043)
Payments received for which performance obligations have not been satisfied8,623 
Effect of foreign currency translation16 
Balance, June 30, 2026$9,072 
Revenue recognized and payments made related to amounts included in the June 30, 2026 balance(8,631)
Payments received for which performance obligations have not been satisfied10,231 
Effect of foreign currency translation17 
Balance, September 30, 2026$10,689 
The table below sets forth the disaggregation of revenue by product category for the periods indicated below (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2026202520262025
Product Revenue
Paint protection film$73,536 $63,531 $210,022 $182,637 
Window film30,894 27,640 86,610 74,234 
Other4,285 4,288 12,471 12,095 
Total
$108,715 $95,459 $309,103 $268,966 
Service Revenue
Software$2,797 $2,208 $7,281 $6,507 
Cutbank credits957 4,257 4,970 12,453 
Installation labor24,276 22,125 72,710 63,222 
Other1,064 1,366 4,152 2,785 
Total$29,094 $29,956 $89,113 $84,967 
Total$137,809 $125,415 $398,216 $353,933 
Because many of our international customers require us to ship their orders to freight forwarders located in the United States, we cannot be certain about the ultimate destination of the product. The following table represents our estimate of sales by geographic regions based on our understanding of ultimate product destination based on customer interactions, customer locations and other factors for the periods set forth below (in thousands):
14
XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2026202520262025
United States$76,719 $71,725 $219,147 $200,185 
Canada15,293 12,975 39,488 36,656 
North America92,012 84,700 258,635 236,841 
China15,351 10,074 42,984 25,886 
Asia Other6,308 5,545 18,179 15,523 
Asia Pacific21,659 15,619 61,163 41,409 
EU, UK, and Africa16,182 16,537 51,000 48,899 
India and Middle East4,770 5,718 17,947 18,541 
Latin America3,186 2,841 9,471 8,243 
Total$137,809 $125,415 $398,216 $353,933 
5.    PROPERTY AND EQUIPMENT, NET
Property and equipment consists of the following as of the dates set forth below (in thousands):
September 30, 2026December 31, 2025
Furniture and fixtures$5,357 $5,155 
Computer equipment6,565 5,892 
Vehicles1,559 1,178 
Equipment13,896 6,294 
Leasehold improvements11,667 14,067 
Buildings37,103 — 
Plotters6,644 5,990 
Land10,110 — 
Construction in Progress28,086 1,097 
Total property and equipment$120,987 $39,673 
Less: accumulated depreciation25,864 23,876 
Property and equipment, net$95,123 $15,797 
The buildings are depreciated on a straight-line basis over estimated useful lives of 39 years.
Depreciation expense for the three months ended September 30, 2026 and 2025 was $1.7 million and $1.6 million, respectively. For the nine months ended September 30, 2026 and 2025, depreciation expense was $5.1 million and $4.7 million, respectively.
During the nine months ended September 30, 2026, the Company acquired four commercial properties in San Antonio, Texas (the "Properties") for approximately $61.3 million, which consisted of land of $10.2 million, buildings of $36.9 million, and a vacant building of $14.2 million classified as construction in progress pending its intended use. The remaining construction in progress balance of $13.8 million relates primarily to manufacturing equipment, which is expected to be completed and placed in service during 2027.
15
XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
6.    INTANGIBLE ASSETS, NET
Intangible assets consists of the following as of the dates set forth below (in thousands):
September 30, 2026December 31, 2025
Trademarks$1,799 $1,663 
Software10,452 9,108 
Trade name1,134 2,240 
Contractual and customer relationships75,821 63,944 
Non-compete428 437 
Other749 732 
Total at cost$90,383 $78,124 
Less: Accumulated amortization34,056 28,504 
Intangible assets, net$56,327 $49,620 
Amortization expense for the three months ended September 30, 2026 and 2025 was $2.3 million and $1.7 million, respectively. For the nine months ended September 30, 2026 and 2025, amortization expense was $6.5 million and $4.7 million, respectively.
7.    GOODWILL
The following table summarizes goodwill transactions for the nine months ended September 30, 2026 and the twelve months ended December 31, 2025 (in thousands):
2026
Balance at December 31, 2025$59,277 
Additions and purchase price allocation adjustments11,990 
Foreign exchange(42)
Balance at September 30, 2026$71,225 
2025
Balance at December 31, 2024$44,126 
Additions and purchase price allocation adjustments13,826 
Foreign exchange1,325 
Balance at December 31, 2025$59,277 
For details related to acquisitions and purchase price allocations completed during the nine months ended September 30, 2026, refer to Note 3, Acquisitions of Businesses.
8.    INVENTORIES
The components of inventory are summarized as follows as of the dates set forth below (in
16
XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
thousands):
September 30, 2026December 31, 2025
Raw materials$17,681 $15,618 
Work in process4,287 1,826 
Finished goods110,227 105,311 
$132,195 $122,755 
9.    DEBT
The Company has U.S. and Canadian revolving credit facilities and Harvest Ventures Holding Company (“Harvest”), a wholly-owned subsidiary of the Company, has a term loan which it incurred in connection with the purchase of the Properties.
REVOLVING FACILITIES
On September 11, 2025, the Company entered into the First Amendment (the “First Amendment”) to its Credit Agreement, dated April 6, 2023 (as amended, the “Credit Agreement”) with Wells Fargo Bank, N.A., as Administrative Agent, and other lenders party thereto. The Amendment, among other things, extended the maturity of the Credit Agreement from April 6, 2026 to September 11, 2028. The Credit Agreement provides for secured revolving loans and letters of credit in an aggregate amount of up to $125 million, which is subject to the terms of the Credit Agreement. As of September 30, 2026 and December 31, 2025, the Company had no outstanding balances under the Credit Agreement. All capitalized terms in this description of the Credit Agreement, that are not otherwise defined in this Report, have the meaning assigned to them in the Credit Agreement.
Borrowings under the Credit Agreement bear interest, at XPEL’s option, at a rate equal to either (a) Base Rate or (b) Adjusted Term SOFR. In addition to the applicable interest rate, the Credit Agreement includes a commitment fee ranging from 0.20% to 0.25% per annum for the unused portion of the aggregate commitment and an applicable margin ranging from 0.00% to 0.50% for Base Rate Loans and 1.00% to 1.50% for Adjusted Term SOFR Loans. At September 30, 2026, these rates were 7.0% and 4.8%, respectively. Both the margin applicable to the interest rate and the commitment fee are dependent on XPEL’s Consolidated Total Leverage Ratio. The Credit Agreement's maturity date is September 11, 2028.
Obligations under the Credit Agreement are secured by a first priority perfected security interest, subject to certain permitted encumbrances, in all of XPEL’s material property and assets, other than the assets which secure the Term Loan.
The terms of the Credit Agreement include certain affirmative and negative covenants that require, among other things, XPEL to maintain legal existence and remain in good standing, comply with applicable laws, maintain accounting records, deliver financial statements and certifications on a timely basis, pay taxes as required by law, and maintain insurance coverage, as well as to forgo certain specified future activities that might otherwise encumber XPEL and certain customary covenants. The Credit Agreement provides for two financial covenants, as follows:
As of the last day of each fiscal quarter:
1.XPEL shall not allow its Consolidated Total Leverage Ratio to exceed 3.50 to 1.00, and
2.XPEL shall not allow its Consolidated Interest Coverage Ratio to be less than 3.00 to 1.00.

17
XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
On May 15, 2026, the Company entered into a second amendment (the "Second Amendment") to the Credit Agreement with Wells Fargo Bank, N.A. (the "Credit Facility Amendment”). The Second Amendment was made in connection with the purchase of the Properties made by Harvest. The Credit Facility Amendment permitted Harvest to incur indebtedness under the term loan described below (the "Term Loan") and the Company to (a) guarantee the Term Loan, (b) assign the real estate purchase agreement for the properties to Harvest, and (c) make an equity investment of up to $18.0 million in Harvest and in Harvest Industrial Corporation (a wholly-owned subsidiary of the Company formed to hold an air permit required by the Texas Commission on Environmental Quality) in connection with the acquisition of the Properties and certain other expenditures related to the Properties.

The Company also has a CAD $4.5 million (approximately $3.2 million USD as of September 30, 2026) revolving credit facility through a financial institution in Canada, and is maintained by XPEL Canada Corp., a wholly-owned subsidiary of XPEL. This Canadian facility is utilized to fund the Company's working capital needs in Canada. This facility bears interest at the Royal Bank of Canada’s prime rate plus 0.25% per annum and is guaranteed by the parent company. As of September 30, 2026 and December 31, 2025, no balance was outstanding on this line of credit.
TERM LOAN
On May 15, 2026, Harvest entered into a $44.8 million term loan agreement (the "Term Loan") with PNC Bank, N.A. (“PNC”), secured by the Properties and a guaranty (the "Guaranty") by the Company.
Borrowings outstanding bear interest at the sum of (a) the Term SOFR Rate in effect on each Reset Date (defined as the closing date or the last day of every month thereafter, unless the last day falls on a non-business day, upon which the Reset Date shall be the first business day after the last day of the month), plus (b) 125 basis points (1.25%), matures ten years from the closing date on May 15, 2036, and amortizes over a twenty-five year period. The interest rate at closing was 4.7% per annum. At September 30, 2026, the interest rate was 5.0%.
The Term Loan is secured by the assets owned by Harvest and is subject to customary representations, warranties, covenants, and events of default. Upon the occurrence of an event of default, PNC may, among other remedies, accelerate the outstanding principal balance and accrued interest and foreclose on the Properties. As of September 30, 2026, $44.4 million in principal was outstanding, $1.8 million of which was classified as current and $42.6 million as long-term on the Condensed Consolidated Balance Sheet. Debt issuance costs incurred in connection with the Term Loan were not material to the condensed consolidated financial statements.
The Term Loan includes certain affirmative and negative covenants that require, among other things, Harvest to maintain its legal existence and good standing, comply with applicable laws, maintain accounting records, deliver financial statements and compliance certifications on a timely basis, pay taxes as required by law, maintain insurance coverage, and maintain its depository accounts with PNC Bank, as well as to forgo certain specified future activities, including incurring additional indebtedness other than indebtedness under the Credit Agreement or not otherwise permitted under the Credit Agreement, granting liens on its assets, guaranteeing third-party obligations, paying dividends except as permitted under the Credit Agreement, merging or transferring substantially all of its assets, or changing its ownership or management, and certain other customary covenants. The Term Loan provides for two financial covenants which become effective after the Credit Agreement with Wells Fargo and any refinancing of the Credit Agreement ceases to be in effect as follows:
As of the last day of each fiscal quarter:
1.XPEL shall not allow its Consolidated Total Leverage Ratio to exceed 3.50 to 1.00, and
2.XPEL shall not allow its Consolidated Interest Coverage Ratio to be less than 3.00 to 1.00.
18
XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)


The following table presents future maturities of the Term Loan as of September 30, 2026 (in thousands):
Remainder of 2026
$448 
20271,792 
20281,792 
20291,792 
20301,792 
Thereafter36,736 
Total$44,352 
10.    ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The following table presents significant accounts payable and accrued liability balances as of the dates set forth below (in thousands):
September 30, 2026December 31, 2025
Trade payables$43,405 $37,771 
Payroll liabilities8,626 7,814 
Contract liabilities10,689 4,795 
Other liabilities4,788 3,909 
$67,508 $54,289 
11.    OTHER SHORT-TERM LIABILITIES
The following table presents significant other short-term liability balances as of the dates set forth below (in thousands):
September 30, 2026December 31, 2025
Contingent consideration - acquisitions$6,143 $10,530 
Acquisition holdback payments14,533 28 
$20,676 $10,558 
The contingent consideration - acquisitions represents the estimated value of acquired inventory that may be sold above its net realizable value and liabilities related to future internal performance milestones. Acquisition holdback payments refer to portions of the acquisition purchase price that are deferred beyond the closing date, including installment payments payable on a scheduled basis, as well as amounts withheld to address potential post-closing adjustments, obligations, or other amounts otherwise payable.
19
XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
12.    FAIR VALUE MEASUREMENTS
ASC 820 prioritizes the inputs to valuation techniques used to measure fair value into the following hierarchy:
Level 1 – Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than the quoted prices in active markets that are observable either directly or indirectly, including: quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Unobservable inputs that are supported by little or no market data and require the reporting entity to develop its own assumptions.
Financial instruments include cash and cash equivalents, accounts receivable, accounts payable, our lines of credit, and long-term debt. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, our lines of credit, long-term debt and short-term borrowings approximate fair value because of the near-term maturities of these financial instruments. The carrying value of the Company’s debt approximates fair value due to the relatively short-term nature and interest rates of the notes. The carrying value of the Company's long-term debt approximates fair value due to the interest rates being market rates.
The estimated fair value of debt is based on market quotes for instruments with similar terms and remaining maturities.
The Company has contingent liabilities related to future internal performance milestones and the estimated value of acquired inventory that may be sold above its net realizable value. The fair value of these liabilities was determined using discounted cash flow analyses and Monte Carlo Simulations based on the probability and timing of certain future payments under these arrangements. These liabilities are accounted for as Level 3 liabilities within the fair value hierarchy.
Level 3 liabilities measured at fair value on a recurring basis as of the dates set forth below are as follows (in thousands):
September 30, 2026December 31, 2025
Level 3:
     Contingent Liabilities$13,709 $19,966 
The following table presents a summary of the changes in fair value of Level 3 liabilities for the nine months ended September 30, 2026 and the twelve months ended December 31, 2025, respectively (in thousands):
September 30, 2026December 31, 2025
Beginning balance$19,966 $1,816 
New acquisitions and measurement adjustments775 25,037 
Recognized contingent liabilities(8,114)(6,341)
Fair value adjustments23 (613)
Effect of foreign currency translation1,059 67 
Ending balance$13,709 $19,966 
20
XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Level 3 contingent liabilities were updated during the reporting period as a result of valuation adjustments. The valuation adjustments are reflected in general and administrative expenses in the Consolidated Statements of Income for the nine months ended September 30, 2026 and the twelve months ended December 31, 2025, respectively.
13.    COMMITMENTS AND CONTINGENCIES
In the ordinary course of business activities, the Company may be contingently liable for litigation and claims including those pertaining to customers, suppliers and former employees. Management believes that adequate provisions have been recorded in the accounts where required. Management also has determined that the likelihood of any class action or other litigation and claims having a material impact on our results of operations, cash flows or financial position is remote.
14.    CAPITAL STOCK
Common Stock
Common stock shares issued at September 30, 2026 and December 31, 2025 were 27,722,793 and 27,682,807, respectively. Common stock shares outstanding at September 30, 2026 and December 31, 2025 were 27,516,016 and 27,604,183, respectively. Par value of these shares for these same dates was $0.03 million.
Preferred Stock
At September 30, 2026 and December 31, 2025 there were no shares of preferred stock issued and outstanding.
Treasury Stock
On May 6, 2025, the Board approved a stock repurchase program that authorized the Company to purchase up to $50 million of the Company’s Common Stock. The timing and amount of shares repurchased will depend on the stock price, business and market conditions, corporate and regulatory requirements, alternative investment opportunities, acquisition opportunities and other factors. The repurchase program may be suspended or discontinued at any time.
During the nine months ended September 30, 2026, the Company repurchased 128,153 shares on the open market at an average price of $46.34 per share, for a total amount of $5.9 million, excluding brokerage commissions and accrued excise tax. No shares were repurchased during the nine months ended September 30, 2025. As of September 30, 2026 and December 31, 2025, $41.1 million and $47.0 million were available for share repurchases under the program, respectively.
21
XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
15.    EARNINGS PER SHARE
We compute basic earnings per share by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share includes effect of granted incremental restricted stock units.
The following table reconciles basic and diluted weighted average shares used in the computation of earnings per share for the periods set forth below (in thousands except per share values):
Three Months Ended September 30,Nine Months Ended September 30,
Numerator2026202520262025
Net income attributable to stockholders of the Company$16,341 $12,940 $44,725 $37,816 
Denominator
Weighted average basic shares27,542 27,675 27,565 27,665 
Dilutive effect of restricted stock units96 26 85 18 
Weighted average diluted shares27,638 27,701 27,650 27,683 
Earnings per share
Basic$0.59 $0.47 $1.62 $1.37 
Diluted$0.59 $0.47 $1.62 $1.37 
16.    SEGMENT INFORMATION
The Company's chief operating decision maker (“CODM”) is its Chief Executive Officer. The CODM reviews geographically segmented data as well as consolidated results on a monthly basis to evaluate performance and make resource allocation decisions. Each geographical segment exhibits similar economic characteristics, shares common products and services, has similar customer types, and uses similar distribution methods. As a result, these segments have been aggregated into a single reportable segment in accordance with the aggregation criteria under ASC 280, Segment Reporting.
The CODM reviews balance sheet information on a consolidated basis which is reflected in the Company's Condensed Consolidated Balance Sheets as of September 30, 2026 and December 31, 2025. The CODM uses gross margin and income from operations to evaluate return on total assets in deciding whether to invest in the development and expansion of our condensed consolidated operations or into strategic transactions, such as acquisitions. Both metrics are also used to monitor budget versus actual results, perform competitive benchmarking analyses, and are considered in evaluating our executives’ compensation.
22
XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table presents our significant expense categories included in our reported measure of segment profitability for the periods set forth below (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2026202520262025
Total revenue$137,809 $125,415 $398,216 $353,933 
Less:
Direct product costs62,175 59,838 180,003 166,468 
Direct non-product costs14,125 13,153 42,334 37,629 
Gross margin
61,509 52,424 175,879 149,836 
Less:
Personnel costs18,205 16,232 53,157 45,606 
Sales and marketing costs4,261 4,162 14,594 10,920 
Facility expenses3,665 3,016 10,242 8,470 
Depreciation and amortization3,241 2,750 9,692 7,804 
Travel and entertainment2,459 2,214 7,213 6,731 
Information technology2,402 1,646 6,428 4,804 
Professional fees1,804 1,733 6,158 5,411 
Shipping1,158 1,336 3,257 4,014 
Other3,236 2,584 7,834 8,907 
Income from operations21,078 16,751 57,304 47,169 
Interest expense4081 674 83 
Other (income) expense(261)— (261)— 
Income tax expense4,466 3,505 12,303 10,321 
Foreign currency exchange gain
(243)110 (926)(1,164)
Net income$16,708 $13,135 $45,514 $37,929 
23

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis provides material historical and prospective disclosures intended to enable investors and other users to assess the financial condition and results of operations of XPEL, Inc. (“XPEL” or the “Company”). Statements that are not historical are forward-looking and involve risks and uncertainties discussed under the heading “Forward-Looking Statements” in this Report and under “Business," "Risk Factors,” "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Financial Statements and Supplementary Data" in the Annual Report which is available on the SEC’s website at www.sec.gov.
Forward-Looking Statements
 This quarterly report on Form 10-Q contains not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to the safe harbor created by those sections. In addition, the Company or others on the Company’s behalf may make forward-looking statements from time to time in oral presentations, including telephone conferences and/or web casts open to the public, in press releases or reports, on the Company’s internet web site, or otherwise. All statements other than statements of historical facts included in this Report or expressed by the Company orally from time to time that address activities, events, or developments that the Company expects, believes, or anticipates will or may occur in the future are forward-looking statements, including, in particular, the statements about the Company’s plans, objectives, strategies, and prospects regarding, among other things, the Company’s financial condition, results of operations and business, and the outcome of contingencies, such as legal proceedings. The Company has identified some of these forward-looking statements in this Report with words like “believe,” “can,” “may,” “could,” “would,” “might,” “forecast,” “possible,” “potential,” “project,” “will,” “should,” “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate,” “approximate,” “outlook,” or “continue” or the negative of these words or other words and terms of similar meaning. The use of future dates is also an indication of a forward-looking statement. Forward-looking statements may be contained in the notes to the Company’s condensed consolidated financial statements and elsewhere in this Report, including under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Forward-looking statements are based on current expectations about future events affecting the Company and are subject to uncertainties and factors that affect all businesses operating in a global market as well as matters specific to the Company. These uncertainties and factors are difficult to predict, and many of them are beyond the Company’s control. Factors to consider when evaluating these forward-looking statements include, but are not limited to:
Operational Risks
•A material disruption from our contract manufacturers or suppliers, or our inability to obtain a sufficient supply of products from alternate suppliers, could cause us to be unable to meet customer demands or increase our costs.
•Any continued reliance on contract manufacturers and suppliers exposes us to product quality and variable cost risks.
•Our results depend on the timely availability of raw materials, components, and commodities at acceptable prices.
•If we do not manage or control the quality of our products, we may be unable to meet customer demands and incur higher costs.
•Our investment in manufacturing and supply chain assets exposes us to regulatory and execution risks.

24

Risks Related to Our Business in China
•Failure to meet the PRC government’s complex regulatory requirements on and significant oversight over our business operation could result in a material adverse change in our operations and the value of our securities.
•We may rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiary to make payments to us could have a material and adverse effect on our ability to conduct our business.
Risks Related to Our Business and Industry
•We are highly dependent on the automotive industry. A prolonged or material contraction in automotive sales and production volumes could adversely affect our business, results of operations and financial condition.
•Our operating results can be adversely affected by inflation, changes in the cost or availability of raw materials, labor, energy, transportation and other necessary supplies and services.
•The after-market automotive product supply business is highly competitive. Competition presents an ongoing threat to the success of our Company.
Strategic Risks
•We depend on our relationships with independent installers and new car dealerships and their ability to sell and service our products. Any disruption in these relationships could harm our sales.
•We may not be able to identify, finance and complete suitable acquisitions and investments, and any completed acquisitions and investments could be unsuccessful or consume significant resources.
•If we are unable to maintain our network of sales and distribution channels, it could adversely affect our net sales, profitability and the implementation of our growth strategy.
Legal, Regulatory and Compliance Risks
•We may incur material losses and costs as a result of product liability and warranty claims.
•Violations of the U.S. Foreign Corrupt Practices Act and similar anti-corruption laws outside the U.S. could have a material adverse effect on us.
•Our failure to satisfy international trade compliance regulations, and changes in U.S. government sanctions, could have a material adverse effect on us. 
•Changes in U.S. administrative policy, including changes to existing trade agreements and any resulting changes in international relations, could adversely affect our financial performance.
Liquidity Risks
•We may seek to incur substantial indebtedness in the future.
•We cannot be certain that additional financing will be available on reasonable terms when required, or at all.
•Our variable rate indebtedness exposes us to interest rate volatility, which could cause our debt service obligations to increase significantly.


25

Risks Relating to Common Stock
•If research analysts issue unfavorable commentary or downgrade our Common Stock, the price of our Common Stock and its trading volume could decline.
•Short sellers of our stock may be manipulative and may have driven down and may again drive down the market price of our Common Stock.
•Our stock price has been, and may continue to be, volatile.
•We may issue additional equity securities or engage in other transactions that could dilute our book value or affect the priority of our Common Stock, which may adversely affect the market price of our Common Stock.
General Risk Factors
•General global economic and business conditions affect demand for our products. 
•A public health crisis could impact our business. 
•Economic, political and market conditions can adversely affect our business, financial condition and results of operations.
We believe the items we have outlined above are important factors that could cause estimates included in our financial statements to differ materially from actual results and those expressed in a forward-looking statement made in this Report or elsewhere by us or on our behalf.  We have discussed these factors in more detail in the Annual Report as supplemented in this Report. These factors are not necessarily all of the factors that could affect us. Unpredictable or unanticipated factors that we have not discussed in this Report could also have material adverse effects on actual results. We do not intend to update our description of important factors each time a potential important factor arises, except as required by applicable securities laws and regulations. We advise our shareholders that they should (1) be aware that factors not referred to above could affect the accuracy of our forward-looking statements and (2) use caution when considering our forward-looking statements.
Company Overview
We manufacture, sell, distribute, and install protective films, coatings and related services primarily to the automobile aftermarket, new car dealerships and automobile original equipment manufacturers, or OEMs. The majority of our revenue is derived from the sale of our automotive products and related services while the remainder of our revenue is derived from non-automotive products including architectural window film and marine and flat surface protection films.
The Company began as a software company designing vehicle patterns used to produce cut-to-fit protective film for headlights and painted surfaces of automobiles. In 2007, we began selling automotive paint protection film products to complement our software business. As paint protection film technology improved and became more durable, awareness and adoption of paint protection film has continued to increase, driving significant industry growth over the last several years. Initial adoption of paint protection film came primarily from luxury car enthusiasts in the United States and Canada. These enthusiasts were primarily served by a growing automotive aftermarket of independent installers of automotive paint protection and window films. Internationally, nascent demand began to build as awareness and adoption in the United States and Canada continued to increase. Over the last few years, new car dealership interest in the product has increased due to their exposure to the aftermarket installer network, while OEM interest in the product has increased through their exposure to the new car dealerships who sell the product.

26

In May 2026 we purchased a four-building site totaling 431,525 square feet in San Antonio, Texas (the "Properties") in which the Company was a substantial tenant for $60.4 million which will serve as the centerpiece of the Company's North American manufacturing and operations footprint. In addition, we acquired a manufacturing facility in China to augment the Company's growing presence in the region.
Strategic Overview
Our strategy initially centered on how best to serve and grow our network of independent installers in the US and Canada and to sell products internationally through independent distributors while simultaneously building and enhancing the XPEL brand. This “best-in-class” service strategy was then extended to new car dealerships and OEMs. Internationally, while our initial market entry has primarily been through indirect distribution, we desire to ultimately sell directly to the majority of the top 25 car markets in the world, which is an important element of our acquisition strategy. To that end, we have acquired distributors in several international markets including India, Thailand, Japan and, most recently, China.
To complement our channel network and distribution, we are investing in manufacturing and the supply chain with a goal to be a high quality, low cost producer for our products which we expect will significantly improve our operating margin and allow more control over the end-to-end manufacturing process.
Key Business Metric - Non-GAAP Financial Measures
Our management regularly monitors certain financial measures to track the progress of our business against internal goals and targets. We believe that the most important measure to the Company is Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”).
EBITDA is a non-GAAP financial measure. We believe EBITDA provides helpful information with respect to our operating performance as viewed by management, including a view of our business that is not dependent on (i) the impact of our capitalization structure and (ii) items that are not part of our day-to-day operations. Management uses EBITDA (1) to compare our operating performance on a consistent basis, (2) to calculate incentive compensation for our employees, (3) for planning purposes including the preparation of our internal annual operating budget, (4) to evaluate the performance and effectiveness of our operational strategies, and (5) to assess compliance with various metrics associated with the agreements governing our indebtedness. Accordingly, we believe that EBITDA provides useful information in understanding and evaluating our operating performance in the same manner as management. We define EBITDA as net income plus (a) total depreciation and amortization, (b) interest expense, net, and (c) income tax expense.
27

The following table is a reconciliation of Net Income to EBITDA for the three and nine months ended September 30, 2026 and 2025 (in thousands):
(Unaudited)(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
20262025% Change20262025% Change
Net Income$16,708 $13,135 27.2 %$45,514 $37,929 20.0 %
Interest408 1 40700.0 %674 83 712.0 %
Taxes4,466 3,505 27.4 %12,303 10,321 19.2 %
Depreciation1,702 1,640 3.8 %5,104 4,733 7.8 %
Amortization2,299 1,663 38.2 %6,519 4,722 38.1 %
EBITDA$25,583 $19,944 28.3 %$70,114 $57,788 21.3 %
Use of Non-GAAP Financial Measures
EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. It is not a measurement of our financial performance under GAAP and should not be considered as alternatives to revenue or net income, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses. EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our operating results as reported under GAAP.
EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of ongoing operations; and other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure.
28

Results of Operations
The following tables summarize the Company’s consolidated results of operations for the three and nine months ended September 30, 2026 and 2025 (dollars in thousands):
Three Months Ended September 30, 2026%
of Total Revenue		Three Months Ended September 30, 2025%
of Total Revenue		$
Change		%
Change
Total revenue$137,809 100.0 %$125,415 100.0 %$12,394 9.9 %
Total cost of sales76,300 55.4 %72,991 58.2 %3,309 4.5 %
Gross margin61,509 44.6 %52,424 41.8 %9,085 17.3 %
Total operating expenses40,431 29.3 %35,673 28.4 %4,758 13.3 %
Operating income21,078 15.3 %16,751 13.4 %4,327 25.8 %
Other (income) expense, net(96)(0.1)%111 0.1 %(207)(186.5)%
Income tax4,466 3.2 %3,505 2.8 %961 27.4 %
Net income$16,708 12.1 %$13,135 10.5 %$3,573 27.2 %
Nine Months Ended September 30, 2026%
of Total Revenue		Nine Months Ended September 30, 2025%
of Total Revenue		$
Change		%
Change
Total revenue$398,216 100.0 %$353,933 100.0 %$44,283 12.5 %
Total cost of sales222,337 55.8 %204,097 57.7 %18,240 8.9 %
Gross margin175,879 44.2 %149,836 42.3 %26,043 17.4 %
Total operating expenses118,575 29.8 %102,667 29.0 %15,908 15.5 %
Operating income57,304 14.4 %47,169 13.3 %10,135 21.5 %
Other (income) expense, net(513)(0.1)%(1,081)(0.3)%568 (52.5)%
Income tax12,303 3.1 %10,321 2.9 %1,982 19.2 %
Net income$45,514 11.4 %$37,929 10.7 %$7,585 20.0 %









29

The following tables summarize revenue results for the three and nine months ended September 30, 2026 and 2025 (dollars in thousands):
Three Months Ended
September 30,		%% of Total Revenue
20262025Inc (Dec)20262025
Product Revenue
Paint protection film$73,536 $63,531 15.7 %53.4 %50.7 %
Window film30,894 27,640 11.8 %22.4 %22.0 %
Other4,285 4,288 (0.1)%3.1 %3.4 %
Total$108,715 $95,459 13.9 %78.9 %76.1 %
Service Revenue
Software$2,797 $2,208 26.7 %2.0 %1.8 %
Cutbank credits957 4,257 (77.5)%0.7 %3.4 %
Installation labor24,276 22,125 9.7 %17.6 %17.6 %
Training and other1,064 1,366 (22.1)%0.8 %1.1 %
Total$29,094 $29,956 (2.9)%21.1 %23.9 %
Total$137,809 $125,415 9.9 %100.0 %100.0 %
Nine Months Ended September 30,%% of Total Revenue
20262025Inc (Dec)20262025
Product Revenue
Paint protection film$210,022 $182,637 15.0 %52.7 %51.6 %
Window film86,610 74,234 16.7 %21.7 %21.0 %
Other12,471 12,095 3.1 %3.2 %3.4 %
Total$309,103 $268,966 14.9 %77.6 %76.0 %
Service Revenue
Software$7,281 $6,507 11.9 %1.8 %1.8 %
Cutbank credits4,970 12,453 (60.1)%1.2 %3.5 %
Installation labor72,710 63,222 15.0 %18.3 %17.9 %
Training and other4,152 2,785 49.1 %1.1 %0.8 %
Total$89,113 $84,967 4.9 %22.4 %24.0 %
Total$398,216 $353,933 12.5 %100.0 %100.0 %



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Because many of our international customers require us to ship their orders to freight forwarders located in the United States, we cannot be certain about the ultimate destination of the product. The following table represents our estimate of sales by summarized geographic regions based on our understanding of ultimate product destination based on customer interactions, customer locations and other factors for the three and nine months ended September 30, 2026 and 2025 (dollars in thousands):
Three Months Ended
September 30,		%% of Total Revenue
20262025Inc (Dec)20262025
United States$76,719 $71,725 7.0 %55.7 %57.2 %
Canada15,293 12,975 17.9 %11.1 %10.4 %
North America92,012 84,700 8.6 %66.8 %67.6 %
China15,351 10,074 52.4 %11.1 %8.0 %
Asia Other6,308 5,545 13.8 %4.6 %4.3 %
Asia Pacific21,659 15,619 38.7 %15.7 %12.3 %
EU, UK, and Africa16,182 16,537 (2.1)%11.7 %13.2 %
India and Middle East4,770 5,718 (16.6)%3.5 %4.6 %
Latin America3,186 2,841 12.1 %2.3 %2.3 %
Total$137,809 $125,415 9.9 %100.0 %100.0 %
Nine Months Ended September 30,%% of Total Revenue
20262025Inc (Dec)20262025
United States$219,147 $200,185 9.5 %55.0 %56.7 %
Canada39,488 36,656 7.7 %9.9 %10.4 %
North America258,635 236,841 9.2 %64.9 %67.1 %
China42,984 25,886 66.1 %10.8 %7.3 %
Asia Other18,179 15,523 17.1 %4.6 %4.4 %
Asia Pacific61,163 41,409 47.7 %15.4 %11.7 %
EU, UK, and Africa51,000 48,899 4.3 %12.8 %13.8 %
India and Middle East17,947 18,541 (3.2)%4.5 %5.2 %
Latin America9,471 8,243 14.9 %2.4 %2.2 %
Total$398,216 $353,933 12.5 %100.0 %100.0 %
Product Revenue. Product revenue for the three months ended September 30, 2026 increased 13.9% over the three months ended September 30, 2025. Product revenue represented 78.9% of our total revenue compared to 76.1% in the three months ended September 30, 2025. Revenue from our paint protection film product line increased 15.7% over the three months ended September 30, 2025. Paint protection film sales represented 53.4% and 50.7% of our total consolidated revenues for the three months ended September 30, 2026 and 2025, respectively. The total increase in paint protection film sales was primarily due to increased paint protection film sales into China resulting from our increased direct presence in these regions and increased demand for our film products across the US and Canada.


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Revenue from our window film product line grew 11.8% for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. Window film sales represented 22.4% and 22.0% of our total consolidated revenues for the three months ended September 30, 2026 and 2025, respectively. This increase was driven by continued demand resulting from increased product adoption in multiple regions for automotive window film led by our China and APAC regions resulting primarily from increasing our direct presence in these regions.
Geographically, we experienced continued growth in most of our regions during the three months ended September 30, 2026 including 52.4% and 13.8% in China and Asia-Other, respectively. The increase in China revenue was driven primarily by higher customer demand and the recognition of incremental direct revenues following the acquisition of our China distributor, completed late in the third quarter of 2025. US, Canada, and Latin America revenues increased 7.0%, 17.9% and 12.1%, respectively, due primarily to increased demand. These increases were offset by a slight decrease in Europe revenue due primarily to timing of distributor sales and a 16.6% decrease in India/Middle East revenue due primarily to the on-going conflict in Iran.
Product Revenue. Product revenue for the nine months ended September 30, 2026 increased 14.9% over the nine months ended September 30, 2025. Product revenue represented 77.6% of our total revenue compared to 76.0% during the nine months ended September 30, 2025. Revenue from our paint protection film product line increased 15.0% over the nine months ended September 30, 2025. Paint protection film sales represented 52.7% and 51.6% of our total consolidated revenues for the nine months ended September 30, 2026 and 2025, respectively. The total increase in paint protection film sales was due to increased demand for our film products across multiple regions and the recognition of incremental direct revenues following the acquisition of our China distributor, completed late in the third quarter of 2025.
Revenue from our window film product line grew 16.7% for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. Window film sales represented 21.7% and 21.0% of our total consolidated revenues for the nine months ended September 30, 2026 and 2025, respectively. This increase was driven by continued demand resulting from increased product adoption in multiple regions for automotive window film led by our China and APAC regions resulting primarily from our increased direct presence in these regions.
Geographically, we experienced continued growth in all of our regions during the nine months ended September 30, 2026 including 66.1%, 17.1%, 9.5%, and 7.7% in China, Asia-Other, the United States, and in Canada, respectively. The increase in China revenue was driven primarily by higher customer demand and the recognition of incremental direct revenues following the acquisition of our China distributor, completed late in the third quarter of 2025. The increases in Asia-Other, the United States, and Canada were driven primarily by increased product adoption and increased demand.
Service revenue. Service revenue consists of revenue from fees for DAP software access, cutbank credit revenue, which represents the value of pattern access provided with eligible product revenue, revenue from the labor portion of installation sales in our Company-owned installation centers, revenue from our dealership services business and revenue from training services provided to our customers.
Service revenue decreased 2.9% over the three months ended September 30, 2025. Installation labor revenue increased 9.7% over the three months ended September 30, 2025 due mainly to increased demand across our corporate owned stores and our OEM networks. In the same period, software revenue grew 26.7% over the three months ended September 30, 2025 due to growth in DAP software subscribers. The increase was offset by a decline in cutbank credit revenue due primarily to a reduction in the estimated fair value of a cutbank credit. Excluding cutbank credit revenue, total service revenue for the three months ended September 30, 2026 increased 9.5% over the three months ended September 30, 2025.
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Service revenue for the nine months ended September 30, 2026 grew 4.9% over the nine months ended September 30, 2025. Within this category, software revenue grew 11.9% over the nine months ended September 30, 2025. This increase was due to an increase in total subscribers to our DAP software. Installation labor revenue increased 15.0% over the nine months ended September 30, 2025 due mainly to increased demand across our corporate owned stores, our dealership services and OEM networks. Excluding cutbank credit revenue, total service revenue for the nine months ended September 30, 2026 increased 16.0% over the nine months ended September 30, 2025.
Total installation revenue (labor and product combined) increased 4.5% over the three months ended September 30, 2025. This represented 20.8% and 21.9% of our total consolidated revenue for the three months ended September 30, 2026 and 2025, respectively. This increase was primarily due to increased demand in our corporate owned stores and across our OEM networks. Total installation revenue (labor and product combined) increased 12.5% over the nine months ended September 30, 2025. This represented 21.8% and 21.8% of our total consolidated revenue for the nine months ended September 30, 2026 and 2025, respectively. These increases were primarily due to increased demand in our corporate owned stores and across our dealership services and OEM networks. Adjusted product revenue, which combines the cutbank credit revenue service component with product revenue, increased 10.0% over the three months ended September 30, 2025. Adjusted product revenue increased 11.6% over the nine months ended September 30, 2025.
Cost of Sales
Cost of sales consists of product costs and the costs to provide our services. Product costs consist of material costs, personnel costs related to warehouse personnel, shipping costs, warranty costs and other related costs to provide products to our customers. Cost of service includes the labor costs associated with installation of product in our installation facilities, costs of labor associated with pattern design for our cutting software and the costs incurred to provide training for our customers.
Product costs for the three months ended September 30, 2026 increased 3.9% over the three months ended September 30, 2025. Cost of product sales represented 45.1% and 47.7% of total revenue in the three months ended September 30, 2026 and 2025, respectively. Cost of service revenue grew 7.4% during the three months ended September 30, 2026. Refer to the Gross Margin section below for discussion of this cost relative to revenue. During the three months ended September 30, 2026, the Company received $4.6 million of cash recoveries related to previously paid import tariffs on inventory purchases. The total recovery was recorded as a reduction of cost of sales. In addition, the Company accelerated the discontinuation of certain older products pursuant to the Company's planned SKU rationalization in conjunction with its vertical integration plan. As a result, the Company recorded a charge to cost of sales of $4.6 million.
Product costs for the nine months ended September 30, 2026 increased 8.1% over the nine months ended September 30, 2025. Cost of product sales represented 45.2% and 47.0% of total revenue in the nine months ended September 30, 2026 and 2025, respectively. Cost of service revenue grew 12.5% during the nine months ended September 30, 2026. Refer to the Gross Margin section below for discussion of this cost relative to revenue.
Gross Margin
Gross margin for the three months ended September 30, 2026 grew approximately $9.1 million, or 17.3%, compared to the three months ended September 30, 2025. For the three months ended
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September 30, 2026, gross margin represented 44.6% of revenue compared to 41.8% for the three months ended September 30, 2025.
Gross margin for the nine months ended September 30, 2026 grew approximately $26.0 million, or 17.4%, compared to the nine months ended September 30, 2025. For the nine months ended September 30, 2026, gross margin represented 44.2% of revenue compared to 42.3% for the nine months ended September 30, 2025.
The following tables summarize gross margin for product and services for the three and nine months ended September 30, 2026 and 2025 (dollars in thousands):
Three Months Ended September 30,%% of Category Revenue
20262025Inc (Dec)20262025
Product margin$46,540 $35,621 30.7 %42.8 %37.3 %
Service margin14,969 16,803 -10.9 %51.5 %56.1 %
Total$61,509 $52,424 17.3 %44.6 %41.8 %
Nine Months Ended September 30,%% of Category Revenue
20262025Inc (Dec)20262025
Product margin$129,100 $102,498 26.0 %41.8 %38.1 %
Service margin46,779 47,338 -1.2 %52.5 %55.7 %
Total$175,879 $149,836 17.4 %44.2 %42.3 %
Product gross margin for the three months ended September 30, 2026 increased approximately $10.9 million, or 30.7%, over the three months ended September 30, 2025 and represented 42.8% and 37.3% of total product revenue for the three months ended September 30, 2026 and 2025, respectively. The increase in gross margin percentage was due primarily to decreases in product costs, favorable changes in product mix improved operating leverage and the on-going sell through of higher cost inventory acquired in our China distributor acquisition in September 2025.
Product gross margin for the nine months ended September 30, 2026 increased approximately $26.6 million, or 26.0%, over the nine months ended September 30, 2025 and represented 41.8% and 38.1% of total product revenue for the nine months ended September 30, 2026 and 2025, respectively. The increase in gross margin percentage was due primarily to decreases in product costs, favorable changes in product mix, improved operating leverage and the on-going sell through of higher cost inventory acquired in our China distributor acquisition in September 2025.
Service gross margin declined 10.9% compared to the three months ended September 30, 2025. This represented 51.5% and 56.1% of total service revenue for the three months ended September 30, 2026 and 2025, respectively. Excluding cutbank revenue, service gross margin increased 11.7% and service gross margin percentage was 48.2% and 41.9% for the three months ended September 30, 2026 and 2025, respectively. This increase was due primarily to a more favorable mix of service channel revenue.
Service gross margin declined 1.2% compared to the nine months ended September 30, 2025. This represented 52.5% and 55.7% of total service revenue for the nine months ended September 30, 2026 and 2025, respectively. Excluding cutbank credit revenue, service gross margin increased 19.9% and service gross margin percentage was 46.9% and 41.1% for the nine months ended September 30, 2026 and 2025, respectively. This increase was due primarily to a more favorable mix of service channel revenue.
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Operating Expenses
Sales and marketing expenses for the three months ended September 30, 2026 increased 8.7% compared to the same period in 2025. This increase was primarily due to increased personnel and marketing costs associated with ongoing growth in multiple markets as the Company increased the number of sponsorships and increased marketing efforts to dealerships as well as increased direct sales marketing costs in China. These expenses represented 10.9% and 11.0% of total consolidated revenue for the three months ended September 30, 2026 and 2025, respectively.
For the nine months ended September 30, 2026, sales and marketing expenses increased 21.4% compared to the same period in 2025. This increase was due to increased personnel and marketing costs incurred associated with ongoing growth in multiple markets as the Company increased its marketing efforts to dealerships as well as increased direct sales marketing costs in China. These expenses represented 11.4% and 10.6% of total consolidated revenue for the nine months ended September 30, 2026 and 2025, respectively.
General and administrative expenses grew approximately $3.6 million, or 16.3% over the three months ended September 30, 2025. This increase in cost was due primarily to increases in personnel, occupancy costs and other general expenses associated with new costs pursuant to our acquisition of our China distributor in September 2025 and a Chinese manufacturer in May 2026. Total General and Administrative expenses represented 18.5% and 17.4% of total consolidated revenue for the three months ended September 30, 2026 and 2025, respectively.
General and administrative expenses grew approximately $7.9 million, or 12.1% over the nine months ended September 30, 2025. This increase in cost was due primarily to increases in personnel, occupancy costs and professional fees including legal costs associated with the acquisition of a Chinese manufacturer. Total General and Administrative expenses represented 18.3% and 18.4% of total consolidated revenue for the nine months ended September 30, 2026 and 2025, respectively.
Interest Expense
Interest expense for the three months ended September 30, 2026 increased $0.4 million from the three months ended September 30, 2025. This increase resulted from interest expense associated with the new term loan agreement obtained in connection with the purchase of certain real estate assets. (See Note 9 in the Notes to Condensed Consolidated Financial Statements).
Interest expense for the nine months ended September 30, 2026 increased $0.6 million from the nine months ended September 30, 2025.
Income Tax Expense
Income tax expense for the three months ended September 30, 2026 increased $1.0 million from the three months ended September 30, 2025. Our effective tax rate was 21.1% for the three months ended September 30, 2026 compared with 21.1% for the three months ended September 30, 2025.
Income tax expense for the nine months ended September 30, 2026 increased $2.0 million from the nine months ended September 30, 2025. Our effective tax rate was 21.3% for the nine months ended September 30, 2026 compared with 21.4% for the nine months ended September 30, 2025.
Net Income
Net income for the three months ended September 30, 2026 increased 27.2% to $16.7 million.
Net income for the nine months ended September 30, 2026 increased 20.0% to $45.5 million.
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Liquidity and Capital Resources
Our primary sources of liquidity are available cash and cash equivalents, cash flows provided by operations and borrowing capacity under our credit facilities. As of September 30, 2026, we had cash and cash equivalents of $45.7 million. For the nine months ended September 30, 2026, cash provided by operations was $59.3 million and as of September 30, 2026 we had $128.2 million in funds available under our credit facilities. We expect to continue to have sufficient access to cash to support working capital needs, pay for capital expenditures (including acquisitions), and to pay interest and service debt. We believe we have the ability and sufficient resources to meet these cash requirements by using available cash, internally generated funds and borrowings under committed credit facilities. We are focused on continuing to generate positive operating cash to fund our operational and capital investment initiatives. We believe we have sufficient liquidity to operate for at least the next 12 months from the date of this quarterly report.
Operating activities. Cash provided by operations totaled $59.3 million for the nine months ended September 30, 2026, compared to $64.3 million during the nine months ended September 30, 2025. This decrease in cash flows from operating activities was mainly due to an increase in inventory partially offset by other changes in working capital.
Investing activities. Cash used in investing activities totaled approximately $90.6 million during the nine months ended September 30, 2026 compared to $20.8 million during the nine months ended September 30, 2025. This increase was due primarily to the purchase of the Properties (as defined below) totaling $60.4 million, deposits related to our supply chain initiatives and acquisition-related payments.
Financing activities. Cash provided by financing activities during the nine months ended September 30, 2026 totaled $26.7 million compared to $0.4 million used during the same period in the prior year. This change was due primarily to borrowings on the Term Loan (as defined below) in 2026 in connection with the purchase of the Properties.
Debt and contingent obligations as of September 30, 2026 and December 31, 2025 totaled approximately $58.1 million and $20.0 million, respectively.
Future Liquidity and Capital Resource Requirements
We expect to fund ongoing operating expenses, capital expenditures, acquisitions, interest payments, tax payments, credit facility maturities, future lease obligations, and payments for other long-term liabilities with cash flow from operations and borrowings under our credit facility. In the short-term, we are contractually obligated to make lease payments and make payments on contingent liabilities related to certain completed acquisitions. In the long-term, we are contractually obligated to make lease payments, for contingent liabilities, and for repayment of borrowings on the Term Loan and credit facilities. In addition, if an opportunity presents itself, we may increase our borrowing under available credit arrangements or sell debt or equity securities, although we may not be able to complete any such financing on terms acceptable to us or at all. We believe that we have sufficient cash and cash equivalents, as well as borrowing capacity, to cover our estimated short-term and long-term funding needs.




36

Credit Facilities and Term Loan
The Company has U.S. and Canadian revolving credit facilities and Harvest Ventures Holding Company (“Harvest”), a wholly-owned subsidiary of the Company, has a term loan which it incurred in connection with the purchase of the Properties.
Credit Facilities
On September 11, 2025, XPEL entered into the Amendment to the Credit Agreement with Wells Fargo Bank, N.A., as Administrative Agent, and other lenders party thereto. The Amendment, among other things, extended the maturity of the Credit Agreement from April 6, 2026 to September 11, 2028. The Credit Agreement provides for secured revolving loans and letters of credit in an aggregate amount of up to $125 million, which is subject to the terms of the Credit Agreement. As of September 30, 2026 and December 31, 2025, the Company had no outstanding balances under the Credit Agreement. All capitalized terms in this description of the credit facility that are not otherwise defined in this Report have the meaning assigned to them in the Credit Agreement.
Borrowings under the Credit Agreement bear interest, at XPEL’s option, at a rate equal to either (a) Base Rate or (b) Adjusted Term SOFR. In addition to the applicable interest rate, the Credit Agreement includes a commitment fee ranging from 0.20% to 0.25% per annum for the unused portion of the aggregate commitment and an applicable margin ranging from 0.00% to 0.50% for Base Rate Loans and 1.00% to 1.50% for Adjusted Term SOFR Loans. At September 30, 2026, these rates were 7.0% and 4.8%, respectively. Both the margin applicable to the interest rate and the commitment fee are dependent on XPEL’s Consolidated Total Leverage Ratio. The Credit Agreement's maturity date is September 11, 2028.
Obligations under the Credit Agreement are secured by a first priority perfected security interest, subject to certain permitted encumbrances, in all of XPEL’s material property and assets, other than the assets which secure the Term Loan.
The terms of the Credit Agreement include certain affirmative and negative covenants that require, among other things, XPEL to maintain legal existence and remain in good standing, comply with applicable laws, maintain accounting records, deliver financial statements and certifications on a timely basis, pay taxes as required by law, and maintain insurance coverage, as well as to forgo certain specified future activities that might otherwise encumber XPEL and certain customary covenants. The Credit Agreement provides for two financial covenants, as follows.
As of the last day of each fiscal quarter:
1.XPEL shall not allow its Consolidated Total Leverage Ratio to exceed 3.50 to 1.00, and
2.XPEL shall not allow its Consolidated Interest Coverage Ratio to be less than 3.00 to 1.00

The Company also has a CAD $4.5 million (approximately $3.2 million USD as of September 30, 2026) revolving credit facility through a financial institution in Canada, and is maintained by XPEL Canada Corp., a wholly-owned subsidiary of XPEL. This Canadian facility is utilized to fund the Company's working capital needs in Canada. This facility bears interest at the Royal Bank of Canada’s prime rate plus 0.25% per annum and is guaranteed by the parent company. As of September 30, 2026 and December 31, 2025, no balance was outstanding on this line of credit.



37

Term Loan
On May 15, 2026, Harvest entered into a $44.8 million term loan agreement (the "Term Loan") with PNC Bank, N.A. (“PNC”), secured by four commercial properties in San Antonio, Texas (the “Properties”), and a guarantee (the "Guaranty") by the Company.
Borrowings under the Term Loan bear interest at the sum of (a) the Term SOFR Rate in effect on each Reset Date (defined as the closing date or the last day of every month thereafter, unless the last day falls on a non-business day, upon which the Reset Date shall be the first business day after the last day of the month), plus (b) 125 basis points (1.25%), matures ten years from the closing date on May 15, 2036, and amortizes over a twenty-five year period. The interest rate at closing was 4.7% per annum. At September 30, 2026, the interest rate was 5.0%.
The Term Loan is secured by the assets owned by Harvest and is subject to customary representations, warranties, covenants, and events of default. Upon the occurrence of an event of default, PNC may, among other remedies, accelerate the outstanding principal balance and accrued interest, foreclose on the Properties, and exercise its rights under the Guaranty. As of September 30, 2026, $44.4 million in principal was outstanding, $1.8 million of which was classified as current and $42.6 million as long-term debt on the Condensed Consolidated Balance Sheets. Debt issuance costs incurred in connection with this Term Loan were not material to the condensed consolidated financial statements.
The Term Loan includes certain affirmative and negative covenants that require, among other things, Harvest to maintain its legal existence and good standing, comply with applicable laws, maintain accounting records, deliver financial statements and compliance certifications on a timely basis, pay taxes as required by law, maintain insurance coverage, and maintain its depository accounts with PNC Bank, as well as to forgo certain specified future activities, including incurring additional indebtedness other than indebtedness under the Credit Agreement or not otherwise permitted under the Credit Agreement, granting liens on its assets, guaranteeing third-party obligations, paying dividends except as permitted under the Credit Agreement, merging or transferring substantially all of its assets, or changing its ownership or management, and certain other customary covenants. The Term Loan provides for two financial covenants which become effective after the Credit Agreement with Wells Fargo and any refinancing of the Credit Agreement ceases to be in effect as follows:
As of the last day of each fiscal quarter:
1.XPEL shall not allow its Consolidated Total Leverage Ratio to exceed 3.50 to 1.00, and
2.XPEL shall not allow its Consolidated Interest Coverage Ratio to be less than 3.00 to 1.00.

As of September 30, 2026 and December 31, 2025, the Company was in compliance with all debt covenants.
Critical Accounting Estimates
There have been no material changes to the Company’s critical accounting estimates from the information provided in the Annual Report on Form 10-K.
Related Party Relationships
There are no family relationships between or among any of our directors or executive officers. There are no arrangements or understandings between any two or more of our directors or executive officers, and there is no arrangement, plan or understanding as to whether non-management stockholders will exercise their voting rights to continue to elect the current Board. There are also no arrangements,
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agreements or understandings between non-management stockholders that may directly or indirectly participate in or influence the management of our affairs.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We have operations that expose us to currency risk in the British Pound Sterling, the Canadian Dollar, the Euro, the Mexican Peso, the New Taiwanese Dollar, the Australian Dollar, the Indian Rupee, the Chinese Yuan Renminbi, the Japanese Yen, the Thai Baht, and the Brazilian Real. Amounts invested in our foreign operations are translated into U.S. Dollars at the exchange rates in effect at the balance sheet date. The resulting translation adjustments are recorded as accumulated other comprehensive income, a component of stockholders’ equity in our condensed consolidated balance sheets. We do not currently hedge our exposure to potential foreign currency translation adjustments.
Borrowings under our revolving lines of credit and our term loan subject us to market risk resulting from changes in interest rates related to our floating rate bank credit facilities. For such borrowings, a hypothetical 200 basis point increase in variable interest rates may result in a material impact to our financial statements. We do not currently have any derivative contracts to hedge our exposure to interest rate risk. During each of the periods presented, we have not experienced a significant effect on our business due to changes in interest rates.
If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could adversely affect our business, financial condition and results of operations.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We have established and maintain a system of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended ("Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosures.
Management, with the participation of our CEO and CFO, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Report. Based on such evaluation, our CEO and CFO have each concluded that as of the end of the period covered by this Report, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures.
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
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Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II. Other Information
Item 1. Legal Proceedings
From time to time, we are made parties to actions filed or have been given notice of potential claims relating to the ordinary conduct of our business, including those pertaining to commercial disputes, product liability, patent infringement and employment matters.
While we believe that a material impact on our financial position, results of operations or cash flows from any such future claims or potential claims is unlikely, given the inherent uncertainty of litigation, it is possible that an unforeseen future adverse ruling or unfavorable development could result in future charges that could have a material adverse impact. We do and will continue to periodically reexamine our estimates of probable liabilities and any associated expenses and receivables and make appropriate adjustments to such estimates based on experience and developments in litigation. As a result, the current estimates of the potential impact on our financial position, results of operations and cash flows for the proceedings and claims described in the notes to our condensed consolidated financial statements could change in the future.
Item 1A. Risk Factors
On May 15, 2026, XPEL, through Harvest Ventures Holding Company, a Texas corporation and wholly-owned subsidiary of the Company (“Harvest”), completed the acquisition of the real property and improvements constituting the Company’s current San Antonio, Texas storage, fabrication and warehouse facility and certain adjoining properties located at 3167 North PanAm Expressway, San Antonio, Texas, 3215 North PanAm Expressway, San Antonio, Texas, 3251 North PanAm Expressway, San Antonio, Texas and 3319 North PanAm Expressway, San Antonio, Texas. Separately, XPEL acquired a 75% interest in a manufacturing facility in China to support the Company's customers in China—where XPEL has invested significantly in its direct go-to-market presence in recent years, including the previously announced acquisition of the Company's Chinese aftermarket distributor in September 2025.

As a result of these transactions, the Company is currently manufacturing paint protection film, or PPF, in China and is preparing to manufacture paint protection film ("PPF") in San Antonio. Manufacturing PPF involves additional risks for the Company including the Risk Factors described below.
Manufacturing PPF in-house will subject us to significant operational, financial, and execution risks, and we may not realize the anticipated benefits of this strategy.
Capital Expenditures and Financial Commitment. Establishing in-house PPF manufacturing capabilities requires substantial capital investment in specialized equipment, facilities, raw material inventory, and personnel. These expenditures will increase our fixed cost base and could strain our liquidity and capital resources. If we are unable to achieve anticipated production volumes or cost efficiencies, or if the market for our products declines, we would likely not recoup these investments, which could materially impair our financial condition and results of operations.
Raw Material Sourcing and Supply Chain Risks. Manufacturing PPF requires access to specialized raw materials, including adhesives and other chemical compounds. We could face challenges in securing reliable supplies at favorable prices, and any disruption in the availability of key raw materials, whether due to supplier issues, geopolitical factors, logistics constraints, or otherwise, could interrupt our production and harm our business.


41

Regulatory and Environmental Compliance. The manufacturing of PPF involves the use and handling of chemicals and industrial processes that are subject to extensive environmental, health, and safety regulations at the federal, state, and local levels. We will be required to obtain and maintain various permits and licenses to operate our manufacturing facilities both in the U.S. and China. Compliance with these regulations could require significant expenditures and management attention, and any failure to comply could result in fines, penalties, production shutdowns, or reputational harm. Changes in applicable regulations or the discovery of previously unknown environmental conditions at our facilities could impose additional costs and liabilities.
Our manufacturing operations may expose employees, contractors, and nearby communities to health and safety risks. PPF manufacturing involves chemical handling, coating, lamination, drying, curing, cutting, packaging, warehousing, and logistics operations, all of which are occupational concerns Our operations may also involve fire, explosion, toxicity, corrosion, inhalation, dermal exposure, equipment, heat, and mechanical hazards. If we fail to maintain effective health and safety controls, we may experience workplace injuries, occupational illness claims, fires, explosions, chemical releases, regulatory investigations, production interruptions, community complaints, or litigation. We may be required to install ventilation, vapor capture, explosion protection, fire suppression, monitoring systems, containment systems, personal protective equipment, emergency response systems, and medical surveillance programs. These measures may require significant capital and operating expenditures. Any serious incident could also result in regulatory penalties, facility shutdowns, criminal liability for responsible personnel, loss of customer confidence, higher insurance costs, and material adverse effects on our business and reputation.
Rising costs and changes in China’s manufacturing environment may reduce the expected benefits of manufacturing in China. China has historically offered supply chain depth, infrastructure, manufacturing scale, and cost advantages. However, companies operating in China face rising labor and operating costs, increased regulatory scrutiny, geopolitical uncertainty, and supply chain concentration risks. China’s labor costs have risen rapidly compared with other emerging markets in recent years. Manufacturers in China may also face increased costs related to energy, environmental controls, waste management, audits, compliance, taxes, and labor regulation. These pressures may reduce the cost savings that justified locating production in China.
If our China operations require higher-than-expected spending on wages, utilities, compliance, environmental controls, permits, insurance, testing, logistics, or quality systems, our margins may decline. We may also need to invest in automation, additional training, supplier development, or redundant production capacity to maintain quality and continuity. If lower-cost or lower-risk manufacturing locations become more attractive, competitors with diversified supply chains may achieve better margins or offer more reliable delivery into export markets. We may be unable to relocate production quickly or cost-effectively if our China manufacturing becomes less competitive.
Transition and Execution Risks.
During the transition period from third-party to in-house manufacturing, we could experience production shortfalls, quality inconsistencies, or supply disruptions as we ramp up our capabilities.
If our products fail in the field, we may be required to replace film, reimburse installers, pay labor costs, provide credits, defend claims, or compensate customers. Product failures could also harm relationships with distributors, installers, fleets, dealers, and automotive original equipment manufacturers. Any sustained quality problem could impair our brand, reduce demand, increase warranty reserves, and adversely affect our margins. We could also face challenges in managing parallel operations or in phasing out relationships with existing third-party manufacturers. Any disruption in our ability to supply PPF products to our customers during this period could result in lost sales, customer attrition, and competitive harm.
42

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities
In May 2025, the Board approved a stock repurchase program that authorized the Company to purchase up to $50 million of the Company’s Common Stock. The timing and amount of shares repurchased will depend on the stock price, business and market conditions, corporate and regulatory requirements, alternative investment opportunities, acquisition opportunities and other factors. The repurchase program may be suspended or discontinued at any time. It is XPEL’s intention to comply with applicable securities laws, including insider trading laws, when engaging in transactions in the Company’s common stock.
During the three months ended September 30, 2026 the Company repurchased shares of our common stock, as indicated in the table below:
Total number
of shares (or
units) purchased
(a)(b)
Average
Price paid
per share
(or unit)
(a)(b)
Total number of shares
(or units) purchased as
part of publicly
announced plans or
programs
(c)
Maximum number (or
approximate dollar value) of
shares (or units) that may yet be purchased under the plans or programs
(d)(e) (in thousands)
July 1-31— $— — $44,059 
August 1-3160,132$49.87 60,132 41,061 
September 1-30— — — 41,061 
Total
60,132 $49.87 60,132 $41,061 
(a)(b) In May 2025, the Company's Board of Directors authorized the Company to repurchase up to $50 million of the Company's common stock. The timing and amount of shares repurchased will depend on the stock price, business and market conditions, corporate and regulatory requirements, alternative investment opportunities, acquisition opportunities and other factors. The repurchase program may be suspended or discontinued at any time.
(c) The repurchase program may be suspended or discontinued at any time.
(d) Shares that may be purchased under the program exclude shares of Common Stock that may be surrendered to satisfy statutory minimum tax withholding obligations in connection with the vesting of restricted stock units and performance stock units issued to employees.
(e) Excludes a 1% excise tax imposed by the Inflation Reduction Act.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
43

Item 6. Exhibits
The following exhibits are being filed or furnished with this quarterly report on Form 10-Q:
Exhibit No.DescriptionMethod of Filing
31.1Filed herewith
31.2Filed herewith
32.1Furnished herewith
32.2Furnished herewith
101
The following materials from XPEL’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2026, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the unaudited Condensed Consolidated Balance Sheets, (ii) the unaudited Condensed Consolidated Statements of Operations, (iii) the unaudited Condensed Consolidated Statements of Comprehensive Income, (iv) the unaudited Condensed Consolidated Statements of  Equity, (v) the unaudited Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements
Filed herewith
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). Filed herewith
44

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
XPEL, Inc. (Registrant)
By:/s/ Barry R. Wood
Barry R. Wood
Senior Vice President and Chief Financial Officer
November 6, 2026(Authorized Officer and Principal Financial and Accounting Officer)
45

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