XPEL(XPEL) - 2025 Q1 - Quarterly Report

Part I - Financial Information Condensed Consolidated Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for the quarter ended March 31, 2025, show an increase in total assets to $294.8 million, total revenue grew 15.2% year-over-year to $103.8 million, driving net income up by 28.8% to $8.6 million, and the company shifted from using $5.0 million in cash from operations in Q1 2024 to generating $3.2 million in Q1 2025 Condensed Consolidated Balance Sheets As of March 31, 2025, total assets increased to $294.8 million from $285.6 million at year-end 2024, primarily driven by a rise in inventory and accounts receivable, while total liabilities slightly decreased to $59.4 million and total stockholders' equity grew to $235.5 million from $225.5 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $23,541 | $22,087 | | Inventory, net | $115,306 | $110,904 | | Total current assets | $178,299 | $168,344 | | Total assets | $294,822 | $285,607 | | Liabilities & Equity | | | | Total current liabilities | $41,582 | $41,518 | | Total liabilities | $59,368 | $60,152 | | Total stockholders' equity | $235,454 | $225,455 | Condensed Consolidated Statements of Income For the three months ended March 31, 2025, total revenue increased by 15.2% to $103.8 million compared to the same period in 2024, with net income rising by 28.8% to $8.6 million, resulting in both basic and diluted EPS of $0.31, up from $0.24 in the prior-year quarter Q1 2025 vs Q1 2024 Income Statement (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $103,805 | $90,104 | 15.2% | | Gross Margin | $43,896 | $37,876 | 15.9% | | Operating Income | $11,120 | $9,229 | 20.5% | | Net Income | $8,586 | $6,666 | 28.8% | | Diluted EPS | $0.31 | $0.24 | 29.2% | Condensed Consolidated Statement of Cash Flows For Q1 2025, net cash provided by operating activities was $3.2 million, a significant improvement from the $5.0 million used in Q1 2024, mainly due to higher net income and changes in working capital, while cash used in investing activities decreased to $1.6 million, and cash used in financing activities was $0.2 million Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $3,228 | $(4,959) | | Net cash used in investing activities | $(1,556) | $(3,114) | | Net cash (used in) provided by financing activities | $(170) | $4,985 | | Increase (Decrease) in cash and cash equivalents | $1,454 | $(2,995) | Notes to Condensed Consolidated Financial Statements The notes detail the company's accounting policies, confirming it operates as a single segment, with revenue disaggregated by product and geography showing strong growth in paint protection and window films, particularly a significant sales increase in China, and the company maintains a $125 million revolving credit facility, which was undrawn as of March 31, 2025, and was in compliance with all debt covenants - The company operates and manages its business as one operating segment, with the CEO acting as the chief operating decision maker (CODM)[26][63] Revenue by Product Category (in thousands) | Product Category | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Paint protection film | $56,441 | $49,011 | 15.2% | | Window film | $18,635 | $14,549 | 28.1% | | Installation labor | $18,650 | $16,706 | 11.6% | Revenue by Geographic Region (in thousands) | Region | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | United States | $58,073 | $52,048 | 11.6% | | China | $8,107 | $1,450 | 459.1% | | Canada | $9,426 | $11,080 | -14.9% | | Continental Europe | $11,148 | $10,216 | 9.1% | - The company has a $125 million revolving credit facility and a CAD $4.5 million facility As of March 31, 2025, there were no outstanding balances on these facilities, and the company was in compliance with all debt covenants[46][50][51] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 15.2% year-over-year revenue growth to strong performance in window film (up 28.1%) and paint protection film (up 15.2%), particularly a 459.1% surge in China sales as distributor inventory levels normalized, with gross margin improving to 42.3% from 42.0%, and the company maintains a strong liquidity position with $23.5 million in cash and $128.1 million available under its credit facilities, sufficient to fund operations for at least the next 12 months EBITDA Reconciliation (Non-GAAP, in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net Income | $8,586 | $6,666 | | Interest | $75 | $473 | | Taxes | $2,694 | $1,818 | | Depreciation | $1,535 | $1,333 | | Amortization | $1,521 | $1,410 | | EBITDA | $14,411 | $11,700 | - Revenue from the paint protection film line increased by 15.2%, primarily driven by increased sales into China as prior excess inventory levels at the distributor began to normalize[80] - Window film revenue grew 28.1%, with automotive window film up 16.2% The company also launched a new windshield protection film in Q4 2024, which generated $1.8 million in revenue in Q1 2025[81] - Product gross margin percentage increased from 37.0% to 38.5% year-over-year due to lower product costs and improved operating leverage Service gross margin percentage decreased from 56.6% to 54.3% due to a higher mix of dealership-related installations[88][89] - The company had cash and cash equivalents of $23.5 million and approximately $128.1 million available under its credit facilities as of March 31, 2025, and believes it has sufficient liquidity for the next 12 months[95] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from foreign currency fluctuations, interest rate changes on its variable-rate debt, and inflation, with operations in multiple foreign currencies but no current hedging, and a hypothetical 200 basis point increase in variable interest rates could materially impact financial statements, while the company may not be able to fully offset inflationary cost pressures through price increases - The company is exposed to currency risk from the British Pound, Canadian Dollar, Euro, Mexican Peso, and several Asian currencies, but does not currently hedge this exposure[109] - Borrowings under revolving credit facilities are subject to floating interest rates A hypothetical 200 basis point increase in these rates could have a material impact on the company's financials[111] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025, with no material changes to the internal control over financial reporting during the quarter - The CEO and CFO concluded that as of the end of the reporting period, the company's disclosure controls and procedures were effective[114] - No changes occurred in the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[116] Part II - Other Information Legal Proceedings The company is involved in ordinary course legal actions but believes that a material impact on its financial position, results of operations, or cash flows from these claims is unlikely - The company is party to various legal actions in the ordinary course of business but has determined that the likelihood of any material impact on its financial position is remote[118][119] Risk Factors The company highlights a specific risk related to existing and potential new trade policies, such as tariffs, which could reduce consumer disposable income, delay vehicle purchases or accessory additions, and disrupt supply chains, adversely affecting the company's results of operations and financial condition - The company identifies a risk that new trade policies and tariffs could reduce consumer disposable income, leading to delayed vehicle and accessory purchases, which could adversely affect financial results[121] - Potential retaliatory trade measures by other countries could disrupt supply chains, increase costs, and create business uncertainty, negatively impacting demand for the company's products[122] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None[123] Defaults Upon Senior Securities Not applicable - Not applicable[124] Mine Safety Disclosures Not applicable - Not applicable[125] Other Information There was no other information to report for the period - None[126] Exhibits The report includes certifications from the CEO and CFO as required by the Sarbanes-Oxley Act, along with XBRL formatted financial statements - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and XBRL data files (101)[127]