FALSE2024Q1000176725812/31xbrli:sharesiso4217:USDiso4217:USDxbrli:sharesxpel:segmentxbrli:purexpel:covenantiso4217:CAD00017672582024-01-012024-03-3100017672582024-05-0900017672582024-03-3100017672582023-12-310001767258us-gaap:ProductMember2024-01-012024-03-310001767258us-gaap:ProductMember2023-01-012023-03-310001767258us-gaap:ServiceMember2024-01-012024-03-310001767258us-gaap:ServiceMember2023-01-012023-03-3100017672582023-01-012023-03-310001767258us-gaap:CommonStockMember2022-12-310001767258us-gaap:AdditionalPaidInCapitalMember2022-12-310001767258us-gaap:RetainedEarningsMember2022-12-310001767258us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001767258us-gaap:ParentMember2022-12-310001767258us-gaap:RetainedEarningsMember2023-01-012023-03-310001767258us-gaap:ParentMember2023-01-012023-03-310001767258us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001767258us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001767258us-gaap:CommonStockMember2023-03-310001767258us-gaap:AdditionalPaidInCapitalMember2023-03-310001767258us-gaap:RetainedEarningsMember2023-03-310001767258us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001767258us-gaap:ParentMember2023-03-310001767258us-gaap:CommonStockMember2023-12-310001767258us-gaap:AdditionalPaidInCapitalMember2023-12-310001767258us-gaap:RetainedEarningsMember2023-12-310001767258us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001767258us-gaap:ParentMember2023-12-310001767258us-gaap:RetainedEarningsMember2024-01-012024-03-310001767258us-gaap:ParentMember2024-01-012024-03-310001767258us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310001767258us-gaap:CommonStockMember2024-01-012024-03-310001767258us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001767258us-gaap:CommonStockMember2024-03-310001767258us-gaap:AdditionalPaidInCapitalMember2024-03-310001767258us-gaap:RetainedEarningsMember2024-03-310001767258us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310001767258us-gaap:ParentMember2024-03-3100017672582022-12-3100017672582023-03-310001767258xpel:ProductRevenuePaintProtectionFilmMember2024-01-012024-03-310001767258xpel:ProductRevenuePaintProtectionFilmMember2023-01-012023-03-310001767258xpel:ProductRevenueWindowFilmMember2024-01-012024-03-310001767258xpel:ProductRevenueWindowFilmMember2023-01-012023-03-310001767258xpel:ProductRevenueOtherMember2024-01-012024-03-310001767258xpel:ProductRevenueOtherMember2023-01-012023-03-310001767258xpel:ServiceRevenueSoftwareMember2024-01-012024-03-310001767258xpel:ServiceRevenueSoftwareMember2023-01-012023-03-310001767258xpel:ServiceRevenueCutbankCreditsMember2024-01-012024-03-310001767258xpel:ServiceRevenueCutbankCreditsMember2023-01-012023-03-310001767258xpel:ServiceRevenueInstallationLaborMember2024-01-012024-03-310001767258xpel:ServiceRevenueInstallationLaborMember2023-01-012023-03-310001767258xpel:ServiceRevenueTrainingMember2024-01-012024-03-310001767258xpel:ServiceRevenueTrainingMember2023-01-012023-03-310001767258country:US2024-01-012024-03-310001767258country:US2023-01-012023-03-310001767258country:CN2024-01-012024-03-310001767258country:CN2023-01-012023-03-310001767258country:CA2024-01-012024-03-310001767258country:CA2023-01-012023-03-310001767258srt:EuropeMember2024-01-012024-03-310001767258srt:EuropeMember2023-01-012023-03-310001767258country:GB2024-01-012024-03-310001767258country:GB2023-01-012023-03-310001767258xpel:MiddleEastAfricaMember2024-01-012024-03-310001767258xpel:MiddleEastAfricaMember2023-01-012023-03-310001767258srt:AsiaPacificMember2024-01-012024-03-310001767258srt:AsiaPacificMember2023-01-012023-03-310001767258srt:LatinAmericaMember2024-01-012024-03-310001767258srt:LatinAmericaMember2023-01-012023-03-310001767258xpel:OtherGeographicRegionMember2024-01-012024-03-310001767258xpel:OtherGeographicRegionMember2023-01-012023-03-310001767258us-gaap:FurnitureAndFixturesMember2024-03-310001767258us-gaap:FurnitureAndFixturesMember2023-12-310001767258us-gaap:ComputerEquipmentMember2024-03-310001767258us-gaap:ComputerEquipmentMember2023-12-310001767258us-gaap:VehiclesMember2024-03-310001767258us-gaap:VehiclesMember2023-12-310001767258us-gaap:EquipmentMember2024-03-310001767258us-gaap:EquipmentMember2023-12-310001767258us-gaap:LeaseholdImprovementsMember2024-03-310001767258us-gaap:LeaseholdImprovementsMember2023-12-310001767258xpel:ComputerEquipmentPlotterMember2024-03-310001767258xpel:ComputerEquipmentPlotterMember2023-12-310001767258us-gaap:ConstructionInProgressMember2024-03-310001767258us-gaap:ConstructionInProgressMember2023-12-310001767258us-gaap:TrademarksMember2024-03-310001767258us-gaap:TrademarksMember2023-12-310001767258us-gaap:SoftwareDevelopmentMember2024-03-310001767258us-gaap:SoftwareDevelopmentMember2023-12-310001767258us-gaap:TradeNamesMember2024-03-310001767258us-gaap:TradeNamesMember2023-12-310001767258us-gaap:CustomerRelationshipsMember2024-03-310001767258us-gaap:CustomerRelationshipsMember2023-12-310001767258us-gaap:NoncompeteAgreementsMember2024-03-310001767258us-gaap:NoncompeteAgreementsMember2023-12-310001767258us-gaap:OtherIntangibleAssetsMember2024-03-310001767258us-gaap:OtherIntangibleAssetsMember2023-12-3100017672582023-01-012023-12-310001767258us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2024-03-310001767258us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2023-12-310001767258srt:MinimumMemberus-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2024-01-012024-03-310001767258us-gaap:LineOfCreditMembersrt:MaximumMemberus-gaap:RevolvingCreditFacilityMember2024-01-012024-03-310001767258srt:MinimumMemberus-gaap:LineOfCreditMemberus-gaap:BaseRateMemberus-gaap:RevolvingCreditFacilityMember2024-01-012024-03-310001767258us-gaap:LineOfCreditMemberus-gaap:BaseRateMembersrt:MaximumMemberus-gaap:RevolvingCreditFacilityMember2024-01-012024-03-310001767258srt:MinimumMemberus-gaap:LineOfCreditMemberxpel:SecuredOvernightFinancingRateSOFRMemberus-gaap:RevolvingCreditFacilityMember2024-01-012024-03-310001767258us-gaap:LineOfCreditMembersrt:MaximumMemberxpel:SecuredOvernightFinancingRateSOFRMemberus-gaap:RevolvingCreditFacilityMember2024-01-012024-03-310001767258us-gaap:LineOfCreditMemberus-gaap:BaseRateMemberus-gaap:RevolvingCreditFacilityMember2024-03-310001767258us-gaap:LineOfCreditMemberxpel:SecuredOvernightFinancingRateSOFRMemberus-gaap:RevolvingCreditFacilityMember2024-03-310001767258us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2023-04-060001767258xpel:HSBCBankCanadaMemberus-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2024-03-310001767258xpel:HSBCBankCanadaMemberus-gaap:LineOfCreditMemberus-gaap:PrimeRateMemberus-gaap:RevolvingCreditFacilityMember2024-01-012024-03-310001767258xpel:HSBCBankCanadaMemberus-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2023-12-310001767258us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001767258us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-31

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 March 31, 2024
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 27,633,935 shares of common stock outstanding as of May 9, 2024.




TABLE OF CONTENTS
Page



Part I. Financial Information
Item 1. Financial Statements
XPEL, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
(Audited)
March 31, 2024December 31, 2023
Assets
Current
Cash and cash equivalents
$8,614 $11,609 
Accounts receivable, net28,569 24,111 
Inventory, net110,171 106,509 
Prepaid expenses and other current assets5,578 3,529 
Income tax receivable 696 
Total current assets
152,932 146,454 
Property and equipment, net
17,624 16,980 
Right-of-use lease assets15,471 15,459 
Intangible assets, net33,938 34,905 
Other non-current assets863 782 
Goodwill37,664 37,461 
Total assets$258,492 $252,041 
Liabilities
Current
Current portion of notes payable$63 $62 
Current portion lease liabilities3,946 3,966 
Accounts payable and accrued liabilities27,611 32,444 
Income tax payable201  
Total current liabilities31,821 36,472 
Deferred tax liability, net2,459 2,658 
Other long-term liabilities682 890 
Borrowings on line of credit24,000 19,000 
Non-current portion of lease liabilities12,814 12,715 
Non-current portion of notes payable 293 317 
Total liabilities72,069 72,052 
Commitments and Contingencies (Note 11)
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; 27,631,097 and 27,630,025 issued and outstanding, respectively
28 28 
Additional paid-in-capital13,176 12,546 
Accumulated other comprehensive loss(2,071)(1,209)
Retained earnings175,290 168,624 
Total stockholders’ equity186,423 179,989 
Total liabilities and stockholders’ equity$258,492 $252,041 
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
March 31,
20242023
Revenue
Product revenue$66,852 $67,308 
Service revenue23,252 18,534 
Total revenue90,104 85,842 
Cost of Sales
Cost of product sales42,135 42,180 
Cost of service10,093 7,702 
Total cost of sales52,228 49,882 
Gross Margin37,876 35,960 
Operating Expenses
Sales and marketing10,391 6,675 
General and administrative18,256 14,354 
Total operating expenses28,647 21,029 
Operating Income9,229 14,931 
Interest expense473 523 
Foreign currency exchange loss (gain)272 (9)
Income before income taxes8,484 14,417 
Income tax expense1,818 2,984 
Net income$6,666 $11,433 
Earnings per share
Basic$0.24 $0.41 
Diluted$0.24 $0.41 
Weighted Average Number of Common Shares
Basic27,630 27,616 
Diluted27,637 27,626 

See notes to condensed consolidated financial statements.
2

XPEL, INC.
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands)
Three Months Ended
March 31,
20242023
Other comprehensive income
Net income
$6,666 $11,433 
Foreign currency translation(862)299 
Total comprehensive income$5,804 $11,732 

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 March 31
Common Stock
Additional Paid-in-CapitalRetained
Earnings
Accumulated
Other
Comprehensive
Loss
Total Stockholders’ Equity
SharesAmount
Balance as of December 31, 2022
27,616 $28 $11,073 $115,824 $(2,203)$124,722 
Net income11,433 11,433 
Foreign currency translation— — — — 299 299 
Stock-based compensation— — 303 — — 303 
Balance as of March 31, 202327,616 28 11,376 127,257 (1,904)136,757 
Balance as of December 31, 2023
27,630 28 12,546 168,624 (1,209)179,989 
Net income— — — 6,666 — 6,666 
Foreign currency translation— — — — (862)(862)
Stock-based compensation1 — 630 — — 630 
Balance as of March 31, 202427,631 $28 $13,176 $175,290 $(2,071)$186,423 
See notes to condensed consolidated financial statements.
4

XPEL, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)

Three Months Ended March 31,
20242023
Cash flows from operating activities
Net income$6,666 $11,433 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation of property, plant and equipment1,333 972 
Amortization of intangible assets1,410 1,161 
Gain on sale of property and equipment(18)(9)
Stock compensation630 303 
Provision for credit losses89 74 
Deferred income tax(157)(115)
Changes in assets and liabilities:
Accounts receivable(4,763)(6,606)
Inventory, net(3,878)(3,886)
Prepaid expenses and other current assets(2,325)(2,512)
Income taxes receivable and payable904 2,360 
Accounts payable and accrued liabilities(4,850)(2,480)
Net cash (used in) provided by operating activities(4,959)695 
Cash flows used in investing activities
Purchase of property, plant and equipment(2,017)(2,055)
Proceeds from sale of property and equipment 12 
Acquisition of a business, net of cash acquired(757) 
Development of intangible assets(340)(321)
Net cash used in investing activities(3,114)(2,364)
Cash flows from financing activities
Net borrowings on revolving credit agreement5,000 2,000 
Repayments of notes payable(15)(77)
Net cash provided by financing activities4,985 1,923 
Net change in cash and cash equivalents(3,088)254 
Foreign exchange impact on cash and cash equivalents93 20 
(Decrease)/Increase in cash and cash equivalents during the period(2,995)274 
Cash and cash equivalents at beginning of period11,609 8,056 
Cash and cash equivalents at end of period$8,614 $8,330 
Supplemental schedule of non-cash activities
Non-cash lease financing$952 $1,237 
Issuance of common stock for vested restricted stock units57  
Supplemental cash flow information
Cash paid for income taxes$1,152 $748 
Cash paid for interest$430 $517 
See notes to condensed consolidated financial statements.
5

XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1.    INTERIM FINANCIAL INFORMATION
The accompanying (a) condensed consolidated balance sheet as of December 31, 2023, which has been derived from audited financial statements, and (b) unaudited interim condensed consolidated financial statements as of and for the three months ended March 31, 2024 and 2023 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, 2023 as filed with the SEC on February 28, 2024 (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 sells, distributes, and installs protective films and coatings, including automotive paint protection film, surface protection film, automotive and 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 wholly-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 wholly-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 - Management has concluded that our chief operating decision maker (“CODM”) is our chief executive officer. The Company’s CODM reviews the entire organization’s consolidated results on a monthly basis to evaluate performance and make resource allocation decisions. Management views the Company’s operations and manages its business as one operating segment.
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 consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and underlying assumptions are reviewed on an ongoing basis. 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 $0.2 million and $0.2 million as of March 31, 2024 and December 31, 2023, 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
6

XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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.
Provisions and Warranties - We provide a warranty on our products. Liability under the warranty policy is based on a review of historical warranty claims. Adjustments are made to the accruals as claims and data experience warrant. Our liability for warranties as of March 31, 2024 and December 31, 2023 was $0.5 million and $0.4 million, respectively. The following tables present a summary of our accrued warranty liabilities for the three months ended March 31, 2024 and the twelve months ended December 31, 2023 (in thousands):
2024
Warranty liability, January 1$422 
Warranties assumed in period412 
Payments(334)
Warranty liability, March 31$500 
2023
Warranty liability, January 1$234 
Warranties assumed in period768 
Payments(580)
Warranty liability, December 31$422 

Recent Accounting Pronouncements Issued and Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures” which makes certain updates to segment reporting. This standard will become effective for our annual reporting for the year beginning January 1, 2024 and for our interim reporting for interim periods beginning January 1, 2025. We do not anticipate implementation of this standard will have a material impact on our financial statements.
In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures”, which makes certain updates to income tax disclosures. This standard becomes effective for our fiscal year beginning January 1, 2025. We do not anticipate implementation of this standard will have a material impact on our financial statements.
7

XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
3.    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 those present are immaterial. Discounts provided by the Company to customers at the time of sale are recognized as a reduction in sales as the products are sold.
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. Typically, product is shipped within a few days after prepayment is received. These prepayments are recorded as contract liabilities on the condensed consolidated balance sheet and are included in accounts payable and accrued liabilities (Note 9). As the performance obligation is part of a contract that has an 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
8

XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 months ended March 31, 2024 (in thousands):
Balance, December 31, 2023$761 
Revenue recognized related to payments included in the December 31, 2023 balance(696)
Payments received for which performance obligations have not been satisfied276 
Effect of foreign currency translation(4)
Balance, March 31, 2024$337 
The table below sets forth the disaggregation of revenue by product category for the periods indicated below (in thousands):
Three Months Ended
March 31,
20242023
Product Revenue
Paint protection film$49,011 $49,548 
Window film14,549 14,982 
Other3,292 2,778 
Total
$66,852 $67,308 
Service Revenue
Software$1,928 $1,458 
Cutbank credits4,018 4,030 
Installation labor16,706 12,399 
Training and other600 647 
Total$23,252 $18,534 
Total$90,104 $85,842 
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
9

XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
ultimate product destination based on customer interactions, customer locations and other factors (in thousands):
Three Months Ended
March 31,
20242023
United States
$52,048 $51,077 
China1,450 6,647 
Canada11,080 8,592 
Continental Europe10,216 7,960 
United Kingdom3,486 3,091 
Middle East/Africa5,143 3,496 
Asia Pacific3,750 2,645 
Latin America2,931 2,173 
Other 161 
Total$90,104 $85,842 

4.    PROPERTY AND EQUIPMENT, NET
Property and equipment consists of the following (in thousands):
March 31, 2024December 31, 2023
Furniture and fixtures
$3,953 $3,844 
Computer equipment4,978 4,743 
Vehicles1,144 1,141 
Equipment5,780 5,685 
Leasehold improvements11,151 10,921 
Plotters4,669 4,315 
Construction in Progress1,079 201 
Total property and equipment32,754 30,850 
Less: accumulated depreciation15,130 13,870 
Property and equipment, net$17,624 $16,980 
Depreciation expense for the three months ended March 31, 2024 and 2023 was $1.3 million and $1.0 million, respectively.

10

XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
5.    INTANGIBLE ASSETS, NET
Intangible assets consists of the following (in thousands):
March 31, 2024December 31, 2023
Trademarks
$883 $864 
Software
6,238 5,919 
Trade name
1,900 1,918 
Contractual and customer relationships
40,689 40,866 
Non-compete
440 447 
Other
723 510 
Total at cost50,873 50,524 
Less: Accumulated amortization16,935 15,619 
Intangible assets, net$33,938 $34,905 
Amortization expense for the three months ended March 31, 2024 and 2023 was $1.4 million and $1.2 million, respectively.

6.    GOODWILL
The following table summarizes goodwill transactions for the three months ended March 31, 2024 and the twelve months ended December 31, 2023 (in thousands):
2023
Balance at December 31, 2022$26,763 
Additions and purchase price allocation adjustments10,422 
Foreign exchange276 
Balance at December 31, 2023$37,461 
2024
Balance at December 31, 2023$37,461 
Additions and purchase price allocation adjustments556 
Foreign exchange(353)
Balance at March 31, 2024$37,664 
Purchase price accounting for acquisitions completed during the year ended December 31, 2023 has not yet been finalized pending the completion of valuation models related to the identified intangible assets included in these transactions.
11

XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
7.    INVENTORIES
The components of inventory are summarized as follows (in thousands):
March 31, 2024December 31, 2023
Raw materials$6,856 $22,308 
Work in process14,658 6,230 
Finished goods88,657 77,971 
$110,171 $106,509 

8.    DEBT
REVOLVING FACILITIES
The Company has a revolving credit facility providing for secured revolving loans and letters of credit in an aggregate amount of up to $125 million, which is subject to the terms of a credit agreement dated April 6, 2023 (the "Credit Agreement"). As of March 31, 2024 and December 31, 2023, the Company had outstanding balances of $24 million and $19 million under this agreement, respectively.
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 March 31, 2024, these rates were 8.5% and 6.4%, 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 April 6, 2026. 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.
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.
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 revolving credit facility through HSBC Bank 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 HSBC Canada Bank’s prime rate plus 0.25% per annum and is guaranteed by the parent company. As of March 31, 2024 and December 31, 2023, no balance was outstanding on this line of credit.
12

XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
As of March 31, 2024 and December 31, 2023, the Company was in compliance with all debt covenants.

9.    ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The following table presents significant accounts payable and accrued liability balances as of the periods ending (in thousands):
March 31, 2024December 31, 2023
Trade payables$20,335 $24,233 
Payroll liabilities3,182 4,296 
Contract liabilities337 761 
Acquisition holdback payments956 868 
Other liabilities2,801 2,286 
$27,611 $32,444 

10.    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 line of credit, and long-term debt. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, our line of credit, and short-term borrowings approximate fair value because of the near-term maturities of these financial instruments. The carrying value of the Company’s notes payable 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. The fair value of these liabilities was determined using a Monte Carlo Simulation 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.
13

XPEL, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Liabilities measured at fair value on a recurring basis as of the dates noted below are as follows (in thousands):
March 31, 2024December 31, 2023
Level 3:
     Contingent Liabilities$675 $815 
Decreases in the fair value of level 3 contingent liabilities are reflected in general and administrative expenses in the Consolidated Statements of Income for the three months ended March 31, 2024.

11.    COMMITMENTS AND CONTINGENCIES
In the ordinary course of business activities, the Company may be contingently liable for litigation and claims with 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 litigation and claims having a material impact on our results of operations, cash flows or financial position is remote.

12.    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 (in thousands except per share values):
Three Months Ended March 31,
Numerator20242023
   Net income$6,666 $11,433 
Denominator
   Weighted average basic shares27,630 27,616 
   Dilutive effect of restricted stock units7 10 
   Weighted average diluted shares27,637 27,626 
Earnings per share
   Basic$0.24 $0.41 
   Diluted$0.24 $0.41 

14


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:
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.
We currently rely on one distributor for our products in China.
A significant percentage of our revenue is generated from our business in China, a market that is associated with certain risks.
The loss of one or more of our key personnel or our failure to attract and retain other highly qualified personnel in the future, could harm our business.
A material disruption from our contract manufacturers or suppliers or our inability to obtain a sufficient supply from alternate suppliers could cause us to be unable to meet customer demands or increase our costs.
Our asset-light business model exposes us to product quality and variable cost risks.
15


Our accounting estimates and risk management processes rely on assumptions or models that may prove inaccurate.
Fluctuations in the cost and availability of raw materials, equipment, labor and transportation could cause manufacturing delays, increase our costs and/or impact our ability to meet customer demand.
Our industry is highly competitive.
Harm to our reputation or the reputation of one or more of our products could have an adverse effect on our business.
Our revenue and operating results may fluctuate, which may make our results difficult to predict and could cause our results to fall short of expectations.
Technology could render the need for some of our products obsolete. 
Infringement of our intellectual property could impact our ability to compete effectively. 
If changes to our existing products or introduction of new products or services do not meet our customers’ expectations or fail to generate revenue, we could lose our customers or fail to generate any revenue from such products or services and our business may be harmed.
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.
We may incur material losses and costs as a result of product liability and warranty claims.
Our failure to satisfy international trade compliance regulations, and changes in U.S. government sanctions, could have a material adverse effect on us. 
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.
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. These factors are not necessarily all of the factors that could affect us. Unpredictable or unanticipated factors 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
The Company is a leading provider of protective films and coatings, including automotive paint protection film, surface protection film, automotive and commercial/residential window films, and ceramic coatings with a global footprint, a network of trained installers and proprietary DAP software. The Company is dedicated to exceeding customer expectations by providing high-quality products, leading customer service, expert technical support and world-class training.

16



The Company began as a software company designing vehicle patterns used to produce cut-to-fit protective film for the painted surfaces of automobiles. In 2007, we began selling automotive surface and paint protection film products to complement our software business. In 2011, we introduced our ULTIMATE protective film product line which, at the time was the industry’s first protective film with self-healing properties. The ULTIMATE technology allows the protective film to better absorb the impacts from rocks and other road debris, thereby fully protecting the vehicle. The film is described as “self-healing” due to its ability to return to its original state after damage from surface scratches. The launch of the ULTIMATE product catapulted the Company into several years of strong revenue growth.
Our over-arching strategic philosophy stems from our view that being closer to the end customer in terms of our channel strategy affords us a better opportunity to efficiently introduce new products and deliver tremendous value which, in turn, drives more revenue growth for the Company.
Strategic Overview
XPEL continues to pursue several key strategic initiatives to drive continued growth. Our global expansion strategy includes establishing a local presence where possible, allowing us to better control the delivery of our products and services. We also add locally based regional sales personnel, leveraging local knowledge and relationships to expand the markets in which we operate.
We seek to increase global brand awareness in strategically important areas, including pursuing high visibility at premium events such as major car shows and high value placement in advertising media consumed by car enthusiasts, to help further expand the Company’s premium brand.
XPEL also continues to expand its delivery channels by acquiring select installation facilities in key markets and acquiring international partners to enhance our global reach. As we expand globally, we strive to tailor our distribution model to adapt to target markets. We believe this flexibility allows us to penetrate and grow market share more efficiently. Our acquisition strategy centers on our belief that the closer the Company is to its end customers, the greater its ability to drive increased product sales. During 2023, we completed four acquisitions in furtherance of this objective. We believe our channel strategy uniquely positions us to be wherever the demand takes us and is a key part of our ability to drive sustained growth.
We also continue to drive expansion of our non-automotive product portfolio. Our architectural window film segment continues to gain traction. We believe there are multiple uses for protective films and we continue to explore those adjacent market opportunities.
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
17


define EBITDA as net income plus (a) total depreciation and amortization, (b) interest expense, net, and (c) income tax expense.
The following table is a reconciliation of Net income to EBITDA for the three months ended March 31, 2024 and 2023 (in thousands):
(Unaudited)
Three Months Ended March 31,
20242023
Net Income$6,666 $11,433 
Interest473 523 
Taxes1,818 2,984 
Depreciation1,333 972 
Amortization1,410 1,161 
EBITDA$11,700 $17,073 

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 their usefulness as comparative measures.
Results of Operations
The following table summarizes the Company’s consolidated results of operations for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31, 2024%
of Total Revenue
Three Months Ended March 31, 2023%
of Total Revenue
$
Change
%
Change
Total revenue$90,104 100.0 %$85,842 100.0 %$4,262 5.0 %
Total cost of sales52,228 58.0 %49,882 58.1 %2,346 4.7 %
Gross margin37,876 42.0 %35,960 41.9 %1,916 5.3 %
Total operating expenses28,647 31.8 %21,029 24.5 %7,618 36.2 %
Operating income9,229 10.2 %14,931 17.4 %(5,702)(38.2)%
Other expenses745 0.8 %514 0.6 %231 44.9 %
Income tax1,818 2.0 %2,984 3.5 %(1,166)(39.1)%
Net income$6,666 7.4 %$11,433 13.3 %$(4,767)(41.7)%

18


The following table summarizes revenue results for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended
March 31,
%% of Total Revenue
20242023Inc (Dec)20242023
Product Revenue
Paint protection film$49,011 $49,548 (1.1)%54.4 %57.7 %
Window film14,549 14,982 (2.9)%16.1 %17.5 %
Other3,292 2,778 18.5 %3.7 %3.2 %
Total$66,852 $67,308 (0.7)%74.2 %78.4 %
Service Revenue
Software$1,928 $1,458 32.2 %2.1 %1.7 %
Cutbank credits4,018 4,030 (0.3)%4.5 %4.7 %
Installation labor16,706 12,399 34.7 %18.5 %14.4 %
Training and other600 647 (7.3)%0.7 %0.8 %
Total$23,252 $18,534 25.5 %25.8 %21.6 %
Total$90,104 $85,842 5.0 %100.0 %100.0 %
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 three months ended March 31, 2024 and 2023 (in thousands):

Three Months Ended
March 31,
%% of Total Revenue
20242023Inc (Dec)20242023
United States$52,048 $51,077 1.9 %57.8 %59.5 %
China1,450 6,647 (78.2)%1.6 %7.7 %
Canada11,080 8,592 29.0 %12.3 %10.0 %
Continental Europe10,216 7,960 28.3 %11.3 %9.3 %
United Kingdom3,486 3,091 12.8 %3.9 %3.6 %
Middle East/Africa5,143 3,496 47.1 %5.7 %4.1 %
Asia Pacific3,750 2,645 41.8 %4.2 %3.1 %
Latin America2,931 2,173 34.9 %3.2 %2.5 %
Other— 161 (100.0)%0.0 %0.2 %
Total$90,104 $85,842 5.0 %100.0 %100.0 %
Product Revenue. Product revenue decreased 0.7% over the three months ended March 31, 2023. Product revenue represented 74.2% of our total revenue for the three months ended March 31, 2024 and 78.4% for the three months ended March 31, 2023. Revenue from our paint protection film product line decreased 1.1% for the three months ended March 31, 2024. Paint protection film sales represented 54.4% and 57.7% of our consolidated revenues for the three months ended March 31, 2024 and 2023,
19


respectively. This decrease was due to lower demand in the U.S., primarily in the after-market channel, and lower sales to XPEL's China distributor. Sales to China reached a record high in the fourth quarter of 2023. Consequently, first quarter 2024 China sales were negatively impacted as our distributor sold through the inventory purchased at the end of last year.
Revenue from our window film product line declined 2.9% for the three months ended March 31, 2024. Window film sales represented 16.1% and 17.5% of our consolidated revenues for the three months ended March 31, 2024 and 2023, respectively. This decline was due mainly to lower revenue into China. Excluding China, total window film revenue grew 10.3%. Architectural window film revenue increased 33.1% to $1.8 million. This increase was due mainly to increased product awareness and demand in most of our regions.
Other product revenue for the three months ended March 31, 2024 grew 18.5% to $3.3 million and represented 3.7% of revenue. This increase was driven by an increase in demand for our non-film related products such as ceramic coating, plotters, chemicals and other film installation tools and accessories. Our FUSION ceramic coating product revenue grew 24.4% to $1.4 million. This increase was due mainly to increased demand for our ceramic coating products.
Geographically, outside of the U.S. and China, we experienced solid growth in most operating regions during the three months ended March 31, 2024, due mainly to increased product awareness and adoption.
Service revenue consists of fees for DAP software access and 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 businesses and revenue from training services provided to our customers. Due mainly to increases in the Company's dealership services business resulting from increased car counts, increased content per vehicle and from our OEM business, service revenue grew 25.5% over service revenue for the three months ended March 31, 2023. Service revenue represented 25.8% and 21.6% of our consolidated revenue from the three months ended March 31, 2024 and 2023, respectively.
Software revenue increased 32.2% from the three months ended March 31, 2023. The increase was due primarily to increases in total subscribers to our software. Software revenue represented 2.1% and 1.7% of consolidated revenue for the three months ended March 31, 2024 and 2023, respectively. Installation labor revenue increased 34.7% due mainly to increased labor revenue in our dealership services business resulting from increased car counts associated with improving U.S. new car dealership inventories.
Total installation revenue (labor and product combined) for the three months ended March 31, 2024 increased 34.7% over the three months ended March 31, 2023. This represented 22.1% and 17.2% of our consolidated revenue for the three months ended March 31, 2024 and 2023, respectively. Adjusted product revenue, which combines the cutbank credit revenue service component with product revenue, decreased 0.7% in the three months ended March 31, 2024 versus the three months ended March 31, 2023.
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 Company-run facilities, costs of labor associated with pattern design for our cutting software and the costs incurred to provide training for our customers. Product costs in the three months ended March 31, 2024 decreased 0.1% over the three months ended March 31, 2023 commensurate with our decrease in product sales. Cost of product sales represented 46.8% and 49.1%
20


of total revenue in the three months ended March 31, 2024 and 2023, respectively. Cost of services grew 31.0% during the three months ended March 31, 2024 and represented 11.2% and 9.0% of total revenue for the three months ended March 31, 2024 and 2023, respectively. This increase was due primarily to increased installation labor costs commensurate with the growth in installation labor revenue.
Gross Margin
The following table summarizes gross margin for product and services for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31,%% of Category Revenue
20242023Inc (Dec)20242023
Product margin$24,717 $25,128 -1.6 %37.0 %37.3 %
Service margin13,159 10,832 21.5 %56.6 %58.4 %
Total$37,876 $35,960 5.3 %42.0 %41.9 %
Product gross margin for the three months ended March 31, 2024 decreased $0.4 million, 1.6% compared to the same period in the prior year. The decrease in product gross margin percentages was primarily due to lower product revenue and increases in non bill of material costs contained within product cost of goods sold.
Service gross margin increased approximately $2.3 million, or 21.5%, over the three months ended March 31, 2023. This represented 56.6% and 58.4% of total service revenue for the three months ended March 31, 2024 and 2023, respectively. The decrease in service gross margin percentage was primarily due to a higher percentage mix of lower margin installation labor revenue and cost inefficiencies associated with lower revenue in our company-owned installation centers.
Operating Expenses
Sales and marketing expenses for the three months ended March 31, 2024 increased $3.7 million, or 55.7%, compared to the same period in 2023. These expenses represented 11.5% and 7.8% of consolidated revenue for the three months ended March 31, 2024 and 2023, respectively. This increase was primarily due to expenses incurred during the period for our annual dealer conference which occurred in the second quarter of the prior year.
General and administrative expenses grew approximately $3.9 million, or 27.2%, during the three months ended March 31, 2024 over the three months ended March 31, 2023. These costs represented 20.3% and 16.7% of consolidated revenue for the three months ended March 31, 2024 and 2023, respectively. The increase was due mainly to increases in personnel, occupancy costs, and professional fees to support the ongoing growth of the business.
Income Tax Expense
Income tax expense for the three months ended March 31, 2024 decreased $1.2 million from the three months ended March 31, 2023. Our effective tax rate was 21.4% for the three months ended March 31, 2024 compared with 20.7% for the three months ended March 31, 2023.
Net Income
Net income for the three months ended March 31, 2024 decreased by $4.8 million, or 41.7%, to $6.7 million.
21



Liquidity and Capital Resources
The primary source of liquidity for our business is available cash and cash equivalents, cash flows provided by operations and borrowing capacity under our credit facility. As of March 31, 2024, we had cash and cash equivalents of $8.6 million. For the three months ended March 31, 2024, cash used in operations was $5.0 million, and as of March 31, 2024 we had approximately $104.3 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 borrowing 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 used in operations totaled approximately $5.0 million for the three months ended March 31, 2024, compared to operating cash inflows of $0.7 million for the three months ended March 31, 2023. This decrease was driven by a decline in net income and a net increase in working capital.
Investing Activities. Cash flows used in investing activities totaled approximately $3.1 million during the three months ended March 31, 2024 compared to $2.4 million during the three months ended March 31, 2023.
Financing Activities. Cash flows provided by financing activities during the three months ended March 31, 2024 totaled approximately $5.0 million compared to $1.9 million in the prior year. This increase was due to an increase in borrowings under our credit facility during the 2024 quarter.
Debt obligations, including balances outstanding on committed credit facilities and contingent liabilities as of March 31, 2024 and December 31, 2023 totaled approximately $25.0 million and $19.9 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 our line of credit. 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.
Credit Facilities
The Company has a revolving credit facility providing for secured revolving loans and letters of credit in an aggregate amount of up to $125 million, which is subject to the terms of a credit agreement dated April 6, 2023 (the "Credit Agreement"). As of March 31, 2024 and December 31, 2023, the Company had outstanding balances of $24 million and $19 million under this agreement, respectively.
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
22


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 March 31, 2023, these rates were 8.5% and 6.4%, 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 April 6, 2026. 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.
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.
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 revolving credit facility through HSBC Bank 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 HSBC Canada Bank’s prime rate plus 0.25% per annum and is guaranteed by the parent company. As of March 31, 2024 and December 31, 2023, no balance was outstanding on this line of credit.
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, 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, and the Australian Dollar. 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 loss, a component of stockholders’ equity in our condensed consolidated balance sheets. We do not currently hedge our exposure to potential foreign currency translation adjustments.
23


Borrowings under our revolving lines of credit or our Credit Agreement (see Note 8) are subject 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.
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.
24


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 consolidated financial statements could change in the future.

Item 1A. Risk Factors
There have been no material changes to the risk factors disclosed in Part I, Item IA of the Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.

Item 3. Defaults Upon Senior Securities
Not applicable.

Item 4. Mine Safety Disclosures
Not applicable.

Item 5. Other Information
None.

25


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
   
101The following materials from XPEL’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020, formatted in XBRL (Extensible Business Reporting Language): (i) the unaudited Consolidated Balance Sheets, (ii) the unaudited Consolidated Statements of Operations, (iii) the unaudited Consolidated Statements of Comprehensive Income, (iv) the unaudited Consolidated Statements of  Equity, (v) the unaudited Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial StatementsFiled herewith

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
May 9, 2024(Authorized Officer and Principal Financial and Accounting Officer)
26

EXHIBIT 31.1
 
CERTIFICATION PURSUANT TO SECTION 302(A) OF THE SARBANES-OXLEY ACT OF 2002
 

I, Ryan L. Pape, certify that:
 
Date: May 9, 2024


1.I have reviewed this Quarterly Report on Form 10-Q of XPEL, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 9, 2024
/s/ Ryan L. Pape
Ryan L. Pape
President and Chief Executive Officer
(Principal Executive Officer)




EXHIBIT 31.2
 
CERTIFICATION PURSUANT TO SECTION 302(A) OF THE SARBANES-OXLEY ACT OF 2002

 
I, Barry R. Wood, certify that:

Date: May 9, 2024

1.I have reviewed this Quarterly Report on Form 10-Q of XPEL, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2024
/s/ Barry R. Wood 
Barry R. Wood
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)




EXHIBIT 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
 
I, Ryan L. Pape, President and Chief Executive Officer of XPEL, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:
 
(1) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and
 
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
This certificate is being furnished solely for the purposes of 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.
Date: May 9, 2024
/s/ Ryan L. Pape
Ryan L. Pape
President and Chief Executive Officer




EXHIBIT 32.2
 
CERTIFICATION PURSUANT TO
18 U.S.C. 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
 
I, Barry R.Wood, Senior Vice President and Chief Financial Officer of XPEL, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:
 
(1) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and
 
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
This certificate is being furnished solely for the purposes of 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.
Date: May 9, 2024
/s/ Barry R. Wood
Barry R. Wood
Senior Vice President and Chief Financial Officer


v3.24.1.u1
Cover Page - shares
3 Months Ended
Mar. 31, 2024
May 09, 2024
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Mar. 31, 2024  
Document Transition Report false  
Entity File Number 001-38858  
Entity Registrant Name XPEL, INC.  
Entity Incorporation, State or Country Code NV  
Entity Tax Identification Number 20-1117381  
Entity Address, Address Line One 711 Broadway St., Suite 320  
Entity Address, City or Town San Antonio  
Entity Address, State or Province TX  
Entity Address, Postal Zip Code 78215  
City Area Code 210  
Local Phone Number 678-3700  
Title of 12(b) Security Common Stock, par value $0.001 per share  
Trading Symbol XPEL  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   27,633,935
Amendment Flag false  
Document Fiscal Year Focus 2024  
Document Fiscal Period Focus Q1  
Entity Central Index Key 0001767258  
Current Fiscal Year End Date --12-31  
v3.24.1.u1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Current    
Cash and cash equivalents $ 8,614 $ 11,609
Accounts receivable, net 28,569 24,111
Inventory, net 110,171 106,509
Prepaid expenses and other current assets 5,578 3,529
Income tax receivable 0 696
Total current assets 152,932 146,454
Property and equipment, net 17,624 16,980
Right-of-use lease assets 15,471 15,459
Intangible assets, net 33,938 34,905
Other non-current assets 863 782
Goodwill 37,664 37,461
Total assets 258,492 252,041
Current    
Current portion of notes payable 63 62
Current portion lease liabilities 3,946 3,966
Accounts payable and accrued liabilities 27,611 32,444
Income tax payable 201 0
Total current liabilities 31,821 36,472
Deferred tax liability, net 2,459 2,658
Other long-term liabilities 682 890
Borrowings on line of credit 24,000 19,000
Non-current portion of lease liabilities 12,814 12,715
Non-current portion of notes payable 293 317
Total liabilities 72,069 72,052
Commitments and Contingencies (Note 11)
Stockholders’ equity    
Preferred stock, $0.001 par value; authorized 10,000,000; none issued and outstanding 0 0
Common stock, $0.001 par value; 100,000,000 shares authorized; 27,631,097 and $27,630,025 issued and outstanding, respectively 28 28
Additional paid-in-capital 13,176 12,546
Accumulated other comprehensive loss (2,071) (1,209)
Retained earnings 175,290 168,624
Total stockholders’ equity 186,423 179,989
Total liabilities and stockholders’ equity $ 258,492 $ 252,041
v3.24.1.u1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2024
Dec. 31, 2023
Statement of Financial Position [Abstract]    
Preferred stock, par value (in dollars per share) $ 0.001 $ 0.001
Preferred stock shares authorized (in shares) 10,000,000 10,000,000
Preferred stock shares issued (in shares) 0 0
Preferred stock shares outstanding (in shares) 0 0
Common stock, par value (in dollars per share) $ 0.001 $ 0.001
Common stock shares authorized (in shares) 100,000,000 100,000,000
Common stock shares issued (in shares) 27,631,097  
Common stock shares outstanding (in shares)   27,630,025
v3.24.1.u1
Condensed Consolidated Statements of Income (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Revenue    
Total revenue $ 90,104 $ 85,842
Cost of Sales    
Total cost of sales 52,228 49,882
Gross Margin 37,876 35,960
Operating Expenses    
Sales and marketing 10,391 6,675
General and administrative 18,256 14,354
Total operating expenses 28,647 21,029
Operating Income 9,229 14,931
Interest expense 473 523
Foreign currency exchange loss (gain) 272 (9)
Income before income taxes 8,484 14,417
Income tax expense 1,818 2,984
Net income $ 6,666 $ 11,433
Earnings per share    
Basic (in dollar per share) $ 0.24 $ 0.41
Diluted (in dollar per share) $ 0.24 $ 0.41
Weighted Average Number of Common Shares    
Basic (in shares) 27,630,000 27,616,000
Diluted (in shares) 27,637,000 27,626,000
Product revenue    
Revenue    
Total revenue $ 66,852 $ 67,308
Cost of Sales    
Total cost of sales 42,135 42,180
Service revenue    
Revenue    
Total revenue 23,252 18,534
Cost of Sales    
Total cost of sales $ 10,093 $ 7,702
v3.24.1.u1
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Other comprehensive income    
Net income $ 6,666 $ 11,433
Foreign currency translation (862) 299
Total comprehensive income $ 5,804 $ 11,732
v3.24.1.u1
Condensed Consolidated Statements of Changes in Stockholders’ Equity - USD ($)
$ in Thousands
Total
Total Stockholders’ Equity
Common Stock
Additional Paid-in-Capital
Retained Earnings
Accumulated Other Comprehensive Loss
Beginning balance (in shares) at Dec. 31, 2022     27,616,000      
Beginning balance at Dec. 31, 2022   $ 124,722 $ 28 $ 11,073 $ 115,824 $ (2,203)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income $ 11,433 11,433     11,433  
Foreign currency translation 299 299       299
Stock-based compensation $ 303     303    
Ending balance (in shares) at Mar. 31, 2023     27,616,000      
Ending balance at Mar. 31, 2023   136,757 $ 28 11,376 127,257 (1,904)
Beginning balance (in shares) at Dec. 31, 2023 27,630,025   27,630,000      
Beginning balance at Dec. 31, 2023   179,989 $ 28 12,546 168,624 (1,209)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income $ 6,666 6,666     6,666  
Foreign currency translation $ (862)         (862)
Stock-based compensation   630 $ 1 630    
Ending balance (in shares) at Mar. 31, 2024     27,631,000      
Ending balance at Mar. 31, 2024   $ 186,423 $ 28 $ 13,176 $ 175,290 $ (2,071)
v3.24.1.u1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Cash flows from operating activities    
Net income $ 6,666 $ 11,433
Adjustments to reconcile net income to net cash (used in) provided by operating activities:    
Depreciation of property, plant and equipment 1,333 972
Amortization of intangible assets 1,410 1,161
Gain on sale of property and equipment (18) (9)
Stock compensation 630 303
Provision for credit losses 89 74
Deferred income tax (157) (115)
Changes in assets and liabilities:    
Accounts receivable (4,763) (6,606)
Inventory, net (3,878) (3,886)
Prepaid expenses and other current assets (2,325) (2,512)
Income taxes receivable and payable 904 2,360
Accounts payable and accrued liabilities (4,850) (2,480)
Net cash (used in) provided by operating activities (4,959) 695
Cash flows used in investing activities    
Purchase of property, plant and equipment (2,017) (2,055)
Proceeds from sale of property and equipment 0 12
Acquisition of a business, net of cash acquired (757) 0
Development of intangible assets (340) (321)
Net cash used in investing activities (3,114) (2,364)
Cash flows from financing activities    
Net borrowings on revolving credit agreement 5,000 2,000
Repayments of notes payable (15) (77)
Net cash provided by financing activities 4,985 1,923
Net change in cash and cash equivalents (3,088) 254
Foreign exchange impact on cash and cash equivalents 93 20
(Decrease)/Increase in cash and cash equivalents during the period (2,995) 274
Cash and cash equivalents at beginning of period 11,609 8,056
Cash and cash equivalents at end of period 8,614 8,330
Supplemental schedule of non-cash activities    
Non-cash lease financing 952 1,237
Issuance of common stock for vested restricted stock units 57 0
Supplemental cash flow information    
Cash paid for income taxes 1,152 748
Cash paid for interest $ 430 $ 517
v3.24.1.u1
INTERIM FINANCIAL INFORMATION
3 Months Ended
Mar. 31, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
INTERIM FINANCIAL INFORMATION INTERIM FINANCIAL INFORMATION
The accompanying (a) condensed consolidated balance sheet as of December 31, 2023, which has been derived from audited financial statements, and (b) unaudited interim condensed consolidated financial statements as of and for the three months ended March 31, 2024 and 2023 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, 2023 as filed with the SEC on February 28, 2024 (the "Annual Report") and with the Management's Discussion and Analysis of Financial Condition and Results of Operations section appearing elsewhere in this Report.
v3.24.1.u1
SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
SIGNIFICANT ACCOUNTING POLICIES SIGNIFICANT ACCOUNTING POLICIES
Nature of Business - The Company is based in San Antonio, Texas and sells, distributes, and installs protective films and coatings, including automotive paint protection film, surface protection film, automotive and 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 wholly-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 wholly-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 - Management has concluded that our chief operating decision maker (“CODM”) is our chief executive officer. The Company’s CODM reviews the entire organization’s consolidated results on a monthly basis to evaluate performance and make resource allocation decisions. Management views the Company’s operations and manages its business as one operating segment.
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 consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and underlying assumptions are reviewed on an ongoing basis. 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 $0.2 million and $0.2 million as of March 31, 2024 and December 31, 2023, 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.
Provisions and Warranties - We provide a warranty on our products. Liability under the warranty policy is based on a review of historical warranty claims. Adjustments are made to the accruals as claims and data experience warrant. Our liability for warranties as of March 31, 2024 and December 31, 2023 was $0.5 million and $0.4 million, respectively. The following tables present a summary of our accrued warranty liabilities for the three months ended March 31, 2024 and the twelve months ended December 31, 2023 (in thousands):
2024
Warranty liability, January 1$422 
Warranties assumed in period412 
Payments(334)
Warranty liability, March 31$500 
2023
Warranty liability, January 1$234 
Warranties assumed in period768 
Payments(580)
Warranty liability, December 31$422 

Recent Accounting Pronouncements Issued and Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures” which makes certain updates to segment reporting. This standard will become effective for our annual reporting for the year beginning January 1, 2024 and for our interim reporting for interim periods beginning January 1, 2025. We do not anticipate implementation of this standard will have a material impact on our financial statements.
In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures”, which makes certain updates to income tax disclosures. This standard becomes effective for our fiscal year beginning January 1, 2025. We do not anticipate implementation of this standard will have a material impact on our financial statements.
v3.24.1.u1
REVENUE
3 Months Ended
Mar. 31, 2024
Revenue from Contract with Customer [Abstract]  
REVENUE 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 those present are immaterial. Discounts provided by the Company to customers at the time of sale are recognized as a reduction in sales as the products are sold.
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. Typically, product is shipped within a few days after prepayment is received. These prepayments are recorded as contract liabilities on the condensed consolidated balance sheet and are included in accounts payable and accrued liabilities (Note 9). As the performance obligation is part of a contract that has an 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 months ended March 31, 2024 (in thousands):
Balance, December 31, 2023$761 
Revenue recognized related to payments included in the December 31, 2023 balance(696)
Payments received for which performance obligations have not been satisfied276 
Effect of foreign currency translation(4)
Balance, March 31, 2024$337 
The table below sets forth the disaggregation of revenue by product category for the periods indicated below (in thousands):
Three Months Ended
March 31,
20242023
Product Revenue
Paint protection film$49,011 $49,548 
Window film14,549 14,982 
Other3,292 2,778 
Total
$66,852 $67,308 
Service Revenue
Software$1,928 $1,458 
Cutbank credits4,018 4,030 
Installation labor16,706 12,399 
Training and other600 647 
Total$23,252 $18,534 
Total$90,104 $85,842 
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 (in thousands):
Three Months Ended
March 31,
20242023
United States
$52,048 $51,077 
China1,450 6,647 
Canada11,080 8,592 
Continental Europe10,216 7,960 
United Kingdom3,486 3,091 
Middle East/Africa5,143 3,496 
Asia Pacific3,750 2,645 
Latin America2,931 2,173 
Other— 161 
Total$90,104 $85,842 
v3.24.1.u1
PROPERTY AND EQUIPMENT, NET
3 Months Ended
Mar. 31, 2024
Property, Plant and Equipment [Abstract]  
PROPERTY AND EQUIPMENT, NET PROPERTY AND EQUIPMENT, NET
Property and equipment consists of the following (in thousands):
March 31, 2024December 31, 2023
Furniture and fixtures
$3,953 $3,844 
Computer equipment4,978 4,743 
Vehicles1,144 1,141 
Equipment5,780 5,685 
Leasehold improvements11,151 10,921 
Plotters4,669 4,315 
Construction in Progress1,079 201 
Total property and equipment32,754 30,850 
Less: accumulated depreciation15,130 13,870 
Property and equipment, net$17,624 $16,980 
Depreciation expense for the three months ended March 31, 2024 and 2023 was $1.3 million and $1.0 million, respectively.
v3.24.1.u1
INTANGIBLE ASSETS, NET
3 Months Ended
Mar. 31, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
INTANGIBLE ASSETS, NET INTANGIBLE ASSETS, NET
Intangible assets consists of the following (in thousands):
March 31, 2024December 31, 2023
Trademarks
$883 $864 
Software
6,238 5,919 
Trade name
1,900 1,918 
Contractual and customer relationships
40,689 40,866 
Non-compete
440 447 
Other
723 510 
Total at cost50,873 50,524 
Less: Accumulated amortization16,935 15,619 
Intangible assets, net$33,938 $34,905 
Amortization expense for the three months ended March 31, 2024 and 2023 was $1.4 million and $1.2 million, respectively.
v3.24.1.u1
GOODWILL
3 Months Ended
Mar. 31, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL GOODWILL
The following table summarizes goodwill transactions for the three months ended March 31, 2024 and the twelve months ended December 31, 2023 (in thousands):
2023
Balance at December 31, 2022$26,763 
Additions and purchase price allocation adjustments10,422 
Foreign exchange276 
Balance at December 31, 2023$37,461 
2024
Balance at December 31, 2023$37,461 
Additions and purchase price allocation adjustments556 
Foreign exchange(353)
Balance at March 31, 2024$37,664 
Purchase price accounting for acquisitions completed during the year ended December 31, 2023 has not yet been finalized pending the completion of valuation models related to the identified intangible assets included in these transactions.
v3.24.1.u1
INVENTORIES
3 Months Ended
Mar. 31, 2024
Inventory Disclosure [Abstract]  
INVENTORIES INVENTORIES
The components of inventory are summarized as follows (in thousands):
March 31, 2024December 31, 2023
Raw materials$6,856 $22,308 
Work in process14,658 6,230 
Finished goods88,657 77,971 
$110,171 $106,509 
v3.24.1.u1
DEBT
3 Months Ended
Mar. 31, 2024
Debt Disclosure [Abstract]  
DEBT DEBT
REVOLVING FACILITIES
The Company has a revolving credit facility providing for secured revolving loans and letters of credit in an aggregate amount of up to $125 million, which is subject to the terms of a credit agreement dated April 6, 2023 (the "Credit Agreement"). As of March 31, 2024 and December 31, 2023, the Company had outstanding balances of $24 million and $19 million under this agreement, respectively.
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 March 31, 2024, these rates were 8.5% and 6.4%, 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 April 6, 2026. 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.
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.
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 revolving credit facility through HSBC Bank 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 HSBC Canada Bank’s prime rate plus 0.25% per annum and is guaranteed by the parent company. As of March 31, 2024 and December 31, 2023, no balance was outstanding on this line of credit.
As of March 31, 2024 and December 31, 2023, the Company was in compliance with all debt covenants.
v3.24.1.u1
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
3 Months Ended
Mar. 31, 2024
Accounts Payable and Accrued Liabilities [Abstract]  
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The following table presents significant accounts payable and accrued liability balances as of the periods ending (in thousands):
March 31, 2024December 31, 2023
Trade payables$20,335 $24,233 
Payroll liabilities3,182 4,296 
Contract liabilities337 761 
Acquisition holdback payments956 868 
Other liabilities2,801 2,286 
$27,611 $32,444 
v3.24.1.u1
FAIR VALUE MEASUREMENTS
3 Months Ended
Mar. 31, 2024
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS 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 line of credit, and long-term debt. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, our line of credit, and short-term borrowings approximate fair value because of the near-term maturities of these financial instruments. The carrying value of the Company’s notes payable 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. The fair value of these liabilities was determined using a Monte Carlo Simulation 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.
Liabilities measured at fair value on a recurring basis as of the dates noted below are as follows (in thousands):
March 31, 2024December 31, 2023
Level 3:
     Contingent Liabilities$675 $815 
Decreases in the fair value of level 3 contingent liabilities are reflected in general and administrative expenses in the Consolidated Statements of Income for the three months ended March 31, 2024.
v3.24.1.u1
COMMITMENTS AND CONTINGENCIES
3 Months Ended
Mar. 31, 2024
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES COMMITMENTS AND CONTINGENCIES
In the ordinary course of business activities, the Company may be contingently liable for litigation and claims with 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 litigation and claims having a material impact on our results of operations, cash flows or financial position is remote.
v3.24.1.u1
EARNINGS PER SHARE
3 Months Ended
Mar. 31, 2024
Earnings Per Share [Abstract]  
EARNINGS PER SHARE 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 (in thousands except per share values):
Three Months Ended March 31,
Numerator20242023
   Net income$6,666 $11,433 
Denominator
   Weighted average basic shares27,630 27,616 
   Dilutive effect of restricted stock units10 
   Weighted average diluted shares27,637 27,626 
Earnings per share
   Basic$0.24 $0.41 
   Diluted$0.24 $0.41 
v3.24.1.u1
SIGNIFICANT ACCOUNTING POLICIES (Policies)
3 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
Basis of Presentation 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 wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated. The functional currency for the Company is the United States ("U.S.") Dollar.
Segment Reporting
Segment Reporting - Management has concluded that our chief operating decision maker (“CODM”) is our chief executive officer. The Company’s CODM reviews the entire organization’s consolidated results on a monthly basis to evaluate performance and make resource allocation decisions. Management views the Company’s operations and manages its business as one operating segment.
Use of Estimates
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 consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and underlying assumptions are reviewed on an ongoing basis. Actual outcomes may differ from these estimates under different assumptions and conditions.
Accounts Receivable
Accounts Receivable - Accounts receivable are shown net of allowances for expected credit losses of $0.2 million and $0.2 million as of March 31, 2024 and December 31, 2023, 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.
Provisions and Warranties Provisions and Warranties - We provide a warranty on our products. Liability under the warranty policy is based on a review of historical warranty claims. Adjustments are made to the accruals as claims and data experience warrant.
Recent Accounting Pronouncements Issued and Not Yet Adopted
Recent Accounting Pronouncements Issued and Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures” which makes certain updates to segment reporting. This standard will become effective for our annual reporting for the year beginning January 1, 2024 and for our interim reporting for interim periods beginning January 1, 2025. We do not anticipate implementation of this standard will have a material impact on our financial statements.
In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures”, which makes certain updates to income tax disclosures. This standard becomes effective for our fiscal year beginning January 1, 2025. We do not anticipate implementation of this standard will have a material impact on our financial statements.
Revenue Recognition
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 those present are immaterial. Discounts provided by the Company to customers at the time of sale are recognized as a reduction in sales as the products are sold.
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. Typically, product is shipped within a few days after prepayment is received. These prepayments are recorded as contract liabilities on the condensed consolidated balance sheet and are included in accounts payable and accrued liabilities (Note 9). As the performance obligation is part of a contract that has an 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.
Fair Value Measurements 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 line of credit, and long-term debt. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, our line of credit, and short-term borrowings approximate fair value because of the near-term maturities of these financial instruments. The carrying value of the Company’s notes payable 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. The fair value of these liabilities was determined using a Monte Carlo Simulation 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.
v3.24.1.u1
SIGNIFICANT ACCOUNTING POLICIES (Tables)
3 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
Schedule of Product Warranty Liability The following tables present a summary of our accrued warranty liabilities for the three months ended March 31, 2024 and the twelve months ended December 31, 2023 (in thousands):
2024
Warranty liability, January 1$422 
Warranties assumed in period412 
Payments(334)
Warranty liability, March 31$500 
2023
Warranty liability, January 1$234 
Warranties assumed in period768 
Payments(580)
Warranty liability, December 31$422 
v3.24.1.u1
REVENUE (Tables)
3 Months Ended
Mar. 31, 2024
Revenue from Contract with Customer [Abstract]  
Schedule of Transactions Within Contract Liabilities
The following table summarizes transactions within contract liabilities for the three months ended March 31, 2024 (in thousands):
Balance, December 31, 2023$761 
Revenue recognized related to payments included in the December 31, 2023 balance(696)
Payments received for which performance obligations have not been satisfied276 
Effect of foreign currency translation(4)
Balance, March 31, 2024$337 
Schedule of Disaggregation of Revenue
The table below sets forth the disaggregation of revenue by product category for the periods indicated below (in thousands):
Three Months Ended
March 31,
20242023
Product Revenue
Paint protection film$49,011 $49,548 
Window film14,549 14,982 
Other3,292 2,778 
Total
$66,852 $67,308 
Service Revenue
Software$1,928 $1,458 
Cutbank credits4,018 4,030 
Installation labor16,706 12,399 
Training and other600 647 
Total$23,252 $18,534 
Total$90,104 $85,842 
Schedule of Revenue Estimate by Geographic Areas 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 (in thousands):
Three Months Ended
March 31,
20242023
United States
$52,048 $51,077 
China1,450 6,647 
Canada11,080 8,592 
Continental Europe10,216 7,960 
United Kingdom3,486 3,091 
Middle East/Africa5,143 3,496 
Asia Pacific3,750 2,645 
Latin America2,931 2,173 
Other— 161 
Total$90,104 $85,842 
v3.24.1.u1
PROPERTY AND EQUIPMENT, NET (Tables)
3 Months Ended
Mar. 31, 2024
Property, Plant and Equipment [Abstract]  
Schedule of Property, Plant and Equipment
Property and equipment consists of the following (in thousands):
March 31, 2024December 31, 2023
Furniture and fixtures
$3,953 $3,844 
Computer equipment4,978 4,743 
Vehicles1,144 1,141 
Equipment5,780 5,685 
Leasehold improvements11,151 10,921 
Plotters4,669 4,315 
Construction in Progress1,079 201 
Total property and equipment32,754 30,850 
Less: accumulated depreciation15,130 13,870 
Property and equipment, net$17,624 $16,980 
v3.24.1.u1
INTANGIBLE ASSETS, NET (Tables)
3 Months Ended
Mar. 31, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Intangible Assets
Intangible assets consists of the following (in thousands):
March 31, 2024December 31, 2023
Trademarks
$883 $864 
Software
6,238 5,919 
Trade name
1,900 1,918 
Contractual and customer relationships
40,689 40,866 
Non-compete
440 447 
Other
723 510 
Total at cost50,873 50,524 
Less: Accumulated amortization16,935 15,619 
Intangible assets, net$33,938 $34,905 
v3.24.1.u1
GOODWILL (Tables)
3 Months Ended
Mar. 31, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Goodwill
The following table summarizes goodwill transactions for the three months ended March 31, 2024 and the twelve months ended December 31, 2023 (in thousands):
2023
Balance at December 31, 2022$26,763 
Additions and purchase price allocation adjustments10,422 
Foreign exchange276 
Balance at December 31, 2023$37,461 
2024
Balance at December 31, 2023$37,461 
Additions and purchase price allocation adjustments556 
Foreign exchange(353)
Balance at March 31, 2024$37,664 
v3.24.1.u1
INVENTORIES (Tables)
3 Months Ended
Mar. 31, 2024
Inventory Disclosure [Abstract]  
Schedule of Inventory
The components of inventory are summarized as follows (in thousands):
March 31, 2024December 31, 2023
Raw materials$6,856 $22,308 
Work in process14,658 6,230 
Finished goods88,657 77,971 
$110,171 $106,509 
v3.24.1.u1
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables)
3 Months Ended
Mar. 31, 2024
Accounts Payable and Accrued Liabilities [Abstract]  
Schedule of Accounts Payable and Accrued Liabilities
The following table presents significant accounts payable and accrued liability balances as of the periods ending (in thousands):
March 31, 2024December 31, 2023
Trade payables$20,335 $24,233 
Payroll liabilities3,182 4,296 
Contract liabilities337 761 
Acquisition holdback payments956 868 
Other liabilities2,801 2,286 
$27,611 $32,444 
v3.24.1.u1
FAIR VALUE MEASUREMENTS (Tables)
3 Months Ended
Mar. 31, 2024
Fair Value Disclosures [Abstract]  
Schedule of Fair Value, Liabilities Measured on Recurring Basis
Liabilities measured at fair value on a recurring basis as of the dates noted below are as follows (in thousands):
March 31, 2024December 31, 2023
Level 3:
     Contingent Liabilities$675 $815 
v3.24.1.u1
EARNINGS PER SHARE (Tables)
3 Months Ended
Mar. 31, 2024
Earnings Per Share [Abstract]  
Schedule of Earnings Per Share, Basic and Diluted
The following table reconciles basic and diluted weighted average shares used in the computation of earnings per share (in thousands except per share values):
Three Months Ended March 31,
Numerator20242023
   Net income$6,666 $11,433 
Denominator
   Weighted average basic shares27,630 27,616 
   Dilutive effect of restricted stock units10 
   Weighted average diluted shares27,637 27,626 
Earnings per share
   Basic$0.24 $0.41 
   Diluted$0.24 $0.41 
v3.24.1.u1
SIGNIFICANT ACCOUNTING POLICIES - Segment Reporting (Details)
3 Months Ended
Mar. 31, 2024
segment
Accounting Policies [Abstract]  
Number of operating segments 1
v3.24.1.u1
SIGNIFICANT ACCOUNTING POLICIES - Accounts Receivable (Details) - USD ($)
$ in Millions
Mar. 31, 2024
Dec. 31, 2023
Accounting Policies [Abstract]    
Allowance for doubtful accounts receivable $ 0.2 $ 0.2
v3.24.1.u1
SIGNIFICANT ACCOUNTING POLICIES - Provisions and Warranties (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Accounting Policies [Abstract]    
Warranty liability $ 500 $ 422
Movement in Standard and Extended Product Warranty Accrual, Increase (Decrease) [Roll Forward]    
Warranty liability, beginning balance 422 234
Warranties assumed in period 412 768
Payments (334) (580)
Warranty liability, ending balance $ 500 $ 422
v3.24.1.u1
REVENUE - Schedule of Transactions Within Contract Liabilities (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2024
USD ($)
Change in Contract with Customer, Liability [Abstract]  
Beginning contract liabilities $ 761
Revenue recognized related to payments included in the December 31, 2023 balance (696)
Payments received for which performance obligations have not been satisfied 276
Effect of foreign currency translation (4)
Ending contract liabilities $ 337
v3.24.1.u1
REVENUE - Disaggregation of Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Disaggregation of Revenue [Line Items]    
Total revenue $ 90,104 $ 85,842
Product revenue    
Disaggregation of Revenue [Line Items]    
Total revenue 66,852 67,308
Paint protection film    
Disaggregation of Revenue [Line Items]    
Total revenue 49,011 49,548
Window film    
Disaggregation of Revenue [Line Items]    
Total revenue 14,549 14,982
Other    
Disaggregation of Revenue [Line Items]    
Total revenue 3,292 2,778
Service revenue    
Disaggregation of Revenue [Line Items]    
Total revenue 23,252 18,534
Software    
Disaggregation of Revenue [Line Items]    
Total revenue 1,928 1,458
Cutbank credits    
Disaggregation of Revenue [Line Items]    
Total revenue 4,018 4,030
Installation labor    
Disaggregation of Revenue [Line Items]    
Total revenue 16,706 12,399
Training and other    
Disaggregation of Revenue [Line Items]    
Total revenue $ 600 $ 647
v3.24.1.u1
REVENUE - Revenue Estimate By Geographic Area (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Disaggregation of Revenue [Line Items]    
Total revenue $ 90,104 $ 85,842
United States    
Disaggregation of Revenue [Line Items]    
Total revenue 52,048 51,077
China    
Disaggregation of Revenue [Line Items]    
Total revenue 1,450 6,647
Canada    
Disaggregation of Revenue [Line Items]    
Total revenue 11,080 8,592
Continental Europe    
Disaggregation of Revenue [Line Items]    
Total revenue 10,216 7,960
United Kingdom    
Disaggregation of Revenue [Line Items]    
Total revenue 3,486 3,091
Middle East/Africa    
Disaggregation of Revenue [Line Items]    
Total revenue 5,143 3,496
Asia Pacific    
Disaggregation of Revenue [Line Items]    
Total revenue 3,750 2,645
Latin America    
Disaggregation of Revenue [Line Items]    
Total revenue 2,931 2,173
Other    
Disaggregation of Revenue [Line Items]    
Total revenue $ 0 $ 161
v3.24.1.u1
PROPERTY AND EQUIPMENT, NET - Schedule of Property, Plant and Equipment (Details) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Property, Plant and Equipment [Line Items]    
Total property and equipment $ 32,754 $ 30,850
Less: accumulated depreciation 15,130 13,870
Property and equipment, net 17,624 16,980
Furniture and fixtures    
Property, Plant and Equipment [Line Items]    
Total property and equipment 3,953 3,844
Computer equipment    
Property, Plant and Equipment [Line Items]    
Total property and equipment 4,978 4,743
Vehicles    
Property, Plant and Equipment [Line Items]    
Total property and equipment 1,144 1,141
Equipment    
Property, Plant and Equipment [Line Items]    
Total property and equipment 5,780 5,685
Leasehold improvements    
Property, Plant and Equipment [Line Items]    
Total property and equipment 11,151 10,921
Plotters    
Property, Plant and Equipment [Line Items]    
Total property and equipment 4,669 4,315
Construction in Progress    
Property, Plant and Equipment [Line Items]    
Total property and equipment $ 1,079 $ 201
v3.24.1.u1
PROPERTY AND EQUIPMENT, NET - Narrative (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Property, Plant and Equipment [Abstract]    
Depreciation expense $ 1,333 $ 972
v3.24.1.u1
INTANGIBLE ASSETS, NET - Schedule of Intangible Assets (Details) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Finite-Lived Intangible Assets [Line Items]    
Total at cost $ 50,873 $ 50,524
Less: Accumulated amortization 16,935 15,619
Intangible assets, net 33,938 34,905
Trademarks    
Finite-Lived Intangible Assets [Line Items]    
Total at cost 883 864
Software    
Finite-Lived Intangible Assets [Line Items]    
Total at cost 6,238 5,919
Trade name    
Finite-Lived Intangible Assets [Line Items]    
Total at cost 1,900 1,918
Contractual and customer relationships    
Finite-Lived Intangible Assets [Line Items]    
Total at cost 40,689 40,866
Non-compete    
Finite-Lived Intangible Assets [Line Items]    
Total at cost 440 447
Other    
Finite-Lived Intangible Assets [Line Items]    
Total at cost $ 723 $ 510
v3.24.1.u1
INTANGIBLE ASSETS, NET - Narrative (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Goodwill and Intangible Assets Disclosure [Abstract]    
Amortization of intangible assets $ 1,410 $ 1,161
v3.24.1.u1
GOODWILL - Schedule of Goodwill (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2024
Dec. 31, 2023
Goodwill [Roll Forward]    
Goodwill beginning balance $ 37,461 $ 26,763
Additions and purchase price allocation adjustments 556 10,422
Foreign exchange (353) 276
Goodwill ending balance $ 37,664 $ 37,461
v3.24.1.u1
INVENTORIES - Schedule of Inventory (Details) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Inventory Disclosure [Abstract]    
Raw materials $ 6,856 $ 22,308
Work in process 14,658 6,230
Finished goods 88,657 77,971
Inventory, net $ 110,171 $ 106,509
v3.24.1.u1
DEBT - Narrative (Details)
3 Months Ended
Mar. 31, 2024
USD ($)
covenant
Mar. 31, 2024
CAD ($)
covenant
Dec. 31, 2023
USD ($)
Apr. 06, 2023
Line of Credit Facility [Line Items]        
Number of covenants | covenant 2 2    
Revolving Credit Facility | Line of Credit        
Line of Credit Facility [Line Items]        
Maximum borrowing capacity $ 125,000,000      
Amount outstanding 24,000,000   $ 19,000,000  
Covenant, interest coverage ratio, minimum       3.50
Covenant, leverage ratio, maximum       3.00
Revolving Credit Facility | Line of Credit | HSBC Bank Canada        
Line of Credit Facility [Line Items]        
Maximum borrowing capacity   $ 4,500,000    
Amount outstanding $ 0   $ 0  
Revolving Credit Facility | Line of Credit | Base Rate        
Line of Credit Facility [Line Items]        
Line of credit facility interest rate equal to or less than) 8.50% 8.50%    
Revolving Credit Facility | Line of Credit | Secured Overnight Financing Rate (SOFR)        
Line of Credit Facility [Line Items]        
Line of credit facility interest rate equal to or less than) 6.40% 6.40%    
Revolving Credit Facility | Line of Credit | Prime Rate | HSBC Bank Canada        
Line of Credit Facility [Line Items]        
Basis spread on prime rate 0.25%      
Revolving Credit Facility | Line of Credit | Minimum        
Line of Credit Facility [Line Items]        
Commitment fee percentage 0.20%      
Revolving Credit Facility | Line of Credit | Minimum | Base Rate        
Line of Credit Facility [Line Items]        
Basis spread on prime rate 0.00%      
Revolving Credit Facility | Line of Credit | Minimum | Secured Overnight Financing Rate (SOFR)        
Line of Credit Facility [Line Items]        
Basis spread on prime rate 1.00%      
Revolving Credit Facility | Line of Credit | Maximum        
Line of Credit Facility [Line Items]        
Commitment fee percentage 0.25%      
Revolving Credit Facility | Line of Credit | Maximum | Base Rate        
Line of Credit Facility [Line Items]        
Basis spread on prime rate 0.50%      
Revolving Credit Facility | Line of Credit | Maximum | Secured Overnight Financing Rate (SOFR)        
Line of Credit Facility [Line Items]        
Basis spread on prime rate 1.50%      
v3.24.1.u1
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES - Schedule of Accounts Payable and Accrued Liability (Details) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Accounts Payable and Accrued Liabilities [Abstract]    
Trade payables $ 20,335 $ 24,233
Payroll liabilities 3,182 4,296
Contract liabilities 337 761
Acquisition holdback payments 956 868
Other liabilities 2,801 2,286
Accounts payable and accrued liabilities $ 27,611 $ 32,444
v3.24.1.u1
FAIR VALUE MEASUREMENTS (Details) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Fair Value, Inputs, Level 3 | Fair Value, Recurring    
Fair Value, Option, Quantitative Disclosures [Line Items]    
Contingent Liabilities $ 675 $ 815
v3.24.1.u1
EARNINGS PER SHARE (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Numerator    
Net income $ 6,666 $ 11,433
Denominator    
Weighted average basic shares (in shares) 27,630,000 27,616,000
Dilutive effect of restricted stock units (in shares) 7,000 10,000
Weighted average diluted shares (in shares) 27,637,000 27,626,000
Earnings per share    
Basic (in dollar per share) $ 0.24 $ 0.41
Diluted (in dollar per share) $ 0.24 $ 0.41

XPEL (NASDAQ:XPEL)
과거 데이터 주식 차트
부터 10월(10) 2024 으로 11월(11) 2024 XPEL 차트를 더 보려면 여기를 클릭.
XPEL (NASDAQ:XPEL)
과거 데이터 주식 차트
부터 11월(11) 2023 으로 11월(11) 2024 XPEL 차트를 더 보려면 여기를 클릭.