[Management View]
XPEL reported record revenue of $125.4 million in Q3 2025, representing 11.1% growth. The US region matched this growth rate, achieving $71.7 million in revenue. The EU region saw a significant increase of 28.8% to $16.5 million. The company completed the acquisition of its Chinese distributor, which is expected to enhance gross margins starting in Q1 2026. Management emphasized a focus on core business investments and operational efficiency.

[Outlook]
XPEL provided Q4 revenue guidance of $123-$125 million, implying 13%-14% full-year growth for 2025. The company aims to achieve a 52%-54% gross margin and mid to high 20% operating margin by 2028, with projected investments of $75-$150 million in manufacturing, supply chain, and M&A. The integration of the China acquisition is expected to generate $10 million in annual run-rate operating income once inventory cycles through.

[Financial Performance]
- Total revenue: $125.4 million, up 11.1% YoY
- US revenue: $71.7 million, up 11.1% YoY
- EU revenue: $16.5 million, up 28.8% YoY
- Net income: $100,000, down 11.8% YoY
- SG&A expenses: $35.7 million, up 20.8% YoY
- EBITDA: $19.9 million, down 8.1% YoY
- Cash flow from operations: $33.2 million, up from $19.6 million in Q3 2024

[Q&A Highlights]
Question 1: Did the price increases impact gross margins, and how is XPEL mitigating this?
Answer: The price increases impacted gross margins by 170 basis points. XPEL has a robust set of suppliers and has mitigated the impact. The company plans to invest in its supply chain to become a high-quality, low-cost provider.

Question 2: How is the rollout of colored films progressing, and what is the expected impact?
Answer: The rollout has been well received, with the best product launch in XPEL's history. The market for colored films is expected to grow, with potential expansion in dealership and OEM channels.

Question 3: What are the revenue assumptions underpinning the mid to high 20% operating margin target by 2028?
Answer: XPEL expects low double-digit organic revenue growth through the midterm.

Question 4: What is the sentiment across the aftermarket and dealer channels?
Answer: The sentiment is mixed, with varying performance across regions. The retail automotive business in the US is looking for extra gross profits, which is positive for XPEL. The company is focused on long-term success and making necessary investments.

Question 5: What is the expected gross margin impact from the China inventory in Q4 and Q1/Q2 2026?
Answer: The drag from the higher-priced China inventory will remain in Q4, but gross margins are expected to improve from the prior year. The highest gross margins are anticipated in Q1 and Q2 2026 as the inventory cycles through.

[Sentiment Analysis]
Analysts were generally positive, focusing on the strategic acquisition in China and the potential for margin improvement. Management maintained a confident and forward-looking tone, emphasizing strategic investments and operational efficiency.

[Quarterly Comparison]
| Metric | Q3 2025 | Q3 2024 | YoY Change |
|-------------------------|---------------|---------------|--------------|
| Total Revenue | $125.4 million| $112.9 million| +11.1% |
| US Revenue | $71.7 million | $64.5 million | +11.1% |
| EU Revenue | $16.5 million | $12.8 million | +28.8% |
| Net Income | $100,000 | $113,400 | -11.8% |
| SG&A Expenses | $35.7 million | $29.6 million | +20.8% |
| EBITDA | $19.9 million | $21.7 million | -8.1% |
| Cash Flow from Operations| $33.2 million | $19.6 million | +69.4% |

[Risks and Concerns]
- Declining revenue in Canada due to broad-based market slowness.
- Flat revenue in Latin America, with weakness in Mexico and operational shifts in Brazil.
- Increased SG&A expenses, including acquisition-related fees and bad debt.
- Gross margin pressure from supplier price increases.

[Final Takeaway]
XPEL delivered a strong Q3 2025 performance with record revenue and significant growth in the US and EU regions. The strategic acquisition of its Chinese distributor is expected to enhance gross margins starting in Q1 2026. Management remains focused on core business investments and operational efficiency, aiming for substantial margin improvements by 2028. Despite some regional challenges and increased expenses, XPEL is well-positioned for long-term growth and profitability.