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    XPEL
    Earnings call· Jun 2026(Q2 FY26)

    XPEL Q2 FY26 earnings call XPEL

    Aug 5, 2026 Source

    Executive summary

    XPEL Q2 FY26 — Record Revenue and Strategic Manufacturing Investments

    XPEL delivered record Q2 FY26 revenue, driven by strong U.S. and China performance, despite headwinds from FTC concerns in dealerships and vehicle availability in the Middle East. The company made significant strategic investments in manufacturing facilities in San Antonio and China, aiming for long-term margin expansion and enhanced innovation. Management is focused on operational efficiency, including SKU reduction and working capital improvements, while continuing share repurchases and small tuck-in acquisitions.

    Highlights

    5

    • Overall revenue grew 14.7% to a record $143.1 million, exceeding expectations.

    • U.S. region revenue grew 11.7% to a record $78.6 million.

    • Cash flow from operations reached a new record of $30.8 million in the quarter.

    • Adjusted EBITDA margin grew to 20.7% in the quarter.

    • India business saw 60-plus percent growth in the quarter.

    Concerns

    5

    • Dealership channel continues to face challenges due to FTC concerns, impacting sales.

    • Domestic car sales in China were down approximately 20% year-over-year in Q2.

    • Iran conflict led to a 5% revenue decline in the India and Middle East region due to vehicle availability issues.

    • Europe region revenue declined 2.3% due to distribution order timing and lower OEM volumes.

    • Manufacturing start-up costs were approximately $0.03 per share in Q2, expected to grow to $0.03-$0.04 per share in Q3.

    Guidance & targets

    5
    CategoryTargetConfidence
    Q3 Revenue
    $137 million to $139 million
    high materiality
    High
    Manufacturing Margin Benefit Start
    Mid-2027
    high materiality
    High
    Operating Margin Goal (Run Rate)
    Mid-20% range
    high materiality
    High
    Gross Margin Trend
    Modestly increase
    medium materiality
    Medium
    Manufacturing Start-up Costs per Share
    $0.03 to $0.04 per share
    medium materiality
    High

    Segment performance

    9
    SegmentRevenueYoYQoQMargin
    U.S. Region
    Record high for the region, with independent channel performing better than the dealership channel. Dealerships still facing FTC concerns.
    		$78.6 million11.7%——
    Canada Region
    Growth driven by timing impact of a large distributor's ordering cadence; underlying growth around 4% excluding timing.
    		—10.8%——
    China Region
    Good quarter despite challenging domestic car sales (down ~20% YoY). Approaching 1-year anniversary of distributor acquisition integration.
    		$15.9 million———
    Rest of APAC Region
    Investments in various countries are paying off, leading to growth and development opportunities, particularly in Japan.
    		—solid growth——
    India and Middle East Region
    Decline driven by impact from Iran conflict and vehicle availability shortage, not broader consumer demand collapse. India saw strong growth on a smaller base.
    India growth: 60%+
    		—-5%——
    Europe Region
    Decline driven by multiple factors including timing of distribution orders and lower year-over-year volumes in OEM operations due to vehicle production cadence. Likely saw impact from products destined for the Middle East.
    		—-2.3%——
    LatAm Region
    Brazil operation is getting up and running as a new build distribution opportunity.
    		—solid quarter——
    Window Film Product Line
    Record revenue, with solid growth across all regions, led by U.S. and China.
    % of total revenue: 22.7%
    		$32.5 million16.1%——
    Total Installation Revenue
    Led by strong performance in corporate-owned stores.
    % of total revenue: a little over 21%
    		—just under 11%——

    Operational metrics

    8
    Revenue Pull-ahead
    $2 million
    Q2 FY26

    Pull-ahead sales ahead of Q3 price increases.

    First Half Revenue Growth
    14%vs H1 FY25
    H1 FY26

    Overall revenue growth for the first half of the year.

    SG&A Expenses
    $39.9 million16.7% growth
    Q2 FY26

    Includes new SG&A from China distributor acquisition in September last year.

    Adjusted EPS
    $0.68
    Q2 FY26

    Adjusted earnings per share, factoring out manufacturing ramp-up costs.

    Capital Expenditure
    $65.1 million
    Q2 FY26

    CapEx includes the real estate purchase for the San Antonio manufacturing site.

    Term Loan
    $44.8 million
    Q2 FY26

    Used to finance a portion of the real estate purchase for manufacturing expansion.

    SKU Reduction
    —
    Ongoing

    Aggressively looking to reduce SKUs and consolidate offerings to drive efficiency in working capital and improve inventory turns. Initial focus was on reducing the rate of SKU additions.

    DSO Improvement
    improved
    Q2 FY26

    Nice improvement in Days Sales Outstanding (DSO) contributing to cash conversion cycle improvement.

    Industry KPIs

    10
    MetricValueDetails
    EPS$0.65USD
    Revenue$143.1 millionUSD
    Inventory—
    Net income—
    Gross margin44.1%%
    Sg a OPEX ratio27.9%% of total revenue
    Operating margin16.2%%
    Adjusted EBITDA ebita—
    Operating income EBIT—
    Share buyback capital return—

    Deals & partnerships

    2
    UndisclosedPurchase of 4-building site for North American manufacturing and supply chain footprintpart of $110 million total investment

    The site includes the existing San Antonio facility. This approach creates maximum optionality for scaling manufacturing operations.

    UndisclosedAcquisition of 75% interest in an existing manufacturing facility in Chinapart of $110 million total investment

    This acquisition rounds out the company's manufacturing footprint in China.

    Risks & headwinds

    5
    Dealership FTC Concernsongoing

    headwind remains

    Mitigation: Engaging with dealership customers and helping them become compliant with FTC requirements; flight to quality helps XPEL in many scenarios.

    Challenging Domestic Car Sales in ChinaQ2 FY26

    down ~20% year-over-year

    Mitigation: Team is doing a great job integrating the acquisition and making progress despite the market conditions.

    Iran Conflict Impact on India/Middle EastQ2 FY26

    revenue declined 5%

    Mitigation: Impact was not as great as feared; primarily driven by vehicle availability shortage, not broader consumer demand. Potential for recapture of deferred business in H2 FY26.

    Europe Seasonality and OEM Production CadenceQ2 FY26

    revenue declined 2.3%

    Mitigation: Expects seasonality in Europe business due to August holidays; OEM volumes are driven by production cadence, not company control.

    Manufacturing Build-out Risksmid-2027 to exit 2028

    largest project in terms of dollars invested

    Mitigation: Company already responsible for quality, supply chain, sourcing, and overseeing production; build-out is about owning assets. Extensive technical team (40+ people) manages development, sourcing, quality, R&D.

    What to watch in Q3 FY26

    5

    Q3 Revenue Performance

    Q3 FY26
    CurrentQ2 revenue: $143.1 million
    Target$137 million to $139 million

    Why it matters

    This will indicate if the company can meet its guidance despite pull-ahead📎 sales and regional headwinds, reflecting underlying demand and execution.

    When you put it together, we're expecting Q3 revenue to be in the $137 million to $139 million range, assumes consistent U.S. and Asia Pacific trending.

    Q&A highlights

    4

    How will the margin benefit from manufacturing investments materialize? Will it be a step function or gradual, and how does China's existing facility contribute to a quicker benefit?

    Management expects margin expansion to occur in step functions rather than a gradual increase, with some points in time showing significant step-ups. The China facility is anticipated to contribute to a quicker turnaround and benefit by mid-2027.

    “Yes. I think you're thinking about it correct in that we'll see some points in time with step-up. So it's not a huge jump up to the terminal run rate, and it's also not necessarily just a gradual quarter-on-quarter increase necessarily. So there are going to be some step functions along the way. To your point with China, yes, definitely a quicker turnaround there. That's definitely part of what we'll see by mid-2027.”

    asked by Matthew Raab · answered by Ryan Pape

    2 min read5 chapters

    Detailed Narrative

    01

    Strong Q2 Performance and Revenue Drivers

    XPEL achieved record revenue of $143.1 million in Q2 FY26, growing 14.7% year-over-year, exceeding internal expectations. This included approximately $2 million of pull-ahead📎 sales ahead of anticipated Q3 price increases. The U.S. region delivered a solid performance with 11.7% growth to $78.6 million, driven by the independent channel outperforming the dealership channel. The company's personalization and referral platform is generating record numbers, supporting aftermarket installers.

    02

    Strategic Manufacturing Investments

    The company announced two key investments totaling approximately $110 million to advance its manufacturing strategy. This includes purchasing a 4-building site in San Antonio to serve as its North American manufacturing and supply chain hub, and acquiring a 75% interest in an existing manufacturing facility in China. These investments are expected to yield incremental margin benefits starting mid-2027, with an operating margin goal of mid-20% by the end of 2028, and are crucial for innovation, agility, and product quality.

    03

    Regional Performance Highlights and Challenges

    Canada saw 10.8% growth, primarily due to distributor ordering cadence, with underlying growth around 4%. China revenue reached $15.9 million, a strong result despite a 20% year-over-year decline in domestic car sales. The India and Middle East region experienced a 5% decline due to vehicle availability issues stemming from the Iran conflict, though India itself grew over 60%. Europe revenue declined 2.3% due to distribution timing and lower OEM volumes, while LatAm had another solid quarter with Brazil operations ramping up.

    04

    Gross Margin and Cost Pressures

    Gross margin improved to 44.1% in Q2 from 43.7% in Q1. The company plans modest price increases in Q3 to offset ongoing price-cost pressures and expects gross margin to continue to modestly increase through the rest of the year. Manufacturing start-up costs in San Antonio and China impacted Q2 EPS by $0.03 per share, with an expected increase to $0.03-$0.04 per share in Q3 as full run-rate costs are incurred.

    05

    Operational Efficiency and Capital Allocation

    XPEL achieved record cash flow from operations of $30.8 million, driven by improved cash conversion cycle and DSO. The company is aggressively working to reduce SKUs and consolidate offerings, particularly after the China distributor acquisition, to enhance inventory turns and overall working capital efficiency. Capital allocation priorities include funding manufacturing initiatives, pursuing small tuck-in acquisitions in service and OEM-adjacent areas, and continuing share repurchases well into next year.

    AI-generated summary of the company’s earnings call. Not investment advice.