XPEL NASDAQ: XPEL reported first-quarter 2026 results that management said came in ahead of internal expectations, driven by strong performance in the U.S. and Asia-Pacific. President and CEO Ryan Pape said the company delivered “solid top and bottom line performance,” with revenue rising 13.1% year over year to $117.4 million.
Pape attributed the quarter’s performance to strength across channels, particularly in March. He noted that March “really dictates how the quarter shakes out,” and said results exceeded expectations even against a strong prior-year comparison in the U.S. tied to elevated auto sales and consumers accelerating purchases amid tariff concerns.
Revenue growth led by U.S. and APAC; Canada timing impact
In the U.S., revenue increased just under 10% to $63.8 million. Pape said the company saw “good performance…across all of our channels,” with the independent installer channel—its largest U.S. revenue component—growing 12% in the quarter. He added that the company’s service business posted “mid-teens plus” growth, and global dealership services installation revenue rose 27%, with the U.S. representing the largest part of that category.
Pape said the company encountered some incremental friction in the U.S. dealership channel after certain dealer groups received reminders from the U.S. Federal Trade Commission on pricing disclosure and practices. While he characterized the overall impact as limited, he said the “net result for us is nominally increased churn and new customer acquisition headwinds there,” adding that regulatory attention can create additional friction in the sales process.
Canada’s performance was affected by the timing of sales to XPEL’s largest distributor in the country. Pape said that if results were normalized for the timing shift—pushing revenue into the second quarter—Canada would have posted 5.7% growth year over year rather than a decline. He said the company saw good growth in corporate operations and the dealership channel, with continued weakness in the aftermarket channel. Pape also pointed to April revenue in Canada as the “second highest month we’ve had in 14 or 15 months,” while cautioning that one month does not establish a trend.
Internationally, Pape said China revenue was in line with expectations, reflecting seasonality tied to Chinese New Year. He said the company made “good headway” integrating its China distribution acquisition, with OEM and 4S business continuing to grow. Europe posted “good results,” and the company saw “outsized growth” in APAC beyond China, which Pape linked to efforts over several years to become more direct in the region.
Pape also said Latin America delivered one of its better quarters after being a weak spot over the past year, as the company progresses with a direct operation in Brazil and other initiatives in Mexico and elsewhere.
Middle East logistics steadied Q1, but management flagged Q2 risk
Pape said XPEL did not see a meaningful impact to its Middle East business in the first quarter from the Iran conflict, crediting the team’s ability to manage “a much more complicated and expensive logistics operation” to keep product flowing to customers. He said some customers initially wanted to order more product in anticipation of additional disruptions, but logistics challenges limited that behavior.
However, Pape said sentiment in the region turned more negative after March, driven by vehicle shortages. “You can’t put our products on cars that don’t exist to be sold,” he said, adding that the company has heard reports of layoffs among some operators in the region. He described the Middle East as a downside risk for the second quarter, while emphasizing that the company intends to continue expanding and investing there despite near-term volatility.
On the Q&A portion of the call, B. Riley Securities analyst Jeff Van Sinderen asked whether Middle East weakness was already reflected in guidance. Pape said it was “a little bit of both,” with some impact embedded in the outlook, but added there could be “further downside risk” if trends develop worse than expected.
OEM programs reach record mix; attachment rate remains key growth driver
Pape said interest in OEM programs remains a “continued bright spot,” spanning multiple manufacturers, regions, and program types. He noted that some OEM initiatives require upfront investment that can pressure gross margin or SG&A early on, but become more profitable as they scale. “We’re beginning to see signs of that leverage in the OEM business,” he said.
OEM revenue in the first quarter was “just under 7%” of total revenue, which Pape called the largest in company history. He said the channel remains a significant growth opportunity and suggested the company could become “more capacity limited” than demand limited as it onboards new programs, which he described as “a good problem.”
Craig-Hallum analyst Matthew Raab asked what is driving XPEL’s U.S. outperformance relative to broader auto trends. Pape said the biggest driver remains “attachment rate growth”—more vehicles receiving some amount of XPEL product. He said content per vehicle is still contributing, but not at the magnitude seen several years ago when paint protection film coverage was shifting rapidly from smaller packages to larger and full-vehicle applications. “If you want sort of the North Star that we’re pursuing, it’s really about attachment,” Pape said.
Margins, expenses, cash flow, and capital investments
Gross margin was 43.7% in the quarter. Pape said the company continues to work through higher-cost China inventory acquired in the transaction and is seeing benefits from other margin initiatives, but also flagged upward cost pressure tied to oil prices, supply chain disruptions, and the petrochemical industry. He said the company still expects to build on first-quarter gross margin in subsequent quarters, but added it is “not guaranteed” and may not reach the magnitude previously expected, with pricing decisions under review.
Asked about gross margin outlook, Pape said the company still expects improvement in the second quarter, but noted uncertainty beyond Q2 due to the evolving pricing and cost environment. He also said the company has been “relatively conservative” on pricing recently, balancing market conditions, but indicated adjustments are likely at least in line with observed input cost pressures.
Senior Vice President and CFO Barry Wood said window film revenue rose 24.8% to $23.3 million, representing about 19.8% of total revenue, with particularly strong growth in China and APAC tied to the company’s move to a more direct model and progress in OEM and 4S channels. Total installation revenue increased a little over 24% and represented just under 24% of total revenue.
SG&A rose 16.6% to $38.2 million, or 32.6% of revenue. Wood said quarterly SG&A included about $1.2 million related to the annual dealer conference held in January and approximately $0.5 million for an expanded presence at the NADA dealer trade show, which he said the company plans to continue. SG&A also included about $2 million of incremental expense related to the China acquisition. Wood said the company expects SG&A growth rates to moderate as the year progresses.
Wood reported EBITDA margin of 14.5%, with operating income up 17% and net income attributable to stockholders increasing 20.5% to $10.3 million. Net income margin attributable to stockholders was 8.8%.
Wood also said days sales outstanding increased again, citing “noise” in accounts receivable tied to the China transition services agreement, where the seller is collecting on XPEL’s behalf, and the fact that more than 60% of the quarter’s accounts receivable billings were in the OEM channel, which carries extended terms. He added that a reorganization of customer-facing operations initially caused collection practices to lag, but said that has been rectified and the company expects DSOs to trend downward.
Cash flow provided by operations was $7.4 million. The company spent approximately $9.7 million in capital expenditures, which Wood said was driven primarily by deposits to preserve optionality on supply chain initiatives. XPEL also executed a roughly $3 million share buyback early in the quarter.
Outlook and strategic updates
Pape provided second-quarter revenue expectations of $135 million to $137 million, reflecting a typical seasonal ramp from Q1 to Q2, “a consistent U.S. trend,” and “modest improvement in Canada.” He cited Middle East weakness and potential delays in dealership services deal flow due to added friction as downside risks.
On manufacturing and supply chain initiatives previously discussed by the company, Pape said XPEL has made “substantial progress” this year, largely settled on its course of action after evaluating alternatives, and has begun executing on the strategy. He characterized it as a multi-year initiative and said the company will provide updates at meaningful milestones rather than “play-by-play commentary.”
Pape also noted the addition of Mark Thornton to XPEL’s board, describing him as a Procter & Gamble executive with China and APAC experience as well as manufacturing and materials science expertise.
About XPEL NASDAQ: XPEL
XPEL, Inc is a leading manufacturer and distributor of advanced protective films and coatings for automotive, marine, aviation, and architectural applications. The company's core products include paint protection film (PPF), window tinting film, and ceramic coatings designed to shield surfaces from scratches, environmental contaminants, and UV damage. XPEL's flagship PPF, known for its self-healing properties, is engineered to maintain a vehicle's factory finish by resisting swirl marks, stone chips, and acid rain.
Beyond automotive protection, XPEL has expanded its offerings to include protective films for electronics and architectural surfaces, providing solutions that enhance durability and prolong the life of high-value assets.
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