XPEL, Inc.

and welcome to the Expel Incorporated First Quarter 2025 Earnings Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions following the presentation. If anyone should require operator assistance during this conference, please press star zero on your phone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, John Nesbitt.

Good morning and welcome to our conference call to discuss Expel's first quarter 2025 financial results. On the call today, Ryan Pape, Expel's President and Chief Executive Officer, and Barry Wood, Expel's Senior Vice President and Chief Financial Officer, will provide an overview of the business operations and review the company's financial results. Immediately after the prepared comments, we will take questions from our call participants. The transcript of this call will be available on the company's website after the call. and I'll take a moment to read the Safe Harbor Statement. During the course of this call, we'll make certain forward-looking statements regarding Expel Inc. and its business, which may include, but are not limited to, anticipated use of proceeds from capital transactions, expansion into new markets, and execution of the company's growth strategy. Such statements are based on our current expectations and assumptions, which are subject to known and unknown risk factors and uncertainties that could cause our actual results to be materially different from those expressed in these statements. Some of these factors are discussed in detail in our most recent Form 10-K, including under Item 1A, Risk Factors, filed with the SEC. Exbeller takes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Okay, with that, I'll now turn the call over to Ryan. Go ahead, Ryan.

Thank you, John, and good morning, everyone, as well. Welcome to the first quarter 2025 call. We're off to a good start this year. Solid top and bottom line performance in the first quarter. Revenue grew 15.2% to 103.8 million. I think a good headline number for us and obviously more detail as you look at our different regions. U.S. region grew 11.6% to 58.1 million in the quarter. This included sales into the aftermarket independent channel that grew over 10%. So I think a good result there relative to what we've been seeing. U.S. car sales in the quarter were good. New car buyer seems to be wanting to get ahead of the tariffs. So obviously you saw a really good SAR in March, which was good. You know, hard to know how that helps and hurts us in this dynamic, but it's not a bad thing when more cards are sold. So what that means for the rest of the year I think remains to be seen. Obviously, still a lot of uncertainty, really impossible to predict what happens and how it might impact the business. But we have good momentum in the U.S. right now, and I see that continuing all things equal. Canada region, revenue declined significantly. 14.9% to 9.4 million in the quarter. If we adjust for some timing differences from the previous year, revenue decline was around 10%, so still rather significant. Sentiment from customers in Canada is, I would say, relatively poor, similar to how the U.S. started the year last year, if you recall, in the first quarter. It was very challenging for the U.S., and Canada outperformed handily in that quarter. So, We've started to enter the busy season. Canada has passed their election, so we'll keep working hard there. I think the worst is probably behind us, but time will tell. China revenue came in at $8.1 million. This was in line with what we expected. At this point, everything is proceeding on track relative to all of our plans in China. We're still engaged with our distributor on evolving the go-to-market to be more direct in China, and we'll probably have more to discuss on that over the next quarter or two. We saw solid growth in most of the other regions. Europe had its second highest quarter in history from a revenue standpoint, which was better, you know, off of some of the sluggishness in Q4. I think our view on Europe for the year is probably improving at this point. And we saw record revenue in the Middle East. As I mentioned earlier, it's impossible to predict what's going to happen in the coming quarters with all the tariff noise. So we won't be providing any guidance for the year. It's hard to say what the near-term impacts will be. We saw good momentum in April. Obviously, that could change, but we're feeling pretty good about that. Our view right now is QT revenue should be in the $117 to $119 million range. Again, you know, the environment we're in, it could be on either side of that potentially. A good gross margin performance in the quarter, which came in at 42.3%. This probably approximates our sort of near-term run rate, plus or minus, And as we discussed previously, we still see upside opportunity for that over the midterm. Although, you know, our expectations of achieving that this year may be somewhat muted, just given all of the noise and things we're having to do. So, we saw nice leverage in the quarter on our SG&A growth, or nice leverage in the quarter as our SG&A growth rates moderated. As we discussed on the last call, we did do a restructuring initiative We had about $400,000 in costs related to that in SG&A for the quarter, another $300,000 in Q2. We're making good progress on our expense initiatives, and that will continue to be a focus for us. But to be clear, we're continuing to invest in SG&A where it drives future revenue of the business, examples of that being in our in-country distribution businesses, which we're actively building, or services expansion where there may be SG&A investment needed. But the focus on SG&A is really on our overhead and back-office where we have to spend more conservatively, but also where we've invested substantially over the past several years to build the team that we have. So I feel pretty good about that. It continues to be a laser focus for us going forward, but I think we're making progress. EBITDA grew 23.2% per quarter to $14.4 million, which is a great result. I briefly touched on the tariff situation earlier. Our team obviously is closely monitoring the ever-changing situation. And, you know, we can take steps to mitigate potential impacts. From a product standpoint, we don't anticipate significant impact from the tariffs based on how we make and how we sell products and where we do it, including in China. So there may be transient noise if we have the wrong product in the wrong place for a quarter or if we're having to consider and having to consider planning around tariffs and retaliatory tariffs doesn't help with our goal of optimizing and ultimately reducing total inventory because it's just less efficient. But we're in a good position. I think much harder to understand is the impact on the new car business and the resulting trickle down impact to our business of the tariffs. You know, questions we're asking are, will there be pull ahead in demand? Maybe we've seen some of that in March or April. Will buyers ultimately substitute one vehicle for another if there's a large pricing disparity? If that substitution happens, how does that impact their decision to accessorize? Will new vehicle inventory become constrained due to production cuts or other factors? How will that impact dealership behavior? Is that good or bad for us? So these are the kind of things that I think we're working to strategize on. But really, our response to all of them is pretty simple. We're not actively doing anything today to change what the business does except to, you know, stay focused on providing best products, services, and support to all of our customers. And as things change or if things change relative to the car market and the impacts on the business, we'll, of course, adjust our business and strategy appropriately. Okay. On the product front, we've talked a lot over the past couple calls, but windshield film continues to do well. We're launching additional colored films in Q2, as well as surface protection films for architectural application. I think what you'll see in that line is, you know, our internal mantra to protect everything. We'll see a lot more protection applications in the architectural space going forward. Today, we announced our board-approved $50 million share repurchase plan authorization. We still view the number one priority for capital allocation is investing in the business via M&A primarily, and then secondarily, a possibility of more CapEx to drive our costs lower. Having said that, there's always a price where buying yourself is obvious, and now we have the vehicle in place to do that. Relative to our inorganic activities, we've discussed our efforts to expand a services business, so that work continues. We're, I would say, prudently cautious in our approach given the end market for that business and sort of some of the uncertainty, but we continue to work through that. And I think a big part of managing that correctly is to ensure we get the right valuation for anything we look at and that, you know, that valuation, the valuations of some of the targets we're looking at, that they move appropriately relative even to our valuation that's moved. So these are things we're focused on, but continuing to push ahead even further in light of that uncertainty. So all in all, I think a good quarter. The team's really done a good job. Everybody's really focused on all the details that matter to ensure we optimize the business and run it in the best possible way, and I couldn't be more thankful for that. So with that, we'll turn it over to Barry. Barry, take it away.