XPEL, Inc.

Good morning everyone and welcome to the Expel Incorporated fourth quarter and year end 2025 earnings call. At this time, all participants are in a listen only mode and the floor will be open for questions following the presentation. We do ask that you limit your questions to one plus a follow up per person. Thank you. 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, Jen Belladeau of IMS Investor Relations. Jen, the floor is yours.

Thank you. Good morning and welcome to our conference call to discuss Expel's fourth quarter and year-end 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. A transcript of this call will be available on the company's website after the call. I'll take a moment now to read the Safe Harbor Statement. During the course of this call, we will 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 10K, including under item 1A, risk factors, filed with the SEC. Expel undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. With that out of the way, I'll turn the call over to Ryan. Please go ahead, Ryan.

Thank you, Jen, and good morning, everyone, and welcome from me also to the fourth quarter 2025 and year-end conference call. 25 was a significant year for us. We accomplished a lot, including our long-planned China distribution acquisition, significant completion of our plans to have a direct position in the largest car markets in the world, and then also positioning ourselves for significant change going forward with planned investments in manufacturing and supply chain. We closed out the year with good momentum. Q4 revenue growing 13.7% and Q4 EBITDA growing 37.6%. Our U.S. region, which is the largest, saw revenue growth of 11% in the quarter, which is a good result in light of sort of all the ongoing dynamics, which is sort of largely unchanged. The corporate stores, dealership service business, and aftermarket all saw growth in their various piece parts. I think our results are probably consistent with the macro car sales trends, Q4 being sequentially down in terms of units reflecting normalization of earlier strength in the year and attempts to front run tariffs and then get ahead of the EV credit expiration. In our case, we likely saw greater than expected negative impact in Q4 for the U.S. as a result of that EV pull forward due to the expiring credits. Compared to what we were expecting, this probably cost us one to two million of end product demand from our referral program channel alone, not including the rest of the market. And that referral program has really been a bright spot this year. So we saw that manifest with just outstanding revenue performance in September and October, which would have correlated with the end of the EB credits and then the following month, which is really replenishment cycle for our dealers. And then the demand in the referral program was down sharply for the rest of the year. But we're seeing signs of that recovering this year. The correlation between our buyer and the EB buyer writ large remains a little bit elusive for us. So, you know, obviously the credit expiration is known and many have prognosticated on what that would be, but extrapolating exactly how that impacts The sales through our channels is proven a little bit harder. But we see significant rebound in the EV sales through the referral channel, obviously in the slower part of the year. So we're pretty optimistic for that going forward. We definitely felt that in the U.S. in the fourth quarter. Q4 was our first full quarter of post-acquisition. China revenue came in at $14 million, probably a little bit higher than we expected. well underway in our integration efforts in the region. And as I mentioned previously, our team is doing a great job. Our acquisition here sets the stage really for growth in three segments of the business, the aftermarket, which for the longest time had been the entirety of our business in China, 4S or dealership, and then further OEM partnerships, which we've been engaged in for the past 18 months. As had been the case all year long, continue to see headwinds in Canada. revenue declining slightly compared to the prior year. Canada has been tough all year. You saw car sales in Canada down sequentially 13% Q4 from Q3, so it's obviously not helpful. Europe was a bright spot in Q4, revenue growing 26.8% in the quarter, really strong performance in our different multiple channels there. Indian Middle East was good, although timing of distributor orders was a bit of a drag there. in the quarter, but very bullish about what we're doing there. And we're seeing the beginnings of activation in India in all of our channel types, not just the aftermarket. So that's really encouraging. Latin America was flat. Weakness there we saw in Q3 continued into Q4. A big part of that is conversion of Brazil into a direct market, which is really our last or close to last market where we want a direct presence. Our expectation for Q1 revenue is in the $112 to $114 million range. This assumes ongoing U.S. trend, continuous office in Canada, and then obviously consideration for the impact of Chinese New Year, which historically always impacts Q1. We'll see that a little bit differently now where we're selling directly versus the sell-in, so get through that quarter and then really our China sales will really start matching sort of the end market demand. So we're happy to see that. Our gross margin in the quarter finished at 41.9%, relatively flat to Q3. As we discussed in last quarter's call, we're managing through some price increases, which have largely been mitigated, as well as selling through acquired inventory that we acquired in the China distributor purchase. So that's obviously at a stepped-up cost basis, so lower margin as we sell through that. We exited the quarter in an upward trend in terms of gross margin and expect gross margins to improve as the year progresses, consistent with our comments on the previous call. As I alluded to earlier, we saw good operating leverage in the quarter, EBITDA growing 37.6%. As we've been discussing, we continue to expect to gain leverage on our added channel costs as we grow all of these operations. Reflecting on the year, I'm happy with our overall performance. Top line growth of 13.3% was solid relative to the environment. We've done a nice job managing through some of these headwinds in gross margin and being able to largely complete our strategy of being direct in these top car markets. I think that's going to be a significant accomplishment and represents significant expense that we've added that now the team is going to grow through that for us. We continue to advance our DAP platform. This has become more integrated and continues to become more integrated into the business of our customers. We're getting great feedback really on the accelerated rate of development here. And that's, I think, due to a couple factors being the bulk of our sort of legacy tech debt being eliminated for having been in this business a long time. And also we're certainly seeing productivity gains from AI, like many are talking about, specifically in that field. You know, we've sharpened our product strategy to focus really on our core products and just the immediate adjacencies and improvements to the core products that comprise most of our sales and where we have the technical competencies. I would say overall, we've probably focused on, you know, too many incremental product ads rather than the full focus on selling more of our core. And I don't think these are things we talk about on this call. You know, the products we've talked about here that we've launched, like the colored films, windshield films, these are really straight to the core. But, you know, sort of behind the curtain, there's been a desire to sort of be all things to our customers and supplying them everything they might need to run their business and You know, reflecting on that, you know, we really pulled back on that because we're not adding a lot of value there, and the effort really needs to be on selling more of the core product. So I think, you know, we've successfully made that pivot this year, and I think that's actually quite important. We started the year with an incredible dealer conference, despite terrible weather at the time, really, across the country and in Texas where we host a conference. We had 720, I believe, registered attendees, all-time record. Pretty amazing in my mind, given the fact that we've added international conferences since we started, which obviously takes some of the demand for the main conference, and in spite of the weakness in the aftermarket. So either way, it was really great, and good validation there. And, you know, it's a fire hose to our team of customer input that really helps us sharpen what we're doing. In terms of our previously discussed investments in manufacturing and supply chain, our work there continues. Expect to have more to discuss over the next several months. But as compared to our previous call, there's really no further update for today except to say the plan and strategy remains on track. We're excited and optimistic about 26. I think this is a sentiment shared by our team and many of our customers, certainly as we hear their feedback in person at our conference. And we'll see how that plays out. I think it's an open question exactly what drives that relative optimism that we see, but I think it's encouraging nevertheless. We've got strong prospects for growth in every part of our channel, in every customer type, in every geography. And as you know, we've got retail customers, we've got aftermarket installers, we've got car dealers, we've got car manufacturers. And we're seeing opportunities in really all of those customer types around the world. So I think it's really a validation of the strategy of why we need the presence that we've built. And to that end, our regional leaders and P&L owners, you know, they're all budgeted to grow their operating leverage this year. And then combined with the gross margin growth that we expect, you know, we'll see benefits at the operating line of the business. And, you know, obviously that's net of any incremental costs we might add pursuing our manufacturing and supply chain should we add costs prior to manifesting in any cog savings. But, If and when that happens, we'll certainly talk about that. So overall, our team is doing an amazing job. I really couldn't be happier. And we've really seen incredible focus on what's going to be important for us going forward. And I want to thank all of them. So with that, I'll turn it over to Barry. Barry, go ahead.