XPEL, Inc.

Good morning, everyone, and welcome to the Expel Incorporated first quarter 2026 earnings call. At this time, all participants have been placed on a listen only mode and a question and answer session will follow the formal 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 of IMS Investor Relations. John, you may begin.

Good morning and welcome to our conference call to discuss Expel's first quarter 2026 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 the call will be available on the company's website after the call. 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 ExpoLink 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 the 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. Expel winner takes no obligation to publicly update or revise any forward-looking statement, whether a result of new information, future events, or otherwise. With that, I'll now turn the call over to Ryan. Please go ahead.

Thank you, John, and good morning, everyone, as well. Welcome to our first quarter 26 call. We're off to a good start this year, solid top and bottom line performance in the quarter. Overall revenue grew 13.1% to $117.4 million, probably a little bit higher than we were expecting, and that was led by the U.S. and APAC, which both outperformed our estimates in March and set us up for a good launch point for the rest of the year. Our U.S. region performed quite well in the quarter with revenue growing just under 10% to 63.8 million. We really, I think, saw good performance, relatively speaking, across all of our channels in the quarter. As we discussed on prior calls, you know, March really dictates how the quarter shakes out. And overall, I would say March exceeded our expectations, especially when you consider the supercharged March of last year in the U.S., where you had the SAR up substantially, consumers trying to front-run tariffs and risk to vehicle prices that they saw. Our U.S. independent installer channel, which is the largest component of our U.S. revenue, grew 12% in the quarter. Good to see the independent aftermarket get off to a nice start. Our service business also had a good quarter, each of those areas growing mid-teens plus. Overall and globally, our dealership services install revenue is up 27%. The United States makes up the largest part of that revenue category, so obviously it performed quite well. In the quarter, we saw some dealer groups in the U.S. receive reminders from the U.S. Federal Trade Commission regarding their pricing disclosure and pricing practices. Most dealers are compliant and use this as a reminder to review their compliance, but some are less likely to pursue preloaded products due to concerns around interpreting the regulations or that they need the tools to gain compliance. So the net result for us is nominally increased churn and new customer acquisition headwinds there. But we're also really helpful for many of these dealers to gain or maintain compliance with our offerings. So nothing new there, but any time regulation sort of rears its head, that just creates more friction. But all in all, even with that, good results. Canada in Q1. performance somewhat masked by the timing of sales to our large distributor we have there. If we normalize that for timing, which will push that revenue into Q2 of this year, we would have seen growth in Canada 5.7% versus Q1 of last year versus the decline that we saw. So we saw a really good growth in corporate operations, good growth in the dealership channel, But still some weakness in the aftermarket channel there in Canada. But I think that is encouraging when you normalize for that. And also our April revenue in Canada was the second highest month we've had in 14 or 15 months. So, you know, one month doesn't make a trend. I think those are positive signs there. China revenue came in about where we expected. You obviously have a seasonal adjustment there relative to Chinese New Year. that is present more when we're selling direct necessarily than our previous distribution model. We make good headway on our integration efforts there relative to the distribution business that we bought. Our OEM and forest business continues to grow and do nicely. And I think teams really integrated well post-acquisition. So we're very pleased with that so far. So as I said, really, all the regions, including Canada, saw really good growth for the quarter, and they all had a strong march. Europe continues to post good results. We also saw outsized growth in APAC beyond China, where we're seeing benefits from becoming more direct in that region that we've worked on for the past few years. And then we saw one of the better quarters in Latin America. which has been a weak spot for us over the past year as we continue to make progress standing up our direct operation in Brazil and some of our other initiatives that we have in Mexico and beyond. So good opportunity there. And we're really, really happy to see the results. We did not see a meaningful impact to the Middle East business in Q1 resulting from the Iran conflict. I would tell you, I think a lot of that The fact that we didn't see negative impact was due to the resourcefulness of our team to navigate what quickly became a much more complicated and expensive logistics operation to get customers their product. The impulse from many of our customers was actually to order more than they needed, anticipating further logistics challenges. But in practice, that didn't happen. Just the logistics precluded it. So really, the quarter came in kind of status quo. We didn't suffer from the disruption, nor did we benefit by sort of customers trying to front run that. I think the unfortunate part of that is the sentiment probably post March is more negative now than it has been there. And really, the key driver of that are the vehicle shortages that are showing up. This is becoming quite common throughout the region. And to say the obvious, you can't put our products on cars that don't exist to be sold. So, you know, clearly that's a concern. And we've had reports that Some dealership and aftermarket and other operators in the region are starting layoffs and things like that to just reduce their overhead. So I think that's really probably one of our downside risks for Q2. But overall, a super important region. We've been doing an amazing job and have a really good strategy. And so we're going to keep expanding and investing and continuing our plans uninterrupted. and just whether that impact near term. And obviously, as everyone knows, it changes every day. A continued bright spot for us is ongoing interest in development of our OEM programs. These programs now span multiple manufacturers, multiple regions, and multiple different program types and configurations. Some of these programs require Upfront investment that negatively impact, you know, gross margin or in SG&A in the beginning because we were adding fixed costs, but then as the program grows and scales as costs are leveraged and margins expanded, we're beginning to see signs of that leverage in the OEM business, which is really encouraging. The Q1 OEM revenue was just under 7% of our total revenue, and that was the largest in history. So we believe this channel will continue to be a good growth opportunity for us and our dealers. And I think we could see a shift from an environment there where, you know, we're more demand limited to more capacity limited in terms of our ability to onboard many things simultaneously. You know, to the extent that happens, I consider that a good problem and will continue you know, have plans in place to continue to scale and evolve and grow what we're doing there. So I think really, really encouraging there. Our expectation for Q2 revenue in the $135 to $137 million range, this assumes sort of normal Q1 to Q2 ramps. I would say Q1 is the lowest quarter of the year, a consistent U.S. trend, modest improvement in Canada. And then I think the downside risks are, and that have impacted our Our estimates here would be Middle East. We certainly expect that to be weaker than we would have expected and probably a little bit delayed new deal flow in some of the dealership services just with that extra friction. So those are probably the downsides. But all in all, I think we're pretty optimistic. We're really happy with how the year started, and we see a lot of that continuing based on what we know today. Our gross margin in the quarter finished 43.7%. We continue to make good progress on working through higher cost China inventory that we acquired. And we continue to see benefits from our other margin initiatives. We are seeing upward pricing pressure from the rise in oil and then all of the disruptions in supply chain and petrochemical industry. So our expectation was to continue to build on this growth margin that we posted this quarter and subsequent quarters this year. I still think that that's likely. However, it's not guaranteed and it may not be at the magnitude we previously expected. But we'll be looking at our pricing as well. So overall, we've taken a bit of a wait and see with respect to the current dynamics, but we'll begin to firm that this quarter. You know, there's a combination of real cost inflation and pricing pressure that we see, but also I think there's some opportunistic pricing that we're seeing people try to take as well. So we want to navigate that and make the best decisions. But, you know, absent any future impact from that, I mean, you're seeing the impact to gross margin that we've talked about from all of these initiatives and as we get Dynamo integrated. And that will continue, excluding those other factors. We did see leverage in the quarter. EBITs are growing 17.8% quarter over quarter. And then just to update on our previously announced initiatives regarding manufacturing and supply chain investments, we've made substantial progress this year and have largely settled on our course of action. You know, after evaluating numerous alternatives and we will begin to execute on that strategy, have begun to execute on that strategy. So we'll have more to share in the coming months and quarters and remain very confident pursuing our goals previously discussed. But I think I would not expect play-by-play commentary from us on this. This is a multi-year initiative to improve the business and improve the performance of the business and allow us to grow into new markets. So that continues to move. We're quite excited about it. And then also I just mentioned Mark Thornton, who we added to the board. Mark is a Procter Gamble executive and really tremendous China and APAC business experience along with manufacturing and material science. So we've been very deliberate about how we expand our board and it was important to initially add one. We've discussed also possibly adding one more board member. But I think we have a very high functioning board that is able to really contribute to the business in a productive way. And the addition of Mark helps us do that. So we've taken our time, but we found a great addition. So very excited about that. So with that, really good job by everyone on our team. I can't stress it enough. And, you know, just the operational discipline this quarter relative to what's happened in the Middle East and to be able to get the revenue out and get the product out and get it in where it needed to go. It took a huge effort just to sort of maintain that status quo operation. So it did a tremendous job, sort of unsung heroes that don't get a lot of praise every day. So I want to call that out. But good job by everybody on the team. With that, I'll turn it over to Barry. Barry, go ahead.