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What changed in XPEL, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of XPEL, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+212 added−181 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-28)

Top changes in XPEL, Inc.'s 2024 10-K

212 paragraphs added · 181 removed · 147 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeIn China, we operate through a sole distributor under a distribution agreement, Shanghai Xing Ting Trading Co., Ltd., which we refer to as the China Distributor. Approximately 10.5% of our consolidated revenue for the year ended December 31, 2023, was derived from sales to the China Distributor.
Biggest changeDue to the nature of this channel, product margins are generally less than other channels. For the year ended December 31, 2024, approximately 13.8% of the Company’s consolidated revenue was through this channel. In China, we operate through a sole distributor under a distribution agreement, Shanghai Xing Ting Trading Co., Ltd., which we refer to as the China Distributor.
The Company has a perpetual license to United States Patent No. 8,765,263 “Multilayer Polyurethane Protective Films”. • Products that are made for us on an exclusive basis – the Company does not own all the underlying IP, but has products made by a third party solely for the Company on an exclusive basis. • Products that we source from suppliers on a non-exclusive basis – the Company does not own the underlying IP but sources products on commercial terms from a third party.
The Company has a perpetual license to United States Patent No. 8,765,263 “Multilayer Polyurethane Protective Films”. • Products that are made for us on an exclusive basis – the Company does not own all the underlying IP, but has products manufactured by a third party solely for the Company on an exclusive basis. • Products that we source from suppliers on a non-exclusive basis – the Company does not own the underlying IP but sources products on commercial terms from a third party.
Related laws may govern the manner in which we store or transfer sensitive information or impose obligations on us in the event of a security breach or inadvertent disclosure of such information. 8 International jurisdictions impose different, and sometimes more stringent, consumer and privacy protections. Our products are subject to export controls, including the U.S.
Related laws may govern the manner in which we store or transfer sensitive information or impose obligations on us in the event of a security breach or inadvertent disclosure of such information. International jurisdictions impose different, and sometimes more stringent, consumer and privacy protections. Our products are subject to export controls, including the U.S.
Within the market for surface and paint 7 protection film, our principal competitors include Eastman Chemical Company (under the LLumar and Suntek brands) and several other smaller companies. For more information, see Risk Factors— The after-market automotive product supply business is highly competitive. Competition presents an ongoing threat to the success of our Company.
Within the market for surface and paint protection film, our principal competitors include Eastman Chemical Company (under the LLumar and Suntek brands) and several other smaller companies. For more information, see Risk Factors— The after-market automotive product supply business is highly competitive. Competition presents an ongoing threat to the success of our Company.
The Company recycles plastic cores, film waste, corrugated boxes and other material related to our conversion operations. We utilize third-party software to monitor our progress on this objective. 9 Intellectual Property and Brand Protection We own intellectual property rights, including numerous patents, copyrights and trademarks, that support key aspects of our brand and products.
The Company recycles plastic cores, film waste, corrugated boxes and other material related to our conversion operations. We utilize third-party software to monitor our progress on this objective. Intellectual Property and Brand Protection We own intellectual property rights, including numerous patents, copyrights and trademarks, that support key aspects of our brand and products.
Environmental Matters General We are subject to a variety of federal, state, local and foreign environmental, health and safety laws and regulations governing, among other things, the generation, storage, handling, use and transportation of hazardous materials; the emission and discharge of hazardous materials into the environment; and the health and safety of our employees.
Environmental Matters General We are subject to a variety of federal, state, local and foreign environmental, health and safety laws and regulations governing, among other things, the generation, storage, handling, use and transportation 9 of hazardous materials; the emission and discharge of hazardous materials into the environment; and the health and safety of our employees.
Government Regulation and Legislation The manufacturing, packaging, storage, distribution, advertising and labeling of our products and our business operations all must comply with extensive federal, state and foreign laws and regulations and consumer protection laws.
Government Regulation and Legislation 8 The manufacturing, packaging, storage, distribution, advertising and labeling of our products and our business operations all must comply with extensive federal, state and foreign laws and regulations and consumer protection laws.
The loss of this relationship, or a material disruption in sales by this distributor, could severely harm our business” and “A significant percentage of our revenue is generated from our business in China, a market that is associated with certain risks.” Company-Owned Installation Centers/Dealership Services XPEL operates 24 Company-owned installation centers: ten in the United States, ten in Canada and one each in the United Kingdom, Australia, Mexico, and Taiwan.
The loss of this relationship, or a material disruption in sales by this distributor, could severely harm our business” and “A significant percentage of our revenue is generated from our business in China, a market that is associated with certain risks.” Company-Owned Installation Centers XPEL operates 23 Company-owned installation centers: ten in the United States, nine in Canada and one each in the United Kingdom, Australia, Mexico, and Taiwan.
In the future, we intend to continue to seek intellectual property protection for our products and enforce our rights against those who infringe on these valuable assets. Human Capital Resources On December 31, 2023, the Company employed approximately 1,054 people (full-time equivalents), with approximately 710 employed in the United States and 344 employed internationally.
In the future, we intend to continue to seek intellectual property protection for our products and enforce our rights against those who infringe on these valuable assets. Human Capital Resources On December 31, 2024, the Company employed approximately 1,143 people (full-time equivalents), with approximately 710 employed in the United States and 433 employed internationally.
New car dealerships have multiple options to sell our products: 1) outsourcing the installation of film to the after-market which is the most common option; 2) developing an in-house program where they hire and train their own employees to install the product; and, 3) utilizing third-party labor to install the product in the dealership facility either on a pre-load basis or after the sale.
New car dealerships have multiple options to sell our products: • outsourcing the installation of film to the after-market which is the most common option; • developing an in-house program where the dealerships hire and train their own employees to install the product (which is purchased directly from us); and, • utilizing third-party labor to install the product in the dealership facility either on a pre-load basis or after the sale.
Automobile Original Equipment Manufacturers (“OEMs”) XPEL sells products, including paint protection film, and provides services, including the installation of paint protection film and pre-delivery inspection to various OEMs. These services are provided in-plant at the OEMs’ facilities or in one of our facilities that is typically adjacent to the OEM’s facility.
OEMs XPEL sells products, including paint protection film, and provides services, including the installation of paint protection film, referral programs and pre-delivery inspection to various OEMs. The installation and pre-delivery inspection services are provided in-plant at the OEMs’ facilities or in one of our facilities that is typically adjacent to the OEM’s facility.
DAP is a proprietary SAAS platform and database consisting of over 80,000 vehicle applications used by the Company and its customers to cut automotive protection film into vehicle panel shapes for both paint protection film and window film products.
Software: A key component of our product offering is our Design Access Platform (“DAP”). DAP is a proprietary SAAS platform and database consisting of over 80,000 vehicle applications used by the Company and its customers to cut automotive protection film into vehicle panel shapes for both paint protection film and window film products.
Some of our Company-owned installation centers are located in geographic areas where we also serve customers in our independent installer/dealership channel, which could be perceived to generate channel conflict.
These locations serve wholesale and retail customers in their respective markets. Some of our Company-owned installation centers are located in geographic areas where we also serve customers in our independent installer channel, which could be perceived to generate channel conflict.
Automotive Window Film Rolls: We sell several lines of automotive window films, primarily under the XPEL PRIME brand name, which exhibit a range of performance characteristics and appearances. Automotive window film sales represented approximately 14.8% of our consolidated revenue for the year ended December 31, 2023.
Surface and Paint Protection film sales represented approximately 53.9% of our consolidated revenue for the year ended December 31, 2024. Automotive Window Film (or Tint): We sell several lines of automotive window or tint films, primarily under the XPEL PRIME brand name, which exhibit a range of performance characteristics and appearances.
The Company will make its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports (and amendments to those reports) filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, or the Securities Exchange Act, available on the Company’s website as soon as reasonably practicable after the Company electronically files or furnishes such materials with the Securities and Exchange Commission or, “SEC”.
The inclusion of the Company’s website address in this Annual Report does not include or incorporate by reference the information on or accessible through the Company’s website, and the information contained on or accessible through the website should not be considered as part of this Annual Report. 10 The Company will make its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports (and amendments to those reports) filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, or the Securities Exchange Act, available on the Company’s website as soon as reasonably practicable after the Company electronically files or furnishes such materials with the Securities and Exchange Commission or, “SEC”.
We seek to increase global brand awareness in strategically important areas, including pursuing high visibility at premium events such as major car shows and high value placement in advertising media consumed by car enthusiasts, to help further expand the Company’s premium brand.
This new car dealership focus is complemented by a comprehensive offering to OEMs that further increases awareness and adoption. 5 We seek to increase global brand awareness in strategically important areas, including pursuing high visibility at premium events such as major car shows, auto races and high value placement in advertising media consumed by car enthusiasts, to help further expand the Company’s premium brand.
Strategic Overview XPEL continues to pursue several key strategic initiatives to drive continued growth. Our global expansion strategy includes establishing a local presence where possible, allowing us to better control the delivery of our products and services. We also add locally based regional sales personnel, leveraging local knowledge and relationships to expand the markets in which we operate.
Strategic Overview XPEL continues to pursue several key strategic initiatives to drive continued growth. Our global expansion strategy includes establishing a local presence where possible, allowing us to better control the delivery of our products and services.
Products and Services Surface and Paint Protection Film Rolls : Our primary products are paint and surface protection films. Most of the products sold are for automotive applications. Paint protection film, our flagship product, is a self-adhesive, clear film designed to be applied to painted surfaces of automobiles and other surfaces.
Most of the products sold are for automotive applications. Paint protection film, our flagship product, is a self-adhesive, clear film designed to be applied to painted surfaces of automobiles and other surfaces. We sell a variety of product lines each with their own unique characteristics, warranties and intended uses.
We support all of these options for new car dealerships through the sales and support to our after-market customers, training and support to dealerships who want to build an in-house program and through our Dealership Services business which provides third-party installation services at dealership locations primarily on a pre-load basis.
We support all of these options for new car dealerships through the sales and support to our after-market customers, training and support to dealerships who want to build an in-house program and through our Dealership Services business which provides third-party installation services at dealership locations. 6 XPEL also offers 24/7 customer service for independent installers and new car dealerships where we provide installation, software and training support via our website and telephone technical support services.
We offer a variety of films with varying colors, visual light transmissions and price points. 4 SAFETY & SECURITY: Safety and Security films are clear, thick polyethylene terephthalate, or PET, films to secure glass in the event of a breakage. We offer a variety of thicknesses and offer films with varying adhesive characteristics for different types of installations.
Architectural window films come in several broad categories, including: Solar: Solar films are designed to provide solar energy rejection. We offer a variety of films with varying colors, visual light transmissions and price points. Safety & Security: Safety and Security films are clear, thick polyethylene terephthalate, or PET, films to secure glass in the event of a breakage.
We also provide marketing and lead generation for our customers by featuring them in our dealer locator on our website. To be considered an Authorized Dealer (and thereby have end customers referred to them), independent installers must employ certified installers and meet other requirements including purchase minimums and more. Our products are primarily utilized for new cars.
To be considered an Authorized Dealer (and thereby have end customers referred to them), independent installers must employ certified installers and meet other requirements including purchase minimums and more. New Car Dealerships Our products are primarily utilized for new cars. As such, new car dealerships will likely be involved in the ultimate sale of our products and services.
Eligible full-time employees in the United States also have access to medical, dental and vision plans, savings plans and other resources. Programs and benefits differ internationally for a variety of reasons, such as local legal requirements, market practices and negotiations with work councils, trade unions and other employee representative bodies. Available Information XPEL was incorporated in Nevada in 2003.
Programs and benefits differ internationally for a variety of reasons, such as local legal requirements, market practices and negotiations with work councils, trade unions and other employee representative bodies, but the Company strives to offer competitive pay and benefits in each jurisdiction in which it has operations. Available Information XPEL was incorporated in Nevada in 2003.
The majority of our revenue is derived from our automotive products and services while the remainder of our revenue is derived from non-automotive products including architectural window film, marine and flat surface protection films. The Company began as a software company designing vehicle patterns used to produce cut-to-fit protective film for the painted surfaces of automobiles.
The majority of our revenue is derived from the sale of our automotive products and related services while the remainder of our revenue is derived from non-automotive products including architectural window film and marine and flat surface protection films.
We consider our relations with the China Distributor to be good, but the loss of our relationship could result in the delay of the distribution and a decrease in marketing of our products in China. For more information, see Risk Factors— We currently rely on one distributor of our products and services in China.
For more information, see Risk Factors— We currently rely on one distributor of our products and services in China.
We believe our channel strategy uniquely positions us to be wherever the demand takes us and is a key part of our ability to drive sustained growth. We also continue to drive expansion of our non-automotive product portfolio. Our architectural window film segment continues to gain traction.
During 2024, we completed five acquisitions in furtherance of this objective. We believe our channel strategy uniquely positions us to be wherever the demand takes us and is a key part of our ability to drive sustained growth.
We believe there are multiple uses for protective films and we continue to explore those adjacent market opportunities. Sales and Distribution We sell and distribute our products through independent installers, new car dealerships, third-party distributors, Company-owned installation centers, Automobile Original Equipment Manufacturers, Protex Canada’s franchisees, and online.
Sales and Distribution We sell and distribute our products through independent installers, new car dealerships, third-party distributors, Company-owned installation centers, Automobile Original Equipment Manufacturers, Protex Canada’s franchisees, and online. Independent Installers We offer complete turn-key solutions to independent installers, which includes XPEL protection films, installation training, access to our proprietary DAP software, marketing support and lead generation.
The Company internalizes many conversion operations including quality assurance, inspection, rewinding, boxing and packaging for many of its products at its facilities around the world. The Company’s product lines continue to grow and include both film and non-film products.
The Company’s film products (including paint protection film and automotive and architectural window films) are produced using various roll-to-roll manufacturing processes performed entirely by third parties. The Company internalizes many conversion operations including quality assurance, inspection, rewinding, boxing and packaging for many of its products at its facilities around the world.
Suppliers The Company’s products are sourced from a number of suppliers or manufactured by various third-party contract manufacturers. The Company has currently opted to pursue an “asset-light” manufacturing model whereby third-party suppliers and manufacturers are used to supply the Company with the majority of its products.
The Company has currently opted to pursue an “asset-light” manufacturing model whereby third-party suppliers and manufacturers are used to supply the Company with the majority of its products. We routinely evaluate building or buying manufacturing assets for some of our products, but we believe that our asset-light model best suits the Company at the present time.
We believe that this software greatly enhances installation efficiency and reduces film waste – a valuable feature to our customers, as their highest cost tends to be labor. Increasingly, DAP is used to manage operations for our dealers, including job management, scheduling and inventory tracking.
We provide access to our proprietary DAP software which, in turn, provides access to pattern libraries that enable cutting our films into specific shapes to aid in their installation. We believe that this software greatly enhances installation efficiency and reduces film waste – a valuable feature to our customers, as their highest cost tends to be labor.
Architectural Window Film Rolls : We sell architectural glass solutions for commercial and residential buildings under the VISION brand name, representing our first product set with a fully non-automotive use. Architectural window films come in several broad categories, including: SOLAR: Solar films are designed to provide solar energy rejection.
Windshield Protection Film: We sell windshield protection film which, unlike automotive window tint, is applied to the outside of a windshield, helping to make the windshield more impact-resistant and prevent costly repairs. 4 Architectural Window Film: We sell architectural glass solutions for commercial and residential buildings under the VISION brand name, representing our first product set with a fully non-automotive use.
OTHER: In addition to the main categories of SOLAR and SAFETY & SECURITY films, we also offer anti-graffiti, exterior applied and decorative films. Architectural window film sales represented approximately 2.3% of our consolidated revenue for the year ended December 31, 2023.
We offer a variety of thicknesses and offer films with varying adhesive characteristics for different types of installations. Other: In addition to the main categories of Solar and Safety & Security films, we also offer anti-graffiti, exterior applied and decorative films.
This channel represented approximately 4.1% of the Company’s consolidated revenue for the year ended December 31, 2023. Online and Catalog Sales XPEL offers certain products such as paint protection kits, car wash products, after-care products and installation tools via its website.
Online and Catalog Sales XPEL offers certain products such as paint protection kits, car wash products, after-care products and installation tools via its website. Revenues from this channel are negligible, but we believe that by offering these products on our website, we increase brand awareness.
XPEL also offers 24/7 customer service for independent installers and new car dealerships where we provide installation, software and training support via our website and telephone technical support services. Distributors In various parts of the world, XPEL operates primarily through third-party distributors under written agreements with the Company to develop a market or a region under our supervision and direction.
Distributors In various parts of the world, XPEL operates primarily through third-party distributors under written agreements with the Company to develop a market or a region under our supervision and direction. These distributors may sell to other distributors or customers who ultimately install the product on an end customer’s vehicle.
Installation services (including product and labor revenue) represented approximately 18% of our consolidated revenue for the year ended December 31, 2023. Miscellaneous Products, Tools and Pre-Cut Films: We sell a variety of other miscellaneous product sets including pre-cut film products, tools and accessories and merchandise and apparel.
Ceramic coating: We sell a hydrophobic, self-cleaning coating that can be applied to a variety of surface types for automobiles, aircraft and marine applications. Miscellaneous Products, Tools and Pre-Cut Films: We sell a variety of other miscellaneous product sets including pre-cut film products, tools and accessories and merchandise and apparel.
In 2007, we began selling automotive surface and paint protection film products to complement our software business. In 2011, we introduced our ULTIMATE protective film product line which, at the time was the industry’s first protective film with self-healing properties.
The Company began as a software company designing vehicle patterns used to produce cut-to-fit protective film for headlights and painted surfaces of automobiles. In 2007, we began selling automotive paint protection film products to complement our software business.
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Item 1. Business Company Overview We are a supplier of automotive paint protection film, automotive window film, ceramic coatings, architectural window film products, and related tools and equipment to support the installation of these products. We also function as a service provider offering installation of these products through multiple channels.
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Item 1. Business Company Overview We are a supplier of protective films, coatings and related services primarily to the automobile aftermarket, new car dealerships and automobile original equipment manufacturers, or OEMs.
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The ULTIMATE technology allows the protective film to better absorb the impacts from rocks and other road debris, thereby fully protecting the vehicle. The film is described as “self-healing” due to its ability to return to its original state after damage from surface scratches. The launch of the ULTIMATE product catapulted the Company into several years of strong revenue growth.
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As paint protection film technology improved and became more durable, awareness and adoption of paint protection film continued to increase driving significant industry growth over the last several years. Initial adoption of paint protection film came primarily from luxury car enthusiasts in the United States and Canada.
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Our over-arching strategic philosophy stems from our view that being closer to the end customer in terms of our channel strategy affords us a better opportunity to efficiently introduce new products and deliver tremendous value which, in turn, drives more revenue growth for the Company.
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These enthusiasts were primarily served by a growing automotive aftermarket of independent installers of automotive paint protection and window films. Internationally, nascent demand began to build as awareness and adoption in the United States and Canada continued to increase.
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Historically, one of the top complaints from new car buyers has been damage to paint from rock chips and road debris. Paint protection film solves for this issue by protecting the painted surface from such damage. The installation of paint protection film requires training and practice to become proficient.
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Over the last few years new car dealership interest in the product increased due to their exposure to the aftermarket installer network while OEM interest in the product increased through their exposure to the new car dealerships who were selling the product.
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Most installers of paint protection film prefer to use software and a pattern databases to aid in the installation. The benefits of using software for installation include increased installation efficiency and reduction of waste. Some of the products sold are used for non-automotive applications, such as industrial protection, screen protection or architectural protection.
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Our strategy initially centered on how best to serve and grow our network of independent installers in the US and Canada and to sell products internationally through independent distributors while simultaneously building and enhancing the XPEL brand. This “best-in-class” service strategy was then extended to new car dealerships and OEMs.
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We sell a variety of product lines each with their own unique characteristics, warranty and intended use. Surface and Paint Protection film sales represented approximately 58.0% of our consolidated revenue for the year ended December 31, 2023.
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Internationally, while our initial market entry was primarily through indirect distribution, we desire to ultimately sell directly to the majority of the top twenty-five car markets in the world which is an important element of our acquisition strategy. Products Surface and Paint Protection Film : Our primary products are paint and surface protection films.
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Ceramic coating: We sell a hydrophobic, self-cleaning coating that can be applied to a variety of surface types for automobiles, aircraft and marine applications. Ceramic coating sales represented less than 2% of our consolidated revenue for the year ended December 31, 2023. Software : A key component of our product offering is our Design Access Platform (“DAP”).
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Automotive window film sales represented approximately 15.7% of our consolidated revenue for the year ended December 31, 2024.
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Our DAP customers pay a monthly access fee to access our proprietary database. Monthly DAP subscriptions represented less than 2% of our consolidated revenue for the year ended December 31, 2023.
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Services Installation Services: We offer installation services for the installation of all of our products in our various channels. We have over 400 installation technicians who are highly trained to install our products effectively and efficiently. Total installation labor revenue represented approximately 17.7% of our consolidated revenue for the year ended December 31. 2024.
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Installation, Dealership and OEM Services : We offer installation services of our various products directly to retail and wholesale customers through our Company-owned installation facilities in their respective markets, through our dealership services business which provides on-site services to automobile dealerships and to Original Equipment Manufacturers (“OEMs”).
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Our DAP customers pay a monthly access fee to access our proprietary database. Training Services: We offer training services to our customers for the installation of all of our products. The installation of surface protection and window films requires training and practice to become proficient. We offer both inbound and outbound training for a fee.
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Our acquisition strategy centers on our belief that the closer the Company is to its end customers, the greater its ability to drive increased product sales. During 5 2023, we completed four acquisitions in furtherance of this objective.
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We utilize a new car dealership centric focus that allows us to sustain continued growth in the enthusiast segment while simultaneously driving increased awareness and adoption down market with non-luxury brands.
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Independent Installers/New Car Dealerships We primarily operate by selling a complete turn-key solution directly to independent installers and new car dealerships, which includes XPEL protection films, installation training, access to our proprietary DAP software, marketing support and lead generation. For the year ended December 31, 2023, approximately 63.2% of the Company’s consolidated revenue was through this channel.
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For the year ended December 31, 2024, approximately 63.8% of the Company’s consolidated revenue was through this channel. We offer a suite of services to complement our products for our aftermarket installer customers and strive to create value for being an XPEL dealer.
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We offer a suite of services to complement our products for our dealers and strive to create value for being an XPEL dealer. We provide access to our proprietary DAP software which, in turn, provides access to pattern libraries that enable cutting our films into specific shapes to aid in their installation.
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Increasingly, DAP is used to manage operations for our dealers, including job management, scheduling and inventory tracking. We also provide marketing and lead generation for our customers by featuring them in our dealer locator on our website.
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As such, new car dealerships will likely be involved in the ultimate sale of our products and services.
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Approximately 5.7% of our consolidated revenue for the year ended December 31, 2024, was derived from sales to the China Distributor. We consider our relations with the China Distributor to be good, but the loss of our relationship could result in the delay of the distribution and a decrease in marketing of our products in China.
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These distributors may sell to other distributors or customers who ultimately install the product on an end customer’s vehicle. Due to the nature of this channel, product margins are generally less than other 6 channels. For the year ended December 31, 2023, approximately 18.1% of the Company’s consolidated revenue was through this channel.
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Competition 7 The Company principally competes with other manufacturers and distributors of automotive protective film products.
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These locations serve wholesale and retail customers in their respective markets. The Company also provides on-site installation services to automobile dealerships throughout the United States and Canada through its dealership services business. This channel represented approximately 14.0% of the Company’s consolidated revenue for the year ended December 31, 2023.
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The Company also competes for “shelf space” within new car dealerships, particularly in the United States and Canada. Dealerships have several options to sell additional products and/or services to automobile purchasers in order to increase their gross profit per vehicle.
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Revenues from this channel are negligible, but we believe that by offering these products on our website, we increase brand awareness. The revenue from this channel represented less than 1.0% of the Company’s consolidated revenue for the year ended December 31, 2023. Competition The Company principally competes with other manufacturers and distributors of automotive protective film products.
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The Company believes its products and services provide dealerships with a set of unique options to increase their gross profit per vehicle. Suppliers The Company’s products are sourced from a number of suppliers or manufactured by various third-party contract manufacturers.
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We routinely evaluate building or buying manufacturing assets for some of our products, but we believe that our asset-light model best suits the Company at the present time. The Company’s film products (including paint protection film and automotive and architectural window films) are produced using various roll-to-roll manufacturing processes performed entirely by third parties.
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The Company’s product lines continue to grow and include both film and non-film products.
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The inclusion of the Company’s website address in this Annual Report does not include or incorporate by reference the information on or accessible through the Company’s website, and the information contained on or accessible through the website should not be considered as part of this Annual Report.
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Eligible full-time employees in the United States also have access to medical, dental and vision plans, savings plans and other resources.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

55 edited+40 added−12 removed140 unchanged
Biggest changeThe after-market automotive product supply business is highly competitive. Competition presents an ongoing threat to the success of our Company. We face significant competition from a number of companies, many of whom have greater financial, marketing and technical resources than us, as well as regional and local companies and lower-cost manufacturers of automotive and other products.
Biggest changeWe face significant competition from a number of companies, many of whom have greater financial, marketing and technical resources than us, as well as regional and local companies and lower-cost manufacturers of automotive and other products. Such competition may result in pressure on our profit margins and limit our ability to maintain or increase the market share of our products.
Our degree of leverage could have important consequences for the holders of our Common Stock, including increasing our vulnerability to general economic and industry conditions; requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities; restricting us from making strategic acquisitions or causing us to make non-strategic divestitures, limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes; and limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged.
Our degree of leverage could have important consequences for the holders of our Common Stock, including increasing our vulnerability to general economic and industry conditions; requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities; restricting us from making strategic acquisitions or 25 causing us to make non-strategic divestitures, limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes; and limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged.
We believe that our ability to compete effectively depends upon many factors both within and beyond our control, including: • the usefulness, ease of use, performance, and reliability of our products compared to our competitors; • the timing and market acceptance of products, including developments and enhancements to our products or our competitors’ products; • customer service and support efforts; • marketing and selling efforts; • our financial condition and results of operations; • acquisitions or consolidation within our industry, which may result in more formidable competitors; • our ability to attract, retain, and motivate talented employees; • our ability to cost-effectively manage and grow our operations; • our ability to meet the demands of local markets in high-growth emerging markets, including some in which we have limited experience; and • our reputation and brand strength relative to that of our competitors.
We believe that our ability to compete effectively depends upon many factors both within and beyond our control, including: • the usefulness, ease of use, performance, and reliability of our products compared to our competitors; • the timing and market acceptance of products, including developments and enhancements to our products or our competitors’ products; • customer service and support efforts; • marketing and selling efforts; • our financial condition and results of operations; • acquisitions or consolidation within our industry, which may result in more formidable competitors; 16 • our ability to attract, retain, and motivate talented employees; • our ability to cost-effectively manage and grow our operations; • our ability to meet the demands of local markets in high-growth emerging markets, including some in which we have limited experience; and • our reputation and brand strength relative to that of our competitors.
The failure or inadequacy of our IT systems, the compromise, disruption, degradation, manipulation, loss, theft, destruction, or unauthorized disclosure or use of confidential information, or the unauthorized 22 access to, disruption of, or interference with our products and services that rely on IT systems, could impair our ability to secure and maintain intellectual property rights; result in a product manufacturing interruption or failure, or in the interruption or failure of products or services that rely on IT systems; damage our operations, customer relationships, or reputation; and cause us to lose trade secrets or other competitive advantages.
The failure or inadequacy of our IT systems, the compromise, disruption, degradation, manipulation, loss, theft, destruction, or unauthorized disclosure or use of confidential information, or the unauthorized access to, disruption of, or interference with our products and services that rely on IT systems, could impair our ability to secure and maintain intellectual property rights; result in a product manufacturing interruption or failure, or in the interruption or failure of products or services that rely on IT systems; damage our operations, customer relationships, or reputation; and cause us to lose trade secrets or other competitive advantages.
Any such charges could significantly harm our business, 13 financial condition, results of operations and the price of our securities. Estimates and assumptions are made on an ongoing basis for the following: revenue recognition, capitalization of software development costs, impairment of long-lived assets, inventory reserves, allowances for doubtful accounts, fair value for business combinations, and impairment of goodwill.
Any such charges could significantly harm our business, financial condition, results of operations and the price of our securities. Estimates and assumptions are made on an ongoing basis for the following: revenue recognition, capitalization of software development costs, impairment of long-lived assets, inventory reserves, allowances for doubtful accounts, fair value for business combinations, and impairment of goodwill.
Alternatively, if a court were to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.
Alternatively, if a court were to find this 29 choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.
We expect to analyze and evaluate the acquisition of 17 strategic businesses or product lines with the potential to strengthen our industry position or enhance our existing set of product and service offerings. We may not be able to identify suitable acquisition candidates, obtain financing or have sufficient cash necessary for acquisitions or successfully complete acquisitions in the future.
We expect to analyze and evaluate the acquisition of strategic businesses or product lines with the potential to strengthen our industry position or enhance our existing set of product and service offerings. We may not be able to identify suitable acquisition candidates, obtain financing or have sufficient cash necessary for acquisitions or successfully complete acquisitions in the future.
Intellectual property protection, however, may not preclude competitors from developing products similar to ours or from challenging our names or products. Further, as we expand on a multi-national level and in some jurisdictions where the protection of intellectual property rights is less 21 robust, the risk of competitors duplicating our proprietary technologies increases.
Intellectual property protection, however, may not preclude competitors from developing products similar to ours or from challenging our names or products. Further, as we expand on a multi-national level and in some jurisdictions where the protection of intellectual property rights is less robust, the risk of competitors duplicating our proprietary technologies increases.
Item 1A. Risk Factors 10 This Annual Report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face as described below and elsewhere in this Annual Report.
Item 1A. Risk Factors This Annual Report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face as described below and elsewhere in this Annual Report.
The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could harm our business. We currently depend on the continued services and performance of our executive officers, Ryan L. Pape, our President and Chief Executive Officer and Barry R.
The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could harm our business. 13 We currently depend on the continued services and performance of our executive officers, Ryan L. Pape, our President and Chief Executive Officer and Barry R.
We also rely to a large extent on the efficient and uninterrupted operation of complex information technology systems, infrastructure, and hardware (together “IT systems”), some of which are within our control and some of which are within the control of third parties, to accumulate, process, store, and transmit large amounts of confidential information and other data.
We also rely to a large extent on the efficient and uninterrupted operation of complex information technology systems, infrastructure, and 24 hardware (together “IT systems”), some of which are within our control and some of which are within the control of third parties, to accumulate, process, store, and transmit large amounts of confidential information and other data.
Furthermore, all Common Stock beneficially owned by persons who are not our affiliates and have beneficially owned such shares for at least one year may be sold at any time by these existing stockholders in accordance with Rule 144 of the Securities Act.
Furthermore, all Common Stock beneficially owned by persons who are not our affiliates 28 and have beneficially owned such shares for at least one year may be sold at any time by these existing stockholders in accordance with Rule 144 of the Securities Act.
In particular, licenses and permits issued or granted to our Company by relevant governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot predict the effect of the interpretation of existing or new Chinese laws or regulations on our businesses.
In particular, licenses and permits issued or granted to our Company by relevant 12 governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot predict the effect of the interpretation of existing or new Chinese laws or regulations on our businesses.
These fluctuations may be caused by a number of factors, many of which are beyond our control. For example, changes in industry or third-party specifications may alter our development timelines and consequently our ability to deliver 15 and monetize new or updated products and services.
These fluctuations may be caused by a number of factors, many of which are beyond our control. For example, changes in industry or third-party specifications may alter our development timelines and consequently our ability to deliver and monetize new or updated products and services.
If the Company manufactures a defective product, it may experience material product liability losses. Whether or not its products are defective, the Company may incur significant costs to defend product liability claims. It also could incur significant costs in correcting any defects, lose sales and suffer damage to its reputation.
If the Company manufactures a 22 defective product, it may experience material product liability losses. Whether or not its products are defective, the Company may incur significant costs to defend product liability claims. It also could incur significant costs in correcting any defects, lose sales and suffer damage to its reputation.
Sales of shares of Common Stock under Rule 144 or another exemption under the Securities Act or pursuant to a registration statement could have a material adverse effect on 25 the price of our Common Stock and could impair our ability to raise additional capital through the sale of equity securities.
Sales of shares of Common Stock under Rule 144 or another exemption under the Securities Act or pursuant to a registration statement could have a material adverse effect on the price of our Common Stock and could impair our ability to raise additional capital through the sale of equity securities.
This choice of forum provision may limit a stockholder’s ability to bring claim in a judicial forum that it finds 26 favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees.
This choice of forum provision may limit a stockholder’s ability to bring claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees.
The resolution of any such dispute may be subject to the exercise of considerable discretion by the Chinese government and its 11 agencies and forces unrelated to the legal merits of a particular matter or dispute may influence their determination.
The resolution of any such dispute may be subject to the exercise of considerable discretion by the Chinese government and its agencies and forces unrelated to the legal merits of a particular matter or dispute may influence their determination.
Financial statements prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP” or “GAAP”) require the use of estimates, judgments and assumptions that affect the reported amounts.
Financial statements prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP” or “GAAP”) require the use of estimates, judgments and assumptions that affect 14 the reported amounts.
These risks include: • changes in general economic and political conditions in countries where we operate, particularly in emerging markets; • relatively more severe economic conditions in some international markets than in the U.S.; • the difficulty of enforcing agreements and collecting receivables through non-U.S. legal systems; • the difficulty of communicating and monitoring standards and directives across our global facilities; • the imposition of trade protection measures and import or export licensing requirements, restrictions, tariffs or exchange controls; • the possibility of terrorist action affecting us or our operations; • the threat of nationalization and expropriation; • difficulty in staffing and managing widespread operations in non-U.S. labor markets; • changes in tax treaties, laws or rulings that could have a material adverse impact on our effective tax rate; • limitations on repatriation of earnings; • the difficulty of protecting intellectual property in non-U.S. countries; and • changes in and required compliance with a variety of non-U.S. laws and regulations.
These risks include: • changes in general economic and political conditions in countries where we operate, particularly in emerging markets; • the imposition of trade protection measures, including increased tariffs, and import or export licensing requirements, restrictions, tariffs or exchange controls; • fluctuating exchange rates; • relatively more severe economic conditions in some international markets than in the U.S.; • the difficulty of enforcing agreements and collecting receivables through non-U.S. legal systems; • the difficulty of communicating and monitoring standards and directives across our global facilities; • the possibility of terrorist action affecting us or our operations; • the threat of nationalization and expropriation; • difficulty in staffing and managing widespread operations in non-U.S. labor markets; • changes in tax treaties, laws or rulings that could have a material adverse impact on our effective tax rate; • limitations on repatriation of earnings; • the difficulty of protecting intellectual property in non-U.S. countries; and • changes in and required compliance with a variety of non-U.S. laws and regulations.
Wood, our Senior Vice President and Chief Financial Officer, none of whom has an employment agreement. Loss of key personnel, including members of management as well as key product development, marketing, and sales personnel, could disrupt our operations and have an adverse effect on our business.
Wood, our Senior Vice President and Chief Financial Officer, neither of whom has an employment agreement. Loss of key personnel, including members of management as well as key product development, marketing, and sales personnel, could disrupt our operations and have an adverse effect on our business.
Acquisitions and investments may involve significant cash expenditures, debt issuance, equity issuance, operating losses and expenses.
Acquisitions and investments may involve significant cash expenditures, debt 19 issuance, equity issuance, operating losses and expenses.
For these reasons and because the market for our services and products is relatively new and rapidly changing, it is difficult to predict our future financial results. If the model of selling vehicles through dealerships in North America changes dramatically, our revenue could be impacted. Generally, most vehicles in North America are sold through franchised new car dealerships.
For these reasons and because the market for our services and products is relatively new and rapidly changing, it is difficult to predict our future financial results. If the model of selling vehicles through dealerships changes dramatically, our revenue could be impacted. Generally, most vehicles are sold through franchised new car dealerships.
It remains unclear what the U.S. administration or foreign governments, including China, will or will not do with respect to tariffs, the U.S.MCA or other international trade agreements and policies.
It remains unclear what the U.S. administration or foreign governments, including China, Canada and Mexico will or will not do with respect to tariffs, the U.S.MCA or other international trade agreements and policies.
These dealerships have a strong profit motive and are historically very good at selling accessories and other products. Going forward, if the dealership model were to change in the form of fewer franchised dealerships, or the possibility of manufacturer owned distribution, the prospects in this channel may diminish.
These dealerships have a strong profit motive and are historically very good at selling accessories and other products. Going forward, if the dealership model were to change in the form of fewer franchised dealerships, changes in 17 franchise laws or the possibility of manufacturer owned distribution, the prospects in this channel may diminish.
We have established a liability reserve under these warranties based on a review of historical warranty claims. Our liability reserve for warranties as of the year ended December 31, 2023 was $0.4 million. The warranty reserve may not be sufficient to cover the costs associated with future warranty claims.
We have established a liability reserve under these warranties based on a review of historical warranty claims. Our liability reserve for warranties as of the year ended December 31, 2024 was $0.7 million. The warranty reserve may not be sufficient to cover the costs associated with future warranty claims.
Automotive sales and production are cyclical and depend on, among other things, general economic conditions, consumer spending, vehicle demand and preferences (which can be affected by a number of factors, including fuel costs, employment levels and the availability of consumer financing).
Automotive sales and production are cyclical and depend on, among other things, general economic conditions, consumer sentiment and spending, vehicle demand and preferences (which can be affected by a number of factors, including fuel costs, employment levels, inflation, tariffs, and the availability and cost of consumer financing).
The Company distributes all of its products in China through one distributor, with sales to such distributor representing approximately 10.5% of our consolidated revenue for the year ended December 31, 2023. The China Distributor places orders with us on a prepaid basis at a price set by us, which we may change with 30 days’ notice.
The Company distributes all of its products in China through the China distributor, with sales to such distributor representing approximately 5.7% of our consolidated revenue for the year ended December 31, 2024. The China Distributor places orders with us on a prepaid basis at a price set by us, which we may change with 30 days’ notice.
If we are unable to retain and acquire new customers, our financial performance may be materially and adversely affected. 18 We are exposed to political, regulatory, economic and other risks that arise from operating a multinational business. Sales outside of the U.S. for the year ended December 31, 2023 accounted for approximately 43% of our consolidated revenue.
If we are unable to retain and acquire new customers, our financial performance may be materially and adversely affected. 20 We are exposed to political, regulatory, economic and other risks that arise from operating a multinational business. Sales outside of the U.S. for the year ended December 31, 2024 accounted for approximately 42.8% of our consolidated revenue.
Our directors and executive officers, together with their affiliates and related persons, beneficially owned, in the aggregate, approximately 9.5% of our outstanding Common Stock as of February 28, 2024.
Our directors and executive officers, together with their affiliates and related persons, beneficially owned, in the aggregate, approximately 9.3% of our outstanding Common Stock as of February 28, 2025.
The trading price of our Common Stock has been and could continue to be subject to wide fluctuations in response to certain factors, including: • U.S. and global economic conditions leading to general declines in market capitalizations, with such declines not associated with operating performance. • Quarter-to-quarter variations in results of operations. • Our announcements of new products. • Our announcements of acquisitions or divestitures. • Our announcements of significant new customers or contracts. • Our competitors’ announcements of new products. • Our product development. • Changes in our management team. • General conditions in our industry. • Investor perceptions and expectations regarding our products, services, plans and strategic position and those of our competitors and clients. 24 In addition, the public stock markets experience extreme price and trading volume volatility, particularly in growth sectors of the market.
The trading price of our Common Stock has been and could continue to be subject to wide fluctuations in response to certain factors, including: • U.S. and global economic conditions leading to general declines in market capitalization, with such declines not associated with operating performance. • Quarter-to-quarter variations in results of operations. • Our announcements of new products. • Our announcements of acquisitions or divestitures. • Our announcements of significant new customers or contracts. • Our competitors’ announcements of new products. • Our product development. • Changes in our management team. • General conditions in our industry. • Investor perceptions and expectations regarding our products, services, plans and strategic position and those of our competitors and clients.
A public health crisis could impact our business A public health crisis, including a pandemic, similar in nature to the coronavirus disease, could impact all geographic regions where we sell or produce products, creating business disruptions that could have a material adverse effect on our business, financial condition, results of operations and cash flows.
A public health crisis could impact our business A public health crisis, including a pandemic, could impact all geographic regions where we sell or produce products, creating business disruptions that could have a material adverse effect on our business, financial condition, results of operations and cash flows.
If we are unable to adequately protect our intellectual property or if our patterns become widely available without our permission, our revenue could be impacted.
We maintain an aggressive approach to defending our intellectual property. If we are unable to adequately protect our intellectual property or if our patterns become widely available without our permission, our revenue could be impacted.
See “Cautionary Notice Regarding Forward-Looking Statements.” Operational Risks We currently rely on one distributor of our products and services in China. The loss of this relationship, or a material disruption in sales by this distributor, could severely harm our business.
Operational Risks We currently rely on one distributor of our products and services in China. The loss of this relationship, or a material disruption in sales by this distributor, could severely harm our business.
The GDPR also confers a private right of action on certain individuals and associations. In addition, the CPRA became effective in January 2020 and has similar requirements to the GDPR.
The GDPR also confers a private right of action on certain individuals and associations. In addition, the state of California’s California Privacy Rights Act became effective in January 2020 and has similar requirements to the GDPR.
As of February 28, 2024, we had 27,631,097 shares of Common Stock outstanding of which 2,616,697 shares were held by affiliates. All of the shares of Common Stock held by affiliates are restricted or controlled securities under Rule 144 promulgated under the Securities Act of 1933 as amended (the “Securities Act”).
As of February 28, 2025, we had 27,652,226 shares of Common Stock outstanding of which 2,572,842 shares were held by affiliates. All of the shares of Common Stock held by affiliates are restricted or controlled securities under Rule 144 promulgated under the Securities Act of 1933 as amended (the “Securities Act”).
Because of our dependence on the China Distributor, any loss of our relationship or any adverse change in the financial health of such distributor that would affect its ability to distribute our products may have a material adverse effect on our business, financial condition, results of operations and cash flows.
Because of our dependence on the China Distributor, any loss of our relationship or any adverse change in the financial health of such distributor that would affect its ability to distribute our products may have a material adverse effect on our business, financial condition, results of operations and cash flows. 11 A significant percentage of our revenue is generated from our business in China, a market that is associated with certain risks.
Manufacturer-owned sales of new cars might become harder to penetrate or more streamlined with fewer opportunities to sell accessories. This would make us more reliant on our independent installer, retail-oriented channel, which would require more internal efforts and financial resources to create consumer awareness. If ride-sharing or alternate forms of vehicle ownership gain in popularity, our revenue could be impacted.
Manufacturer-owned sales of new cars might become harder to penetrate or more streamlined with fewer opportunities to sell accessories. This would make us more reliant on our independent installer, retail-oriented channel, which would require more internal efforts and financial resources to create consumer awareness.
If one or more of the research analysts ceases to cover us or fails to publish reports on us regularly, demand for our Common Stock could decrease, which could cause the price or trading volume to decline. Our stock price has been, and may continue to be, volatile.
If one or more of the research analysts ceases to cover us or fails to publish reports on us regularly, demand for our Common Stock could decrease, which could cause the price or trading volume to decline. 26 Short sellers of our stock may be manipulative and may have driven down and may again drive down the market price of our common stock.
This volatility has significantly affected the market prices of securities of many companies for reasons often unrelated to the operating performance of the specific companies. The broad market fluctuations may adversely affect the market price of our Common Stock.
In addition, the public stock markets experience extreme price and trading volume volatility, particularly in growth sectors of the market. This volatility has significantly affected the market prices of securities of 27 many companies for reasons often unrelated to the operating performance of the specific companies. The broad market fluctuations may adversely affect the market price of our Common Stock.
Upon a default under our credit facilities, the lenders could also foreclose against any collateral securing such obligations, which may be all or substantially all of our assets.
Upon a default under our credit facilities, the lenders could also foreclose against any collateral securing such obligations, which may be all or substantially all of our assets. If that occurred, we may not be able to continue to operate as a going concern.
During the year ended December 31, 2023, approximately 10.5% of our consolidated revenue was generated in China, more than any other country outside of the U.S. and Canada in which we operate, and we expect to continue to expand our business in China.
Maintaining a strong position in the Chinese market is a key component of our global growth strategy. During the year ended December 31, 2024, approximately 5.7% of our consolidated revenue was generated in China, more than any other country outside of the U.S. and Canada in which we operate, and we expect to continue to expand our business in China.
Our principal competitors have significantly greater resources than we do. This may allow our competitors to respond more effectively than we can to new or emerging technologies and changes in market requirements.
Additionally, as we introduce new products and as our existing products evolve, or as other companies introduce new products and services, we may become subject to additional competition. Our principal competitors have significantly greater resources than we do. This may allow our competitors to respond more effectively than we can to new or emerging technologies and changes in market requirements.
There is no assurance, however, that the Chinese government will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice. Furthermore, the Chinese government continues to exercise significant control over the Chinese economy through regulation and state ownership.
There is no assurance, however, that the Chinese government will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.
In addition, we have sought to, and may continue to seek to grow through strategic acquisitions. Our growth strategy may place significant demands on our 19 management and our operational and financial infrastructure.
We have made and we expect to make further investments in additional personnel, systems and internal control processes to help manage our growth. In addition, we have sought to, and may continue to seek to grow through strategic acquisitions. Our growth strategy may place significant demands on our management and our operational and financial infrastructure.
While Russia’s invasion of Ukraine and the Israel-Hamas conflict have not had a material direct impact on our business, and our related direct exposure is limited, the nature and degree of the effects of these conflicts, as well as the other effects of the current business environment over time remain uncertain.
While these factors and their impact are difficult to predict, any one or more of them could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition While Russia’s invasion of Ukraine and the Israel-Hamas conflict have not had a material direct impact on our business, and our related direct exposure is limited, the nature and degree of the effects of these conflicts, as well as the other effects of the current business environment over time remain uncertain.
We have experienced rapid growth over the last several years and we believe we will continue to grow at a rapid pace. This growth has put significant demands on our processes, systems and personnel. We have made and we expect to make further investments in additional personnel, systems and internal control processes to help manage our growth.
We have experienced growth over the last several years and we believe we will continue to grow at a rapid pace, particularly in less mature markets outside of North America. This growth has put significant demands on our processes, systems and personnel.
Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance, the condition of the capital markets, and other factors.
We cannot be certain that additional financing will be available on reasonable terms when required, or at all. From time to time, we may need additional financing. Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance, the condition of the capital markets, and other factors.
A material disruption from our contract manufacturers or suppliers, or our inability to obtain a sufficient supply of products from alternate suppliers, could cause us to be unable to meet customer demands or increase our costs.
If we do not succeed in attracting, hiring, and integrating effective personnel, or retaining and motivating existing personnel, our business could be adversely affected. A material disruption from our contract manufacturers or suppliers, or our inability to obtain a sufficient supply of products from alternate suppliers, could cause us to be unable to meet customer demands or increase our costs.
We operate in many parts of the world that are recognized as having governmental and commercial 20 corruption and in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices.
We operate in many parts of the world that are recognized as having governmental and commercial corruption and in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. We cannot assure you that our internal control policies and procedures will always protect us from reckless or criminal acts committed by our employees or third-party intermediaries.
Any fluctuations in the cost and availability of any of our products and/or any interruptions in the delivery of our products could harm our gross margins and our ability to meet customer demand. If we are unable to successfully mitigate these cost increases, supply interruptions and/or labor shortages, our results of operations could be affected.
Any fluctuations in the cost and availability of any of our products and/or any interruptions in the delivery of our products could harm our gross margins and our ability to meet customer demand. As our service business continues to grow, the importance of managing the installation labor increases.
Nonetheless, our policies and procedures may not always protect us from actions that would violate U.S. or non-U.S. laws. Any improper actions could subject us to civil or criminal penalties, including material monetary fines, or other adverse actions including denial of import or export privileges, and could damage our reputation and business prospects.
Any improper actions could subject us to civil or criminal penalties, including material monetary fines, or other adverse actions including denial of import or export privileges, and could damage our reputation and business prospects. 23 Changes in U.S. administrative policy, including changes to existing trade agreements and any resulting changes in international relations, could adversely affect our financial performance.
If technology for pattern creation were improved or if paint protection film properties fundamentally changed, our proprietary patterns could become more widely available, and our business could be negatively impacted. 16 Similarly, our automotive and architectural window films could be impacted by changes or enhancements from automotive manufacturers or window manufacturers that would reduce the need for our products.
We create patterns for our DAP platform through a combination of technology and skilled labor. If technology for pattern creation were improved or if paint protection film properties fundamentally changed, our proprietary patterns could become more widely available, and our business could be negatively impacted.
Infringement of our intellectual property could impact our ability to compete effectively. Our intellectual property, particularly our patterns, is susceptible to being copied without our authorization. We maintain an aggressive approach to defending our intellectual property.
If OEM production volumes were negatively impacted due to economic, regulatory or competitive reasons, we may incur excess labor costs associated with the reduced demand. 18 Infringement of our intellectual property could impact our ability to compete effectively. Our intellectual property, particularly our patterns, is susceptible to being copied without our authorization.
As the volume of automotive production and the mix of vehicles produced fluctuate, the demand for our products may also fluctuate.
In addition, rising interest rates could have a material adverse effect on consumer sentiment due to the direct relationship between interest rates and monthly loan payments, a critical factor for many buyers. As the volume of automotive production and the mix of vehicles produced fluctuate, the demand for our products may also fluctuate.
Removed
A significant percentage of our revenue is generated from our business in China, a market that is associated with certain risks. Maintaining a strong position in the Chinese market is a key component of our global growth strategy.
Added
Such risks should be carefully considered, some of which have manifested and any of which may occur in the future, before making an investment decision with respect to any of the Company’s securities.
Removed
Trade policy In 2018, the U.S. government took the stance that China was engaged in unfair trade practices, and instituted a series of tariffs and other trade barriers on China in response. Though the U.S. and China reached a phase one agreement in January 2020, tension persists between the two countries.
Added
See “Cautionary Notice Regarding Forward-Looking Statements.” In addition, there may be other factors not currently known to the Company, which could, in the future, materially adversely affect the Company, its business, financial condition, or the results of operations.
Removed
The current administration instituted additional export controls in October 2022 and October 2023. Although the current U.S. administration has continued to enforce the phase one agreement, the future of U.S. and Chinese trade relations is uncertain.
Added
The Company does not undertake responsibility for updating any of the factors listed below, whether as a result of new information, future events, or otherwise. Investors are advised to consult any further public Company disclosures on related subjects, such as filings with the Securities and Exchange Commission, in Company press releases, or in other public Company presentations.
Removed
If the current agreement is abandoned, changed or violated by either party, we could be forced to increase the sales price of our products, reduce margins, or otherwise suffer from trade restrictions or changes in policy levied by the U.S. or Chinese governments, any of which may have a material adverse effect on our business.
Added
While the Chinese economy has experienced significant growth over past decades, growth has been uneven, both geographically and among different sectors of the economy. The Chinese economy remains under pressure and is impacted by challenges with the country’s real estate market which affects domestic consumption and has historically been a source of funds for government stimulus and individual wealth.
Removed
If 12 we do not succeed in attracting, hiring, and integrating effective personnel, or retaining and motivating existing personnel, our business could be adversely affected.
Added
The Chinese government has implemented various measures to generate economic growth and strategically allocate resources. Some of these measures may benefit the Chinese economy overall, but may have a negative effect on us. Any slowdown in the Chinese economy may reduce the demand for our products and services and materially and adversely affect our business and results of operations.
Removed
Such competition may result in pressure on our profit margins and limit our ability to maintain or increase the market share of our products. 14 Additionally, as we introduce new products and as our existing products evolve, or as other companies introduce new products and services, we may become subject to additional competition.
Added
The Chinese government continues to exercise significant control over the Chinese economy through regulation and state ownership, and imposing industrial policies and through strategically allocating resources, controlling payment of foreign currency denominated obligations, setting monetary policy and providing preferential treatment to selected industries or companies.
Removed
We create patterns for our DAP platform through a combination of technology and skilled labor.
Added
Trade policy During the last few years, there have been significant changes to U.S. and other countries’ trade policies, export control laws, sanctions, legislation, treaties and tariffs including, but not limited to, U.S. trade policies and tariffs affecting China, Mexico and Canada and certain of the other countries in which we operate.
Removed
We cannot assure you that our internal control policies and procedures will always protect us from reckless or criminal acts committed by our employees or third-party intermediaries.
Added
These changes have, in certain cases, increased our costs of doing business. There is significant uncertainty about the future of trade relationships around the world, including potential changes to trade laws and regulations, trade policies, and tariffs.
Removed
Changes in U.S. administrative policy, including changes to existing trade agreements and any resulting changes in international relations, could adversely affect our financial performance.
Added
For example, effective February 4, 2025, the U.S. government implemented an additional 10% tariff on goods being imported from China and, in response, the Chinese government implemented a 15% tariff on certain goods being imported into China from the U.S.
Removed
Changes in the United Kingdom's economic and other relationships with the European Union could adversely affect us. We have significant operations in both the European Union and the United Kingdom. In the year ended December 31, 2023, our European Union and United Kingdom sales totaled $34.9 million and $13.4 million, respectively.
Added
The U.S. has also announced additional 25% tariffs for goods imported into the U.S. from Mexico and Canada beginning in March 2025.
Removed
Expressed as a percentage of total consolidated revenue for the year ended December 31, 2023, these figures represented 8.8% and 3.4%, respectively. If modifications to existing terms of the existing trade agreement between the United Kingdom and the European Union were to occur, the changes could negatively impact our competitive position, supplier and customer relationships and financial performance.
Added
We cannot predict what additional actions may ultimately be taken by the U.S. or other governments with respect to tariffs or trade relations, what products may be subject to such actions (including subject to U.S. export control restrictions), or what actions may be taken by the other countries in retaliation.
Removed
If that occurred, we may not be able to continue to operate as a going concern. 23 We cannot be certain that additional financing will be available on reasonable terms when required, or at all. From time to time, we may need additional financing.
Added
The imposition of additional tariffs or other trade barriers could increase our costs in certain markets and may cause our customers to find alternative sourcing or could make it more difficult for us to sell our products in some markets or to some customers, which may result in declines in our sales and operating income.
Added
Additionally, it is possible that government policy changes and uncertainty about such changes could increase market volatility and currency exchange rate fluctuations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+0 added−1 removed3 unchanged
Biggest changeThis program is integrated within the Company’s enterprise risk management system and addresses all aspects of the corporate information technology environment. 27 The underlying controls of the cyber risk management program are based on recognized best practices and standards for cybersecurity and information technology, including those set forth in the International Organization Standardization (“ISO”) 27001 standard.
Biggest changeThe underlying controls of the cyber risk management program are based on recognized best practices and standards for cybersecurity and information technology, including those set forth in the 30 International Organization Standardization (“ISO”) 27001 standard. The Company has an annual assessment, performed by a third party, of the Company’s cyber risk management program against this standard.
The Director of Enterprise manages the third service party service provider engaged to monitor the Company’s cybersecurity environment and is regularly updated by the third party service providers on the cybersecurity activities. The Directory of Enterprise Systems has 21 years of experience in information technology and is supported by a team with additional relevant experience and related certifications.
The Director of Enterprise Systems manages the third-party service provider engaged to monitor the Company’s cybersecurity environment and is regularly updated by the third-party service provider on the cybersecurity activities. The Director of Enterprise Systems has 22 years of experience in information technology and is supported by a team with additional relevant experience and related certifications.
The Director of Enterprise Systems leads the Company’s cybersecurity program. The Director of Enterprise Systems assesses and manages XPEL’s cyber risk management program, informs senior management regarding the prevention, detection, mitigation, and remediation of cybersecurity incidents and supervises such efforts.
XPEL partners with leading cybersecurity companies and organizations, leveraging third-party technology and expertise to control and monitor its processes. The Director of Enterprise Systems leads the Company’s cybersecurity program. The Director of Enterprise Systems assesses and manages XPEL’s cyber risk management program, informs senior management regarding the prevention, detection, mitigation, and remediation of cybersecurity incidents and supervises such efforts.
Item 1C. Cybersecurity The Company maintains a cyber risk management program designed to identify, assess, manage, mitigate, and respond to cybersecurity threats.
Item 1C. Cybersecurity The Company maintains a cyber risk management program designed to identify, assess, manage, mitigate, and respond to cybersecurity threats. This program is integrated within the Company’s enterprise risk management system and addresses all aspects of the corporate information technology environment.
A program for staging incident response drills is in place to prepare support teams in the event of a significant incident. External partners are a key part of the Company’s cybersecurity infrastructure. XPEL partners with leading cybersecurity companies and organizations, leveraging third-party technology and expertise to control and monitor our processes.
The Company employs a third-party organization to conduct 24/7 monitoring of its global cybersecurity environment and to coordinate the investigation and remediation of alerts. A program for staging incident response drills is in place to prepare support teams in the event of a significant incident. External partners are a key part of the Company’s cybersecurity infrastructure.
Removed
The Company has an annual assessment, performed by a third party, of the Company’s cyber risk management program against this standard. The Company employs a third-party organization to conduct 24/7 monitoring of its global cybersecurity environment and to coordinate the investigation and remediation of alerts.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeCountry or Region Installation and Sales Locations Warehouse Locations Administrative, Training, and Other Locations Leased Square Footage United States 10 3 1 291,900 Continental Europe 3 1 2 88,451 Canada 10 3 1 73,506 Mexico 1 1 — 13,659 United Kingdom 1 1 — 14,835 Asia Pacific 2 1 — 20,484 We believe that our facilities are suitable for their purpose and are sufficient to support our current business needs. 28
Biggest changeCountry or Region Installation and Sales Locations Warehouse Locations Administrative, Training, and Other Locations Leased Square Footage United States 14 3 1 333,200 Continental Europe 3 1 2 88,451 Canada 12 3 1 105,199 Mexico 1 1 — 13,659 United Kingdom 1 1 — 14,835 Asia and Asia Pacific 8 1 — 65,639 We believe that our facilities are suitable for their purpose and are sufficient to support our current business needs.
A summary of our principal facilities as of December 31, 2023 is set forth in the chart below.
A summary of our principal facilities as of December 31, 2024 is set forth in the chart below.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time, we are made parties to actions filed or have been given notice of potential claims relating to the ordinary conduct of our business, including those pertaining to commercial disputes, product liability, patent infringement and employment matters.
Biggest changeItem 3. Legal Proceedings 31 From time to time, we are made parties to actions filed or have been given notice of potential claims relating to the ordinary conduct of our business, including those pertaining to commercial disputes, product liability, patent infringement and employment matters. On August 8, 2024, a securities class action complaint, Greg Adishian v.
Added
XPEL, Inc., et. al., case number 5:24-cv-00873, was filed against the Company in the United States District Court for the Western District of Texas. The complaint named as defendants the Company and certain of its officers for making false and misleading statements regarding the Company's financial outlook. On December 23, 2024, the plaintiff voluntarily dismissed this case without prejudice.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe data assumes a hypothetical investment of $100 on July 19, 2019 in our common stock and each of the indices, and reinvestment of any dividends.
Biggest changeThe data assumes a hypothetical investment of $100 on December 31, 2020 in our common stock and each of the indices, and reinvestment of any dividends. The historical stock performance presented below is not intended to and may not be indicative of future stock performance.
Purchases of Equity Securities In the year ended December 31, 2023 we did not repurchase any shares of our Common Stock. Item 6. [Reserved]
Purchases of Equity Securities In the year ended December 31, 2024 we did not repurchase any shares of our Common Stock. Item 6. [Reserved]
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s Common Stock is traded on The Nasdaq Stock Market LLC under the symbol “XPEL”. Holders As of February 28, 2024, there were 11 stockholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s Common Stock is traded on The Nasdaq Stock Market LLC under the symbol “XPEL”. Holders As of February 28, 2025, there were eight stockholders of record.
The following data and graph show a comparison of the cumulative total stockholder return for XPEL’s common stock, the Russell 2000 Index and the S&P 500 Index from December 31, 2019 through December 31, 2023.
The following data and graph show a comparison of the cumulative total stockholder return for XPEL’s common stock, the Russell 2000 Index and the S&P 500 Index from December 31, 2020 through 32 December 31, 2024.
The historical stock performance presented below is not intended to and may not be indicative of future stock performance. 29 We have chosen to use the Russell 2000 Index rather than an industry or line-business index because we do not believe our company is comparable to companies in a particular industry or line-of-business such as after-market automotive or consumer discretionary product companies and we have not used a peer group of companies because our major competitors are either much larger than we are and their competitive products constitute small lines of business for these companies or other competitors are private companies.
We have chosen to use the Russell 2000 Index rather than an industry or line-business index because we do not believe our company is comparable to companies in a particular industry or line-of-business such as after-market automotive or consumer discretionary product companies and we have not used a peer group of companies because our major competitors are either much larger than we are and their competitive products constitute small lines of business for these companies or other competitors are private companies.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThis information is not necessarily indicative of results of future operations, and should be read in conjunction with Part I, Item 1A, “Risk Factors,” Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and accompanying notes thereto included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report to fully understand factors that may affect the comparability of the information presented below (dollars in thousands). 30 Year Ended December 31, % Change 2023 % of Total Revenue 2022 % of Total Revenue 2021 % of Total Revenue 2023 vs. 2022 2022 vs. 2021 Total Revenue $ 396,293 100.0 % $ 323,993 100.0 % $ 259,263 100.0 % 22.3 % 25.0 % Total Cost of Sales 233,879 59.0 % 196,481 60.6 % 166,586 64.3 % 19.0 % 17.9 % Gross Margin 162,414 41.0 % 127,512 39.4 % 92,677 35.7 % 27.4 % 37.6 % Total Operating Expenses 95,442 24.1 % 73,575 22.7 % 52,561 20.3 % 29.7 % 40.0 % Operating Income 66,972 16.9 % 53,937 16.6 % 40,116 15.5 % 24.2 % 34.5 % Other Expenses 941 0.2 % 1,972 0.6 % 676 0.3 % (52.3) % 191.7 % Income Tax 13,231 3.3 % 10,584 3.3 % 7,873 3.0 % 25.0 % 34.4 % Net Income $ 52,800 13.3 % $ 41,381 12.8 % $ 31,567 12.2 % 27.6 % 31.1 % Company Overview The Company is a leading provider of protective films and coatings, including automotive paint protection film, surface protection film, automotive and commercial/residential window films, and ceramic coatings with a global footprint, a network of trained installers and proprietary DAP software.
Biggest changeYear Ended December 31, % Change 2024 % of Total Revenue 2023 % of Total Revenue 2022 % of Total Revenue 2024 vs. 2023 2023 vs. 2022 Total Revenue $ 420,400 100.0 % $ 396,293 100.0 % $ 323,993 100.0 % 6.1 % 22.3 % Total Cost of Sales 243,040 57.8 % 233,879 59.0 % 196,481 60.6 % 3.9 % 19.0 % Gross Margin 177,360 42.2 % 162,414 41.0 % 127,512 39.4 % 9.2 % 27.4 % Total Operating Expenses 118,213 28.1 % 95,442 24.1 % 73,575 22.7 % 23.9 % 29.7 % Operating Income 59,147 14.1 % 66,972 16.9 % 53,937 16.6 % (11.7) % 24.2 % Other Expenses 2,369 0.6 % 941 0.2 % 1,972 0.6 % 151.8 % (52.3) % Income Tax 11,289 2.7 % 13,231 3.3 % 10,584 3.3 % (14.7) % 25.0 % Net Income $ 45,489 10.8 % $ 52,800 13.3 % $ 41,381 12.8 % (13.8) % 27.6 % Company Overview We are a supplier of protective films, coatings and related services primarily to the automobile aftermarket, new car dealerships and OEMs.
Service revenue consists of revenue from fees for DAP software access, cutbank credit revenue, which represents the value of pattern access provided with eligible product revenue, revenue from the labor portion of installation sales in our Company-owned installation centers, revenue from our dealership services business, and revenue from training services provided to our customers.
Service revenue consists of revenue from fees for DAP software access, cutbank credit revenue, which represents the value of pattern access provided with eligible product revenue, revenue from the labor portion of installation sales in our Company-owned installation centers, labor revenue from our dealership services business, and revenue from training services provided to our customers.
As of December 31, 2023 and December 31, 2022, no balance was outstanding on this facility. Critical Accounting Estimates We have adopted various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates.
As of December 31, 2024 and December 31, 2023, no balance was outstanding on this facility. Critical Accounting Estimates We have adopted various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates.
Discussions of the periods prior to the year ended December 31, 2022 that are not included in this Annual Report on Form 10-K are found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022 and the discussion therein for the year ended December 31, 2022 compared to the year ended December 31, 2021 is incorporated by reference into this Annual Report.
Discussions of the periods prior to the year ended December 31, 2023 that are not included in this Annual Report on Form 10-K are found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023 and the discussion therein for the year ended December 31, 2023 compared to the year ended December 31, 2022 is incorporated by reference into this Annual Report.
Although we believe the assumptions and estimates made were reasonable and appropriate, these estimates require judgment and are based in part on historical experience and information obtained from the management of the acquired entities. 38 Inventory Valuation Inventories are stated at the lower of cost or net realizable value. Cost is determined on a weighted average cost basis.
Although we believe the assumptions and estimates made were reasonable and appropriate, these estimates require judgment and are based in part on historical experience and information obtained from the management of the acquired entities. 41 Inventory Valuation Inventories are stated at the lower of cost or net realizable value. Cost is determined on a weighted average cost basis.
In addition to the applicable interest rate, the Credit Agreement includes a commitment fee ranging from 0.20% to 0.25% per annum for the unused portion of the 37 aggregate commitment and an applicable margin ranging from 0.00% to 0.50% for Base Rate Loans and 1.00% to 1.50% for Adjusted Term SOFR Loans.
In addition to the applicable interest rate, the Credit Agreement 40 includes a commitment fee ranging from 0.20% to 0.25% per annum for the unused portion of the aggregate commitment and an applicable margin ranging from 0.00% to 0.50% for Base Rate Loans and 1.00% to 1.50% for Adjusted Term SOFR Loans.
EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of ongoing operations; and other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure. 32 Results of Operations This section of this Annual Report on Form 10-K generally discusses the years ended December 31, 2023 and 2022 and year-over-year comparisons between those years.
EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of ongoing operations; and other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure. 35 Results of Operations This section of this Annual Report on Form 10-K generally discusses the years ended December 31, 2024 and 2023 and year-over-year comparisons between those years.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Executive Summary Set forth below is summary financial information for the years ended December 31, 2023, 2022, and 2021.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 Executive Summary Set forth below is summary financial information for the years ended December 31, 2024, 2023, and 2022.
At December 31, 2023, these rates were 6.5% and 6.4%, respectively. Both the margin applicable to the interest rate and the commitment fee are dependent on XPEL’s Consolidated Total Leverage Ratio. The Credit Agreement's maturity date is April 6, 2026.
At December 31, 2024, these rates were 7.5% and 5.6%, respectively. Both the margin applicable to the interest rate and the commitment fee are dependent on XPEL’s Consolidated Total Leverage Ratio. The Credit Agreement's maturity date is April 6, 2026.
XPEL Canada Corp., a wholly-owned subsidiary of XPEL, Inc., also has a CAD $4.5 million revolving credit facility through HSBC Bank Canada. This facility is utilized to fund our working capital needs in Canada. This facility bears interest at HSBC Canada Bank’s prime rate plus 0.25% per annum and is guaranteed by the parent company.
XPEL Canada Corp., a wholly-owned subsidiary of XPEL, Inc., also has a CAD $4.5 million revolving credit facility. This facility can be utilized to fund our working capital needs in Canada. This facility bears interest at the Royal Bank of Canada’s prime rate plus 0.25% per annum and is guaranteed by the parent company.
The decrease in service gross margin percentage was primarily due to a higher percentage of lower margin installation labor revenue relative to other higher margin service revenue components. Operating Expenses Sales and marketing expenses for the year ended December 31, 2023 increased 25.3% compared to 2022.
The decrease in service gross margin percentage was primarily due to a higher percentage of lower margin installation labor revenue relative to other higher margin service revenue components. Operating Expenses Sales and marketing expenses for the year ended December 31, 2024 increased 34.7% compared to 2023.
The increase in product gross margin percentages was primarily due to decreases in product costs, favorable changes in product mix and improved operating leverage. Service gross margin increased approximately $9.8 million for the year ended December 31, 2023, and represented 57.7% and 59.6% of total service revenue for the years ended December 31, 2023 and 2022, respectively.
The increase in product gross margin percentages was primarily due to decreases in product costs, favorable changes in product mix and improved operating leverage. Service gross margin increased approximately $9.3 million for the year ended December 31, 2024, and represented 57.4% and 57.7% of total service revenue for the years ended December 31, 2024 and 2023, respectively.
Cash flows used in financing activities during the year ended December 31, 2023 totaled approximately $7.3 million compared to cash provided by financing activities of $0.6 million in the prior year. This use of cash was due primarily to net repayments on our credit facilities.
Cash flows used in financing activities during the year ended December 31, 2024 totaled approximately $19.3 million compared to cash use of $7.3 million in the prior year. This use of cash was due primarily to net repayments on our credit facilities.
Credit Facilities The Company has a revolving credit facility providing for secured revolving loans and letters of credit in an aggregate amount of up to $125.0 million, which is subject to the terms of a credit agreement dated April 6, 2023 (the "Credit Agreement").
Credit Facilities The Company has a revolving credit facility providing for secured revolving loans and letters of credit in an aggregate amount of up to $125.0 million, which is subject to the terms of a credit agreement dated April 6, 2023 (the "Credit Agreement"). As of December 31, 2024, the Company had no outstanding balance under this agreement.
Product costs consist of material costs, certain personnel costs, shipping costs, warranty costs and other costs related to providing products to our customers.
Cost of Sales Cost of sales consists of product costs and the costs to provide our services. Product costs consist of material costs, certain personnel costs, shipping costs, warranty costs and other costs related to providing products to our customers.
The following tables summarize revenue results for the years ended December 31, 2023, 2022 and 2021 (dollars in thousands): Year Ended December 31, % Change % of Total Revenue 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 2023 2022 2021 Product Revenue Paint protection film $ 229,880 $ 192,374 $ 169,880 19.5 % 13.2 % 58.0 % 59.4 % 65.5 % Window film 67,951 54,370 38,363 25.0 % 41.7 % 17.1 % 16.8 % 14.8 % Other 13,575 11,430 9,040 18.8 % 26.4 % 3.5 % 3.5 % 3.5 % Total $ 311,406 $ 258,174 $ 217,283 20.6 % 18.8 % 78.6 % 79.7 % 83.8 % Service Revenue Software $ 6,518 $ 5,213 $ 4,373 25.0 % 19.2 % 1.6 % 1.6 % 1.7 % Cutbank credits 17,626 16,317 12,372 8.0 % 31.9 % 4.4 % 5.0 % 4.8 % Installation labor 58,477 42,828 24,253 36.5 % 76.6 % 14.8 % 13.2 % 9.4 % Training and other 2,266 1,461 982 55.1 % 48.8 % 0.6 % 0.5 % 0.3 % Total $ 84,887 $ 65,819 $ 41,980 29.0 % 56.8 % 21.4 % 20.3 % 16.2 % Total $ 396,293 $ 323,993 $ 259,263 22.3 % 25.0 % 100.0 % 100.0 % 100.0 % 33 Because many of our international customers require us to ship their orders to freight forwarders located in the United States, we cannot be certain about the ultimate destination of the product.
The following tables summarize revenue results for the years ended December 31, 2024, 2023 and 2022 (dollars in thousands): Year Ended December 31, % Change % of Total Revenue 2024 2023 2022 2024 vs 2023 2023 vs 2022 2024 2023 2022 Product Revenue Paint protection film $ 226,710 $ 229,880 $ 192,374 (1.4) % 19.5 % 53.9 % 58.0 % 59.4 % Window film 77,666 67,951 54,370 14.3 % 25.0 % 18.5 % 17.1 % 16.8 % Other 14,473 13,575 11,430 6.6 % 18.8 % 3.4 % 3.5 % 3.5 % Total $ 318,849 $ 311,406 $ 258,174 2.4 % 20.6 % 75.8 % 78.6 % 79.7 % Service Revenue Software $ 8,061 $ 6,518 $ 5,213 23.7 % 25.0 % 1.9 % 1.6 % 1.6 % Cutbank credits 17,015 17,626 16,317 (3.5) % 8.0 % 4.0 % 4.4 % 5.0 % Installation labor 74,478 58,477 42,828 27.4 % 36.5 % 17.7 % 14.8 % 13.2 % Training and other 1,997 2,266 1,461 (11.9) % 55.1 % 0.6 % 0.6 % 0.5 % Total $ 101,551 $ 84,887 $ 65,819 19.6 % 29.0 % 24.2 % 21.4 % 20.3 % Total $ 420,400 $ 396,293 $ 323,993 6.1 % 22.3 % 100.0 % 100.0 % 100.0 % 36 Because many of our international customers require us to ship their orders to freight forwarders located in the United States, we cannot be certain about the ultimate destination of the product.
The following table is a reconciliation of Net Income to EBITDA for the years ended December 31, 2023, 2022, and 2021 (dollars in thousands): 2023 % of Total Revenue 2022 % of Total Revenue 2021 % of Total Revenue Net Income $ 52,800 13.3 % $ 41,381 12.8 % $ 31,567 12.2 % Interest 1,248 0.3 % 1,410 0.4 % 303 0.1 % Taxes 13,231 3.3 % 10,584 3.3 % 7,873 3.0 % Depreciation 4,534 1.1 % 3,433 1.1 % 1,887 0.7 % Amortization 5,059 1.3 % 4,401 1.4 % 2,501 1.0 % EBITDA $ 76,872 19.4 % $ 61,209 18.9 % $ 44,131 17.0 % 31 Use of Non-GAAP Financial Measures EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
We define EBITDA as net income plus (a) total depreciation and amortization, (b) interest expense, net, and (c) income tax expense. 34 The following table is a reconciliation of Net Income to EBITDA for the years ended December 31, 2024, 2023, and 2022 (dollars in thousands): 2024 % of Total Revenue 2023 % of Total Revenue 2022 % of Total Revenue Net Income $ 45,489 10.8 % $ 52,800 13.3 % $ 41,381 12.8 % Interest 996 0.2 % 1,248 0.3 % 1,410 0.4 % Taxes 11,289 2.7 % 13,231 3.3 % 10,584 3.3 % Depreciation 5,820 1.4 % 4,534 1.1 % 3,433 1.1 % Amortization 5,877 1.4 % 5,059 1.3 % 4,401 1.4 % EBITDA $ 69,471 16.5 % $ 76,872 19.4 % $ 61,209 18.9 % Use of Non-GAAP Financial Measures EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
Gross Margin The following table summarizes gross margin for product and services for the years ended December 31, 2023, 2022 and 2021 (dollars in thousands): Year Ended December 31, % Change % of Category Revenue 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 2023 2022 2021 Product $ 113,398 $ 88,269 $ 65,997 28.5 % 33.7 % 36.4 % 34.2 % 30.4 % Service 49,016 39,243 26,680 24.9 % 47.1 % 57.7 % 59.6 % 63.6 % Total $ 162,414 $ 127,512 $ 92,677 27.4 % 37.6 % 41.0 % 39.4 % 35.7 % Product gross margin for the year ended December 31, 2023 increased approximately $25.1 million, or 28.5%, over the year ended December 31, 2022 and represented 36.4% and 34.2% of total product revenue for the years ended December 31, 2023 and 2022, respectively.
Gross Margin The following table summarizes gross margin for product and services for the years ended December 31, 2024, 2023 and 2022 (dollars in thousands): Year Ended December 31, % Change % of Category Revenue 2024 2023 2022 2024 vs 2023 2023 vs 2022 2024 2023 2022 Product $ 119,058 $ 113,398 $ 88,269 5.0 % 28.5 % 37.3 % 36.4 % 34.2 % Service 58,302 49,016 39,243 18.9 % 24.9 % 57.4 % 57.7 % 59.6 % Total $ 177,360 $ 162,414 $ 127,512 9.2 % 27.4 % 42.2 % 41.0 % 39.4 % Product gross margin for the year ended December 31, 2024 increased approximately $5.7 million, or 5.0%, over the year ended December 31, 2023 and represented 37.3% and 36.4% of total product revenue for the years ended December 31, 2024 and 2023, respectively.
Debt obligations, including balances outstanding on committed credit facilities and contingent liabilities, as of December 31, 2023 and December 31, 2022 totaled approximately $19.9 million and $27.0 million, respectively.
Debt obligations, including balances outstanding on committed credit facilities and contingent liabilities, as of December 31, 2024 and December 31, 2023 totaled approximately $2.1 million and $20.2 million, respectively.
As of December 31, 2023, we had cash and cash equivalents of $11.6 million, for the year ended December 31, 2023, cash flows provided by operations were $37.4 million, and as of December 31, 2023 we had approximately $109.4 million in funds available under our credit facilities.
As of December 31, 2024, we had cash and cash equivalents of $22.1 million, and we had approximately $128.1 million in funds available under our credit facilities. For the year ended December 31, 2024, cash flows provided by operations were $47.8 million.
Cash flows used in investing activities totaled approximately $26.4 million during the year ended December 31, 2023 compared to cash use of $14.2 million for the year ended December 31, 2022. This increase in cash used was due mainly to additional cash outlay for acquisitions in 2023. Financing activities.
Cash flows used in investing activities totaled approximately $18.4 million during the year ended December 31, 2024 compared to cash use of $26.4 million for the year ended December 31, 2023. This decrease in cash used was due to a reduction in expenditures for acquisitions in the year ended December 31, 2024. Financing activities.
During 2023, service revenue grew 29.0% over service revenue for the year ended December 31, 2022. Within the service revenue category, software revenue increased 25.0% from the year ended December 31, 2022. This increase was due primarily to increases in customers subscribing to our software. Cutbank credit revenue grew 8.0% from the year ended December 31, 2022.
During 2024, service revenue grew 19.6% over service revenue for the year ended December 31, 2023. 37 Within the service revenue category, software revenue increased 23.7% from the year ended December 31, 2023. This increase was due primarily to increases in customers subscribing to our software. Cutbank credit revenue decreased 3.5% from the year ended December 31, 2023.
The following table represents our estimate of sales by geographic regions based on our understanding of ultimate product destination based on customer interactions, customer locations and other factors for the years ended December 31, 2023 and 2022 (dollars in thousands): Year Ended December 31, % % of Total Revenue 2023 2022 Increase 2023 2022 United States $ 224,839 $ 189,890 18.4 % 56.7 % 58.6 % Canada 43,506 38,997 11.6 % 11.0 % 12.0 % China 41,576 33,993 22.3 % 10.5 % 10.5 % Continental Europe 34,883 24,713 41.2 % 8.8 % 7.6 % Middle East/Africa 16,472 10,499 56.9 % 4.2 % 3.2 % United Kingdom 13,438 10,298 30.5 % 3.4 % 3.2 % Asia Pacific 11,943 9,026 32.3 % 3.0 % 2.8 % Latin America 8,737 5,411 61.5 % 2.2 % 1.7 % Other 899 1,166 (22.9) % 0.2 % 0.4 % Total $ 396,293 $ 323,993 22.3 % 100.0 % 100.0 % Revenue Product Revenue.
The following table represents our estimate of sales by geographic regions based on our understanding of ultimate product destination based on customer interactions, customer locations and other factors for the years ended December 31, 2024 and 2023 (dollars in thousands): Year Ended December 31, % % of Total Revenue 2024 2023 2024 vs 2023 2024 2023 United States $ 240,569 $ 224,839 7.0 % 57.2 % 56.7 % Canada 52,139 43,506 19.8 % 12.4 % 11.0 % China 24,148 41,576 (41.9) % 5.7 % 10.5 % Continental Europe 39,564 34,883 13.4 % 9.4 % 8.8 % Middle East/Africa 20,887 16,472 26.8 % 5.0 % 4.2 % United Kingdom 14,604 13,438 8.7 % 3.5 % 3.4 % Asia Pacific 16,825 11,943 40.9 % 4.0 % 3.0 % Latin America 11,664 8,737 33.5 % 2.8 % 2.2 % Other — 899 (100.0) % 0.0 % 0.2 % Total $ 420,400 $ 396,293 6.1 % 100.0 % 100.0 % Revenue Product Revenue.
This increase was due mainly to increased product awareness and adoption in most of our regions. Other product revenue for the year ended December 31, 2023 grew 18.8% to $13.6 million and represented 3.5% of total consolidated revenue.
Architectural window film revenue increased 9.4% to $10.4 million and represented 13.4% of total window film revenue and 2.5% of total consolidated revenue for the year ended December 31, 2024. This increase was due mainly to increased product awareness and adoption in most of our regions.
Product revenue increased 20.6% during the year ended December 31, 2023 as compared to 2022 and represented 78.6% of our consolidated 2023 revenue. Within this category, revenue from our paint protection film product line increased 19.5% as compared to the prior year and represented 58.0% of total consolidated revenue for the year ended December 31, 2023.
Product revenue increased 2.4% during the year ended December 31, 2024 as compared to 2023 and represented 75.8% of our consolidated 2024 revenue. Within this category, revenue from our paint protection film product line decreased 1.4% as compared to the prior year and represented 53.9% of total consolidated revenue for the year ended December 31, 2024.
Borrowings under the Credit Agreement bear interest, at XPEL’s option, at a rate equal to either (a) Base Rate or (b) Adjusted Term SOFR.
As of December 31, 2023, the Company had an outstanding balance of $19.0 million under the Credit Agreement. Borrowings under the Credit Agreement bear interest, at XPEL’s option, at a rate equal to either (a) Base Rate or (b) Adjusted Term SOFR.
This product line includes both automotive and architectural window film. Automotive window film grew 20.2% to $58.5 million for the year ended December 31, 2023. This increase was due to continued channel focus, increased product adoption in multiple regions and increased demand. Architectural window film revenue increased 65.9% to $9.5 million.
Automotive window film revenue grew 12.5% to $65.8 million for the year ended December 31, 2024 and represented 84.7% of total window film revenue and 15.7% of total consolidated revenue for the year ended December 31. 2024 . This increase was due to continued channel focus, increased product adoption in multiple regions and increased demand.
Accordingly, we believe that EBITDA provides useful information in understanding and evaluating our operating performance in the same manner as management. We define EBITDA as net income plus (a) total depreciation and amortization, (b) interest expense, net, and (c) income tax expense.
Accordingly, we believe that EBITDA provides useful information in understanding and evaluating our operating performance in the same manner as management.
This increase was driven by an increase in demand for our non-film related products such as ceramic coating, plotters, chemicals and other film installation tools and accessories. Our FUSION ceramic coating product revenue grew 51.7% to $6.2 million. This increase was driven primarily by increased channel focus and increased demand for our ceramic coating products.
Other product revenue for the year ended December 31, 2024 grew 6.6% to $14.5 million and represented 3.4% of total consolidated revenue. This increase was driven by an increase in demand for our non-film related products such as ceramic coating, plotters, chemicals and other film installation tools and accessories. Our FUSION ceramic coating product revenue grew 4.1% to $6.4 million.
Net Income Net income for the year ended December 31, 2023 increased by 27.6% to $52.8 million compared to the prior year due primarily to continued strong revenue growth and improved margins. 36 Liquidity and Capital Resources The primary sources of liquidity for our business are available cash and cash equivalents, cash flows provided by operations, and borrowings under our credit facilities.
Net Income Net income for the year ended December 31, 2024 decreased by 13.8% to $45.5 million. 39 Liquidity and Capital Resources The primary sources of liquidity for our business are available cash and cash equivalents, cash flows provided by operations, and borrowings under our credit facilities.
We believe that the most important measure to the Company is Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”). EBITDA is a non-GAAP financial measure.
Key Business Metric - Non-GAAP Financial Measures Our management regularly monitors certain financial measures to track the progress of our business against internal goals and targets. We believe that the most important measure to the Company is Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”). EBITDA is a non-GAAP financial measure.
These expenses represented 8.0% and 7.8% of consolidated revenue for the years ended December 31, 2023 and 2022, respectively. This increase was due mainly to increased personnel, and additional marketing projects intended to increase awareness of our brand globally. General and administrative expenses grew approximately $15.4 million, or 32.0%, during the year ended December 31, 2023.
These expenses represented 10.2% and 8.0% of consolidated revenue for the years ended December 31, 2024 and 2023, respectively. This increase was due mainly to increased personnel, and additional marketing projects including sponsorships and increased marketing efforts to dealerships and end customers. General and administrative expenses for the year ended December 31, 2024 increased 18.4% compared to 2023.
This increase was due primarily to the 34 aforementioned increases in demand for our products and services. Installation labor revenue increased 36.5% from the year ended December 31, 2022, due mainly to strong demand across our dealership service and OEM businesses and at our Company-owned installation facilities.
This decrease was due primarily to the decrease in paint protection film revenue. Installation labor revenue increased 27.4% from the year ended December 31, 2023, due mainly to strong demand across our dealership service and OEM businesses.
Adjusted product revenue, which combines the cutbank credit revenue service component with product revenue, increased by 19.9% from the year ended December 31, 2022 due mainly to the same factors described previously. Cost of Sales Cost of sales consists of product costs and the costs to provide our services.
Total installation revenue (labor and product combined) at our Company-owned installation centers for the year ended December 31, 2024 increased 27.4% over the year ended December 31, 2023. Adjusted product revenue, which combines the cutbank credit revenue service component with product revenue, increased by 2.1% from the year ended December 31, 2023 due mainly to the same factors described above.
Cash flows provided by operations totaled approximately $37.4 million for the year ended December 31, 2023, compared to $12.1 million for the year ended December 31, 2022. The increase in operating cash flows for the year ended December 31, 2023 was driven primarily by an increase in operating earnings and a reduction in inventory purchases. Investing activities .
Cash flows provided by operations totaled approximately $47.8 million for the year ended December 31, 2024, compared to $37.4 million for the year ended December 31, 2023.
Our effective income tax rates for the years ended December 31, 2023 and 2022 were 20.0% and 20.4%, respectively. See Note 14 of the Notes to our Consolidated Financial Statements for further information.
See Note 14 of the Notes to our Consolidated Financial Statements for further information.
These costs represented 16.1% and 14.9% of total consolidated revenue for the years ended December 31, 2023 and 2022, respectively.
These costs represented 17.9% and 16.1% of total consolidated revenue for the years ended December 31, 2024 and 2023, respectively. The increase was due mainly to increases in personnel, 38 occupancy costs, depreciation and amortization, and information technology costs to support the ongoing growth of the business.
Product costs in the year ended December 31, 2023 increased 16.5% over the year ended December 31, 2022 commensurate with the growth in product revenue. Cost of service revenue grew 35.0% during the year ended December 31, 2023. The increase was due primarily to increased labor costs associated with our expanding installation business.
Product costs in the year ended December 31, 2024 increased 0.9% over the year ended December 31, 2023, commensurate with the growth in product revenue. Cost of service revenue grew 20.6% during the year ended December 31, 2024, commensurate with the related serviced revenue growth. Refer to the Gross Margin section below for discussion of this cost relative to revenue.
Geographically, we experienced growth in many regions during the year. The U.S. and Canadian markets are our most mature markets. Our continued strong growth in these markets was being driven primarily by increased paint protection film attachment rates. Outside of these more mature markets, our continued strong growth was driven by increased product awareness and adoption. Service revenue.
This increase was driven primarily by increased channel focus and increased demand for our ceramic coating products. Geographically, we experienced continued growth in most of our regions including 7.0% growth in the US region, our most mature market. These increases were primarily due to increasing product awareness and adoption. Service revenue.
The increase was due mainly to increases in personnel, occupancy costs, information technology costs, research and development costs and professional fees to support the ongoing growth of the business. 35 Income Tax Expense Our provision for income taxes was $13.2 million in the year ended December 31, 2023 as compared to $10.6 million in the year ended December 31, 2022.
Income Tax Expense Our provision for income taxes was $11.3 million in the year ended December 31, 2024 as compared to $13.2 million in the year ended December 31, 2023. Our effective income tax rates for the years ended December 31, 2024 and 2023 were 19.9% and 20.0%, respectively.
This growth was due mainly to increases in demand for our film products across multiple regions. This increase was driven by both new customer additions and revenue growth in existing customers. Revenue from our window film product line grew 25.0% in the year ended December 31, 2023 and represented 17.1% of our consolidated annual 2023 revenue.
Revenue from our window film product line grew 14.3% during the year ended December 31, 2024 and represented 18.5% of our consolidated annual 2024 revenue. This product line includes both automotive and architectural window film.
Removed
The Company is dedicated to exceeding customer expectations by providing high-quality products, leading customer service, expert technical support and world-class training. Key Business Metric - Non-GAAP Financial Measures Our management regularly monitors certain financial measures to track the progress of our business against internal goals and targets.
Added
This information is not necessarily indicative of results of future operations, and should be read in conjunction with Part I, Item 1A, “Risk Factors,” Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and accompanying notes thereto included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report to fully understand factors that may affect the comparability of the information presented below (dollars in thousands).
Removed
Training revenue increased 55.1% from the year ended December 31, 2022 as we continue to grow our global training presence. Total installation revenue (labor and product combined) at our Company-owned installation centers for the year ended December 31, 2023 increased 36.5% over the year ended December 31, 2022.
Added
The majority of our revenue is derived from the sale of our automotive products and related services while the remainder of our revenue is derived from non-automotive products including architectural window film and marine and flat surface protection films.
Removed
As of December 31, 2023, the Company had an outstanding balance of $19.0 million under this agreement. As of December 31, 2022, the Company had an outstanding balance of $26.0 million under a prior credit agreement which was subsequently repaid and terminated.
Added
This decrease was primarily the result of a decline in sales into China offset by increases in most other operating regions. Sales into China were negatively impacted as our distributor continued to sell through excess inventory levels during the year.
Added
Interest Expense Interest expense decreased 20.2% to $1.0 million in the year ended December 31. 2024 compared to the year ended December 31. 2023. This decrease was due to the reduction in the amount of our debt facility throughout the year.
Added
Foreign Currency Exchange Loss Foreign currency loss for the year ended December 31, 2024 was $1.4 million compared to a foreign currency gain of $.3 million for the year ended December 31, 2023. This increase in foreign currency loss was due to the significant strengthening of the U.S. dollar during the year.
Added
The increase in operating cash flows for the year ended December 31, 2024 was driven primarily by a reduction in inventory purchases partially offset by a decline in net income and other changes in working capital. Investing activities .

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk We have operations that expose us to currency risk in the British Pound Sterling, the Canadian Dollar, the Euro, the Mexican Peso, the New Taiwanese Dollar, and the Australian Dollar. Amounts invested in our foreign operations are translated into U.S.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk We have operations that expose us to currency risk in the British Pound Sterling, the Canadian Dollar, the Euro, the Mexican Peso, the New Taiwanese Dollar, the Australian Dollar, the Indian Rupee, the Chinese Yuan Renminbi, the Japanese Yen, and the Thai Baht.
If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could adversely affect our business, financial condition and results of operations. 39
If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could adversely affect our business, financial condition and results of operations. 42
Dollars at the exchange rates in effect at the balance sheet date. The resulting translation adjustments are recorded as accumulated other comprehensive income, a component of stockholders’ equity in our consolidated balance sheets. We do not currently hedge our exposure to potential foreign currency translation adjustments.
Amounts invested in our foreign operations are translated into U.S. Dollars at the exchange rates in effect at the balance sheet date. The resulting translation adjustments are recorded as accumulated other comprehensive income, a component of stockholders’ equity in our consolidated balance sheets. We do not currently hedge our exposure to potential foreign currency translation adjustments.

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