Good morning, and welcome to the XPEL, Inc. Second Quarter 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, John Nesbett of IMS Investor Relations. John, the floor is yours.

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

Thank you, John, and good morning as well, everyone, and welcome to our second quarter 2025 call. We had a record quarter in Q2 with revenue growing 13.5% to $124.7 million. I think this exceeded our expectations going into the quarter and in the environment that we're in. We had an easier comp in China given the sort of orchestration of the revenue in the previous year. But even factoring that in, revenue growth would have been about 11% in a more normalized environment. So really good. I think the U.S. region grew 8.4% to $70.4 million for the quarter, which was also a record and good. I think, obviously, Q2 in the U.S. was quite exciting, you might say. In a sense it was punctuated by tariff anxiety to start. And for those who follow the car market, this jumped the U.S. SAAR in the first part of the quarter and then it slowed in the end as maybe some consumers tried to front-run pricing fears in the new car market. Our view is really mixed as to whether that helped us, hurt us or what the impact was. Obviously, we would prefer a more stable environment month-to-month. But I don't think it was overwhelmingly positive for us because some of those gains at the front half of the quarter were given up in the second half. And if you look at the new car SAAR for the quarter, I think it was up modestly, like 2%, 2.5% from prior year. So I think this is just more of the same in terms of this choppy and uncertain environment that we've been in and expect to continue to be in. Canada region revenue grew 7.4% for the quarter. As we discussed previously, Canada started the year very slow, but…

Thanks, Ryan, and good morning, everyone. I just wanted to add just a little bit more color on the top line performance in the quarter. Our total product revenue increased 13.9%, while total service revenue increased 12% quarter-over-quarter. And on a year-to-date basis, revenue grew 14.2% to $228.5 million. Our total window film product line grew 27% in the quarter, driven primarily by our automotive window tint which grew 22.5%. And our newest product, Windshield Protect, which is a windshield protection film, also contributed to that solid performance. Our gross margin for the quarter grew 11.8% to $53.5 million, reflecting a gross margin percentage of 42.9%. On a year-to-date basis, our gross margin grew 13.6% to $97.4 million, and that was a gross margin percentage of 42.6%. Our total SG&A expenses grew 19.3% to $34.2 million quarter-over-quarter, and this was right at about 27.4% of total revenue. And sequentially, SG&A was up 4.4% versus Q1. And if you normalize for the onetime costs that Ryan alluded to, SG&A would have grown 13.7% quarter-over-quarter. And moving forward, our SG&A growth rate should moderate as we lap our acquisition-related SG&A expenses that Ryan was talking about earlier in the second half of the year. On a year-to-date basis, SG&A grew 16.9% to $67 million. Ryan talked about EBITDA for the quarter earlier, but I'll also note that, on a year-to-date basis, EBITDA grew 12.9% to $37.8 million, reflecting a 16.6% EBITDA margin. Net income for the quarter increased 7.8%, reflecting a 13% net income margin. Again, normalizing for the onetime costs, net income would have grown 16.7% quarter-over-quarter. EPS was $0.59 per share for the quarter. And again, normalizing for the one-timers, EPS would have been $0.63 per share. And on a year-to-date basis, net income grew 14.3%, which is -- reflects a 10.8% net income margin. And year-to-date, our EPS is $0.90 per share. So again, we're pleased with the quarter and excited to see what the rest of the year holds. And with that, operator, we'll now open up the call for questions.

Thank you very much, Barry. [Operator Instructions] Your first question is coming from Jeff Van Sinderen of B. Riley Securities.

I guess the first question I had was, any more color you can share on the dealer service business trends?

Yes, Jeff, thanks for the question. I think this is -- continues to be a bright spot. We see revenue there growing faster than the aftermarket channel at present. I think there's a lot of reasons why that might be the case, but that trend certainly continued in Q2. We have now in the U.S. relative stability in terms of inventory, new car inventory. And I think there's -- obviously, the post-COVID era created a lot of volatility. I think there was a lot of concern about tariff-induced inventory challenges, which could impact us because we're sometimes attaching product at the time it hits the dealership lot rather than when it's sold. But that hasn't really materialized in a super negative way. So we've been doing great. I think July was an all-time record for that in terms of number of vehicles and revenue and pretty much every other metric. And it's something that we see expansion opportunities in other markets too. We're working on -- with a couple of large groups and other countries for something similar. So I think it's been a bright spot. And then we have the opportunity too, I think, over time to layer on our referral and personalization platform to help the dealers do even more upselling through that business. So a bright spot overall.

Okay. And then just to follow up a little bit on what you just hit on, maybe you can delve a little bit more into the personalization platform initiatives that you're working on now and what we might see develop there.

Well, I think that the challenge -- fundamental challenge of this business has been and is -- is and has been one of awareness where the products we sell they're virtually or actually invisible. They don't market themselves going down the road. And you have a very -- you have an industry in the aftermarket that is a very sort of offline and analog business in the sense that most of the sales are made on the phone or they're made in points of presence in shops. And that's good. They're very effective at selling that way, but you also miss out on a lot of consumers where buying that way is maybe not what they're thinking of first in an Amazon- type world that we live in. So with this platform, we're able to reach, through partnerships with OEMs and dealerships and others, consumers maybe in a form that is more comfortable to some of them online. We can present a lot of product information. We can present video. We can really make a compelling reason to buy the product. And then we can facilitate an online transaction and run that through the network. And the ultimate goal of that is that it will, and we're seeing it now, but it will serve as a way to increase attach rates in participating vehicles and provide a really good source of revenue for our participating installers. So I think it's a way to ultimately grow the business and reach another set of consumers. And so the feedback has been really good. It's going to take continued investment on us and continued development with other partners that want to leverage it. But it's I think a great opportunity for our industry.

Okay. That's helpful. And then just finally, if I could ask, is there anything on mix, gross margin, OpEx considerations for second half that we should be aware of thinking about the quarterly progression?

No. I mean the trends we see, obviously, first quarter is usually the slowest quarter. Second and third are our peak revenue quarters of the year. Fourth quarter, we usually see a little sequential decline in the U.S. business. Our overall cost structure is pretty stable outside of the things we mentioned earlier on the call. The gross margin profile is consistent. And absent something on the tariff side that would cause us an unexpected issue, no, don't really see any big movement on that for the rest of the year.

[Operator Instructions] Our next question is coming from Steve Dyer of Craig-Hallum.

This is Matthew Raab on for Steve. Just want to start on M&A. Ryan, you have $50 million of cash on the balance sheet, which I think is the most cash you've ever had as a public company. It sounds like you've got your eye on something or multiple somethings. I guess, any other hints you could give us at this point? And then maybe anything on sizing, looking at more bolt-on or something larger?

Yes. I mean I think our approach has been -- remains pretty consistent with what we've talked about in the past. Our first order of business is really of consolidating our international distribution so that we can serve directly the markets we want to be in. We've largely done that. I think a few exceptions are China, Brazil in terms of the top car markets of the world. So obviously, that remains an interest and something that we're very active on. As we look at the dealership business, as was referenced in the earlier question, this is a way -- again, another way to reach consumers where they are. The dealerships have tremendous volume. And so looking at M&A in that space that could bring more customers into the fold and more dealerships into the fold, so that's a little more downstream. Those are the areas that we remain principally focused on. And I think we really have 2 streams of thought. We're looking at things that are more meaningful while also pursuing a cadence of smaller bolt-on things. So I don't expect us to be in a position where the -- our cash position continues to build. That's not what we've been working towards, and we remain on track on that. Obviously, we're not going to do things for the sake of doing them. But we're not going to be sitting here a year from now just seeing that cash position build. There are plenty of opportunities. And I think the opportunities that are out there are probably only getting more interesting to us in terms of the things we're doing and then sort of relative valuations and then our ability to integrate them, which we've enhanced over time as well.

Yes. Okay. And then thoughts on the U.S. market in the second half and as we get into 2026. A wide range of estimates out there on what SAAR could be. I think July was actually pretty good. But then you have the EV tax credit going away at the end of Q3. So quite a few puts and takes there. I guess, how do you feel that the business is positioned in that backdrop? And then how do you think about growth in the U.S. market as we look out over the next few quarters?

Well, I think you have 2 things. Obviously, we can't sell products that go on new cars if new cars aren't sold. So we watch the SAAR and the prognostications about that. But like interest rates or anything else, our view is that no one really knows. And so we can't really plan for that. We have to just respond to it. But then the second piece of that is what are the things that we can control. And we can create awareness to increase attach rates into whatever the SAAR is. We can win competitive business and take share no matter what the SAAR is. So you really have one part thing that we have no control over and then 2 parts that we do have control over. And so those are really the things that we're focused on. And if the SAAR declines or the negative side of the estimates come in, we'll deal with that. But I think the focus for us is on the things that we can control. And there's plenty of things we can do to win business and increase attach rate and better serve our customers no matter what happens to the SAAR.

Yes. Okay. And then switching over to China. You've now lapped the sell-in, sell-through adjustments you've made over the last few quarters. And you also have a few quarters now under your belt with the improved product mix. How should we think about growth relative to the $8 million to $9 million a quarter run rate that we've seen in the last few quarters?

Yes. I mean I think our overall current view on sort of the China in-country growth with what we're doing today is probably low double digits in terms of what we could see happen. There's a whole other series of channels there in the OEM and PDI and 4S business, which historically the company and through our distribution is not pursued, but in the past year, we really increased our efforts to pursue that business, including building the teams necessary to support it. And that really represents the substantial upside for the business over the next several years. The volumes possible through that channel are significant, and that's really what will unlock the growth versus the more traditional aftermarket sales in-country. So I think the timing on that, there's bid and tender processes and things that happen, so it's really not something that's quite as easy to model as maybe our traditional business. But if you just sort of look at the core of what we're doing there, it's a low double-digit growth, and then augmented by that as we as we see that accelerate and get more success in that channel.

Thank you very much. Well, we appear to have reached the end of our question-and-answer session. I will now turn the call back over to the management team for their closing remarks.

Yes, I want to thank everybody for joining us and thank our team for doing such a great job. Have a great day, everyone.

Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time. And have a wonderful day. We thank you for your participation.