XPEL: 3 Key Takeaways for Long-Term Investors

On its third-quarter 2026 earnings call, held on Nov. 4, 2026, XPEL (NASDAQ:XPEL) reported revenue growth of 9.9% to $137.8 million alongside expanding gross margins. The automotive protective film maker faces short-term regulatory friction in U.S. auto dealerships, but it's scaling direct international distribution and expanding domestic manufacturing to drive long-term operating leverage (growing revenue faster than operating expenses).

Three key takeaways from management's comments stand out for long-term investors.

1. Regulatory Pressures at Auto Dealerships Near a Bottom

Federal scrutiny and state regulations targeting undisclosed vehicle add-ons created uncertainty for dealership partners, causing sales through that channel to flatten. Management expects fourth-quarter performance to mark the trough as dealers update sales software and offer protective films as optional accessories rather than preinstalled packages.

The CARS Act requires that add-ons be disclosed as optional and provide real benefit to the customer. Our products, though, deliver tangible, visible, and warranty protection, and dealers can sell them in full compliance.
-- Ryan Pape, President and Chief Executive Officer

2. Global Supply Chain Expansion Unlocks Future Margin Potential

XPEL is transitioning to direct distribution and in-house manufacturing, expanding its footprint through a new plant in Texas and an acquired facility in China. Supplying non-U.S. markets from the Chinese facility in early 2027 will lower production costs and expand gross margin (the percentage of revenue remaining after direct cost of goods sold).

We'll begin leveraging the China facility that we acquired for additional products destined for non-China, non-U.S. markets over the first half of next year. That represents upside on our investment there to leverage those assets...
-- Ryan Pape, President and Chief Executive Officer

3. Vehicle Manufacturer Partnerships Offer Unprecedented Pipeline Growth

Opportunities with original equipment manufacturers (OEMs, vehicle makers) have expanded rapidly, with a project pipeline double the company's historical total. The acquisition of the graphics supplier VISCO adds vehicle personalization capabilities and opens access to new auto manufacturer accounts.

Our OEM business pipeline remains very strong. We have more open and potential projects theoretically for 2027 than our cumulative history to date, probably by 2x if they were all to occur...
-- Ryan Pape, President and Chief Executive Officer

Looking Ahead

Short-term headwinds in the Middle East create friction, yet operational progress stays on track. Internal manufacturing investments in Texas remain scheduled for a mid-2027 launch, supporting long-term operating margin goals while disciplined overhead cost control provides steady efficiency.

The balance sheet is strong and gives us complete flexibility moving forward.
-- Ryan Pape, President and Chief Executive Officer

With regulatory resets nearing completion and direct international operations scaling up, execution across key markets positions the business for broader momentum.

There are near-term macro challenges in some of these regions we need to contend with, but we're confident these will sort out as we move into next year.
-- Ryan Pape, President and Chief Executive Officer

The Motley Fool recommends Xpel. The Motley Fool has a disclosure policy.