XPEL (XPEL) risk factors, FY2025 10-K

Operational Risks

1. 01A 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
2. 02Any continued reliance on contract manufacturers and suppliers exposes us to product quality and variable cost risksNew
3. 03If we do not manage or control the quality of our products, we may be unable to meet customer demands and incur higher costs New
4. 04Our results depend on the timely availability of raw materials, components, and commodities at acceptable pricesNew
5. 05Our planned investment in manufacturing and supply chain assets exposes us to execution risksNew
6. 06We are subject to extensive environmental, health, and safety laws and regulations governing emissions, discharges, waste management, hazardous materials, chemical registration, and worker protectionNew
7. 07Existing and potential new trade policies, such as tariffs, could adversely affect our operations, costs and businessNew
8. 08If we are unable to effectively manage our growing labor force, our business could be impacted
9. 09The 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
10. 10Increased regulatory scrutiny of dealerships that inhibit or change their selling process or how they interface with consumers could impact our revenueNew
11. 11The preparation of our financial statements involves the use of estimates, judgments and assumptions, and our financial statements may be materially affected if such estimates, judgments and assumptions prove to be inaccurateNew
12. 12made 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 goodwillNew
13. 13Failure to meet the PRC government’s complex regulatory requirements on and significant oversight over our business operation could result in a material adverse change in our operations and the value of our securitiesNew
14. 14Fluctuation in the value of RMB may result in foreign currency exchange lossesNew

Risks Related to Our Majority but Not Wholly-Owned Subsidiary in China

1. 15If we decide to sell our interest in the subsidiary, the minority shareholders may have rights of first refusal or other rights that could delay or prevent a sale or require us to sell on less favorable terms. In addition, PRC regulations may restrict the transfer of ownership interests in foreign-invested enterprisesNew
2. 16China’s Merger & Acquisition Rules and certain other regulations establish complex procedures for certain acquisitions of PRC companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in ChinaNew
3. 17directly or indirectly used for purposes beyond its business scope and prohibit foreign-invested companies from using such RMB fund to provide loans to persons other than affiliates unless otherwise permitted under their business scopesNew
4. 18We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our businessNew
5. 19Increases in labor costs and enforcement of stricter labor laws and regulations in China may adversely affect our business and our profitabilityNew
6. 20Any failure to comply with Chinese regulations regarding our employee equity incentive plans may subject Chinese plan participants or us to fines and other legal or administrative sanctionsNew
7. 21Failure to make adequate contributions to various employee benefit plans as required by Chinese regulations may subject us to penaltiesNew
8. 22We face increasing competition for qualified employees in China, particularly in other major cities and for technical, commercial, and managerial rolesNew
9. 23We are subject to occupational health and safety laws and regulations in ChinaNew

Risks Related to Our Business and Industry

1. 24We are highly dependent on the automotive industry. A prolonged or material contraction in automotive sales and production volumes could adversely affect our business, results of operations and financial condition
2. 25Our operating results can be adversely affected by inflation, tariffs, changes in the cost or availability of raw materials, labor, energy, transportation and other necessary supplies and services
3. 26The after-market automotive product supply business is highly competitive. Competition presents an ongoing threat to the success of our Company
4. 27Harm to our reputation or the reputation of one or more of our products could have an adverse effect on our business
5. 28Our revenue and operating results may fluctuate, which may make our results difficult to predict and could cause our results to fall short of expectations
6. 29If the model of selling vehicles through dealerships changes dramatically, our revenue could be impacted
7. 30If ride-sharing or alternate forms of vehicle ownership gain in popularity, our revenue could be impacted
8. 31Technology could render the need for some of our products obsolete
9. 32If paint were replaced with other technologies such as film-based products at the point of manufacture, or if machined-based application of paint protection film was developed, the need for paint protection film or the labor services provided by our sales and distribution channels could be reduced
10. 33Changes in OEM accessorization strategies or production volumes could impact our business
11. 34Infringement of our intellectual property could impact our ability to compete effectively37% rewritten
12. 35We must conduct research and development activities to improve our existing products and services and to introduce new products and servicesNew
13. 36If changes to our existing products or introduction of new products or services do not meet our customers’ expectations or fail to generate revenue, we could lose our customers or fail to generate any revenue from such products or services and our business may be harmed

Strategic Risks

1. 37We depend on our relationships with independent installers and new car dealerships and their ability to sell and service our products. Any disruption in these relationships could harm our sales
2. 38We may not be able to identify, finance and complete suitable acquisitions and investments, and any completed acquisitions and investments could be unsuccessful or consume significant resources
3. 39If we are unable to maintain our network of sales and distribution channels, it could adversely affect our net sales, profitability and the implementation of our growth strategy
4. 40If we are unable to retain and acquire new customers, our financial performance may be materially and adversely affected
5. 41We are exposed to political, regulatory, economic and other risks that arise from operating a multinational business
6. 42Volatility in currency exchange rates could have a material adverse effect on our financial condition, results of operations and cash flows
7. 43If we fail to manage our growth effectively, our business, financial condition and results of operations may suffer

Legal, Regulatory and Compliance Risks

1. 44We may incur material losses and costs as a result of product liability and warranty claims
2. 45Our failure to satisfy international trade compliance regulations, and changes in U.S. government sanctions, could have a material adverse effect on us
3. 46Changes in U.S. administrative policy, including changes to existing trade agreements and any resulting changes in international relations, could adversely affect our financial performance
4. 47Intellectual property challenges may hinder our ability to develop and market our products, and we may incur significant costs in our efforts to successfully avoid, manage, defend and litigate intellectual property matters
5. 48We may face design limitations or liability associated with the use of products for which patent ownership or other intellectual property rights are claimed
6. 49Failure, inadequacy, or breach of our information technology systems, infrastructure, and business information or violations of data protection laws could result in material harm to our business and reputation
7. 50We may seek to incur substantially more indebtedness in the future
8. 51We cannot be certain that additional financing will be available on reasonable terms when required, or at all
9. 52Our variable rate indebtedness exposes us to interest rate volatility, which could cause our debt service obligations to increase significantly

Risks Relating to Common Stock

1. 53If research analysts issue unfavorable commentary or downgrade our Common Stock, the price of our Common Stock and its trading volume could decline
2. 54Short sellers of our stock may be manipulative and may have driven down and may again drive down the market price of our Common Stock
3. 55Our stock price has been, and may continue to be, volatile
4. 56We may issue additional equity securities or engage in other transactions that could dilute our book value or affect the priority of our Common Stock, which may adversely affect the market price of our Common Stock
5. 57We may issue shares of preferred stock with greater rights than our Common Stock
6. 58We have not paid any cash dividends on our Common Stock to date and do not anticipate any cash dividends being paid to holders of our Common Stock in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our Board
7. 59Shares eligible for future sale may depress our stock price
8. 60Your percentage of ownership in our Common Stock may be diluted in the future
9. 61Anti-takeover provisions could make a third-party acquisition of us difficult
10. 62Our directors and officers may have control over us40% rewritten
11. 63Our bylaws provide that the state located in Clark County, Nevada will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees87% rewritten
12. 64General global economic and business conditions affect demand for our products
13. 65A public health crisis could impact our business
14. 66Economic, political and market conditions can adversely affect our business, financial condition and results of operations