Dorman Products, Inc.

Good morning and thank you for standing by. Welcome to the Dorman Products Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the former presentation. Please note, this conference is being recorded. I'd like to turn the conference over to David Hessen, Dorman's Chief Financial Officer. Thank you so Please go ahead.

Thank you. Good morning and welcome to Dorman's fourth quarter 2023 earnings conference call. I'm joined today by Kevin Olson, our chief executive officer. First, Kevin will provide a business update and I will review the quarterly and full year financial results and provide our 2024 outlook. And then Kevin will provide closing remarks. After that, we'll open the call for questions. By now, Everyone should have access to our earnings release and earnings call presentation, which went out yesterday after the market closed. These documents are available on the investor relations portion of our website at DormanProducts.com. Before we begin, I would like to remind everyone that our prepared remarks, earnings release, and investor presentation include forward-looking statements within the meaning of federal securities laws. We advise listeners to review the risk factors and cautionary statements in our most recent 10Q, 10K, and yesterday's release for important material assumptions, expectations, and factors that may cause actual results to differ materially from those anticipated and described in such forward-looking statements. We'll also reference certain non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are contained in the schedules attached to our press release and in the appendix to this earnings call presentation, both of which can be found on the investor relations section of Dorman's website. Finally, during the Q&A portion of today's call, we ask that participants limit themselves to one question with one follow-up and to rejoin the queue if they have additional questions. And with that, I will turn the call over to Kevin.

Thanks, David. Good morning, and thank you for joining us on our fourth quarter 2023 earnings call. Today, I will discuss our strategy, operating highlights, and business activity. Please turn to slide three if you're following along in our deck. In Q4, we realigned our business along three segments, consistent with the sectors of the motor vehicle aftermarket in which we operate, light duty, heavy duty, and specialty vehicle. In connection with our transition to segment reporting, we are initiating live quarterly conference calls to provide additional insight into these segments and the overall company. Before we dive into Q4 performance, we thought it would be helpful to step back for a moment and review who we are as a company and what we do. Some of you have likely followed our story for years, but there are many listeners who are just getting to know Dorman. We are known as one of the leading innovators of repair solutions for the motor vehicle aftermarket. We deliver products from bumper to bumper across our legacy light duty business, our commercial vehicle focused heavy duty business, and our UTV and ATV focused specialty vehicle business. We are an engine of continuous innovation across each of these segments. And while our heavy duty and specialty businesses are relatively new additions to the portfolio, resulting from our acquisitions of Dayton Parts and Super ATV, we're very excited about what the future holds. Moving on to slide four, as I mentioned, we're leading the charge on innovation, and we think the capabilities and approach of our new product development team are unique. Over decades, our ideation team has built an immense network of relationships with repair technicians and end customers in the field enable us to continuously cultivate a robust new product pipeline over the last three years we brought over 19 000 new skus to market across our three segments such as our patented oil filter housing a number of electronic control modules and an oe fixed line of pre-press axles many of which have enhanced features designed to solve repair problems created by the original equipment The technical capabilities and experience of our new product development team enable us to provide a comprehensive suite of active market solutions, from bumper to bumper and across different drivetrains from ICE to hybrid to BEV. We are truly agnostic to powertrain type. Our product development capabilities are further enhanced by our asset-light model that leverages our network of hundreds of suppliers globally. We utilize this diverse network to manufacture the vast majority of our products. With this approach, our team is able to work closely with our suppliers to ensure products meet our designs and specifications, and we have the ability to efficiently and effectively flex production up or down as needed to best serve the needs of our markets. Moving on to slide five, we leverage our new product innovation engine across an expansive Total addressable market of $165 billion. We have a significant opportunity to grow our share of wallet with a wide range of leading aftermarket customers. Also, while our heavy duty and specialty vehicle segments collectively contribute a quarter of our top line today, we're targeting growing those businesses to approximately 15% of top line each by the end of 2028. On slide six, you will find our strategy for driving growth and profitability by leveraging our innovation capabilities to bring thousands of new products to market annually. In light duty, there's a significant focus on growing IP-centric categories like our advanced electronics, which have a large current OE share and premium margin potential. We see opportunities that draw on the digital investments that we've made for our customers' omnichannel selling approach to continue to broaden our distribution reach. We're also taking actions to improve supply chain efficiency and optimize our distribution operations. In heavy duty, we're implementing the same dormant playbook that's been effective in our light duty business. We're investing in new product capabilities to drive innovation and in our digital infrastructure to enable omnichannel presence. and we're optimizing our manufacturing operations and supply network. Turning to specialty vehicle, the acquisition of Super 8 TV gave us access to high margin and rapidly expanding market specialty specialized transport vehicles. We've increased our focus on growing non-discretionary parts categories, including repair parts, which approximate 50% of this segment's net sales. We'll also continue to invest in the upgrade accessory categories that Super ATV is known for. Finally, we're focused on growing our presence with the vehicle dealers, particularly in regions where we're under-penetrated, such as the West Coast. As we look back on our performance over the last few years on slide seven, we've demonstrated a trend of top-line growth, disciplined investment, and cost control. From 2019 to 2023, our top line grew at an 18% CAGR, while we're also been prudent operators as demonstrated by adjusted operating income growth above our peers. Before I hand it over to David, I wanted to provide you with my thoughts on our results. We ended the year with strong Q4 financial results, which were aligned with our guidance. We delivered record net sales in EPS, and significantly improved our margins. For the year, we generated record-free cash flow, continued to pay down our debt, and repurchased shares. Our innovation engine launched thousands of new products and solutions across all three segments, and we drove efficiencies into and costs out of our operations during the quarter. I'm proud of our contributors who were the driving force behind our strong performance as they come to work each day focused and how we can deliver innovative solutions to the app. I wanna thank them for the ingenuity, dedication and hard work. Gross margin was a heightened focus area of the company in 2023. I'm pleased to report that our adjusted Q4 gross margin increased 640 basis points year over year and was up 180 basis points sequentially compared Q3. Throughout the year, we managed through significant inflation implemented productivity measures in our operations, which enabled us to push our margins back up to 2018 levels. Gross margin improvement was also the engine behind the strong Q4 free cash flow that we used to pay down our debt and repurchase our shares. Overall, Dorma continues to stand on strong financial footing. As I look forward, I'm optimistic about 2024. Industry fundamentals remain strong, and while there is a level of macro uncertainty in global markets that have the potential to impact near-term results, I believe we have the team and plans in place to deliver strong results in 2024. At this point, I'd like to turn things over to David so he can provide some deeper perspectives on our financial performance.