Dorman Products, Inc.

Good morning, and thank you for standing by. Welcome to the Doorman Products first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note that this conference is being recorded. I'd now like to turn the conference over to Alex Whitelam, Vice President of Investor Relations. Thank you, sir. Please go ahead.

Good morning, everyone. Welcome to Dorman's first quarter 2025 earnings conference call. I'm joined by Kevin Olson, Dorman's chief executive officer, and David Heshen, Dorman's chief financial officer. Kevin will share updates on the business and address the tariff situation. Then David will review our quarterly results and reaffirm guidance. Kevin will then close our prepared remarks before opening the call for questions. By now, everyone should have access to our earnings release and earnings call presentation, which are available on the investor relations portion of our website at DormanProducts.com. Before we begin, I'd like to remind everyone that our prepared remarks, earnings release, and investor presentation, including forward-looking statements within the meeting of federal securities laws. We advise listeners to review the risk factors and cautionary statements in our most recent 10Q, 10K, and earnings 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 earnings release and in the appendix to this earnings call presentation, both of which can be found on the investor relations section of Thorman'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'll turn the call over to Kevin.

Thanks, Alex. Good morning, and thank you for joining our first quarter 2025 earnings call. As Alex mentioned, I'll start with a high-level review of the results and then cover the actions we've taken over the last several years to position us well to address tariffs. I'll also touch on the observations we're seeing within each of our segments. Turning to slide three, I wanted to briefly touch on the quarter. David will provide more detail, but we had an outstanding first quarter with strong top and bottom line results. Consolidated net sales for the quarter grew 8% year over year to $508 million. Our team continues to do a great job on the new product development front, which contributed to our growth. We also delivered solid margin expansion in the quarter. Adjusted operating margin for Q1 2025 was 17%. expanding 310 basis points compared to the same period last year. This margin performance was again led by our light duty business, which drove solid margin improvement over last year's first quarter. Lastly, adjusted diluted EPS increased over last year's first quarter by an impressive 54% to $2.02. And free cash flow in the quarter was $40 million. allowing us to repay $20 million of debt and repurchase $12 million of our common stock. Overall, we began the year with strong results that support our expectations for continued growth this year. On slide four, we thought it would be valuable to discuss some of the investments we've made in our business over the last several years, which position us well to perform in situations of economic uncertainty like we currently face. I'd like to caveat that the situation has been highly fluid, as you all know, and we are following it closely. I've been extremely impressed with our team and their ability to pivot and navigate through the day-to-day challenges. It speaks to the level of talent we have across the organization. First, as we discussed on our last call, we've taken significant steps to diversify our supply chain since the Section 301 tariffs on Chinese imports went into effect in 2018 and 2019. Entering 2025 and before the new tariffs were put into effect, we have been executing a plan to continue to reduce our share of products sourced from China. In 2025, we estimate that approximately 30% to 40% will be sourced from partners in China, approximately 30% from the US, and the remainder from various regions around the world. We will continue to remain focused on optimizing our supply chain strategy. We believe this level of diversification gives us a competitive advantage. It is not just an effort to capture cost savings. Our asset-light manufacturing strategy and expertise stand out as competitive advantages, allowing us to identify and partner with leading manufacturers around the globe to drive redundancy, flexibility, and resiliency within our supply chain. The end result is better products at better prices for our customers and end users. Through our strategic sourcing investments, we develop strong relationships with our supply partners. Our scale often makes us a strategic customer for our vendors. In many instances, we're one of their largest customers. This scale and strategic position fosters deep partnerships with our suppliers that ultimately benefit our customers and end users. Next, The products that we sell play an essential role in everyday life. Our products help people get to work, get their kids to school, take vacations, and visit friends and family. Our products also help businesses keep their goods flowing from point A to point B and provide everyday services to local communities. The majority of our product portfolio is non-discretionary in nature. So if you are in need of one of our parts, Odds are your vehicle is not operating or not operating safely. Non-discretionary parts have historically done well in uncertain economic times. And for decades, we have successfully navigated various diverse economic environments. Furthermore, we believe our innovation strategy and the strength of our brands position us well to succeed. Our innovative solutions are core not only to our success, but also to the success of our customers and technicians who rely on our new products for their own growth and profitability. We've also strategically invested in our brands over the last several years, which has led to the Dorman, Dayton, and Super ATV brands being sought after in their respective segments. And finally, our financial profile serves as a significant benefit to our investors and customers. We have a strong balance sheet and liquidity positions, allowing us to manage higher costs from tariffs in the short term, to invest in inventory to support our customer needs, and to capitalize on strategic growth opportunities along the way. We expect our strong financial foundation will stand out as a key competitive advantage compared to our peers. In the end, we have the experience and playbook and the right set of solutions, suppliers and customers, along with the financial strength to navigate the changing trade environment. Before I turn it over to David, let me touch on the observations we're seeing across our segments on slide five. These observations include what we've experienced leading up to the recent tariff announcements and what we see looking forward in the new trade and economic environment. Starting with light duty, as I mentioned, positive macro trends continued into the year. Vehicle miles traveled climbed higher year over year, and we expect that used vehicles will continue to stay on the road longer Although which are key contributors to the excess of the aftermarket. During the quarter customer demand was strong trend that followed through from the end of 2024. In particular. We have a strong season with a patented oil filter housing product that we discussed in previous calls. This along with the success of our other recent new products will key contributors to our growth. In our heavy duty segment. The soft market conditions that impacted trucking and freight markets in 2024 continued through this year's first quarter. While the early signs of stabilization we spoke of on our last call continued the first few months of 2025, the announcement of tariffs and the impact on demand for trucking and freight began creating additional uncertainty in the market late in the quarter. We're watching it closely and will continue to position the business for long-term success through portfolio expansion, productivity initiatives. In specialty vehicle, we remain encouraged with the enthusiasm behind the UTV and ATV markets. The feedback we get from end users is that they are very engaged and positive, and we're not seeing a pullback in ridership. However, consumer spending softened during the quarter and may be ahead when moving forward. We remain focused on expanding our portfolio of non-discretionary parts, capturing share, an expanded dealer network as the market rebounds. With that, I'll hand it off to David to review our Q1 financial performance. Thanks, Kevin.