Dorman Products, Inc.

Good morning and thank you for standing by. Welcome to the Dorman Products 3rd 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 Whiteland, Vice President of Investor Relations. Thank you, sir. Please go ahead.

thank you good morning everyone welcome to dorman's third quarter 2025 earnings conference call i'm joined by kevin olson dorman's chief executive officer and david hessian dorman's chief financial officer kevin will provide a quick overview along with an update on each of our business segments and their respective markets then david will review the consolidated results and our guidance before turning it back over to kevin for 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 are available on the investor relations portion of our website at dormantproducts.com. Before we begin, I'd 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 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 in 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'll turn the call over to Kevin.

Thanks, Alex. Good morning, and thank you for joining our third quarter 2025 earnings call. As Alex mentioned, I'll start with a high-level review of the results along with an update on our segments and market observations for each before turning it over to David. Let me start on slide three. First, I'd like to thank our contributors for all their hard work and dedication this year, which allowed us to execute exceptionally well and deliver for our customers. In the third quarter, we drove strong top and bottom line growth. Consolidated net sales were $544 million for Q3, up 7.9% year over year. This growth was primarily driven by tariff-related pricing actions that took effect in the quarter, which we covered in detail during our last earnings call. Additionally, we saw solid POS growth in the quarter, which was up mid-single digits year over year. As we expected and discussed previously, we delivered strong margin growth in the quarter. This was largely driven by the timing dynamics of pricing and costs associated with tariffs. As a reminder, while the majority of our price increase went into effect in the third quarter, the inventory that we purchased in Q2 comes with higher tariff-related costs that will begin to impact our income statement in the fourth quarter of this year. As a result, we expect a lower gross margin in Q4 compared to Q3. Adjusted operating margin for Q3 2025 was 20.5%, a 340 basis point increase over last year's third quarter. Adjusted diluted EPS grew 34% year over year to $2.62, which again was driven by our growth, margin expansion, and the timing dynamics of pricing and cost related to tariffs. Finally, operating cash flow was $12 million and free cash flow was $2 million in the quarter. While this is a slight improvement over Q2, our cash flow continues to be impacted by higher tariff costs. David will discuss this in more detail shortly. So while there were some timing subtleties within the quarter, we're pleased with our performance and expect to continue delivering strong year-over-year growth for our shareholders. Next, I'll provide our results for each of our business segments. I'll also dive into our market observations and share some highlights for each. Starting on side four, our light duty business had another strong quarter. with net sales increasing 9% year over year in Q3. The growth was primarily driven by tariff-related pricing actions that took effect in the third quarter. POS more closely aligned with our net sales, up mid-single digits year over year. And similar to last quarter, we're not seeing any significant oversupply in the inventory data we have from our largest customers. On the margin front, light duty delivered a 470 basis point gain in operating margin, driven primarily by tariff related pricing, as well as the impact of our supplier diversification initiative. Looking across the light duty market, macro trends continue to remain positive. The vehicle miles traveled increasing year over year. However, uncertainty in the market related to tariffs and trade dynamics continues to persist. We're closely monitoring the environment and continue to work with our suppliers and customers as part of our overall tariff mitigation strategy. And while it appears that inflationary pricing has started to reach our end users, we remain confident in our ability to drive long-term growth as non-discretionary repair parts have historically performed well through various economic cycles. We also thought it would be helpful to provide some business insights and highlight new products and updates across our segments. In the light duty business, we recently launched an electronic power steering rack for specific Ram truck models from 2013 to 2024. This is a first to aftermarket part and the only available option in the independent aftermarket that is manufactured new. This product is a great example of our capabilities within complex electronics given the functionality and integration with various systems throughout the vehicle. The EPS rack is an OE fixed component, with significant upgrades compared to the original manufacturer's part that are designed to ensure a long, reliable service life. The electronics within have been redesigned with added surge protection and an improved layout to reduce heat and electrical interference. Additionally, protective coatings have been applied to resist contamination from water, salt, dust, and other harmful contaminants. It has also been designed for simple, seamless installation with no dealer programming needed. This product is a culmination of extensive, complex, cross-functional work with our engineering teams, so I'd like to congratulate everyone involved. Next, let me turn to slide five for updates on our heavy duty business. Net sales grew 6% year-over-year in the third quarter. While market conditions continued to pressure the segment, the team executed on the pricing front and drove volume through new business. The benefit of higher net sales growth in the quarter was offset by lower manufacturing productivity, impacting margins, which were flat year-over-year. Longer term, we remained focused on driving a mid-teens operating margin profile for the heavy-duty segments. Digging more into the broader trucking and freight market, it remains difficult to predict an inflection point. While we're pleased with the recent net sales growth over the last two quarters, we continue to see mixed signals across our customer channels. But we're hopeful that the worst is behind us and we'll see it turn in the coming quarters. Despite the headwinds, we continue to execute key initiatives to best position the business for the eventual rebound of the trucking and freight market. As an example, we just launched our redesigned website with an improved e-commerce platform that helps customers identify the right parts for the right applications and get our products to the right locations on time. We expect the new site, which has been designed with the next generation of heavy-duty repair professionals in mind, will enable us to scale and be even more competitive with the help of its user-friendly interface and modernized look and feel. On slide six, I'll provide an overview of the specialty vehicle segment. Top line growth was relatively flat year over year with continued market pressures in the quarter, including weak consumer sentiment from tariffs and interest rates remaining at higher levels. Operating margin was impacted by lower manufacturing productivity in the quarter as we proactively reduced production in our Chinese manufacturing facility in Q1. following a ramp up of production in Q4 of 2024 to get ahead of tariffs. Long term, we are targeting a high teens margin profile for the business. We remain focused on our innovative strategy and continuing to develop new products for both the current part and next generation vehicles. Despite the challenging consumer sentiment during the quarter, UTV and ATV ridership remains strong, which is a continuation of the positive trends we've seen in prior quarters. We expect that as the economy continues to stabilize and interest rates further decline, riders will increase their spending on their vehicles. OEs have also commented that machine inventory is starting to normalize, which should bring stability to the end market. Speaking of new products, I wanted to highlight four-inch long travel kit that we introduced for Polaris XD 1500 models. This bundle widens the vehicle's wheelbase by a total of eight inches, providing more stability and control on rough terrain. The kit is designed for more of a utility application, allowing operators to improve the rides that fit the work they do on a daily basis. This is a great example of a solution designed for those utilizing their vehicles for work, not just play. We continue to expand our portfolio of non-discretionary utility-focused products to broaden our reach with new users. With that, I'll turn it over to David to cover our results in more detail.

David? Thanks, Kevin. Let me start with our consolidated results for the third quarter on slide seven. Net sales in the third quarter were $544 million, up 7.9% year over year. As Kevin outlined, our net sales growth was driven primarily by tariff-related pricing initiatives. Positive macro trends in our light duty business and the success of our innovation strategy across all three segments remain foundational to the strong momentum of the overall business. Adjusted gross margin for the quarter was 44.4%, a 390 basis point increase compared to last year's third quarter. As Kevin mentioned, this margin expansion was driven by the timing dynamics of when price and costs related to tariffs are recognized in our income statement. Additionally, our supplier diversification efforts contributed to margin improvement in the quarter. We remain on track to reach our goal of reducing our overall supply from China to 30% to 40% as we exit 2025. Adjusted SG&A expenses, a percentage of net sales, was 23.9%, up 50 basis points compared to the same period last year. Adjusted operating income was $111 million for the third quarter, up 30% compared to last year's third quarter. Adjusted operating margin expanded 340 basis points to 20.5%, primarily from the improvement in gross margin I just discussed. Finally, adjusted diluted EPS in the third quarter was $2.62, a 34% increase year over year. In addition to the increase in operating income, lower interest expense positively impacted our adjusted diluted EPS growth, offsetting a higher comparable effective tax rate given favorable discrete items in last year's third quarter. Turning to our cash flow on slide eight, for the third quarter, our cash flow was impacted by the higher cost inventory affected by tariffs. This led to operating cash flow of $12 million and free cash flow of $2 million in the quarter, which was a decline from last year, but a modest improvement from last quarter. We expect that free cash flow will rebound in the coming quarters. With tariff and trade uncertainty impacting parts of our business, we maintained our pause on share repurchases through the quarter. As always, we'll continue to monitor market conditions along with the cash needs of the business and opportunistically repurchase shares to return capital to our shareholders as part of our broader capital allocation strategy, which remains unchanged. We also believe we remain well positioned to fund our strategic growth initiatives given our strong liquidity position, which I'll cover on the next slide. Slide nine reiterates what we've been saying for a number of quarters now. Our asset light nature and long track record of generating strong levels of cash flow have enabled the liquidity position and balance sheet capacity that allow us to manage higher cost inventory while still investing in strategic growth opportunities. As you can see, at the end of the quarter, net debt was $401 million, and our net leverage ratio was 0.92 times adjusted EBITDA. Additionally, our total liquidity was $654 million at the end of September, up from $642 million at the end of 2024. Again, we expect the strength of our balance sheet will stand as a competitive advantage and a key driver of our success going forward. Finally, let me discuss our guidance for 2025 on slide 10. With our strong performance through the first nine months, we have reaffirmed our net sales and EPS guidance ranges for the year. Our guidance for 2025 is based on the tariffs that are currently enacted. Should any material changes to tariffs or trade disruptions significantly impact our business or alter our expectations, we may look to update our guidance prior to year end. Starting with top line, we expect net sales growth to be in the range of 7% to 9% over 2024. And for adjusted diluted EPS, we expect a range of $8.60 to $8.90 for an increase of 21% to 25% compared to last year. Finally, for modeling purposes and additional clarity on the final quarter of the year, we expect that Q4 will see a reduced gross margin percentage compared to this quarter as tariffs begin to impact our cost of goods sold. Also, we expect the full year tax rate will land at approximately 23.5%. With that, I'll now turn it back over to Kevin to conclude. Kevin.

Thanks, David. Just to finish up, I'd like to commend the team on delivering strong top and bottom line performance in the quarter and year to date. Our results reflect the hard work and dedication of our contributors all around the globe who are managing exceptionally well in a dynamic economic environment. Our business is well positioned to deliver strong performance in 2025 and we're pleased with the opportunities ahead. With that, I would now like to open the call up for questions. Operator?

Ladies and gentlemen, we will now begin the question and answer session. I would like to remind everyone to ask a question. Please press the star button followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. We ask that you please limit your inputs to one question and one follow-up. One moment, please, for your first question. Your first question comes from the line of Scott Stember of Roth Capital. Please go ahead.

Good morning, and thanks for taking my questions. Good morning, Scott. Good morning, Scott. Last week, one of your bigger customers commented that they were starting to see some elasticity issues, notably on the DIY side. Are you seeing any change in behavior, whether it's DIY or DIFM, related to elasticity, or is it too soon to say at this point?

Hey, Scott, it's Kevin. Good question. Look, I'm not going to comment on what our customers say, but I will tell you how we're looking at it. Really solid quarter, growth up 9% in light duty, 8% overall. POS was solid in the quarter. New continues to be a strong driver of growth. Macros continue to look solid in terms of the sweet spot of the vehicle, miles, age of the vehicle. But, you know, keep in mind that our portfolio differs quite a bit from, you know, a lot of our customers and a lot of our other folks in the supplier community. We have a heavy non-discretionary majority of our parts. So, you know, either your car is not going to run or it's not going to run safely. So, you know, we have some benchmarks as well. You know, we went through the 2008. 18 and 19 timeframe where we had some inflation. And we went through the time period of 2023 and 2022, 23, when we had that inflationary period and we raised prices. And what we generally see over time is our portfolio is generally inelastic and performs pretty well because of the non-discretionary nature of it.

Got it. And then last question before I jump back into the queue on margins. Typically, when price increases go through to cover tariffs, usually there's some optical distortion on the margin line. But it seems that you guys at least recently have been comfortable that you could keep margins relatively flat because of some of the self-help stuff that you have going on. Is that narrative still in play? And just trying to get a sense of where we should look at margins as we go forward in the next couple of quarters.

Yeah, look, really strong order for margins. You know, we breached 20% operating margin. But as David said in his prepared remarks, we do expect some compression as we move into the fourth quarter with the dynamic of the tariffs, you know, coming through COGS, cost of goods sold. But I think that there are a lot of activities that we've also talked about that we anticipate reading through, whether that be cost initiatives, whether that be productivity improvements in our DCs, you know, and throughout the business, frankly. And longer term, you know, we continue to... to see this business as a high-teens operating margin business.

Great. Thanks again.

Thanks, Scott.

Your next question comes from the line of Jeff Flick of Stephens, Inc. Please go ahead.

Good morning, guys. Congrats on a nice quarter. Thanks for taking my questions. Kevin, I was wondering if we could just maybe address the trajectory of light duty you know, up 9.3%, you know, with price increases, you know, relative to the 10.1 and 13.8, it was up the previous two quarters. Just any, you know, additional color clarity on, you know, what was driving that would be great.

Look, it was, Jeff, we view it as a very solid quarter in light duty. You know, 9% sales growth. POS was very solid in the quarter. New products continue, you know, drive exceptional growth there we don't we don't see that stopping you know as i as i mentioned before the macroeconomic environment still looks very good there in terms of uh you know the sweet spot of of the 7 to 14 year old vehicle continues to rise miles driven continue to increase i think the age of the vehicle now is is around 12.8 years old so when we step back um And we look at it, given the non-discretionary nature of our portfolio there, we feel really good about driving future growth.

Yeah, Jeff, and I'll just add a little color. I'm sorry, add a little color there. The Q3 was 9.3%. It was real consistent with the second quarter, and it's pretty consistent with the first quarter as well, because if you look at the first quarter, it had a very easy comp. So it's pretty consistent growth through the year in the light-duty business.

Just a quick follow-up on kind of the dynamics of price increases. I was just curious, let's just say you guys decide, hey, you're going to take a 4% price increase, which obviously goes to your customer, who then in turn will pass that along in one way, shape, or form to the end user. How does that dynamic play out? Is it typically that you're customer is going to take your price increase and just pass that on percent, you know, at the same percentage or, you know, what's the dynamic there?

Yeah, I mean, look, I really can't comment on how our customers are going to react to, you know, potential price increase from us or any other supplier. All I can tell you, Jeff, is kind of how we handle it. You know, it's a multifaceted approach, right? I mean, And it's really aligned with historical practices that I talked about earlier. You know, we've been through this before in 1819 and 22, 23. First, you know, we have a very defined strategy to diversify our supply chain, which we've made a lot of progress on over the years. We're a much different company than we were from that respect from six, seven years ago. We negotiate with our suppliers, right? I mean, obviously these are our supply partners around the globe. And so we obviously look to get the best price value combination we can from our supply base. And then, as I mentioned earlier, we continue to look at productivity initiatives across the company. And when that's all said and done, we'll work with our customers to strategically implement price increases. But beyond that, Jeff, I really can't comment on what our customers are going to do from that standpoint.

Great. Thanks very much, and best of luck in the next quarter. Thank you. Thanks.

Our next question comes from the line of Tristan Thomas Martin of BMO Capital Markets. Please go ahead.

Hey, good morning. Hey, Tristan. Good morning.

The first brand has been all over the news. How should we think about kind of like product overlap or any other overlap, and then what could it be potentially in terms of an opportunity for you guys?

Yeah, thanks for the question, Tristan. It's a good one. I'll start out by saying that, you know, we don't view ourselves as a comparison to first brands. And then I'll also point out, you know, from the Dorman perspective, we have a very healthy balance sheet in liquidity. I think we're carrying less than one times leverage at this point. We don't engage in any off-balance sheet financing. We only participate in the customer-sponsored factoring programs with our largest customers. And frankly, we've been doing that for decades. You know, we do have publicly secured debt, but we haven't speculatively financed our receivables or, frankly, any other working capital assets. And, you know, to kind of address your question straight on, I mean, we do have some categories that overlap with customers. first brands, but not in a material way. It's really around the edges. And of course, we stand ready to help our customers that they need help from this situation, as we always do.

Okay, thank you. And then just one on specialty vehicles. I was just wondering, you introduced the new long travel suspension for the XC1500. Do you see any change in aftermarket attachment rate on newer vehicles such as the XT1500, but OEMs are focused a little bit more on factory accessories versus maybe some older, more mature vehicles that don't have the same OEM kind of accessory support.

Thanks. Yeah, I mean, clearly, you know, when you have less contented models, that's a good thing for us. Frankly, with price points being what they are and they've increased so much over the years, we view it as a good dynamic going forward because I think we'll start to see a lot more entry price point models in the future. I tell you that the specialty vehicle market continues. Look, we love the business. Rider enthusiasm continues to remain high. We do surveys of dealers and riders consistently. But the discretionary side of that business has definitely felt more impact, which is roughly half the business. And that's why we continue to double down on non-discretionary repair parts in that business, which we've really expanded that portfolio since the acquisition a few years ago.

Great. Thanks, everyone. Got it.

Your next question comes from the line of Brett Jordan of Jefferies. Please go ahead.

Hey, good morning, guys. Hey, Brett. Hey, Brett. I think you said that your POS was up mid-single digits. Is that units or is that POS dollars out the door of the customer? I guess if we could sort of look at the Q3, how much of the growth was price versus pieces?

Yeah, Brett, that's dollars. And, you know, we've always quoted POS in dollar terms. Hope you can appreciate that we don't and have never disclosed unit growth for competitive reasons. You know, it could really put us in a situation with some customers that they could triangulate price increases. So we don't disclose that. I'll only say that POS growth in the quarter was very solid. particularly as we look at it compared to Q2. And look, as I said before, the non-discretionary nature of our portfolio bodes well in a period of increasing inflation. We've seen it before. It's not our first time going through a period like this.

Yeah. So I guess when you think about your customers have sort of thrown out same-skew inflation between two and a half, at least three, and then four, where do you sort of

that low mid single digit, the right number?

You broke up a little bit there, Brad. I will, I think I got the gist of your question, though. I mean, at the end of the day, I can't comment on what my, you know, our customers that are publicly out there have very different product offerings than we do in terms of DIY. You know, we tend to, you know, the majority of our portfolio is, as you know, hard parts. much more DIFM, professional content. So it's not a real good compare, you know, trying to compare some of our customers to our portfolio. Okay.

And then a question on supply chain. I think you're saying you expect to be 30% to 40% China by year end. What's the supply chain map going to look like? I mean, a few years ago, you were 70% China. Are there other countries that are concentrated? I think, you know, sort of how diverse.

Look, right now, yeah, I mean, we've said previously that right now we're about 30 to 40% China, depending on the mix, roughly 30% in the US, and the balance is rest of the world. I think we're, you know, as we move forward, you'll probably see a little bit less than that indexing towards China. But to be honest, I think we feel pretty good about the nature of the footprint now. Even with regard to all these very fluid situation around tariffs, we're very diversified. And frankly, we have a very robust supply chain, much more robust than we did six, seven years ago. So I think we can handle anything that's thrown at us on the trade front, given where we are in Frankly, if we need to pivot, we have the experience to do that. We have the know-how and the tools and the experience to do that.

It seems like some of your margin benefits have been sort of shifting the supply chain. Is the rest of the world cheaper than your prior average, or where are you picking up this margin from sort of revamping the supply chain?

Well, I mean, there's certainly been some of that as we've, over the years, Brad, I mean, it seems like we've been in a constant flux since 2018-19. But listen, we're never going to, you know, move to a region where we become uncompetitive. I mean, so that's always a part of the calculus, you know, in terms of the cost. But there's a lot of other things that factor in there, too, in terms of the quality, the value that the supplier offers, the lead times. There's a lot that goes into that equation. But at the end of the day, the moves we've made, we feel comfortable that we can remain competitive in this environment.

Thank you.

Your next question comes from the line of David Lance of Wells Fargo. Please go ahead.

Hey, good morning, and thanks for taking our questions. I guess considering strong light duty sales and a sequential improvement in heavy duty and specialty vehicle trends, curious if you could just talk about your share position across those segments in Q3.

Yeah, sure. I mean, listen, in light duty, we continue to believe we're taking share. You know, if you look at the overall market growth statistics that we look at over the years, anywhere between 3% and 4% historically. We've consistently outperformed that. And that's really driven by our new product efforts, particularly new to the aftermarket where that part only exists in the OE channel the day before we launch it. And that's been a huge driver of growth. I'd say in heavy duty, you know, we did see some nice growth in the quarter. So some positive signs. Some of that growth was driven by tariff pricing. But we also had some key customer wins. We have a very small share in a large TAM and heavy duty. So we feel we have a lot of runway to go in that space. And in specialty, again, when you look at our overall share position, it's pretty small in a fairly large market. So we like the runway. That's why we like the space. And I would tell you that just in terms of share performance, we believe We're outperforming the overall market. Although we're not happy with flat sales growth, we believe that the rest of the market has been down. So we do believe we're taking share. We think it's a combination of the initiatives that we've undertaken, whether that be expanding our non-discretionary repair portfolio or geographic expansion. We've seen a lot of success in that regard.

Got it. That's helpful. And then the balance sheet is really healthy. So curious if you could talk about your appetite for M&A and what the pipeline looks like today.

Yeah, great question. You know, look, we have different acquisition strategies across the different segments. I think if you look at, and I'll just remind you what those are. In light duty, you know, we're always looking for potential technology acquisition opportunities. You know, as the vehicles continue to technologically advance, we want to make sure we stay ahead of that curve, as we have in years past. And geographic expansion, you know, remains a priority for that segment. You look at specialty vehicle, you know, highly fragmented market. As you know, we have a fairly small share of that market, so we view that as ripe for uh, brand and product portfolio acquisition plays and in heavy duty, you know, we're, we're still a small player in a very large market. Um, there are a lot of, uh, channel, um, channel plays where today we have opportunity that, you know, acquisition would really help us penetrate some of those channels in a much greater way. I would tell you that the funnel looks very strong. We consistently work the funnel. Um, but I will tell you that, um, Targets, you know, the amount of actionable targets has been a bit slowed. I think it's slowed by the tariff situation. I think a lot of potential sellers are probably waiting to see how the tariffs impact their business, whether that be from pricing or margins or demand, what have you. And I think once that shakes out, I think there'll be a lot more activity on the other side of that.

Yeah, just a little comment on the balance sheet. You know, the leverage right now in the quarter was 0.92 times. So, strong balance sheet. We view that we've got the dry powder to not only absorb the higher cost of inventory, but also execute against the M&A program, which Kevin outlined.

Got it. Thank you. You got it.

Your next question comes from the line of Justin Ages of CJS Securities. Please go ahead.

Hi, morning all. Morning. I wanted to follow up on the comment about first brands. So, you know, I think we're aware about the customer-sponsored factory. Have you seen any or had any conversations about terms that you guys use? The terms that might be changing as a result of that are completely unrelated, and the terms are pretty clear set.

Yeah, the terms are pretty clear, and we don't see any indication that there's going to be any change in the terms.

Okay, that's helpful. And then on the light duty, can you give us some color on the amount of time, like the lead time for the power steering product that you outlined? Just want to get a sense of, you know, from idea to get to market, how long that took.

Well, that's a loaded question, but it's also a great question. For that particular product, I mean, we have been in the market with an electronic power steering rack for a different make and model starting about 18 to 24 months ago. But if I look at total development time, on a part like that, it's substantial. Certainly a lot longer than a purely mechanical part, as you can imagine. There is a safety component to that part. There's an electronic, complex electronics component to that part. So it's a much longer cycle time on that part. And obviously, as a result, has a much higher selling price than a pure mechanical part.

Got it. Okay. I appreciate you taking the question. Thank you. You got it.

Your next question comes from the line of Gary Prestapino, Barrington Research. Please go ahead.

Hi. Good morning, everyone. Could you guys give us some idea on specialty, what the mix is of non-discretionary versus discretionary at this point, and how that has shifted since the acquisition?

Yeah, Gary, sure, absolutely. It's roughly about 50-50 right now, and it was material less than that when we acquired the business. So it's moved up quite a bit. And I think we're very well positioned for when that market does recover, you know, the pure accessory side and then the break and fix or non-discretionary repair to drive

know oversized growth compared to market when we do start seeing the recovery and the geographic expansion which which i talked about before too we've seen some great progress there as well yeah that's what i wanted to hit on too i mean the geographic expansion as i recall you said you were west of the mississippi you were pretty light with dealerships can you maybe help us out as to you know how that is is going in terms of picking up new dealerships without getting too specific i mean you know overall growth in dealership would be helpful?

Yeah, that's a great question, Gary. We have been very focused on that. And we've added, I'll just put it this way, we've added a significant amount of new dealer relationships out west. Now our focus is on driving more share of wallet within those dealerships. So, you know, first step, getting in the dealers, getting relationship established, And now we're driving share of wallet gains there.

OK, thank you. Got it.

The last question comes from the line of Scott Stemberg for Off Capital. Please go ahead.

Yeah, just a quick follow up on tariffs. Has there been any meaningful change to your exposure from a geographic standpoint that, you know, whether it's India, China or any other country, since the last time you guys gave an update?

Boy, Scott, that's a great question. I think the answer is yes. From last quarter, certainly we've seen some changes, but there's a lot of headline news around tariffs that actually haven't made their way into law or implementation. So it's hard for me to... It's changed so much. It's been so fluid, Scott. It's hard for me to pinpoint an exact date. But look, I'll just summarize it this way. Where we sit right now, we feel well-positioned to handle a current tariff environment or any other potential changes that might come down the pipe, particularly as we look at how we compare and have set. We feel like we have a footprint that is... as competitive as anyone else out there in the aftermarket. And so I think we can handle any changes that come our way. And I'll characterize it as manageable at this point.

Got it. That's great. Thanks again.

You got it, Scott.

There are no further questions at this time. Ladies and gentlemen, this concludes the base earnings call. We thank you for participating. You may now disconnect.