Dorman Products, Inc.

Good morning, and thank you for standing by. Welcome to the Dorman Products First Quarter 2026 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 would now like to turn the conference over to Alex Whitelim, Vice President of Investor Relations. Thank you, sir. Please go ahead.

Thank you. Good morning, everyone. Welcome to Dorman's First Quarter 2026 Earnings Conference Call. I'm joined by Kevin Olson, Dorman's Chairman, President, and Chief Executive Officer, and Charles Rayfield, Dorman's Chief Financial Officer. Kevin will begin with a high-level overview of the quarter and share our segment-level performance and market trends. Charles will then walk through our first quarter financial results in more detail, discuss capital allocation, and then turn it back 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 in the investor relations portion of our website at dormantproducts.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 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 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, and good morning, everyone. Thank you for joining us today. I'll begin with a brief overview of our first quarter results and then provide commentary on the performance and key trends we're seeing across our business segments. Turning to slide three, we delivered solid performance in the first quarter with results that were largely in line with our expectations. Consolidated net sales were $529 million, representing an increase of 4% compared to the first quarter of last year. The year-over-year growth was primarily driven by pricing actions implemented across the business, partially offset by lower volumes compared to the exceptionally strong first quarter we experienced in 2025. Adjusted operating margin for the quarter was 12.1%, down 490 basis points compared to the prior year period. This margin performance reflects the highest levels of tariff-related costs that we expect to see in 2026. Again, due to our use of FIFO, the costs recognized in this year's first quarter are associated with the inventory we purchased last year. When tariff rates peaked, in the earlier stages of the tariff implementation. Similarly, the sourcing, productivity, and automation initiatives that we executed over the last several months and continue to drive today are expected to support improved margin performance as we move through the balance of the year. Adjusted EBITDA margin, a new metric we've included this quarter, was 15.2%, down 440 basis points compared to the same period last year. This decrease is driven by lower operating margins, as I just covered. Please see the reconciliation in our appendix for details on this metric. Adjusted diluting earnings per share for the quarter was also in line with expectations at $1.57, down approximately 22% year over year. As we've discussed over the last several quarters, this decline was primarily driven by higher levels of tariff-related costs that were recognized in our cost of goods sold during the quarter. Cash generation continued to improve sequentially, as expected, with operating cash flow in the quarter of 44 million. We also invested in opportunistic share repurchases, deploying 51 million in the quarter, a record for our company. Charles will cover this in more detail shortly. So overall, we began the year with solid performance and met our expectations. Combined with our positive outlook for the remainder of the year, we have reaffirmed our 2026 guidance. Turning to slide four in our light duty segment, net sales increased approximately 4% year over year, driven primarily by the pricing actions we undertook in 2025. Volume was lower compared to last year's first quarter, but let me highlight a few driving factors. First, this year's performance was up against a difficult comparison to last year's first quarter, where we drove exceptionally strong 14% year over year growth in net sales. Looking back over the last two years combined, we delivered 18% growth in net sales. Second, ordering patterns with the customer we discussed on our last call began to normalize during the quarter. Lastly, I'd call out that we estimate POS with our large customers was up mid-single digits in the quarter. While there was inflation embedded in that growth, we remain confident in the non-discretionary nature of our portfolio and will continue to monitor the overall economic conditions of our end users and the impact that the ongoing geopolitical tensions are having on the broader economy. Operating margin performance in the quarter was consistent with our outlook. as Q1 2026 reflected the highest level of tariff expense. As the ongoing benefits of our supplier diversification, productivity and automation initiatives are recognized, we expect light duties margin performance to improve as the year progresses. From a market perspective, underlying light duty fundamentals remain positive. Vehicle miles traveled increasing year over year in the first quarter. Also, Higher used vehicle values are impacting consumers' buying decisions, which we believe will result in extended vehicle life and sustained aftermarket demand for repair and replacement parts. In addition, light-duty trucks and SUVs continue to represent a growing portion of the VIO, providing further opportunity for product portfolio expansion with higher average selling prices. A good example of how our innovation strategy supports this opportunity is our OEFIX air suspension compressor for a broad set of GM SUV models. This product addresses a common OEM failure mode caused by overheating, which can lead to cascading failures throughout the air suspension system. Our patent-pending design improves heat dissipation by approximately 25%. incorporates thermal protection, and utilizes proprietary software to optimize performance and reliability. By delivering an upgraded repair solution designed to last longer and at an attractive aftermarket price point, products like this not only create value for installers and end users, but also reinforce Dorman's leadership and product innovation. Just an excellent job by our light duty team to deliver another OE fix solution. Turning to slide five in our heavy-duty segment, net sales increased approximately 12% compared to last year's first quarter, driven by pricing initiatives and the year-over-year impact of certain commercialization initiatives we have installed in the business. While the dollar change is relatively small, operating margin improved 110 basis points versus the prior year. I'll also point out that the lower overall margin reflects tariff-related costs that were elevated in the first quarter of 2026. With the impact that tariffs will have on our margins this year, along with the infrastructure investments we've made in the business, we're not expecting significant year-over-year incremental operating margin improvement in 2026. That said, we'll continue to appropriately manage the business in the short term while executing on our strategy to drive a significantly improved operating margin profile for heavy duty over the long term. on the broader sector market conditions remain challenged great freight recession continued through the first quarter and geopolitical tensions created further economic uncertainty for consumer demand as a result near-term visibility remains limited and we are not expecting meaningful growth in freight tonnage throughout the year however we continue to capture market share in certain channels such as the oe dealer network there has been an increased appetite for aftermarket solutions. Overall, we continue to see opportunities for growth. We remain focused on balancing our approach with cost discipline and strategic investment that will allow us to continue capitalizing on these opportunities when the market improves. As a great example, we are encouraged by the opportunity we see within our diesel after-treatment portfolio, which we believe represents a meaningful long-term growth driver the heavy-duty segment. Modern diesel engines rely on diesel exhaust fluid or DEF systems to meet increasingly stringent emissions regulations. These systems are subject to high failure rates due to harsh operating conditions, temperature extremes, and sensor degradation, making reliable aftermarket solutions critical for fleet uptime. Through our Dayton Parts brand, we offer one of the most comprehensive portfolios of replacement parts for diesel aftertreatment, including deaf headers and pumps. Our solutions provide plug-and-play installation and meter exceed OE performance at an aftermarket price. These products are built with durable materials, subjected to extensive testing, and incorporate best-in-class sensor technology designed for long service life. As the installed base of DEF-equipped vehicles continues to age and fleet acceptance of aftermarket solutions increase, we believe our leadership in after-treatment systems positions us exceptionally well to serve fleet customers and capture incremental share over time. Congratulations to our Dayton Parts team for bringing this opportunity to market. Turning to slide six in our specialty vehicle segment, net sales were flat year over year. as pricing actions in certain categories offset slightly lower volume year over year. Keep in mind that from a seasonality standpoint, Q1 is typically the slowest quarter of the year. Operating margin performance was in line with our expectations, selecting higher tariff-related costs. We're also investing in our expanded dealer network to drive more wallet share and optimize our footprint. From a market perspective, we are seeing early signs of stabilization as we enter the 2026 riding season, with new vehicle sales increasing year-over-year in the first quarter. We also continue to see strong engagement with our ridership as attendance at the national UTV-ATV events remain high. Additionally, we're seeing new, lower-cost, entry-level vehicles entering the market that offer improved opportunities for aftermarket enhancements. One new product that illustrates this opportunity well is the power steering kit developed for the new Polaris Ranger 500 platform. As many of you know, Polaris recently introduced the Ranger 500 as a more stripped-down, cost-effective utility vehicle designed to appeal to a broad customer base, including fleet users, recreational riders, and first-time buyers. By design, this platform shifts with more basic features which creates an attractive opportunity for the aftermarket to enhance functionality and performance to accessories and add-on components. Power steering is a good example. While the Ranger 500 does not include power steering as standard equipment, demand for steering assist remains high, particularly among users operating in rough terrain or using the vehicle for work applications. Super ATV Power Steering Kit provides a bolt-on solution that significantly reduces steering improving control and reducing operator fatigue. This system is engineered for easier installation and features sealed input and output shafts along with watertight connectors designed to withstand harsh riding environments. Congratulations to the team at Super ATV for being the first to bring this solution to market. With that, I'll turn it over to Charles to cover our results in more detail. Charles.