Dorman Products, Inc.

Good morning. My name is Nikki, and I will be your conference operator today. At this time, I would like to welcome everyone to the Dorman Products second quarter 2026 earnings conference call. All participant lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, Please press Star 1 on your telephone keypad. Please be advised that today's conference is being recorded. Lastly, if you should require operator assistance, please press Star 0. I will now turn the call over to Alex Whitelam, Vice President of Investor Relations. Please go ahead.

Thank you. Good morning, everyone. Welcome to Dorman's Second Quarter 2026 Earnings Conference Call. I'm joined by Kevin Olsen, 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 current business environment, along with our segment-level performance and market trends. Charles will walk through our second quarter financial results in more detail, discuss cash flow and capital allocation, as well as our updated guidance before turning 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 on our website at investors.dormanproducts.com. Before we begin, I would like to remind everyone that our prepared remarks, earnings or 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 10-Q, 10-K, and earnings or 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, 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 our website. Throughout the presentation, we'll discuss the impact of IEPA tariff refunds that we received in the second quarter. I point everyone to the schedule we've included in the appendix of our presentation, which details the refund's impact on our results. 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 second quarter results, spend some time on the current business environment, and provide commentary on the performance and key trends we're seeing across our business segments. I'll then turn it over to Charles. Turning to slide three, we delivered a strong second quarter with record sales, earnings, and robust cash flow generation. Our results were positively impacted by the recovery of IEPA tariff costs, which Charles will cover in just a moment. We continue to be well-positioned to make strategic investments that will allow us to drive medium to long-term growth. Following recent developments, we believe the tariff landscape has stabilized, which is positive for Dorman and our customers. With an overall lower tariff environment, we began making targeted price reductions in the quarter, which we expect will continue through the back half of the year. Consolidated net sales were $545 million in the second quarter, up approximately 1% compared to the same period last year. Net sales were impacted by the pricing actions I just mentioned, which we started in the quarter. High level, the fundamentals of our industry and our leadership position within the aftermarket remain strong. I'll cover our end markets in the coming slides. Jumping to the bottom line, adjusted diluted earnings per share for the quarter was a record $3.08, up 50% compared to the second quarter of 2025. Given our performance through the first half of the year and the targeted pricing actions we are taking as a result of a more stable tariff environment, We are updating our full year 2026 guidance. We now expect year-over-year net sales growth of 3% to 5% and adjusted diluted earnings per share to be in the range of $8.50 to $8.80. Charles will walk through the guidance change in more detail in a moment. Turning to slide four in our life duty segment. Net sales were flat year-over-year at $424 million as we started reducing pricing with tariff costs coming down. Volume was lower in the quarter, but keep in mind we were comparing against a strong 10% year-over-year growth in Q2 of 2025. Looking more broadly across our top customers, POS from a total dollars perspective was again up in the mid-single-digit range, which includes inflation embedded in the overall price at the counter. I'd also mention that the light duty business has done an excellent job recently capturing business wins in new categories. We expect this will drive increased volume growth in the back half of the year and through 2027. Operating margin expanded 620 basis points year over year to 24.7%. driven by refund dynamics. Year-to-date operating margin was 19.4%, which is more in line with our normalized rate, as the IEPA refund impact was less significant. From an industry perspective, the foundational drivers of the light-duty aftermarket remain positive. The average age of light-duty vehicles now sits at 12.9 years, and vehicle miles traveled continue to increase for the quarter in trailing 12-month periods. Overall, these fundamentals support sustained demand for repair and replacement parts over the long haul. In addition to these macro trends, we continue to keep a close eye on our broad end user base. During the quarter, we saw some modest pressure continue on categories that tend to be DIY focused and are relatively discretionary. But keep in mind, this is a smaller portion of our overall portfolio as we skew more to the DIFM customer. and the vast majority of our product portfolio is non-discretionary in nature. This larger makeup of our portfolio was more stable and again PLS was consistent in the quarter. Stepping back, our innovation strategy continues to drive significant value for our customers and end users. One recent product launch that highlights this is our new aluminum oil pan for a broad set of Ford F-150s. The original OE part is made with plastic and prone to warping and leaking, creating a well-defined pain point for end users and technicians. Our patented OE fix solution is built from rugged, high-pressure die-cast aluminum, delivering a more durable, longer-lasting repair at an attractive aftermarket price. Additionally, we've included a convenient magnet drain plug, which helps prevent harmful metal debris from damaging the engine. And we've designed the plug with an angled mount boss that enables a complete drain. This is exactly the type of product that reinforces Dorman's leadership in aftermarket innovation. And I want to congratulate the Light2D team on another excellent OE fix launch. Turning to slide five in our heavy-duty segment, net sales increased approximately 7% year-over-year to $66 million, driven by the full-year impact of last year's pricing actions along with business wins in certain categories and channels. Operating margin improved 340 basis points to 4.2%. Excluding the refund benefit, heavy-duty's comparable operating margin of 2.3% was up 150 basis points on net sales leverage. While the commercialization and infrastructure investments we've made over the last several years position the heavy-duty segment for long-term growth, they also create an inherent hurdle on the margin front. We expect those investments will help us drive higher volume with an eventual freight market rebound, offset increased costs, and allow us to return to our targeted margin profile for the business. On the broader sector, market conditions remain challenged. The Great Freight Recession continued through the second quarter, with higher fuel costs and general inflation further weighing on consumer sentiment and freight demand. While freight rates have begun to rebound as fewer fleet operators remain in the market, we do not expect meaningful trucking mileage or tonnage growth in 2026. That said, and as we highlighted on our last call, we continue to see OE dealers increasingly focused on improving revenue and profitability through their service centers, with new and used vehicle sales lower year over year. Aftermarket partnerships allow these dealers an opportunity to drive improved margin, which is a prime opportunity for us to offer high-quality solutions at aftermarket price points. Needless to say, we're leaning into this channel further. We're also leaning into product and category expansion within our heavy duty segment, especially for solutions above the frame. We recently launched a number of new to the aftermarket products, including a hydrocarbon injection nozzle that is designed to restore critical dosing functionality within the vehicle's emission system. We've also broadened our fluid reservoir portfolio with the introduction of new power steering, and Windshield Washer Reservoirs, providing additional coverage for high population applications. And finally, we introduced two new LED headlight assemblies for a broad range of international models. These are three great examples where we're diversifying our portfolio and providing more solutions to expand our relationship with fleets across North America. Congrats to the Dayton team for driving innovation across the business. Turning to slide six in our specialty vehicle segment, net sales were down 1% year-over-year to $54 million. Slightly softer customer demand was partially offset by pricing initiatives in certain categories. Consumer sentiment in our specialty vehicle business remained sensitive to macroeconomic conditions, and we believe higher fuel prices along with broader inflationary pressures weighed on volume during the quarter. Operating margin expanded 880 basis points to 26.1%. Excluding the refund benefit, comparable adjusted operating income margin for specialty vehicle was 17.8% in the quarter, or 50 basis points above the same period last year, which highlights that the team did a nice job improving their overall margin profile. We're also expanding Super ATV's presence outside the United States. which we believe will support growth over the long term. While this initiative will take some time to materialize, we're encouraged with our trajectory and the opportunities ahead of us. On the broader specialty vehicle market we continue to see consumer demand shift across the overall sector. Specifically for the second quarter, new vehicle sales continue to increase But the growth came from two different types of vehicles and different consumers. First, more affluent riders are driving growth through cab models, which come with more features pre-installed and typically have lower attachment rates at the dealer. At the same time, we're seeing continued growth in newly launched models that are geared towards entry level and less affluent riders. As we highlighted on our last call, these models offer significant opportunities for upgrades and repairs. Overall, our large and growing set of solutions allows us to win with all types of riders and vehicles. I'd also mention that ridership remains strong, and riders are holding onto their vehicles longer. To that end, we're purposely expanding our portfolio of non-discretionary repair-oriented solutions for older models still in service, given the elongated repair cycle occurring today. Finally, we're seeing some of the new OEs who have entered the market in recent years continue to launch new models. This broader field of machines provides Super ATV with opportunities to expand their portfolio. One new product that highlights this opportunity well is the Super ATV Vented Windshield developed for the CFMoto Z10 platform. CFMoto continues to offer riders lower price point vehicles with reputable quality. Recently, CFMoto launched a new sport line with their Z10 platform, and our team was one of the first to market with purpose-built, highly desired upgrade in a vented windshield. The vented design offers comfort, especially in the summer riding months, for riders looking for protection from dust and debris in demanding conditions. Speed to market continues to be one of Super ATV's core strengths. Congratulations to the team on another strong product launch. With that, I'll turn it over to Charles to cover our results in more detail. Charles? Thanks, Kevin.