Q1 2025 Dorman Products Inc Earnings Call

It only mode a question and answer session will follow the formal presentation.

Special Thanks to

Please note that this conference is being recorded.

Speaker Change: I'd now like to turn the conference over to Alex White Lamb, Vice President of Investor Relations. Thank you. Sir. Please go ahead.

Kevin Olson: Good morning, everyone. Welcome to <unk> first quarter 2025 earnings Conference call I'm joined by Kevin Olson, Chairman and Chief Executive Officer, David <unk>, Chief Financial Officer.

Kevin Olson: Kevin will share updates on the business and address the tariff situation then David will review, our quarterly results and reaffirmed guidance. Kevin will then close our prepared remarks before opening the call for questions by.

Kevin Olson: 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 Dorman products Dot com.

Good morning, and thank you for standing by. Welcome to the Dorman 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.

Kevin Olson: Before we begin I'd like to remind everyone that our prepared remarks earnings release, and investor presentation, including forward looking statements within the meaning of federal Securities laws.

Speaker Change: 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.

Kevin Olson: We advise listeners to review the risk factors and cautionary statements in our most recent 10-Q10-K 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.

Speaker Change: Good morning, everyone. Welcome to Dorman's first quarter 2025 earnings conference call. I'm joined by Kevin Olsen, Dorman's Chief Executive Officer at David Hession, Dorman's Chief Financial Officer.

Kevin Olson: We will 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 <unk> website.

Speaker Change: Kevin will share updates on the business and address the terror situation. Then David will review our quarterly results and reaffirmed guidance. Kevin will then close our prepared remarks before opening the call for questions.

Speaker Change: By now, everyone should have access to our earnings release and earnings called presentation, which are available on the investor relations portion of our website at DormanProducts.com

Kevin Olson: 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.

Speaker Change: Before we begin, I'd like to remind everyone that are prepared remarks earning his release and investor presentation, including forward-looking statements within the meeting of federal securities laws.

Kevin Olson: Thanks, Alex Good morning, and thank you for joining our first quarter 2025 earnings call.

Speaker Change: We advise listeners to review the risk factors and cautionary statements in our most recent 10Q, 10K and Ernest Releas for important material assumptions, expectations, and factors that may cause actual results that differ materially from those anticipated and described in such forward-looking statements.

Kevin Olson: As Alex mentioned I'll start with a high level review of the results then cover the actions we've taken over the last several years to position us well to address tariffs.

Kevin Olson: I'll also touch on the observations were seeing within each of our segments.

Speaker Change: We'll also reference certain non-GAT measures. Reconciliation of these non-GAT measures to the most directly comparable GAT 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.

Kevin Olson: Turning to slide three I wanted to briefly touch on the quarter.

Kevin Olson: David will provide more detail, but we had an outstanding first quarter with strong top and bottom line results.

David: Consolidated net sales for the quarter grew 8% year over year to $508 million.

Speaker Change: Finally, during the Q&A portion of today's call, we ask the participants limit themselves to one question with one follow-up and to rejoin the Q if they have additional questions. And with that, I'll turn the call over to Kevin.

David: Our team continues to do a great job on the new product development front, which contributed to our growth.

David: We also delivered solid margin expansion in the quarter.

David: Adjusted operating margin for Q1, 2025 was 17% expanding 310 basis points compared to the same period last year.

Kevin Olsen: Thanks, Alex. Good morning. 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.

This margin performance was again led by our light duty visits which drove solid margin improvement over last year's first quarter.

Speaker Change: I'll also touch on the observations we're seeing within each of our segments.

David: Lastly, adjusted diluted EPS increased over last year's first quarter by an impressive 54% to $2 <unk> and free cash flow in the quarter was $40 million, allowing us to repay $20 million of debt and repurchased $12 million of our common stock.

Speaker Change: During the slide three, I wanted to briefly touch on the quarter. David will provide more detail but we had an outstanding first quarter. We're strong top and bottom line results.

Speaker Change: 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.

David: So overall, we began the year with strong results that support our expectations for continued growth this year.

Speaker Change: 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.

David: 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 reform and situations of economic uncertainty like we currently face.

This margin performance was again led by our light duty business

David: I'd like to caveat that the situation has been highly fluid as you all know and we are following it closely of an extremely.

which drove solid margin improvement over last year's first quarter.

Speaker Change: Lastly, adjusted diluted EPS increased over last year's first quarter by an impressive fifty-four percent to two dollars and two cents.

David: The impressed with our team and their ability to pivot and navigate through the day to day challenges.

David: <unk> to the level of talent, we have across the organization.

Speaker Change: 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.

David: First as we discussed on our last call we have taken significant steps to diversify our supply chain since the section 301 tariffs on Chinese imports went into effect in 2018 in 2019.

Speaker Change: Overall, we began the year with strong results that support our expectations for continued growth this year.

David: Entering 2025 and before the new tariffs are put into effect.

Speaker Change: On Slide 4, 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.

David: We have been executing a plan to continue to reduce our share product sourced from China.

David: In 2025, we estimate that approximately 30% to 40% will be sourced from partners in China, approximately 30% of the U S and the remainder from various regions around the world.

Speaker Change: I'd like to caveat that the situation has been highly fluid as you all know and we are following it closely.

David: We will continue to remain focused on optimizing our supply chain strategy. We believe this level of diversification gives us a competitive advantage is not just an effort to capture cost savings.

Speaker Change: I've been extremely impressed with our team and their ability to pivot and navigate through the day-to-day challenges.

Speaker Change: It speaks to the level of talent we have across the organization.

Speaker Change: First, as we discussed 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.

David: Our asset light manufacturing strategy.

David: Expertise standout 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.

Speaker Change: Entering 2025, and before the new tariffs are put into effect,

David: The end result is better products at better prices for our customers and end users.

Speaker Change: We have been executing a plan to continue to reduce our share product source from China.

David: Through our strategic sourcing investments, we've developed strong relationships with our supplier partners are scale, often makes us a strategic customer for our vendors in many instances, where one of their largest customers. This scale and strategic position fosters deep partnerships with our suppliers ultimately benefit our customer.

Speaker Change: In 2025, we estimate that approximately 30 to 40% will be sourced from partners in China, approximately 30% from the U.S., and the remainder from various regions around the world.

Speaker Change: We'll continue to remain focused on optimizing our supply chain strategy. We believe this level of diversification gives us a competitive advantage, as not just an effort to capture cost savings.

David: And end users neck.

David: Next the products that we sell play an essential role in everyday life.

Our Acid Life Manufacturing Strategy

David: Our products help people get to work get their kids to school take vacations and visit friends and family.

David: Our products also help businesses keep their goods flowing from point, a to point b and provide everyday services to local communities.

Speaker Change: The end result is better products at better prices for our customers and end users.

David: The majority of our product portfolio is non discretionary in nature.

David: So if you are in need of one of our parts.

Speaker Change: There are strategic sourcing investments we developed a strong relationship to our supply partners.

David: Are your vehicle is not operating or not operating safely.

Speaker Change: Our scale often makes us a strategic customer for our vendors. In many instances we're one of their largest customers.

David: Non discretionary parts have historically done well in uncertain economic times and for decades, we have successfully navigated various diverse economic environments.

Speaker Change: This scale and strategic position bossers deep partnerships with our suppliers that ultimately benefit our customers and end users.

David: Furthermore, we believe our innovation strategy and the strength of our brands position us well to succeed.

Next.

Speaker Change: The products that we sell play an essential role in everyday life.

David: 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.

Speaker Change: Our products sell people get to work, get their kids to school, take vacations, and visit friends and family.

Speaker Change: Our products also help businesses keep their goods flowing from point A to point B and provide everyday services to local communities

David: We are also strategically invested in our brands over the last several years, which has led to the Doormen Dayton suite Gray television brands being sought after in their respective sectors.

Majority of our product portfolio is non-discretionary nature.

Speaker Change: So if you are in need of one of our parts, Azar, 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.

David: And finally, our financial profile serves as a significant benefit to our investors and customers. We have a strong balance sheet and liquidity position, allowing us to manage higher costs from tariffs in the short term to invest in inventory to support our customer needs.

David: To capitalize on strategic growth opportunities along the way.

Speaker Change: Furthermore, we believe our innovation strategy and the strength of our brand's positions well to succeed. Our innovative solutions are core not only to our success, but also to the success of our customers and technicians.

David: We expect our strong financial foundation with standout as a key competitive advantage compared to our peers.

David: In the end, we have the experienced and playbook and the right set of solutions suppliers and customers along with the financial strength to navigate the changing trade environment.

Speaker Change: We lie on our new products for their own growth and profitability.

Speaker Change: We've also strategically invested in our brands over the last several years, which has led to the Dorman, Dayton, and Sue Gray, TV brands being sought after in their respective segments.

David: Before I turn it over to David.

David: Let me touch on the observations were seeing across our segments on slide five. These observations include what we've experienced leading up to the recent tariff announcements.

Speaker Change: And finally, our financial profile serves as a significant benefit to our investors and customers.

David: And what we see looking forward in the new trade and economic environment.

We have a strong balance sheet and liquidity position.

David: Starting with light duty as I mentioned.

Speaker Change: allowing us to manage higher costs from tariffs in the short term to invest in inventory to support our customer needs.

David: Positive macro trends continued into the year.

David: Vehicle miles traveled clients higher year over year, and we expect that used vehicles will continue to stay on the road longer.

And to capitalize on strategic growth opportunities along the way.

Speaker Change: We expect our strong financial foundation will stand out as a key competitive advantage compared to our peers.

David: Both of which are key contributors to the success of the aftermarket.

David: During the quarter customer demand was strong.

Speaker Change: In the end, we have the experience in playbook and the right set of solutions, suppliers and customers.

David: And a follow through from the end of 2024 in particular, we had a strong season with our patented oilfield warehousing product that we've discussed in previous calls this along with the success of.

Speaker Change: along with the financial strength to navigate the changing trade environment.

Speaker Change: 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.

David: Of our other recent new products were key contributors to our growth.

David: In our heavy duty segment.

David: The soft market conditions that impacted trucking and freight markets in 2024 continued through this year's first quarter.

David Hession: and what we see looking forward in the new trade and economic environment.

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.

David Hession: Starting with Lake 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 in the road boulder.

David: Dan, creating additional uncertainty in the market late in the quarter.

David Hession: Both of which are key contributors to the success of the aftermarket.

David: Watching it closely and we'll continue to position the business for long term success through portfolio expansion productivity initiatives.

David Hession: During the quarter, customer demand was strong, a trend that followed through from the end of 2024. In particular, we had a strong season with our patented oil filter housing product that we've discussed in previous calls.

David: And specialty vehicles remain encouraged with the enthusiasm behind the UTV and ATV markets.

David: The feedback we get from end users that they are very engaged and positive and we're not seeing a pullback in ridership. However.

David Hession: This, along with the success of our other recent new products, were key contributors to our growth.

David: However, consumer spending softened during the quarter and maybe a headwind moving forward.

in our heavy-duty segment

David Hession: The soft market conditions that impact the trucking and freight markets in 2024 continue through this year's first quarter.

David: Remain focused on expanding our portfolio of non discretionary parts capturing share with expanded dealer network as the market rebounds.

David Hession: 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.

David: With that I'll hand, it off to David to review, our Q1 financial performance.

David: Thanks, Kevin as.

David: As we turn to slide six I'd like to point out that we maintained our positive momentum from the fourth quarter.

David Hession: For watching closely, we'll continue to position the business for long-term success through portfolio expansion productivity initiatives.

David: Consolidated net sales in the first quarter were $508 million.

David: Up 8% year over year, driven by strong customer demand.

David Hession: Specialty Vehicle, Remain Encourage with the enthusiasm behind the UTV and ATV Markets.

David: Light duty again drove above market sales growth on positive macro trends and the success of our new products.

David Hession: The feedback we get from end users is that they are very engaged and positive, and we're not seeing a pullback in ridership.

David: I'll cover each of our segments more in just a moment.

David: Adjusted gross margin for the quarter was 49%, a 220 basis point increase compared to the prior year period.

David Hession: However, the tumor spending softened during the quarter and maybe a headwind moving forward. We remain focused on expanding our portfolio of non-discretionary parts.

David: Margin expanded on a strong sales growth and favorable mix of new products, coupled with cost savings generated from supplier diversification as well as productivity and automation initiatives.

Capturing Share The Expanded Dealer Network As The Market Revounds

David Hession: With that, I'll hand it off to David to review our Q1 financial performance.

David Hession: Thanks, Kevin. As we turn to slide sticks, I'd like to point out that we maintain our positive momentum from the fourth quarter.

David: Adjusted SG&A expense as a percentage of net sales was 23, 9% down 100 basis points compared to the first quarter of 2024.

David Hession: Consolidys and net sales in the first quarter were $518 million, up 8% year-over-year, driven by strong customer demand.

David: Adjusted operating income was $86 million in the first quarter up 33% compared to the same period last year.

David Hession: Light duty again drove above market sales growth on positive macro trends in the success of our new products.

David: Adjusted operating margin expanded 310 basis points to 17% largely from the gross margin improvement I just discussed.

David Hession: I'll cover each of our segments more and just the moment.

David Hession: A Joseph Gross margin for the quarter was 40.9%, a 220 basis point increase compared to the prior year period

David: Finally, adjusted diluted EPS in the first quarter was $2 and <unk>.

David Hession: margin expanded on the strong sales growth and favorable mix of new products coupled with cost savings generated from supplier diversification as well as productivity and automation initiatives.

David: Up 54% compared to last year's first quarter.

David: Along with increased adjusted operating income and lower interest expense as a result of our debt repayments over the last 12 months, our effective tax rate benefited from a timing difference in the quarter.

David Hession: Adjusted SGNA expense as a percentage of net sales was 23.9% down a hundred basis points compared to the first quarter of 2024.

David: Finally, our share repurchase program activity over the last year contributed to positive EPS growth.

David Hession: Adjusted operating income with $86 million in the first quarter, up 33% compared to the same period last year.

David: Next let me provide updates on each of our business segments, starting with light duty on slide seven.

David Hession: Adjusted operating margin expanded 310 basis points to 17%, largely from the gross margin improvement I just discussed.

David: Light duty performance in the first quarter was outstanding with.

David: With net sales, increasing 14% year over year.

David: The growth was driven by strong customer demand, especially for our new products with foundation, a positive macro trends continuing through the first quarter.

David Hession: Finally, adjusted diluted EPS in the first quarter was $2.02, up 54% compared to last year's

David: POS was up high single digits versus shipments that were up low teens in the quarter.

David Hession: Along with increased adjusted operating income in lower interest expense as a result of our debt repayments over the last 12 months, our effective tax rate benefited from a timing difference in the quarter.

David: Light duty also drove strong margin improvement with segment operating margin increasing to 19, 9% for the quarter of 380 basis point increase compared to the same period last year.

David Hession: Finally, our Sherry Purchase Program activity over the last year contributed to positive

This margin expansion benefited from new product mix and cost savings from our ongoing automation and productivity initiatives, along with higher leverage on our volume.

David Hession: Next, let me provide updates on each of our business segments, starting with Lake

David Hession: Like duties performance in the first quarter without stand, with net sales increasing 14% year-over-year

David: Turning to slide eight.

David: Heavy duty net sales were again impacted by continued market pressures and freight transportation and trucking aftermarket.

David Hession: The growth was driven by strong customer demand, especially for our new products, with foundation-repositive macro trends continuing through the first quarter.

David: Net sales were down 11% year over year and segment operating margin turned slightly negative as the business has a larger fixed cost manufacturing footprint and our U S manufacturing plant compared to our other segments.

David Hession: The COS was a high single digits versus shipments that were up low teams in the quarter.

David Hession: Light duty also drove strong margin improvement, with segment operating margin increasing to 19.9% for the quarter, a 380 basis point increase compared to the same period last year.

David: While the early signs of stabilization that we mentioned on our last call continued to play out through the first few months of the year, the uncertainty that tariffs and check into the trucking and freight market give us further pause the call for a rebound in our business.

David Hession: This margin, expansion, benefit, and new product mix and cost savings from our ongoing automation and productivity initiatives along with higher leverage on our bond.

David: That said, we will continue to invest in new product development and commercialization initiatives to capture share and best serve our customers when the market does turn.

David Hession: Turning to slide 8, heavy duty net sales were again impacted by continued market pressures in freight transportation and a trucking aftermarket.

David: Moving to slide nine.

David: TV and ATV ridership in the specialty vehicle segment remains healthy.

David Hession: Net sales were down 11% year over year, and segment operating margin turned slightly negative as the business has a larger fixed cost manufacturing footprint in our US manufacturing plants compared to our other segments.

David: But in the first quarter net sales declined 9% year over year, which proved to be a notable shift from the growth. We saw at the end of last year.

David: We expect this turn was the result of consumer sentiment changing after the holiday season, and as uncertainty around tariffs took hold.

David Hession: While the early signs of stabilization that we mentioned on our last call continue to play out through the first few months of the year, the uncertainty that tariffs inject into the trucking and freight markets, give us further pause to call for a rebound in our business.

David: This weekend confidence level and the economy will likely continue given general uncertainty in tariffs, while we expect demand to return once the economy re stabilize.

David: To best serve our customers and riders will continue to invest in product offerings through our internal innovation funnel and through tuck in acquisitions are value added brands.

David Hession: That said, will continue to invest in new product development and commercialization initiatives to capture share and best serve our customers when the market does turn.

David Hession: Moving to Slide 9, UTV and ATV ridership and a specialty vehicle segment remains healthy.

David: We will also continue to expand our dealer network to further broaden our market share.

David: On the margin front segment operating margin declined to 10, 2% in the quarter.

David Hession: But in the first quarter, Ned sailed to climb 9% year over year, which proved to be a notable shift from the growth we saw at the end of last year.

David: A main driver of this decline with the deleverage of our fixed costs as sales declined.

David Hession: We expect this turn was the result of consumer sentiment changing after the holiday season and as uncertainty around tariffs took hold.

David: <unk> heavy duty business, we manufacture a portion of our products internally in the U S.

David: Within our operations, we are taking appropriate actions to mitigate margin degradation.

David Hession: This week in confidence level in economy will likely continue, given general uncertainty and terrorist, but we expect demand to return once the economy restabilizes.

David: Should the market softness continue in the future.

David: Turning to our cash flow on slide 10.

David Hession: To best serve our customers and riders, we'll continue to invest in product offerings through our internal innovation funnel and through tuck-in acquisitions of value-added brands.

David: Our cash flow in the quarter was solid and strong earnings growth offset by investments we made in inventory.

David: Free cash flow in the first quarter was $40 million essentially in line with the same period last year.

David Hession: We'll also continue to expand our dealer network to further broaden our market share.

David: During the quarter, we deployed $11 million in capital expenditures repaid $20 million in debt and repurchased $12 million of our common stock.

David Hession: On the margin front, segment operating margin declined to 10.2% in the forward.

David Hession: The name driver of this decline was the de-leverage of our fixed costs as sales declined.

David: The cash flow, we've generated and our use of cash over the last eight quarters have positioned us well with the liquidity to manage increased costs as a result of the tariffs.

David Hession: They want to the heavy duty business. We manufacture a portion of our products internally in the US.

David: Touch on our liquidity in just a minute, but I wanted to highlight that our capital allocation strategy has proved to be a key value driver for dormant.

David Hession: Within our operations, we are taking appropriate actions to mitigate margin degradation to the

David: As we look forward our long term strategy doesn't change we will continue to look at our debt and leverage targets first and then utilize our cash to invest internally and that is where we get our greatest return.

Turning to our cashflow on slide 10.

David Hession: Our cash flow in the quarter was solid. Had strong earnings growth offset by investments we made in inventory.

David Hession: Free cash flow in the first quarter was $40 million, essentially in line with the same period last year.

David: We will then look to invest in strategic growth opportunities and Opportunistically repurchase shares that said in the short term will be utilizing a portion of our cash and balance sheet flexibility to fund the higher cost of inventory, resulting from the tariffs.

During the quarter, we deployed $11 million in capital expenditures.

David Hession: Repay $20 million in debt and repurchase $12 million of our common stock.

David: On slide 11, we highlight much of what we've already covered which is that we believe we have the balance sheet capacity and liquidity to help finance the cash needed for the significant increase in inventory cost we anticipate as a result of the tariffs.

David Hession: The cash we've generated in our use of cash over the last eight quarters have positioned us well with the liquidity to manage increased costs as a result of the tariffs.

David Hession: I'll touch on our liquidity in just a minute, but I wanted to highlight that our capital allocation strategy has proved to be a key value driver for Dorman.

David: As you can see net debt was reduced to $402 million and our net leverage ratio was one <unk> hundred one times adjusted EBITDA down from 112 times at the end of last year.

David Hession: As we look forward, our long-term strategy doesn't change. We will continue to look at our debt and mortgage targets first, and then utilize our cash to invest internally. That is where we get our greatest return.

David: Additionally, our total liquidity increased to $660 million at the end of the quarter up from $642 million at.

David: At the end of 2024.

David: In the end, we expect the strength of our balance sheet will be a competitive advantage against the market conditions. We currently face.

David: Turning to slide 12, I'd like to cover our guidance for 2025.

David: Given our performance in the first quarter and the future outlook for our underlying business. We are reaffirming our 2025 net sales growth guidance of 3% to 5% and adjusted diluted EPS guidance range of $7 55.

David: $7 85.

David: Please note that this guidance does not include any impact related to U S tariff enacted or proposed in 2025 or any potential retaliatory measures.

David: The U S trade partners.

David: As you know the situation remains highly fluid and negotiations between various countries and the administration are ongoing.

David: Adding to the fluidity, our conversations and negotiations with our suppliers and customers are ongoing as well.

David: With this level of uncertainty we felt it was prudent to continue providing our positive view of the underlying business.

David: Not include any impact from increased pricing or higher costs associated with the tariffs.

David: Situation gained more clarity both at the macro level and for dormant look to provide an updated view with the impacts to our expected results.

David: Finally for modeling purposes, we continue to expect a 24% effective tax rate.

David: With that I'll now turn it back over to Kevin to conclude Kevin. Thanks.

Kevin Olson: Thanks, David I'll, just reinforce what we've said throughout.

Kevin Olson: First and foremost we had an outstanding first quarter that positions us well for growth this year.

Kevin Olson: While there is significant level of uncertainty that exists with tariffs, we have the experience and talent to address the challenges ahead.

Kevin Olson: Additionally.

Kevin Olson: We have a stronger supplier base, a more diversified customer base and a stronger financial foundation than we've ever had before we'll continue focusing on the needs of our customers and users and look to capitalize on the opportunities we see in the marketplace.

Kevin Olson: With that I would now like to open the call up for questions operator.

Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and we would like to ask a question. Please press star one on your telephone keypad can we just go ahead and trying to queue. If you would like to withdraw your question. Thank you.

Speaker Change: Final one again you guys.

Speaker Change: I call upon to ask a question in a listening via speaker phone or device. Please pickup your handset. Thanks for that your phone is not on mute and asking a question press star one to join the queue.

Scott: And our first question comes from the line of Scott <unk> with Roth Capital Partners. Your line is open.

Scott: Hi, Good morning, guys and thanks for taking my questions.

Speaker Change: Good morning, Scott Good morning, Scott.

Scott: Very strong performance.

Scott: Heavy duty.

Scott: Very strong high single digit Pos.

Scott: A few ticks below the sell off I guess the first question.

Speaker Change: Have you seen any of your bigger customers buying ahead to get ahead of tariffs.

Speaker Change: And if not is this just a function that the difference of new guys.

Speaker Change: Gaining shelf space with some of your bigger faster growing partners that are expanding rapidly.

Kevin Olson: Yes, it's Kevin good good question Scott.

Kevin Olson: The light duty business is very strong in the quarter, followed a very strong fourth quarter as well.

Kevin Olson: Our Pos as we noted in the prepared remarks.

Kevin Olson: It was up high single digit very similar to what we were seeing last year.

Kevin Olson: Really driven by our new product performance.

Kevin Olson: And the macros continue to be favorable as well as we mentioned.

Kevin Olson: Our sell in growth actually did exceed our Pos growth in the quarter.

Kevin Olson: Really as a result of an <unk>.

Kevin Olson: Easier comp in the quarter.

Kevin Olson: If we look back and you look at the two year stack in the quarter.

Kevin Olson: More in line with what the Pos growth that we saw some timing issues last year in the first quarter versus the fourth quarter of 2023.

Kevin Olson: Yes to answer your question around the buy ahead, we haven't seen any any indications at this point yet.

Unknown Executive: At this time, all participants are in a listen only mode. A question-and-answer session will follow the formal presentation.

Kevin Olson: Of customers getting ahead of the tariffs at least.

Your bigger faster growing partners that are expanding rapidly.

From ordering from us that could potentially happen, but as of now we haven't seen any meaningful evidence of that.

Unknown Executive: Please note that this conference is being recorded.

Yes, it's Kevin Good question Scott.

Alexander Whitelam: I'd now like to turn the conference over to Alex Whitelam, Vice President of Investor Relations. Thank you, sir.

The light duty business is very strong in the quarter following a very strong fourth quarter as well.

Kevin Olson: Got it.

Kevin Olson: On tariffs, obviously I appreciate there's a lot of uncertainty here and it's hard to predict anything, but clearly with 145% as it stands right now.

Kevin Olsen: Good morning, everyone. Welcome to Dorman's first quarter 2025 earnings conference call.

Our Pos as we noted in the.

Kevin Olsen: I'm joined by Kevin Olsen, Dorman's Chief Executive Officer and David Hession, 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.

Prepared remarks.

It was up high single digit very similar to what we were seeing last year.

Kevin Olson: Some folks are concerned of what impact it will have.

Really driven by our new product performance.

Kevin Olson: New business. So it sounds like Youre, a lot better position than you were the last time around with tariffs, but could you just.

And the macros continue to be favorable as well as we mentioned.

Kevin Olsen: Kevin will then close our prepared remarks before opening the call for questions.

Kevin Olson: Again remind us of some of the mitigation efforts that you have in place and then.

Our sell in growth actually did exceed our Pos growth in the quarter.

Unknown Executive: 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 10-Q, 10-K, and earnest 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.

Kevin Olson: Timing of when we would actually start to see anything hit your results.

Really as a result of it.

An easier comp in the quarter.

If we look back and you look at the two year stack in the quarter kind of more in line with what the Pos growth that we saw some timing issues last year in the first quarter versus the fourth quarter of 2023.

Kevin Olson: Yes sure.

Kevin Olson: <unk>.

Speaker Change: As you mentioned Scott again, its cabinets, it's really too early to tell it is a very fluid situation that the $2 32 auto tariffs just went into effect a couple of days ago.

To answer your question around the buy ahead, we haven't seen any any indications at this point yet.

Kevin Olson: And as we've talked about we.

Kevin Olson: We do have a very diverse supply chain much more diverse than it was say five six years ago.

Customers getting ahead of the tariffs at least.

From ordering from us.

Kevin Olson: That's intentional and I'll just reiterate.

That could potentially happen, but as of now we haven't seen any meaningful evidence of that.

Unknown Executive: 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.

Kevin Olson: What are what our footprint looks like.

Kevin Olson: Across across storm and roughly 30% to 40% is sourced from China.

Got it.

On tariffs, obviously I appreciate there's a lot of uncertainties here and it's hard to predict anything, but clearly with 145% as it stands right now.

Kevin Olson: In 2025, we estimate.

Kevin Olson: Obviously, depending on product mix.

Unknown Executive: 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.

Some folks are concerned.

Kevin Olson: Approximately 30% is in the U S and the balance is really spread around the rest of the globe.

What impact that will have.

On your business. So it sounds like Youre, a lot better position than you were the last time around with tariffs, but could you just.

Kevin Olsen: And with that, I'll turn the call over to Kevin. Thanks, Alex.

Kevin Olson: I also want to point out keep in mind that.

Again remind us of some of the mitigation efforts that you have in place and then.

Kevin Olsen: 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.

Kevin Olson: The vast majority of our parts Scott are non discretionary in nature.

Timing of when we would actually start to see anything hit your results.

Kevin Olson: It's really been fairly inelastic historically as we've gone through periods like this.

Yes sure.

I mean.

As you mentioned Scott again its cabinets.

Kevin Olson: And just to hit on your point is when it when it impacts US again, we're on we're on FIFO inventory.

Really too early to tell it's a very fluid situation the $2 32 auto tariffs.

Kevin Olson: And it all depends on when some of these tariffs has started to come into effect, but in general we will see.

Just went into effect a couple of days ago.

And as we talked about.

We do have a very diverse supply chain.

Much more diverse than it was say five six years ago.

Kevin Olson: A lot of these tariffs for roughly.

Kevin Olsen: 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. The 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.

And that's intentional.

Kevin Olson: Six months or so after we started occurring just because of FIFO.

Just reiterate.

What are what our footprint looks like.

Kevin Olson: In regards to your question around mitigation I mean look we've we've been down this road before we feel like we have a really good.

Across across storm and roughly 30% to 40% is sourced from China and.

In 2025, we estimate and Thats obviously.

Kevin Olson: Playbook to deal with this.

Kevin Olson: We're obviously, we're going to look.

Depending on product mix.

Approximately 30% is in the U S and the balance is really spread around the rest of the globe.

Kevin Olson: To negotiate with our both our supply base in terms of cost concessions.

Kevin Olson: Driving further productivity initiatives in the business and then obviously look look to offset any difference through through price changes.

I also want to point out you know keep in mind that.

The vast majority of our parts Scott are non discretionary in nature.

It's really been fairly inelastic.

Kevin Olson: Great. That's all I have for now I will get back in the queue. Thank you.

Historically as we've gone through.

Speaker Change: Thanks Scott.

It's like this.

Speaker Change: Our next question comes from the line of Bret Jordan with Jefferies. Your line is open.

And just to hit on your point is when it when it impacts us.

Kevin Olsen: So overall, we began the year with strong results that support our expectations for continued growth this year.

Again, we're on we're on FIFO inventory.

Bret Jordan: Good morning.

Speaker Change: Good morning, Brett.

Speaker Change: On that EBIT margin in light vehicle and you talked about product mix versus leverage on the volume could you sort of break out what was product mix versus leverage on the volume you've talked about a lot of new to the aftermarket in the oilfield for housing.

And it all depends on when some of these tariffs start to come into effect, but in general we will see.

Kevin Olsen: 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'm extremely impressed with our team and their ability to pivot and navigate through the day-to-day challenges. speaks to the level of talent we have across the organization.

A lot of these tariffs for roughly.

Six months or so after we started occurring just because of FIFO.

Speaker Change: As you sort of pocket, where that pretty solid margin expansion came from.

In regards to your question on mitigation I mean look we.

Speaker Change: I mean, Brian if you look back we've been generating these type of operating margins in light duty for quite some time now.

We've been down this road before we feel like we have a really good.

Playbook to deal with this.

Speaker Change: And really it is it is mostly due to our product mix, we don't spike out exactly how much is due to just core business.

We're obviously, we're going to look.

<unk>.

To negotiate with our both our supply base in terms of cost concessions.

Kevin Olsen: 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 are 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 30-40% will be sourced from partners in China, approximately 30% from the U.S., and the remainder from various regions around the world. We will continue to remain focused on optimizing our supply chain strategy.

Speaker Change: But a lot of it is due to the new product mix.

Speaker Change: And as we've talked about before we've had some really successful new products come to market, but also the macros have improves right I mean, if you look at.

Driving further productivity initiatives in the business and then obviously look look to offset any difference through through price changes.

Speaker Change: The sweet spot.

Speaker Change: Seven to 14 year old vehicle, which is where we really target.

Great. That's all I have for now I will get back in the queue. Thank you.

Thanks Scott.

Speaker Change: New product development.

Speaker Change: That vehicle cohort has really grown over the last couple of years.

Our next question comes from the line of Bret Jordan with Jefferies. Your line is open.

Speaker Change: We see that cohort continuing to grow over the next three years to four years.

Hey, guys good morning.

Good morning, Brett on that EBIT margin and might be a call and you talked about product mix versus leverage on the volume could you sort of break out what was product mix versus leverage on the volume you've talked about a lot of new to the aftermarket and the oil filter housing.

Speaker Change: Those two factors that really.

Speaker Change: Enabled us to expand margins in the light duty side.

Speaker Change: Okay, and then I guess when you think about the more commoditized mixing in the portfolio, maybe chassis and your supply chain footprint versus competition is there any material difference or is everything pretty much exposed in the same countries have you thought about yourself versus maybe the tenneco chassis businesses of about a <unk> chassis business is there any.

Kevin Olsen: We believe this level of diversification gives us a competitive advantage.

Kevin Olsen: It's not just an effort to capture cost. or Acid Light Manufacturing Strategy. 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've developed a strong relationship to our supply chain. 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.

Could you just sort of pocket, where that pretty solid margin expansion came from.

I mean, Brian if you look back we've been generating these type of operating margins in light duty for quite some time now and.

Speaker Change: Risk that someone will be advantaged given their geographic mix or is pretty much the same.

And really it is it is mostly due to our product mix, we don't spike out exactly how much is due to just core business.

Speaker Change: Yeah. Good question, Brett I'm, not going to comment on a specific category, but I think overall, you're going to see some of that in terms of depending on where all the tariff settle out which which I don't think.

A lot of it is due to the new product mix.

And as we've talked about before we've had some really successful new products come to market, but also the macros have improved right I mean, if you look at.

Speaker Change: Anyone really knows at this point, there will be situations where.

The sweet spot.

The 7% to 14 year old vehicle, which is where we really target.

Speaker Change: Someone may be advantaged versus somebody else.

New product development.

That vehicle cohort has really grown over the last couple of years.

Speaker Change: I will just say that as we look at our footprint.

Kevin Olsen: 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. 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.

Speaker Change: And if you look at kind of the exposure to to kind of the highest tariffs region now.

We see that cohort continuing to grow over the next three to four years.

Those two factors that really.

Hard parts is very still very indexed to China, and if we look at kind of our exposure. We think we're a lot less exposed and boats and.

Enabled us to expand margin in the light duty side.

Okay, and then I guess when you think about the more commoditized mixing in the portfolio, maybe chassis and your supply chain footprint versus competition is there any material difference or is everybody pretty much exposed in the same countries have you thought about yourself versus.

Speaker Change: And given our balanced.

Speaker Change: Print around the globe overall, we see ourselves at a competitive advantage situation.

Speaker Change: Great.

Speaker Change: On pricing in the event, we do get tariffs.

Maybe the tenneco chassis businesses of AMETEK chassis business is there any risk that someone will be advantaged given their geographic mix or is pretty much everybody. The same.

Speaker Change: The conversations with your large retail customers.

Speaker Change: Does it sound as if I really still expect them to be able to pass most of these through or is it the magnitude of the tariff something that some.

Yeah. Good question, Brett I'm, not going to comment on any specific category, but I think overall, you're going to see some of that in terms of depending on where all the tariff settle out, which which I don't think anyone.

Speaker Change: Some place along the line of supply chain or the retailers the FTE some of those higher costs.

Kevin Olsen: 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.

Bret Jordan: Yes, Brett.

Bret Jordan: Not going to comment on what our customers are going to do but I'll just say that.

Really knows at this point, there will be situations where.

Bret Jordan: From our perspective, we're pretty comfortable that we can offset.

Someone may be advantaged versus somebody else.

Kevin Olsen: We've also strategically invested in our brands over the last several years, which has led to the Dorman, Dayton, and Super 8 TV brands being sought after in their respective factories. And finally, our financial profile serves as a significant benefit to our investors and customers. you have a strong balance sheet and liquidity. allowing us to manage higher costs from tariffs in the short to invest in inventory to support our customer needs. 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.

Bret Jordan: The net impact at the end of the day keep in mind again, our portfolio is.

I'll, just say that as we look at our footprint.

And if you look at kind of the exposure to to kind of the highest tariff region now.

Bret Jordan: Mostly non discretionary repair parts hard parts.

Bret Jordan: Our customers we are a strategic partner.

<unk> parts is very still very indexed to China, and if we look at kind of our exposure. We think we're a lot less exposed than most.

Bret Jordan: So all of our customers, we have a strong brand both to our customers and the end users and we have a proven playbook.

Bret Jordan: Done this before back in 2018.

And given our balanced.

Foot print around the globe overall, we see ourselves at a competitive advantage situation.

Bret Jordan: <unk> timeframe.

Bret Jordan: And.

Bret Jordan: At the end of the day, we think will be successful wherever this ends up.

Okay, Great and then on pricing in the event, we do get tariffs.

Speaker Change: Great. Thank you.

Bret Jordan: Got it.

The conversations with your large retail customers.

Kevin Olsen: 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.

Speaker Change: Next question comes from the line of Gary <unk> with Barrington Research. Your line is open.

Does it sound as if everybody is still expected to be able to pass most of these through or just the magnitude of the tariff something that somehow.

Some place along the line of supply chain or the retailers they have to eat some of those higher costs.

Gary <unk>: Good morning, everyone.

Speaker Change: Good morning, Gary.

Kevin Olsen: Before I turn it over to David, let me touch on the observations we're seeing across our segments on slide 5. These observations include what we've experienced leading up to the recent tariff announcement 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. both of which are key contributors to the success of the app. During the quarter, customer demand was strong, a trend that followed through from the end of 2024.

Speaker Change: David just a couple of questions on.

Yes, Brett.

Not going to comment on what our customers are going to do but I'll just say that.

Speaker Change: The income statement it looked like your.

Speaker Change: Interest expense really stepped down sequentially.

From our perspective, we're pretty comfortable that we can offset.

Speaker Change: I'm wondering is that.

Speaker Change: It looks like net interest was about seven $4 million or something like that.

The net impact at the end of the day keep in mind again, our portfolio is.

Speaker Change: Is that a good number to use for the rest of it throughout the rest of the year on a quarterly basis or was there something in there that caused that step down.

Mostly non discretionary repair parts hard parts.

Our customers we are a strategic partner.

Speaker Change: Yeah, Gary it's David we've been focused as you know on paying down our debt since the.

To all of our customers, we have a strong brand both to our customers and the end users and we have a proven playbook.

David: Acquisition, we've paid down close to $270 million over the last couple of years, which has brought our leverage down to one times EBITDA. So the balance sheet strong as it's ever been we feel really confident about our ability to navigate in this current situation as far as the interest expense Gary. Thank you.

Done this before back in 2018.

Kevin Olsen: In particular, we had a strong season with our patented oil filter housing product that we've discussed in previous calls. This, along with the success of our other recent new products, were key contributors to our growth.

Timeframe.

And.

At the end of the day, we think will be successful wherever this ends up.

Great. Thank you.

Got it.

David: Current quarter is probably a good good assumption for your model.

Kevin Olsen: in our heavy duty segment. Soft market conditions that impacted trucking and freight markets in 2024 continue 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. will watch in closely and will continue to position the business for long-term success through portfolio expansion and productivity initiatives. Specialty Vehicle, remain encouraged with the enthusiasm behind the UTV and ATV market. Feedback we get from end-users is that they are very engaged and positive.

Next question comes from the line of Gary <unk> with Barrington Research. Your line is open.

David: Okay, Great. That's very helpful. And then could you maybe.

David: Just getting back to these this whole issue with <unk>.

Good morning, everyone.

Good morning, Gary.

David: And all of that.

David just a couple of questions on.

David: Versus when this happened before which was I think 2008 2019, I believe how much of your product.

The income statement it looked like your.

Interest expense really stepped down sequentially.

David: Then sourced from China, and then what takeaways that you get from that experience.

I'm wondering is that.

It looks like net interest was about seven 4 million or something like that.

David: That you could.

David: Could definitely.

Is that a good number to use for the rest of it throughout the rest of the year on a quarterly basis or was there something in there that caused that step down.

David: Use.

Speaker Change: In this current environment, if the tariff start really impacting the price of products.

Kevin Olson: Yeah, Gary it's Kevin Good question I think.

Yeah, Gary it's David we've been focused as you know on paying down our debt since the.

Kevin Olson: Six seven years ago, when we went through that before I believe we disclosed.

Kevin Olsen: We're not seeing a pullback in ridership. However, consumer spending softened during the quarter and may be a headwind moving forward. We remain focused on expanding our portfolio of non-discretionary parts.

Acquisition, and we've paid down close to $270 million over the last couple of years, which has brought our leverage down to one times EBITDA. So the balance sheet strong as it's ever been we feel really confident about our ability to navigate in this current situation as far as the interest expense Gary. Thank you.

Kevin Olson: Roughly 70 plus percent was China, Taiwan.

Kevin Olson: Which the vast majority of that was China.

Kevin Olson: The disclosure back then so we're in a materially different place as we look at it dormant.

Kevin Olsen: Capturing Share, an Expanded Dealer Network as the Market Rebounds.

David Hession: With that, I'll hand it off to David to review our Q1 financial. Thanks, Kevin. As we turn to slide six, I'd like to point out that we maintain our positive momentum from the fourth quarter. Consolidated net sales in the first quarter were $508 million, up 8% year-over-year, driven by strong customer demand. Light duty again drove above market sales growth on positive macro trends and the success of our new product. I'll cover each of our segments more in just a moment. Adjusted gross margin for the quarter was 40.9%, a 220 basis point increase compared to the prior year period.

Kevin Olson: Today.

Kevin Olson: When we think about.

Current quarter is probably a good good assumption for your model.

Kevin Olson: Mitigation efforts what are we learned I think at the end of the day.

Okay, Great. That's very helpful. And then could you maybe.

Kevin Olson: That that event six seven years ago caused us to really look at.

Just getting back to these.

Whole issue.

Tariffs and all that.

Kevin Olson: Diversifying our supply chain building, a more resilient supply chain.

Versus when this happened before which was I think 2008 2019, I believe how much of your product.

Kevin Olson: And we've been very successful doing that so we have kind.

Kevin Olson: Kind of a core base of knowledge of these other regions, we know where there's capacity, we know where we can source quality parts at the right value around the globe. So we had experienced.

Then sourced from China.

And then what takeaways that you get from that experience.

That you.

Could definitely.

Use.

In this current environment, if the tariff start really impacting the price of products.

Kevin Olson: No.

David Hession: Margin expanded on the strong sales growth and favorable mix of new products, coupled with cost savings generated from supplier diversification, as well as productivity and automation initiatives. The adjusted SG&A expense as a percentage of net sales was 23.9%, down 100 basis points compared to the first quarter of 2024. Adjusted operating income was $86 million in the first quarter, up 33% compared to the same period last year. Adjusted Operating Margin expanded 310 basis points to 17%, largely from the gross margin improvement I just discussed. Finally, adjusted diluted EPS in the first quarter was $2.02, up 54% compared to last year's first quarter.

Kevin Olson: Folks in all of these reasons at this point.

Yeah, Gary it's Kevin Good question I think.

Kevin Olson: At the end of the day. We've also spent a lot of time.

Six seven years ago, when we went through that before I believe we disclosed.

Kevin Olson: Driving productivity throughout our business, we've talked about it before we.

Roughly 70 plus percent was China, Taiwan.

Kevin Olson: We undertook in automation.

Kevin Olson: Extra size, where our strategy initiative, where we have.

Which a vast majority of that was China.

Kevin Olson: We have automated our distribution facilities.

Allison disclosure back then so we're in a materially different place as we look at it dormant.

Kevin Olson: And we're going to continue to look to drive cost out of the business.

Today.

Kevin Olson: And whatever is left.

When we think about.

Kevin Olson: Whatever.

Kevin Olson: Net cost we have less we look to offset that in price.

Mitigation efforts, what we learned.

At the end of the day.

Speaker Change: Okay, and then just if I could just sneak one more in and it's a real easy one.

That that event.

Six seven years ago caused us to really look at.

Speaker Change: You cited new products is driving growth in the quarter.

Diversifying the supply chain and building a more resilient supply chain.

Speaker Change: Would you be able to maybe not quantify the actual numbers.

And we've been very successful doing that so we have.

Speaker Change: Level of sales.

Kind of a core base of knowledge of these other regions, we know where there's capacity, we know where we can source quality parts at the right value around the globe. So we had experienced.

Speaker Change: How many how many basis points within the range of the growth for the quarter was contributed by new products.

David Hession: along with increased adjusted operating and Lower Interest Expense as a result of our debt repayments over the last 12 months. Our effective tax rate benefited from a tiny difference in the quarter. Finally, our share repurchase program activity over the last year contributed to positive EPS growth.

Speaker Change: Yes, Gary we don't we don't break that out, but I will tell you that if you look at the overall market.

No.

Folks in all of these reasons at this point.

Speaker Change: <unk>.

Speaker Change: Across the industry.

At the end of the day. We've also spent a lot of time driving productivity throughout our business, we've talked about it before we undertook in automation.

Speaker Change: Looking at low single digit growth.

Speaker Change: And that's kind of compared to high single digit.

David Hession: Next, let me provide updates on each of our business segments, starting with light duty on slide 7. Light duties performance in the first quarter was outstanding. with net sales increasing 14% year over year. The growth was driven by strong customer demand, especially for our new products, with foundationally positive macro trends continuing through the first quarter.

Speaker Change: Pos growth that we experience.

Speaker Change: For the most part.

Exercise, where her strategy initiative, where we.

Speaker Change: That differential is driven by new products and that is that has been our model and it will continue to be a business model.

We have automated our distribution facilities.

And we're going to continue to look to drive cost out of the business.

Speaker Change: <unk> been very comfortable.

Speaker Change: Saying historically, they were able to significantly outperform market growth because of our business model and we think thats going to continue.

And whatever whatever.

Net cost we have less we look to offset that in price.

David Hession: POS was up high single digits versus shipments that were up low teens in the quarter.

Speaker Change: Thank you that's very helpful explanation I appreciate it thank you.

Okay, and then just if I could just sneak one more in and it's a real easy one.

David Hession: light duty also drove strong margin segment operating margin increasing to 19.9% for the quarter, a 380 basis point compared to the same period last This margin expansion benefited new product mix and cost savings from our ongoing automation and productivity initiatives, along with higher leverage on our volume.

Speaker Change: Okay.

You cited new products is driving growth in the quarter.

Speaker Change: Next question comes from the line of Justin HSE Ccs.

Would you be able to maybe not quantifying the actual numbers.

Speaker Change: Your line is open.

Speaker Change: Hi, good morning, all.

Level of sales.

Speaker Change: Good morning.

How many how many basis points within a range of the growth for the quarter was contributed by new products.

Speaker Change: I appreciate the color on how much is sourced from China can you give us any.

Speaker Change: Indication, how that splits out amongst the segments like.

Yes, Gary we don't we don't break that out, but I will tell you that as you look at the overall market.

David Hession: Turning to slide 8, heavy-duty net sales were again impacted by continued market pressures in freight transportation and the trucking app. Net sales were down 11% year-over-year, and segment operating margin turned slightly negative as the business has a larger fixed-cost manufacturing footprint in our U.S. manufacturing plants compared to our other segments.

Speaker Change: That 30% to 40% is the majority going to light duty or any color on that would be helpful.

Okay.

Across the industry.

Looking at low single digit growth.

Speaker Change: Yes, Jeff Good question, we're not going to get into the details.

Yeah.

That's kind of compared to high single digit.

Speaker Change: As disclosed the impact.

Pos growth that we experience.

Speaker Change: <unk>.

Speaker Change: Segments, mainly because frankly.

For the most part.

That differential is driven by new products and that is that has been our model and will continue to be a business model.

Speaker Change: Too fluid at this point and for competitive reasons I will make a couple of comments, though on each individual segment.

David Hession: While the early signs of stabilization that we mentioned on our last call continue to play out through the first few months of the year, the uncertainty that tariffs inject into the trucking and freight markets give us further pause to call for a rebound in our business. That said, we'll continue to invest in new product development and commercialization initiatives to capture, share, and best serve our customers when the market doesn't.

We've been very comfortable.

Speaker Change: In light duty as I mentioned before we believe we have a very diversified supply chain.

Saying historically, they were able to significantly outperform market growth because of our business model and we think thats going to continue.

Speaker Change: Footprint, we have less exposure as I mentioned before.

Speaker Change: To the overall hard parts market.

Thank you that's very helpful. Ben explanation depreciated. Thank you.

Speaker Change: In the aftermarket we make significantly so.

Speaker Change: So overall, we view that we have a competitive advantage in relation to the competitive set in the light duty.

Next question comes from the line of Justin Lee Joseph CGS Securities. Your line is open.

Speaker Change: If you look at look at heavy duty very modest impact from tariffs.

David Hession: Moving to slide 9, UTV and ATV ridership in the specialty vehicles segment remains healthy. But in the first quarter, net sales declined 9% year over year, which proves to be a notable shift from the growth we saw at the end of last year. We expect this turn was the result of consumer sentiment changing after the holiday season and as uncertainty around tariffs took hold. This weakened confidence level in the economy will likely continue, given general uncertainty and tariffs, but we expect demand to return once the economy restables. To best serve our customers and riders, we'll continue to invest in product offerings through our internal innovation funnel and through tuck-in acquisitions of value-added brands.

Hi, good morning, all.

Good morning.

Speaker Change: We believe again as we look around the competitive landscape that we're well advantaged there.

I appreciate the color on how much is sourced from China can you give us any.

Indication, how that splits out amongst the segments like.

Speaker Change: In the specialty vehicle, we do have some exposure to China, but we also have a large manufacturing footprint in the U S mass in Indiana.

That 30% to 40% is the majority going to light duty or any color on that would be helpful.

Speaker Change: If we look at that entire industry, it's very heavily indexed to China. So again, we think we're well positioned as we look.

Yes, Jeff Good question, we're not going to get into the details.

Our disclosed the impact that are different.

Speaker Change: Against the competitive set.

Segments, mainly because frankly, it's too fluid at this point and for competitive reasons I will make a couple of comments, though on each individual segment.

Speaker Change: And also keep in mind just in that.

Speaker Change: We do have a pretty good footprint here in the U S. As I mentioned before we do source roughly 30% of our products here in the U S. Some of that through our own plants, we do have six.

In light duty as I mentioned before we believe we have a very diversified supply chain.

David Hession: will also continue to expand our dealer network to further broaden our market share.

Speaker Change: <unk> manufacturing plants in the U S and obviously, we'll look to leverage them.

And footprint, we have less exposure as I mentioned before.

So the overall hard parts market.

Speaker Change: As much as we can where it makes sense.

David Hession: On the margin front, segment operating margin declined to 10.2% in the poor. The main driver of this decline was the de-leverage of our fixed costs as sales... Similar to heavy-duty business. We manufacture a portion of our products internally in the U.S. Within our operations, we are taking appropriate action to mitigate margin degradation.

In the aftermarket we think significantly so.

Speaker Change: Alright, that's very helpful. I appreciate you taking my questions.

So overall, we view that we have a competitive advantage in relation to the competitive set in light duty.

Speaker Change: You got adjusted Thank you.

Speaker Change: And we have a follow up question from Scott <unk> with Roth Capital Partners. Your line is open.

If you look at look at heavy duty.

A modest impact from tariffs.

Scott: Hey, guys just one follow up these $2 32 tariffs just trying to figure out if you guys have been able to.

We believe again as we look around the competitive landscape that we are well.

Vintage there.

David Hession: should the markets office continue in the Turning to our cash flow on slide. Our cash flow on the quarter was solid, had strong earnings growth offset by investments we made in investments. Free cash flow in the first quarter was $40 million, essentially in line with the same period last year. During the quarter, we deployed $11 million in capital expenditures. Repaid $20 million in debt and repurchased $12 million of our common stock. The cash flow we've generated and our use of cash over the last 8 quarters have positioned us well with the liquidity to manage increased costs as a result of the tariff.

Scott: Ascertain whether there'll be any exemptions.

In the specialty vehicle, we do have some exposure to China, but we also have a large manufacturing footprint in the U S mass in Indiana.

Scott: Also talking about.

Scott: The president is talking about.

Scott: Auto parts.

Scott: There being some kind of a claw back I'm not sure if that is related to just the OEM and OEM production or is there some benefit.

If we look at that entire industry, it's very heavily indexed to China. So again, we think we're well positioned as we look against the competitive set.

Scott: Offset for the pure aftermarket.

And also keep in mind just in that.

Scott: Yeah.

Scott: Scott.

We do have a pretty good footprint here in the U S. I mentioned before we do source roughly.

Scott: Still working through that but in general.

Scott: The auto part the 232 tariffs is really tied to the HTS code.

30% of our products here in the U S. Some of that to our own plants.

Scott: And.

Do have six.

Scott: Where we have parts of that fall into those codes are obviously subject to that tariffs in there is there is a.

<unk> manufacturing plants in the U S and obviously, we will look to leverage them.

David Hession: I'll touch on our liquidity in just a minute, but I wanted to highlight that our capital allocation strategy has proved to be a key value driver for Dorman.

Scott: A bunch of other tariffs as well.

As much as we can where it makes sense.

Scott: And they all interplay.

Scott: But for.

Alright, that's very helpful. I appreciate you taking my questions.

Scott: For the most part.

Scott: That exemption was for the OE, but we're still evaluating the impact on them.

You got adjustments thank you.

David Hession: As we look forward, our long-term strategy doesn't change. We will continue to look at our debt and leverage targets first, and then utilize our cash to invest internally, as that is where we get our greatest return. will then look to invest in strategic growth opportunities and opportunistically repurchase shares. That said, in the short term, we'll be utilizing a portion of our cash and balance sheet flexibility to fund the higher cost of inventory resulting from the tariff. On slide 11, we highlight much of what we've already covered, which is that we believe we have the balance sheet capacity and liquidity to help finance the cash needed for the significant increase in inventory costs we anticipate as a result of the tariff.

And we have a follow up question from Scott <unk> with Roth Capital Partners. Your line is open.

Scott: Got it.

Scott: Thanks again.

Scott: Got it.

Hey, guys just one follow up these $2 32 tariffs I'm just trying to figure out if you guys have been able to.

Speaker Change: Ladies and gentlemen that concludes the question and answer session. Thank you all for joining and you may now disconnect.

Ascertain whether there'll be any exemptions and also talking about.

The president is talking about an auto parts.

There being some kind of a claw back I'm not sure if that is related to just the OEM and OEM production or is there some benefit or offset for the pure aftermarket.

Yeah.

Scott.

Working through that but in general.

David Hession: As you can see, net debt was reduced to $402 million, and our net leverage ratio was 1.01 times adjusted EBITDA, down from 1.12 times at the end of last year. Additionally, our total liquidity increased to $660M at the end of the quarter, up from $642M at the end of 2024. In the end, we expect the strength of our balance sheet will be a competitive advantage against the market conditions we currently face.

The auto part the 232 tariffs is really tied to the HTS code.

And.

Where we have parts that fall into those codes are obviously subject to that tariffs in there is there is a bunch of other tariffs as well.

And they all interplay.

But.

For the most part.

That exemption was for the OE.

We're still evaluating the impact on Durbin.

Got it.

Thanks again.

Got it.

David Hession: Turning to slide 12, I'd like to cover our guidance for 2025. Given our performance in the first quarter and the future outlook for our underlying business, we are reaffirming our 2025 Net Sales Growth Guidance of 3% to 5% and adjusted diluted EPS guidance range of $7.55 to $7.80.

Ladies and gentlemen that concludes the question and answer session. Thank you all for joining and you may now disconnect.

Yeah.

[music].

Okay.

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David Hession: Please note that this guidance does not include any impact related to US tariff enacted or proposed in 2025, or any potential retaliatory measures from US trade As you know, the situation remains highly fluid, and negotiations between various countries and the administration are ongoing. Adding to the fluidity, our conversations and negotiations with our suppliers and customers are ongoing as well. With this level of uncertainty, we felt it was prudent to continue providing our positive view of the underlying business.

Yes.

[noise].

David Hession: did not include any impact from increased pricing or higher costs associated with them.

David Hession: As the situation gains more clarity, both at the macro level and for Dorman, we'll look to provide an updated view with the impacts to our expected results. And finally, for modeling purposes, we continue to expect a 24% effective tax.

Kevin Olsen: With that, I'll now turn it back over to Kevin to conclude. Thanks, David. I'll just reinforce what we've said throughout.

Kevin Olsen: First and foremost, we have an outstanding first quarter that positions us well for growth. While there is significant level of uncertainty that exists with tariffs, we have the experience and talent to address the challenges ahead. Additionally, we have a stronger supplier base, a more diversified customer base. Stronger financial foundation than we've ever had before. continue focusing on the needs of our customers and users. and look to capitalize on the opportunities we see in the market.

Unknown Executive: With that, I would now like to open the call up for questions. Operator? Thank you.

Unknown Executive: We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star one to join.

Scott Stember: And our first question comes from the line of Scott Stember with Roth Capital Partners. Good morning, guys, and thanks for taking my question. Morning, Scott. Very strong performance in heavy duty. Very strong high single digit POS. A few ticks below the sell.

Kevin Olsen: So I guess the first question is, have you seen any of your bigger customers buying ahead to get ahead of tariffs? And if not, is this just a function that the difference of you guys gaining shelf space with some of your bigger, faster growing partners that are expanding rapidly? Yeah, good.

Kevin Olsen: It's Kevin. Good, good question, Scott. You know, the light duty business is very strong in the quarter, you know, it followed a very strong fourth quarter as well. Our POS, as we noted, you know, in the prepared remarks was up high single digit, very similar to what we were seeing last year, really driven by our new product performance, you know, and the macros continue to be favorable as well, as we mentioned. Our selling growth actually did exceed our POS growth in the quarter, really as a result of an easier comp in the quarter. You know, if we look back and you look at the two year stack in the quarter, kind of more in line with what the POS growth that we saw some timing issues last year in the first quarter versus the fourth quarter of 2023.

Kevin Olsen: To answer your question around the buy-ahead, we haven't seen any indications at this point yet of customers getting ahead of the tariffs, at least from ordering from us. That could potentially happen, but as of now, we haven't seen any meaningful evidence of Got it. And, you know, on tariffs, obviously, appreciate there's a lot of uncertainties here. And it's, it's hard to predict anything. But clearly, with 145%, as it stands right now, you know, some folks are concerned, you know, what impact it'll have on your business. So it sounds like you're a lot better position than you were the last time around with tariffs.

Kevin Olsen: But could you just Again, remind us of some of the mitigation efforts that you have in place and then timing of when we would actually start to see anything hit your results. Yeah, sure. You know, I mean, as you mentioned, Scott, again, it's Kevin, it's, it's really too early to tell it's a very fluid situation that the 232 auto tariffs just went into effect a couple days ago. And as we talked about, we do have a very diverse supply chain, you know, much more diverse than it was, say, five, six years ago. And that that's intentional.

Kevin Olsen: And I'll just reiterate what our what our footprint looks like across across Dorman, roughly 30 to 40% is sourced from China. In 2025, we estimate and that's obviously depending on product mix. Approximately 30% is in the U.S. and the balance is really spread around the rest of the globe. I also want to point out, keep in mind that the vast majority of our parts, Scott, are non-discretionary in nature, and it's really been fairly inelastic historically as we've gone through periods like this. And just to hit on your point is when it impacts us, again, you know, we're on FIFO inventory.

Kevin Olsen: And it all depends on when, you know, some of these tariffs have started to come into effect. But in general, we won't see, you know, a lot of these tariffs for, you know, roughly six months or so after we start incurring them just because of FIFO.

Kevin Olsen: No, in regards to your question on mitigation, I mean, look, we've been down this road before. We feel like we have a really good playbook to deal with this. You know, we're, you know, obviously, we're going to look to negotiate with both our supply base in terms of cost concessions, driving further productivity initiatives in the business, and then obviously look to offset any difference through price changes.

Scott Stember: Great, that's all I have for now. I'll get back in the queue. Thank you. Thanks, Scott.

Bret Jordan: Our next question comes from the line of Bret Jordan with Jeffries. Your line is open. Hey guys, good morning. Morning, Brad. On that even margin in light vehicle, you talked about product mix versus leverage on the volume. Could you sort of break out what was product mix versus leverage on the volume? You've talked about a lot of new to the aftermarket and the oil filter housing. You know, if you use a sort of bucket where that pretty solid margin expansion came. I mean, Brad, if you look back, we've been generating these type of operating margins in light duty for quite some time now.

Kevin Olsen: And really, it is it is mostly due to our product mix. We don't spike out exactly how much is due to just core business. A lot of it is due to the new product mix. And as we've talked about before, we've had some really successful new products come to market. But also, you know, the macros have improved, right? I mean, if you look at the sweet spot, you know, the seven to 14 year old vehicle, which is where we really target new product development, you know, that vehicle cohort has really grown over the last couple years.

Kevin Olsen: And we see that cohort continuing to grow over the next three to four years.

Kevin Olsen: Those two factors have really enabled us to expand margin in light duty. Okay.

Bret Jordan: And then I guess when you think about the more commoditized mix in the portfolio, maybe chassis, and your supply chain footprint versus competition, is there any material difference or is everybody pretty much exposed in the same countries?

Kevin Olsen: Have you thought about yourself versus... Maybe the Tenneco chassis businesses or the Bevitech chassis businesses. Is there any risk that someone will be advantaged given their geographic mix or is pretty much everybody the same?

Kevin Olsen: Yeah, good question, Brett. I'm not going to comment on any specific category. But I think overall, you're going to see some of that in terms of depending on where all the tariffs settle out, which which I don't think Anyone really knows at this point, there will be situations where someone may be advantaged versus somebody else. I'll just say that, you know, as we look at our footprint. And if you look at kind of the exposure to to kind of the highest tariff region now, hard parts is very still very indexed to China. And if we look at kind of our exposure, we think we're a lot less exposed than most.

Kevin Olsen: And given our balanced footprint around the globe overall, we see ourselves in a competitive advantage.

Bret Jordan: Okay, great.

Bret Jordan: And then on pricing, in the event we do get tariffs, and, you know, the conversations with your large retail customers, does it sound as if everybody's still expecting to be able to pass most of these through? Or is just the magnitude of the tariff something that someplace along the line of the supply chain or the retailers, they have to eat some of this higher cost?

Kevin Olsen: Yeah, Brett, you know, I'm not going to comment on what our customers are going to do. But I'll just say that, you know, from from our perspective, we're pretty comfortable that we can offset the net impact at the end of the day. Keep in mind, again, our portfolio is is mostly non-discretionary repair parts, part parts. Our customers, we're a strategic partner to all of our customers. We have a strong brand, both to our customers and the end users. And we have a proven playbook. I mean, we've done this before, back in the 2018 timeframe. and you know at the end of the day we think we'll be successful wherever this ends up.

Bret Jordan: Great, thank you. You got it.

Gary Prestopino: Next question comes from the line of Gary Prestopino with Barrington Research. Your line is open. Good morning, everyone. I'm fine, Gary. David, just a couple of questions on the income statement. It looked like you're interest expense really stepped down sequentially. And I'm wondering, is that looks like net interest was about 7.4 million or something like that. Is that a good number to use for the rest throughout the rest of the year on a quarterly basis? Or was there something in there that caused that step?

David Hession: Yeah, Gary, it's David. We've been focused, as you know, on paying down our debt since the acquisition and we've paid down close to $270 million over the last couple of years, which has brought our leverage down to one time dividend. So the balance sheet is as strong as it's ever been. We feel really confident about our ability to navigate in this current situation.

Gary Prestopino: As far as the interest expense, Gary, I think using the current quarter is probably a good, good assumption for your model. Great, that's very helpful.

Gary Prestopino: And then could you maybe Just getting back to the this whole issue with the tariffs and all that. versus when this happened before, which was, I think, 2018. I believe. How much of your product was then sourced from China? And then, you know, what takeaways did you get from that experience that you, you know, could definitely use in this current environment if the tariffs start really impacting the price of product?

Kevin Olsen: Yeah, Gary, it's Kevin. Good question. I think, you know, six, seven years ago, when we went through that before I believe we disclosed You know, roughly 70 plus percent was China, Taiwan, of which a vast majority of that was China. I think that was the disclosure back then. So we're in a materially different place as we look at Dorman. today. You know, when we think about you know, mitigation efforts, you know, what have we learned? I think, you know, at the end of the day, that that event, you know, six, seven years ago caused us to really look at diversifying the supply chain, building a more resilient supply chain, and we've been very successful doing that.

Kevin Olsen: So we have kind of a core base of knowledge of these other regions, we know where there's capacity, you know, we know where we can source quality parts at the right value around the globe. So we have experienced, you know, folks in all these regions at this point. You know, at the end of the day, we've also spent a lot of time driving productivity throughout our business. We've talked about it before, we undertook an automation exercise where a strategy initiative where we have automated our distribution facilities. And we're going to continue to look to drive costs out of the business.

Kevin Olsen: and whatever is left, you know, whatever net cost we have left, we look to offset that price.

Gary Prestopino: Okay, and then just if I could just sneak one more in and it's a real easy one. You cited new products as driving growth in the quarter. Would you be able to maybe not quantify the actual numbers, the level of sales, but how many, how many basis points within a range of the growth of the quarter was contributed by new products?

Kevin Olsen: Yeah, Gary, we don't we don't break that out. But I will tell you that if you look at the overall market growth across the industry, you're looking at low single digit growth. you know, and that's kind of compared to, you know, high single digit POS growth that we experienced. For the most part, that differential is driven by new products. That has been our business model and will continue to be a business model. We've been very comfortable saying historically that we're able to significantly outperform market growth because of our business model. And we think that's going to continue.

Gary Prestopino: No, thank you. That's very helpful. That explanation. Appreciate it. Thank you.

Justin Ages: Next question comes from the line of Justin Ages with CJS Securities. Your line is open. Hi, good morning, all. Morning. Um, appreciate the color on how much is sourced from China.

Justin Ages: Can you give us any indication how that splits out amongst the segments like of that 30 to 40 percent is the majority going to light duty or any color on that would be helpful? Yeah, Justin, good question.

Kevin Olsen: You know, we're not going to get into the details, or disclose the impact in our in our different segments, mainly because frankly, it's it's too fluent at this point. And for competitive reasons, I will make a couple of comments though on on each individual segment. In light duty, as I mentioned before, we believe we have a very diversified supply chain. and Footprint. We have less exposure, as I mentioned before. to the overall hard parts market. in the aftermarket. We think significantly so. Overall, we view that we have a competitive advantage in relation to the competitive set in light duty.

Kevin Olsen: You'll get a look at heavy duty, very modest impact from tariffs. We believe, again, as we look around the competitive landscape, that we're well advantaged there. In specialty vehicle, we do have some exposure to China, but we also have a large manufacturing footprint in the US, Mass in Indiana. If we look at that entire industry, it's very heavily indexed to China. So again, we think we're well positioned as we look against the competitive set.

Justin Ages: And also keep in mind, Justin, that, you know, we do have a pretty good footprint here in the US. I mentioned before, we do source roughly 30% of our products here in the US, some of that to our own plants. We do have a six. Dormino and manufacturing plants in the US and obviously we look to leverage them as much as we can where it makes sense. All right, that's very helpful. I appreciate you taking the question.

Justin Ages: You got it, Justin. Thank you.

Scott Stember: And we have a follow-up question from Scott Stember with Roth Capital Partners. You guys just one follow up on these 232 tariffs, just trying to figure out if you guys have been able to ascertain whether there'll be any exemptions and also talking about, you know, the President talking about on auto parts, there being some kind of a clawback. I'm not sure if that is related to just the OEM and OEM production, or is there some benefit or offset for the pure app? Yeah. Scott, we're, we're still working through that. But in general, you know, the auto part, the 232 tariffs is really tied to, you know, the HTS code.

Kevin Olsen: and where we have parts that fall under those codes are obviously subject to that tariff. And there's a bunch of other tariffs as well, and they all interplay. But for the most part, that exemption was for the OE, but we're still evaluating the impact on Dorman. Got it. Thanks again.

Unknown Executive: Ladies and gentlemen, that concludes the question and answer session. Thank you all for joining, and you may now disconnect.