Dorman Products, Inc. (NASDAQ:DORM) Q4 2024 Earnings Conference Call February 27, 2025 8:00 AM ET Company Participants Alex Whitelam - Vice President, Investor Relations Kevin Olsen - Chief Executive Officer David Hession - Chief Financial Officer Conference Call Participants Scott Stember - ROTH MKM Gary Prestopino - Barrington Research Justin Ages - SJS Securities Bret Jordan - Jefferies Operator Good morning, and thank you for standing by. Welcome to the Dorman Products Fourth Quarter 2024 Earnings Confe ...

DORMAN PRODUCTS, INC. Q4 2024 EARNINGS PRESENTATION FEBRUARY 27, 2025 TDORMANT Forward-Looking Statements & Non-GAAP Financial Measures FORWARD-LOOKING STATEMENTS This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, may be forward-looking statements. Words such as "may," "will," "should," "likely," "probably," "anticipates," "expects," "intends," "plans," "projects," "bel ...

Group 1 - Dorman Products reported quarterly earnings of $2.20 per share, exceeding the Zacks Consensus Estimate of $1.97 per share, and up from $1.57 per share a year ago, representing an earnings surprise of 11.68% [1] - The company achieved revenues of $533.77 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 1.68% and increasing from $494.3 million year-over-year [2] - Dorman Products has outperformed consensus EPS estimates in all four of the last quarters and has topped consensus revenue estimates twice during the same period [2] Group 2 - The stock has underperformed the market with a decline of about 3.1% since the beginning of the year, while the S&P 500 has gained 1.3% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to those expectations [4] - The current consensus EPS estimate for the upcoming quarter is $1.50 on revenues of $482.23 million, and for the current fiscal year, it is $7.54 on revenues of $2.09 billion [7] Group 3 - The Automotive - Replacement Parts industry, to which Dorman Products belongs, is currently ranked in the top 23% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5] - Dorman Products currently holds a Zacks Rank 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6]

Financial Performance - Total net sales for Q4 2024 were $533.8 million, an increase of 8.0% compared to $494.3 million in Q4 2023[5]. - Diluted EPS for Q4 2024 was $1.77, up 11% from $1.60 in the same quarter last year; adjusted diluted EPS was $2.20, up 40% from $1.57[9]. - For the full year 2024, net sales reached $2.009 billion, a 4.1% increase from $1.930 billion in 2023[10]. - Adjusted net income for the twelve months ended December 31, 2024, was $220,697 thousand, a significant increase of 54.3% from $143,175 thousand in the previous year[27]. - The company reported a diluted earnings per share (GAAP) of $6.14 for the twelve months ended December 31, 2024, compared to $4.10 in the previous year, reflecting a 49.4% increase[27]. Profitability Metrics - Gross profit for Q4 2024 was $221.7 million, representing 41.5% of net sales, compared to 39.3% in Q4 2023[6]. - Adjusted gross margin for the full year 2024 was 40.2%, up from 36.1% in the prior year[10]. - Gross profit margin improved to 40.2% for the twelve months ended December 31, 2024, compared to 36.1% for the same period in 2023[29]. - SG&A expenses for Q4 2024 were $135.0 million, or 25.3% of net sales, compared to $117.0 million, or 23.7% in Q4 2023[7]. - SG&A expenses as a percentage of net sales decreased to 24.1% for the twelve months ended December 31, 2024, down from 24.4% in 2023[32]. Cash Flow and Capital Management - The company generated $231 million in cash from operating activities for the full year, allowing for a $94 million reduction in debt and $78 million in stock repurchases[4]. - Cash provided by operating activities for the twelve months ended December 31, 2024, was $231,047 thousand, an increase of 10.7% compared to $208,758 thousand for the same period in 2023[25]. - Capital expenditures for the twelve months ended December 31, 2024, were $39,421 thousand, a decrease of 10.3% from $43,968 thousand in 2023[25]. Segment Performance - Light Duty segment net sales for Q4 2024 were $427.4 million, up 11% from $385.9 million in Q4 2023, with a profit margin increase of 350 basis points[9]. - Heavy Duty segment net sales decreased by 8% to $52.9 million in Q4 2024, with a profit margin decline of 470 basis points[9]. Guidance and Projections - For 2025, the company expects net sales growth of 3% to 5% and diluted EPS in the range of $7.00 to $7.30[5][14]. - The company provided guidance for fiscal 2025 with diluted earnings per share (GAAP) ranging from $7.00 to $7.30[41]. - Adjusted diluted earnings per share (Non-GAAP) is projected to be between $7.55 and $7.85 for fiscal 2025[41]. - Weighted average diluted shares outstanding is estimated at 30,800 for fiscal 2025[41]. Balance Sheet Highlights - Total assets increased to $2,424,521 thousand as of December 31, 2024, up from $2,292,407 thousand a year earlier, representing a growth of 5.8%[24]. - Total current liabilities increased slightly to $563,802 thousand as of December 31, 2024, from $547,151 thousand a year earlier, marking a 3.0% rise[24]. - The company’s retained earnings increased to $1,180,862 thousand as of December 31, 2024, up from $1,069,435 thousand in the previous year, indicating a growth of 10.4%[24]. Other Financial Adjustments - Fair value adjustments to contingent consideration totaled $7.1 million pretax and $20.5 million pretax for the three and twelve months ended December 31, 2023, respectively[4]. - Workforce reduction costs amounted to $5.0 million pretax for the twelve months ended December 31, 2024[5]. - Discrete tax adjustment for state tax matters totaled $8.1 million during the three and twelve months ended December 31, 2024[6]. - Tax adjustments totaled $(1.7) million and $(7.5) million during the three and twelve months ended December 31, 2024, respectively[7].

Core Insights - Dorman Products, Inc. reported strong financial results for Q4 and full year 2024, with net sales increasing by 8% in Q4 and 4.1% for the full year, driven by performance in Light Duty and Specialty Vehicle segments [3][5][9]. Financial Performance - Q4 2024 net sales reached $533.8 million, up from $494.3 million in Q4 2023, marking an 8% increase [5][10]. - Full year 2024 net sales totaled $2,009.2 million, compared to $1,929.8 million in 2023, reflecting a 4.1% growth [9][10]. - Gross profit for Q4 2024 was $221.7 million, representing 41.5% of net sales, an increase from 39.3% in Q4 2023 [6][10]. - For the full year 2024, gross profit was $806.4 million, or 40.1% of net sales, up from 35.5% in the prior year [11][12]. Earnings Metrics - Diluted EPS for Q4 2024 was $1.77, an 11% increase from $1.60 in Q4 2023, while adjusted diluted EPS rose 40% to $2.20 [8][10]. - Full year diluted EPS was $6.14, a 50% increase from $4.10 in 2023, with adjusted diluted EPS at $7.13, up 57% from $4.54 [12][10]. Segment Performance - In Q4 2024, Light Duty segment sales were $427.4 million, up 11% from $385.9 million in Q4 2023, with a profit margin increase of 350 basis points [8]. - Heavy Duty segment sales decreased by 8% to $52.9 million, with a profit margin decline of 470 basis points [8]. - Specialty Vehicle segment sales increased by 5% to $53.5 million, with a profit margin decrease of 350 basis points [8]. Cash Flow and Capital Management - Cash from operating activities for 2024 was $231 million, enabling the company to reduce debt by $94 million and repurchase $78 million in common stock [4][10]. - The company reported a significant increase in cash flow, with Q4 cash from operating activities at $71 million, compared to $59.6 million in Q4 2023 [27]. 2025 Guidance - Dorman Products expects net sales growth of 3% to 5% for 2025, with diluted EPS projected between $7.00 and $7.30, and adjusted diluted EPS between $7.55 and $7.85 [5][14].

Core Points - Dorman Products, Inc. will report its financial results for Q4 and the full year ended December 31, 2024, after the Nasdaq market closes on February 26, 2025 [1] - A conference call and webcast to discuss these financial results is scheduled for February 27, 2025, at 8 a.m. ET [2] Company Overview - Dorman Products has been providing aftermarket replacement products for over 100 years, aimed at saving time and money for professionals and vehicle owners [3] - The company is a global organization with a diverse catalog of products for various types of vehicles, including cars, trucks, and specialty vehicles [4]

Core Insights - Dorman Products, Inc. has appointed Tayfun Uner as President of Light Duty, a newly-created role aimed at driving strategic growth and overseeing the largest business segment [1][2] - Uner brings extensive experience from consumer goods, having previously served as Senior Vice President at Newell Brands and held strategic positions at McKinsey & Company, Procter & Gamble, and Carlsberg Breweries [2] - The appointment is part of Dorman's effort to formalize leadership structures across its three business segments, enhancing operational efficiency and growth potential [2] Company Overview - Dorman Products has been providing innovative repair solutions for over 100 years, offering a wide range of aftermarket replacement products designed to save time and money for repair professionals and vehicle owners [3][4] - The company operates globally, with a diverse catalog of products that includes components for cars, trucks, and specialty vehicles, covering various aspects from chassis to complex electronics [4]

Industry Overview - The Zacks Automotive - Replacement Parts industry focuses on the production, marketing, and distribution of replacement components for the automotive aftermarket, including essential parts like engine, steering, and brakes [3] - The industry is less exposed to economic downturns as consumers prefer to repair older vehicles rather than purchase new ones, leading to consistent demand for replacement parts [3] Key Investing Themes - The average age of vehicles in the U.S. reached an all-time high of 12.6 years in 2024, driving demand for automotive replacement parts due to the need for more frequent repairs and maintenance [4] - The shift towards electrification, autonomy, and digitization in the automotive industry is creating new growth opportunities in the replacement parts market, requiring advanced components and skilled technicians [5] Industry Performance - The Zacks Automotive - Replacement Parts industry has underperformed compared to the Auto, Tires, and Truck sector and the S&P 500, declining 17% over the past year while the sector and S&P 500 grew by 27% and 29%, respectively [9] - The industry is currently trading at an EV/EBITDA ratio of 8.8X, significantly lower than the S&P 500's 18.84X and the sector's 22.78X, indicating an attractive valuation [10] Company Highlights Dorman Products - Dorman Products is a key player in the aftermarket industry, focusing on replacement and upgrade parts, with a strong balance sheet and a debt-to-capitalization ratio of 28% [11] - The company has consistently surpassed earnings estimates, with an average surprise of 35%, and is expected to see year-over-year growth of 4% in sales and 9% in earnings for 2025 [12] Standard Motor Products - Standard Motor Products is a leading manufacturer of automotive replacement parts, with a focus on engine management and temperature control systems, and has expanded its geographic presence through the acquisition of Nissens [20] - The company has a long-term debt-to-capital ratio of 0.17, lower than the industry average, and has repurchased $10.4 million of shares in the first nine months of 2024 [20] - The Zacks Consensus Estimate for Standard Motor's 2025 sales and earnings implies year-over-year growth of 2.3% and 11.3%, respectively [21]

Industry Overview - The automotive replacement parts industry is experiencing growth driven by an aging vehicle fleet, with the average age of vehicles in the U.S. reaching 12.6 years in 2024, leading to increased demand for repairs and maintenance [8] - The industry's dynamics are shifting due to the electrification, autonomy, and digitization of vehicles, which require advanced components and skilled technicians, creating new growth opportunities [2] - Affordability issues are expected to persist, encouraging vehicle owners to opt for repairs over new purchases, further boosting demand for replacement parts [9] Market Performance - The Zacks Automotive Replacement Parts industry has underperformed compared to the Auto, Tires, and Truck sector and the S&P 500, declining 17% over the past year while the sector and S&P 500 grew by 27% and 29% respectively [11] - The industry's current valuation, based on the EV/EBITDA ratio, is 8.8X, significantly lower than the S&P 500's 18.84X and the sector's 22.78X, indicating potential value opportunities [12] Key Players - Dorman Products is a key player in the aftermarket industry, focusing on replacement and upgrade parts, with a strong balance sheet and a debt-to-capitalization ratio of 28%, supported by share buybacks [21] - Standard Motor Products is a leading manufacturer of automotive replacement parts, with recent acquisitions aimed at expanding geographic presence and improving cost savings, currently holding a Zacks Rank 3 (Hold) [23][24]

Group 1 - Dorman Products (DORM) is currently outperforming its peers in the Auto-Tires-Trucks sector, with a year-to-date return of approximately 65.3% compared to the sector average of 6.8% [4] - The Zacks Rank for Dorman Products is 1 (Strong Buy), indicating a positive earnings outlook and strong analyst sentiment, with a 12.3% increase in the full-year earnings estimate over the past three months [3][4] - Dorman Products belongs to the Automotive - Replacement Parts industry, which has an average loss of 17.2% this year, further highlighting DORM's strong performance [6] Group 2 - REE Automotive Ltd. (REE) has also shown strong performance in the Auto-Tires-Trucks sector, with a year-to-date return of 48.3% and a Zacks Rank of 2 (Buy) [5][7] - The Automotive - Original Equipment industry, which includes REE, has experienced a decline of 19.4% this year, contrasting with Dorman Products' positive performance [7]