Financial Data and Key Metrics Changes - The company achieved net sales of $138.4 million for Q3 2025, reflecting a 3.2% increase compared to $134 million in the same period last year [21] - Core business growth was reported at 6.4%, marking the third consecutive quarter of year-over-year growth [22] - Gross margin improved to 43.2%, an increase of 422 basis points from 39% in the prior year [22] - Adjusted EBITDA for the quarter was $27.1 million, up from $22.1 million in the previous year, with an adjusted EBITDA margin of 19.6%, a 309 basis point improvement [23][24] - Free cash flow generation was $5.5 million, a significant improvement from a negative $2.1 million in the same quarter last year [24] Business Line Data and Key Metrics Changes - The B2B channel experienced a growth of 7.3%, driven by enhanced engagement with key partners [6] - Direct-to-consumer sales increased by 4.2% year-over-year, supported by improved promotional execution and digital performance [11] - The domestic muscle division grew by 6.2%, while the Euro and import division saw a remarkable growth of 16.6% [12][13] Market Data and Key Metrics Changes - The company reported strong engagement from its enthusiast community, with attendance at events remaining robust despite weather-related challenges [11] - E-commerce and direct-to-consumer channels performed well, with third-party marketplaces growing by 28% year-to-date [15] Company Strategy and Development Direction - The company is focused on an omnichannel strategy, enhancing customer engagement across various platforms [4] - Strategic initiatives contributed approximately $27.8 million in revenue and $6.2 million in cost savings during the quarter, reflecting disciplined execution and operational improvements [17] - The company aims to maintain gross margins above 40% and achieve adjusted EBITDA margins of 20% [56] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the fluid economic environment, citing factors such as higher unemployment and persistent inflation affecting consumer sentiment [26] - Despite these challenges, the company raised its full-year revenue guidance to a range of $590 to $605 million, reflecting confidence in its operational execution [27] - The company remains committed to strengthening its balance sheet and enhancing free cash flow generation [27] Other Important Information - The company prepaid an additional $10 million in debt, bringing total prepayments to $100 million since September 2023, marking a significant milestone in its transformation [25] - The company is focused on operational improvements and enhancing working capital management, with inventory reduction efforts ongoing [20] Q&A Session Summary Question: Pricing realization and delta explanation - Management indicated that the delta in pricing realization is due to a combination of strong B2B growth and contractual pricing not flowing through immediately [28][29] Question: Structural margin profile and sustainability - Management confirmed no structural changes affecting margins and indicated a commitment to driving continued margin acceleration [30] Question: Organic sales growth expectations for Q4 - Management noted that conservatism in guidance is due to current market conditions and the absence of a marketing calendar event from the previous year [32] Question: Impact of consumer spending changes - Management expressed confidence in consumer resilience and potential increases in demand due to discretionary income or tax refunds [34] Question: Priorities for 2026 - Management highlighted ongoing focus on strategic initiatives and operational improvements as key priorities for the upcoming year [35] Question: Inventory levels and operational decisions - Management explained that increased inventory levels were a strategic decision to enhance customer service and operational visibility [36] Question: Competitive landscape and share gains - Management stated that share gains are attributed to enhanced relationships with distributors and improved product data quality [53]

Financial Data and Key Metrics Changes - The company achieved net sales of $166.7 million, reflecting a 3.9% increase in the core business compared to the prior year [13][38] - Free cash flow reached $35.7 million, marking the highest quarterly free cash flow generated in the company's history, an increase of $11.3 million versus the prior year [10][14] - Gross margins improved to 41.7%, up 26 basis points year over year, demonstrating stability despite external cost pressures [14][38] - Adjusted EBITDA margin was 21.9%, down 74 basis points year over year, reflecting normalization following prior year SKU rationalizations and divestitures [14][40] Business Line Data and Key Metrics Changes - The B2B channel experienced approximately 6.5% growth, driven by increased sales support and customer satisfaction [11] - Direct to consumer sales increased by 8.6%, with third-party marketplaces like Amazon and eBay growing over 28% [12][19] - The domestic muscle vertical delivered 6% year-over-year growth, while the modern truck and off-road division led with an impressive 17% growth [20] - The Euro and import division saw a combined growth of 4%, with Euro brands up 20% [20] Market Data and Key Metrics Changes - The company reported strong performance in the automotive performance aftermarket, with broad-based growth across more than 20 brands [11][19] - The company is expanding its reach in Mexico, which is expected to represent about 5% of the U.S. market long-term [80] Company Strategy and Development Direction - The company is focused on an omni-channel strategy, enhancing customer engagement through various platforms [6][7] - Strategic initiatives contributed approximately $27 million in revenue this quarter, emphasizing product innovation and operational excellence [11][30] - The company aims to maintain gross margins of 40% and achieve adjusted EBITDA margins greater than 20% while generating strong free cash flow [111] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the evolving consumer and macroeconomic environment, with no meaningful impact from tariffs projected for 2025 or 2026 [8][34] - The company is taking a conservative approach to guidance for the second half of the year, reflecting mixed economic signals [44][106] Other Important Information - The company has implemented a comprehensive tariff mitigation strategy, with over $15 million in opportunities identified through supplier negotiations and sourcing from lower-cost regions [33][104] - The company has reduced inventory by approximately $9 million since the beginning of the year, contributing to improved cash flow and working capital efficiency [17][40] Q&A Session Summary Question: How have partners and enthusiasts responded to price increases? - Management noted that feedback indicated pricing was in line or lower than competitors, with strong sales in June [50] Question: Are you winning market share with lower pricing? - Management confirmed that indicators suggest the company is continuing to take market share, outperforming distribution partners [52][53] Question: How do you anticipate gross margins will trend in the second half? - Management expects to maintain or increase gross margins, supported by strong partnerships and marketing support [55] Question: Can you provide an update on inventory sell-through? - Management reported strong sell-through numbers from distribution partners, indicating good end-user demand [59] Question: What is the outlook for free cash flow and capital allocation? - Management indicated a positive outlook for free cash flow in the second half, with a focus on debt prepayment and M&A opportunities [72] Question: What is the growth trajectory in Mexico? - Management sees Mexico as a natural market with long-term potential, focusing on establishing distributors and product distribution [80][81]