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]