Financial Data and Key Metrics Changes - Consolidated net sales for Q3 2025 were $544 million, representing a 7.9% year-over-year increase, primarily driven by tariff-related pricing actions [4][14] - Adjusted operating margin for Q3 2025 was 20.5%, a 340 basis point increase compared to the same period last year [5][15] - Adjusted diluted EPS grew 34% year-over-year to $2.62, supported by growth, margin expansion, and pricing dynamics related to tariffs [5][15] - Operating cash flow was $12 million, and free cash flow was $2 million, showing slight improvement over Q2 but still impacted by higher tariff costs [6][16] Business Segment Data and Key Metrics Changes - Light-duty business net sales increased 9% year-over-year in Q3, driven by tariff-related pricing actions, with POS growth also up mid-single digits [6][14] - Heavy-duty business net sales grew 6% year-over-year, although margins remained flat due to lower manufacturing productivity [9][14] - Specialty vehicle segment saw relatively flat top-line growth year-over-year, impacted by weak consumer sentiment and lower manufacturing productivity [11][14] Market Data and Key Metrics Changes - The light-duty market continues to show positive macro trends, with vehicle miles traveled increasing year-over-year [7] - The heavy-duty market remains difficult to predict, with mixed signals across customer channels, but recent net sales growth is encouraging [10] - Specialty vehicle market shows strong UTV and ATV ridership, indicating potential for future spending increases as the economy stabilizes [12] Company Strategy and Development Direction - The company aims to reduce overall supply from China to 30% to 40% by the end of 2025, enhancing supplier diversification [15] - Focus on innovation and new product development remains a priority, with recent launches such as an electronic power steering rack for Ram trucks [8] - The company is strategically positioned to capitalize on growth opportunities in light-duty, heavy-duty, and specialty vehicle segments [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to drive long-term growth despite tariff and trade uncertainties, emphasizing the non-discretionary nature of their products [7][22] - The company expects Q4 to see a reduced gross margin percentage compared to Q3 due to tariff impacts on cost of goods sold [18] - Management remains optimistic about the overall performance in 2025, reaffirming net sales and EPS guidance ranges for the year [18][19] Other Important Information - The company has paused share repurchases due to tariff and trade uncertainties but maintains a strong liquidity position to fund strategic growth initiatives [16][17] - The balance sheet remains healthy, with net debt at $401 million and a net leverage ratio of 0.92 times adjusted EBITDA [17] Q&A Session Summary Question: Elasticity issues on the DIY side - Management noted solid growth in light-duty and POS, emphasizing the non-discretionary nature of their parts which typically perform well during inflationary periods [22][23] Question: Margin outlook with price increases - Management expects some margin compression in Q4 due to tariffs impacting COGS but remains confident in long-term margin targets [25] Question: Light-duty sales growth trajectory - Management indicated that the 9% sales growth in light-duty is consistent with previous quarters, driven by new products and favorable macro conditions [29][30] Question: Supply chain diversification - Management confirmed a diversified supply chain with approximately 30% to 40% reliance on China, improving resilience against tariff impacts [42][43] Question: M&A appetite and pipeline - Management expressed a strong interest in M&A opportunities across segments, particularly in light-duty and specialty vehicles, while noting a slowdown in actionable targets due to tariff uncertainties [50][52]