Dorman(US:DORM)2025-05-06 13:02Financial Data and Key Metrics Changes - Consolidated net sales for Q1 2025 grew 8% year over year to $508 million, driven by strong customer demand and new product development [7][19] - Adjusted operating margin for Q1 2025 was 17%, expanding 310 basis points compared to the same period last year [8][20] - Adjusted diluted EPS increased by 54% year over year to $2.20, supported by increased operating income and lower interest expenses [8][21] - Free cash flow for the quarter was $40 million, allowing the company to repay $20 million of debt and repurchase $12 million of common stock [8][27] Business Line Data and Key Metrics Changes - Light Duty segment saw net sales increase by 14% year over year, with operating margin rising to 19.9%, a 380 basis point increase [21][22] - Heavy Duty segment experienced a decline in net sales by 11% year over year, with operating margin turning slightly negative due to market pressures [23] - Specialty Vehicles segment's net sales declined by 9% year over year, with operating margin decreasing to 10.2% due to fixed cost deleverage [24][25] Market Data and Key Metrics Changes - Vehicle miles traveled increased year over year, contributing positively to the aftermarket [15] - Consumer spending softened during the quarter, which may pose a headwind moving forward [18] Company Strategy and Development Direction - The company has diversified its supply chain significantly since the tariffs on Chinese imports were enacted, with an estimated 30% to 40% of products sourced from China in 2025 [9][42] - The focus remains on optimizing supply chain strategy and maintaining strong relationships with suppliers to drive redundancy and flexibility [10][11] - The company aims to continue investing in new product development and expanding its dealer network to capture market share [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current economic uncertainty and highlighted the strength of the company's financial profile as a competitive advantage [14][32] - The company reaffirmed its 2025 net sales growth guidance of 3% to 5% and adjusted diluted EPS guidance of $7.55 to $7.85, excluding potential tariff impacts [29][30] Other Important Information - The company has a strong balance sheet with net debt reduced to $42 million and total liquidity increased to $660 million [28][29] - The management emphasized the importance of nondiscretionary parts in their portfolio, which historically perform well in uncertain economic times [12][13] Q&A Session Summary Question: Have you seen any of your bigger customers buying ahead to get ahead of tariffs? - Management indicated that there have been no significant indications of customers ordering ahead of tariffs at this point [38][39] Question: Can you remind us of some of the mitigation efforts in place regarding tariffs? - Management highlighted a diverse supply chain and a proven playbook for dealing with tariffs, including negotiating cost concessions and driving productivity initiatives [44][45] Question: What was the contribution of new products to growth in the quarter? - Management noted that new products significantly contributed to growth, allowing the company to outperform market growth [64] Question: How much of your product was sourced from China during the previous tariff situation? - Management disclosed that over 70% of products were sourced from China during the previous tariff situation, indicating a much more diversified supply chain now [60][61] Question: How does the tariff situation impact different segments? - Management refrained from disclosing specific impacts by segment but indicated a competitive advantage in light duty and modest impact in heavy duty [72][73]