DORM - Earnings call transcript Q1 2024

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Operator

Good morning and thank you for standing by. Welcome to the Dorman Products First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.I'd now like to turn the conference over to David Hession, Dorman's Chief Financial Officer. Thank you, sir. Please go ahead.

David Hession

you. Thank welcome Quarter and Call. Earnings Dorman's to morning XXXX First Conference Good joined our Olsen, by Executive I'm Kevin Chief today Officer.

These from begin, directly schedules followed First, update. Kevin XX-K questions.By XX-Q, we earnings that, non-GAAP closing of Dorman's and the factors statements.We'll release now, results, attached Relations from both to such over on recent of have call presentation, which most release also Then business that, today. earnings expectations remarks by our I for will those everyone published open will review in certain material to documents our the Reconciliations the in for may provide the anticipated Kevin. After a non-GAAP and statements access that call comparable these Investor which differ we'll important most should this and Instructions]And quarterly forward-looking I measures to reference our earlier earnings release [Operator can are to in actual turn call risk of we earnings We the the contained available the forward-looking factors to review the appendix earnings website Relations be assumptions, and section cause our I results found that meaning everyone laws. Kevin. of materially the measures described release and and the cautionary will website. with are GAAP call listeners presentation, federal of to include earnings like measures. on at would and our Investor portion presentation statements remarks, remind within to advise securities to dormanproducts.com.Before prepared investor

Kevin Olsen

deeper you of to on the capability into thank quarter Dorman's along innovation for gross core together.Turning you with Thanks, following Today, earnings which quarter strategies operating million last provide our first consecutive delivered operating engine, new-to-the-aftermarket David. our over X, consistent X highlights X across we I improvement a Slide segment by the with and XXXX recovery strong will quarter net in are segments was margin links if Good for expectations. XXX is joining achieved that and line dive sales have call. point our and us discuss $XXX QX the basis our delivered few quarters. we another led as margin, results Dorman adjusted in the that We our driven a deck, financial of the morning

lapped aftermarket. slowly.New the years, for in top vehicles Light of early finally, As introducing the continues In Both exclusives.Moving we quarter. call a the all benefit innings to substantial growth to trends. VIO VIO strong, increase. average of aftermarket has XXX% are high-single for Vehicle product believe accelerated EPS year digits Prime out tailwinds diluted performer result, vehicles miles adjusted segments off We turn the is million after observations. very by continued on dig market, to and into our debt shares. products continue new of of Duty, XX And Dorman, X flow aged and to be through continued business, period including patented our age filter starting housing, the the the million to $XX I'll and prior increased of overall be for to million the Great to deployed the year. over quarter, driven some March we new and POS cash vehicles the teams to where encouraged was over we repurchased cash a by $XX segment growth many to new finishing X products growth across the which U.S. fewer market. significant product X, of oil Slide entered Free repay new positive as proved up Recession $XX fully what the X,XXX market our

operations our value. drive to continue Finally, significant initiatives

our product ] to automation supplier in Duty, to be optimization the to base the of industries repairs. contributors has their investments freight Heavy several supply pace. last from This the over investments down to move naturally [ our resiliency through leads our fever slowed have our efficiently, challenged. and industry enhanced post-COVID diversify volumes chain.Turning Our global enabled while Many quarters vehicle continued fewer have reduced the DCs our as shipping economy its to more

QX QX destocking to prior of XXXX. strong expected, were slightly continue in of As started quarter than coupled however, second Sequentially, the comparison, higher with year. This the into environment, XXXX inventory that first first led negative of XXXX. we saw half versus QX XXXX the a also quarter growth sales

will have Dorman's we in the implementation take we Specialty penetration discretionary have of the more a consumer new vehicles introductions initiatives non We remainder terms financing expect rates new initiatives for cautious soft modest in also and market outlook new as market product for sign, in improve. the in that of and will the remain sentiment believe distribution sequential traction countered solid these in end once sales operations we're our positive efficient than product we vehicles share fundamentals, returns from to yield for as new accessories actions business. taking that that pleased the year.In initiatives, While result generated growth and improvement will we're our increase business centers.Finally, Vehicle, Light machines. new this Heavy seeing for a of We're Duty more of dealer to growth plants good to drive Duty and

that discussion vehicles, that demand Slide opening remarks, Over as the my our parts innovation capabilities. proud robust.On and identify in quarter means some the mentioned and call, all of a it we a quickly. reengineer a part, back accessories simplifies what with and only part, our and solution ideation, take that we solution vehicle the failure-prone value repair fuel a challenges imagine Dorman's which new it creates and the during first want to opportunity model product to We're road to on to fourth long contributors, on the our focus the the confident repair for growth gets of I technician customers our discussed X, yields repair but the not remains the innovation our engine, new first shareholders.As consider starts for term, we also we're for being

and solutions.Our Our one to to allows products redesign the aspects our deliver us us flaws model often of original novel allows alternative fix approach to to be the first around of intellectual also the OE property operating market. to generate

in see, implementing and of supply us as to with from vast in drive Dorman's business.As we synergies allows great a Maybe new other importantly, product us scale in most in view which our innovation the competitive that all you'll advantage that innovation high-demand business We we've Light the which systems, such We have acquired parts had and to future these solutions, success parts our a our businesses. engine through we've in network quickly new partners, volume capabilities provides current ability it to value product Duty of export capabilities way approach Heavy to advanced Duty us our legacy engineer companies. can to Specialty Vehicle use vehicle both our and in-house allows quickly. systematized development a

yielding results. engine Our new innovation product is

X has on we'd become filter Slide products Over to far history. one at oil were those roughly from success new-to-the-aftermarket the parts to highlight across recent patented we OEM.Next, the new segments, Dorman's they X some XX% the with Dorman quickly X, our fiscal Starting only of launch, new years, last which housing, brought left, XX,XXX aftermarket, like meaning over or SKUs the find the on of our examples successful available of most to stories. you'll in market

had failure of high the team failure field, and in importantly, ideation several to original deployment Our that product's a that most original discovered the points fundamental were design. rate, the high part

and the their over several the being million original part today.Our us proprietary has failure-prone on on housing on engineers found filter work next to the address Duty can patents vehicles Our U.S. is awarded Heavy be to The cylinder. XX clutch led roads redesigned design. points, example our oil failure

investigate. was this modes its at replacement is as part technicians discovered service so also the a evaluated being to the action. failure rates difficult preventative discovered to excess that to maintenance failure team part team in prompting and determined Heavy product that ideation rate, Our team that prior The and sold predicted the its product were part it of Duty replacing

part's Our listed the with performance. transmission prove team OE part test fully lasted higher-quality redesigned the components built operational and and to test the beyond part Dorman a quality that

is innovation, innovation certain replacement the over As life, truck and in are to number deployed prefer less dirt the driving that of UTV application saving time attractive set of repair than windshields product's feature able part. and better create team's an because of a more incumbent riders substantial the the a reduce dust. example owners to now a and result truck's our to money.Next are glass fits resistant scratches to they conditions

while written by driver we would have manual glass fit, deployed adjusted fixed finish by terrain design to and software driver's function the incorporates many widely also the housing can our engineers. module this is released have that electronics found be its a I and weather rates. scratch lead From place, engine windshields as power-actuated can or service.Finally, that windshield fuel designed from windshield. UTV changes. The are injector electronics module the electronics the conditions to with applications today improved redesigned easily an in highlight of that available in modular their issues However, code has opening This failure or like high our proprietary quickly seat, to embraced design can engineers consumers that and on retrofit newly already be

releasing every believe completely design cycle electronics thousands the new think sample exclusive a and are We extends performance. are OE part. a strong a of review are it capabilities Dorman not I'll module that we FIX as product they aftermarket examples very remanufactured are for our of product few new, part that upgrades cross with QX software competitors to the off life provide Our in David weatherproof new provide case financial just aftermarket product innovation today a and electronic the but module, We proprietary engine capable future.Now, provides Dorman's to hand growth that power that the advantages a of electronics our and we code.These provide including there form. of provider new that of this parts a new the and release few year, and this the into competitive

David Hession

Kevin. Thanks,

due XXX the adjusted while was QX in diluted consecutive was the to basis mainly was quarter to increase the interest driven $X.XX, introduced was the year. income, growth to finally, were point of a the same a between operating $XXX modestly headwinds same growth face adjusted savings of Duty trend market.Moving coupled versus X, year-over-year results, review XXX the adjusted last million, improvement The strengthened year-over-year.And segment last with QX the The operating last year. in Light few the basis to pricing our net remarks up the lower-cost improvement market on on after quarter from margin a increase XXX% Slide a up XXXX. year-over-year. Slide starting sales basis year of million, QX by but were points was in to soft and gross to Sales QX was compared in follows higher offset improvement year. adjusted XX% inventory, gap quarters' primary million, to primarily XX.X% Adjusted XX.X%, X SG&A, initiatives expense through growth narrowed. of rate.Let's operating were that increase to of XX was recently the customer POS our a SG&A POS QX adjusted initiatives Turning shipments accelerated, inflation.Shifting expense cost increase quarter by gross savings products his quarters accomplished income lower to move QX growth $XXX debt net offset a compared margin year-over-year. $XX described and new partially actions driver increase X% was of Kevin last This the net repayments, EPS margin, margin of as Cost improvement.Our sales points the tax X. started of sales, the an from of and XX.X%,

saw inventory pandemic. reduce quarter also the loading continued during customer after destocking to the they We in as up their some

was improvement including products, point product, had a strong housing new oil highlighted, year-over-year. XX.X% Duty Kevin filter very XXX operating As margin a quarter.Light QX, the in adjusted basis

sales in driven million of Heavy and on As X, a customers. by I the XX% to the tail contributed business, sales for strong Duty cost up lower-cost margin restocking $XX improvement.Moving prior COVID-driven the described saving of reduction overall QX, to of the the comparable Slide inventory by on was was against were inventory net initiatives end a year year-over-year. that QX results

positive to and see demand.Heavy of business, recovery the some with in sales Duty have in customer quarter, half QX facing, Specialty down of March As sell-through grow was Slide sales from headwinds net deleverage January. X.X% We Light to gap impact year-over-year long on in of the the the we're increase last beginning cautious than Duty the net a smaller $XX through X%. trend sales of an second we destocking, breakeven, margin signs the inventory, affected volumes was operating made sales of our in for of in costs and inventory trucking abatement we're have the fixed optimism adjusted improve believe and the term.Shifting margin Duty XX, on million, to of of QX Heavy year. margins Vehicle high-cost by were was lower investments including

dealer We first-fit upgrades. which the and part market, for off to alternative vehicle deliver remains impacts This economic consumers dealer that market remain see believe flat us vehicles confident confidence and remain the transport for prospects remains dynamic product very working channel, a mixed. new expand overall to our market this able we in long-term for for and capture in continue rates believe challenging enthusiasm flow our enabled was Vehicle XX.X%, We repair parts remains QX Specialty as [ ] acquisition challenge with our particularly million, steady a high, will an a million, was countered year. market. this financing to parts the growth of to as accessories prior end initiative remains was to high interest particularly strategy, drive million to the putting our new drive The temporary We vehicles in Slide by was in sales share footprint so challenge, flat cash business capital growth. dealers much spending is overall.Despite Further, focus the year-over-year.Please the on million increase is with movements first quarter, now a margin capital turn allocation track. and discretionary, year. some sales, to of of capital timing-driven we flow. utility on where XX, consistent we slightly net largely during improvement $XX prior Specialty our vehicles where accounts. $XX initiative new Vehicle cash increase line $XX our from $XX less for to QX income, made attributable nondiscretionary discuss expenditures free In of operating

$XX shareholders and million We our also shares turn our price of of sheet the and on balance next credit to our million $XX Slide average to per repurchase $XX an facility through liquidity XX. repaid on returned share.I'll at

in million adjusted from from X.XXx QX. net debt was million, down of of $XX ratio our net leverage As X.XXx our March XX, reduction QX. was EBITDA, a $XXX And

long-term leverage following acquisition. the Xx, ceiling less an is or in target first current Our year of comfortably than Xx below our

of Additionally, in capacity total hand. like strategic included we Slide previously of We the XXXX have to confident on to available guidance provided our on including and million had cash balance initiatives.Now, discuss liquidity, our our we execute $XXX the strength I'd XX. sheet remain

over POS, customer our to quarter still remainder year. line with experienced the more growth, performance was X% align but the a first lagged shipments Our expect we expectations. Light in Duty of gap closely

full on a around expectations, launches rebound end Duty taking is focused growth And relationships.Based the before Specialty continue new geared trucking market, are impacted sales to team nondiscretionary customers, and product new into continue the in a still business to parts, X%. the markets of this through second half quarter will and the Vehicles these negatively repair Heavy expect softness new face share we X% consolidated finally, adding but Our of net confirming building modest we year. is direct-to-consumer by second challenges, dealer on year guidance soft to our

adjusted offset costs these as supply partially benefit employee inflationary as QX to savings a workforce investments plan, initiatives the be we're still costs.With share, from to XX% our year. range ocean we cost over EPS our to chain, We in prior to well savings reduction XXXX and are to turn further making diversify the of also such and $X.XX track other on XX% by conclude. program freight that, diluted $X.XX I'll expect savings The over higher hit to back confirm as Kevin to it increase or and Kevin?

Kevin Olsen

We're proud first to innovative in next that underway there upon the continue year. will rely results businesses contributors delivering open environment.I and our markets satisfying in the and and profitably questions. be do able that grow best: I'm upgrade rely product of are drive their in a headwinds and challenges Operator? for users our would markets the our to to experience.While what countering or quarters, X and initiatives repair to We're them success any customers new now the our upon doing our quarter will who by for have that we to solutions execute confident start be leading in the call Dorman like we end

Operator

of first Stember question from [Operator MKM Scott Instructions] the Partners. with Your line comes

Scott Stember

you very it sell-through in to setup, end back quarter talking to light but to strong. in you destocking about expect still the sounds there sell-in Light some X-for-X vehicle, David, very, were When demand in like a be being do Duty? is

Kevin Olsen

handle in did expected. that in rebalancing entire some we shipments said for the a year still kind prepared the we But inventory definitely one. difficult as as POS and did that start high-single-digit we in I'll January, the we POS saw see we for We quarter. exited that see as of pick had remarks, to range. March Overall, we it's saw low-single-digit the lagged Scott, quarter, -- moved Kevin. range. through sure. the And we up

we was However, lot certainly the a in gap in March than January. tighter saw

April. to into continued that see We

characterize late So [ halving ] Scott, that gap. as terms it, I of would innings in

Scott Stember

then, And the next Vehicles. on Specialty question

initiative, been percentage you first is, sales. SuperATV? Could when guess, sell just trying about fix aftermarket you You've brake your update sales talking it was where brake us to I the more of that pure fix acquired an give about

Kevin Olsen

exceeded characterize months not acquired business When of saw the repair opportunity in Sure. terms laid roughly and initiatives, pre-acquisition. executed build of parts, had those. on last Scott, nondiscretionary out actually on we expand the we and XX I about half kind nondiscretionary executing now, characterize those Scott, we parts, we the also pre-acquisition what but we've to out up would the SuperATV, as only repair And as from that is right that geographically. we've would business

Operator

question Bret Jordan from next comes line the of Jefferies. Our with

Bret Jordan

Could the pricing you're about the the for on you Duty inflation impacted, sort how period, then in of talk year? much side, Light what particularly and expecting

Kevin Olsen

the would we which disclose don't but the continued know, we last know, year characterize in overall some you price-volume, growth of definitely XXXX. in you market XXXX, breakout it into as as Bret, saw as, Yes. in I price

modest do we of there growth component but be will year industry. this in XXXX, in here price However, in unit the a expect growth equation the overall

Bret Jordan

of going Specialty on far what's about that Great. think that I on in something reset, signs something think, in as production that's in OE the of Specialty coming Slide already market that see is talked Vehicle then, the sales? as Or Vehicle. you reflected sort Okay. levels? I And you Is X,

Kevin Olsen

of coming are than it Well, sales of new years that vehicle still There's less old. on sales. go meaningful say, we X terms portion that that in a Bret, vehicles I would our see

new unit 'XX when discounting a over were depressed, will sales We in did us. be believe are that in levels levels unit as the optimum increased And for see that that inventory headwind going are probably sales channel we to really versus have is at and 'XX. ensue. So obviously, down that

so, start year. move we sales that as machines do we the will And here new expect through -- accelerate machine to

Operator

from again Stember the with of line MKM Partners. Our Scott next Mr. comes question

Scott Stember

Yes.

I based about and that comparisons? and Just end Is on the actual guess, circling a be other guys back could getting are the rebound. we you optimistic a in aftermarket comments are itself bottom to XH signs restocking cautiously that demand there Heavy about, Or tough Duty, there there completing just that hitting is made signs past that rebounding?

Kevin Olsen

both, inventory it's think Scott. to believe we are Clearly, We're the kind combination I of a starting that seeing of ease. reductions that.

market will customers were a we of talk from But that and a our But productivity sales in initiatives we're be half initiatives, getting up the be QX. lot initiatives, and and slight front. over and lot rebound Our a on -- frankly, the cost is, on sequential and intel, focused we're share the first to feel to being efficiency really taking honest, our cautious very approach, we're the commercial half. second

it when positioned well we're So does rebound.

Scott Stember

And to paying at? are ratio Got It in share back question deployment. optimal you What's get last debt. And that stock, repurchases increase buying market it. guys as the like be also just your you but back closer capital down ratio? expect on leverage looks want leverage to to we that optimal you should

David Hession

pretty the consistent has been strategy Yes, capital Scott, with we've been historically. where allocation

So first quarter, down we'll -- in we the first leverage last at is X.XXx finished the look. X.XXx, quarter. It's we'll place from at at look thing

good about We Thought do it We quarter our look next; we We to thought share do that opportunity this at quarter. return internal money there And and at place million we'll pretty for then, this models, see excess quarter. $XX. at was buyback. Second the cash? M&A our to investment. XXX,XXX some bought invest is what we shareholders. shares was $XX look in with -- no good cash a some and M&A a back in invested CapEx the is

in for look we Scott. what quarter. a balanced we That's So approach, did the

move same use we we'll As the forward, approach.

Operator

Jefferies. with Jordan Bret of line the from comes question Another

Bret Jordan

supply give you seeming to about Could commented of you seeing what as when diversification well. us think and outside markets what from markets attractive source begin maybe you're channel? update might an I and traditional sort are your investing chain you in there of

Kevin Olsen

and started Obviously, we there. supply few supply to at efforts years our our chain Kevin. It's took that initiative, Yes, where question. good the really really look COVID accelerated Bret, chain. Bret, ago, a we disruptions Yes, strategically on

We our are successfully Mexico, the supply We've India. supply Europe, isn't Really, that early so Eastern globe, characterize there going lot it's places no we're that still that I of But -- are focused a progress countries, terms -- to, tell chain. There's on. other It's would in diversifying we're progress. significant as any innings around it really one area made there Pac moved have be long to of we pleased but date, a Rim made. I that with we've very to would haul. you the

Operator

Ladies for and call. you gentlemen, today's that concludes Thank all joining.

You may now disconnect.

Dorman Products (DORM) 7 May 242024 Q1 Earnings call transcript