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Dorman Products, Inc. (DORM) Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered broad-based outperformance: net sales $507.7M (+8.3% YoY) and GAAP diluted EPS $1.87 (+78% YoY); adjusted diluted EPS $2.02 (+54% YoY). Margin expansion was driven by Light Duty mix, supplier diversification, and productivity/automation initiatives .
  • Against S&P Global consensus, Dorman posted a significant beat: revenue $507.7M vs $483.1M* and adjusted/primary EPS $2.02 vs $1.46*; EBITDA also exceeded consensus ($108.5M* vs $81.0M*) .
  • Guidance reaffirmed for 2025 (ex-tariffs): net sales growth +3%–5%, GAAP EPS $7.00–$7.30, adjusted EPS $7.55–$7.85, tax rate ~24% . Liquidity of ~$660M and net leverage ~1.01x provide capacity to absorb tariff-related inventory cost increases .
  • Stock-relevant narrative: strong Light Duty execution and margin gains; tariff fluidity is the primary overhang. Management emphasized nondiscretionary parts and diversified sourcing (~30%–40% China, ~30% U.S.), plus pricing and cost levers to offset tariff impacts, with FIFO delaying P&L effects by ~6 months .

What Went Well and What Went Wrong

  • What Went Well

    • Light Duty strength: net sales +14% YoY to $408.8M; segment margin +380 bps to 19.9% on new product mix, automation, productivity gains, and volume leverage .
    • Enterprise margin expansion: gross margin 40.9% (+220 bps YoY); adjusted operating margin 17% (+310 bps YoY) .
    • Cash generation and capital allocation: $51.2M cash from operations; free cash flow ~$40M; $20M debt repayment and $12M share repurchases in the quarter .
    • Management quote: “We started the year with outstanding performance, including solid top- and bottom-line growth in the first quarter.”
    • Strategic positioning: “We have diversified our supply chain… invested in innovation and strong brands… strengthened our balance sheet and liquidity position.”
    • Resiliency emphasis: “The majority of our product portfolio is nondiscretionary in nature… has historically done well in uncertain economic times.”

  • What Went Wrong

    • Heavy Duty softness persisted: net sales -11% YoY to $51.7M; segment margin slightly negative (-0.3%) given fixed-cost manufacturing footprint and market pressures in freight/trucking .
    • Specialty Vehicle deceleration: net sales -9% YoY to $47.2M; margin fell to 10.2% on fixed-cost deleverage and softer consumer spending post-holidays .
    • Tariff uncertainty: management flagged fluidity of Section 232 auto parts tariffs; no customer “buy-ahead” observed yet; FIFO delays tariff impact to results by ~6 months, but magnitude/timing remain uncertain .
    • Mixed segment exposures: Specialty Vehicle industry broadly indexed to China; while Dorman has U.S. manufacturing (Madison, IN), consumer sentiment is a potential headwind .
    • Potential margin pressure if tariff pass-through not fully realized; management expects to offset via supplier negotiations, productivity, and pricing, but competitive dynamics may vary by category .

Financial Results

Quarterly Summary vs Prior Periods

MetricQ3 2024Q4 2024Q1 2025
Net Sales ($USD Millions)$503.8 $533.8 $507.7
Gross Margin %40.5% 41.5% 40.9%
Operating Margin % (Income from Operations / Sales)15.7% 16.3% 15.8%
Diluted EPS (GAAP)$1.80 $1.77 $1.87
Adjusted Diluted EPS (Non-GAAP)$1.96 $2.20 $2.02

Year-over-Year Growth by Quarter

MetricQ3 2024Q4 2024Q1 2025
Net Sales YoY Growth %+3.2% +8.0% +8.3%
Diluted EPS YoY Growth %+41% +11% +78%

Q1 2025 vs S&P Global Consensus

MetricConsensus*Actual
Revenue ($USD)$483.1M*$507.7M
Primary EPS ($USD)$1.46*$2.02 (Adjusted diluted EPS)
EBITDA ($USD)$81.0M*$108.5M*

Values with asterisks retrieved from S&P Global.

Segment Breakdown (Q1 2025)

SegmentNet Sales ($USD Millions)Net Sales YoY %Segment Profit MarginMargin Change (bps)
Light Duty$408.8 +14% 19.9% +380 bps
Heavy Duty$51.7 -11% -0.3% -30 bps
Specialty Vehicle$47.2 -9% 10.2% -370 bps

KPIs

KPIQ1 2025
Cash from Operations ($USD Millions)$51.2
Capital Expenditures ($USD Millions)$11.0
Free Cash Flow ($USD Millions)~$40.0
Net Debt ($USD Millions)~$402
Net Leverage (x Adjusted EBITDA)~1.01x
Total Liquidity ($USD Millions)~$660
Weighted Avg Diluted Shares (Millions)30.81

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales Growth vs 2024FY 2025+3% – +5% +3% – +5% Maintained
Diluted EPS (GAAP)FY 2025$7.00 – $7.30 $7.00 – $7.30 Maintained
Adjusted Diluted EPSFY 2025$7.55 – $7.85 $7.55 – $7.85 Maintained
Tax Rate EstimateFY 202524% 24% Maintained

Note: Guidance excludes any impact from U.S. tariffs enacted or proposed in 2025 and potential retaliatory measures; also excludes effects from future M&A, supply disruptions, significant inflation, interest rate changes, and share repurchases .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4)Current Period (Q1 2025)Trend
Supply chain diversification & tariffsFocus on operational excellence; no tariff emphasis in Q3/Q4 releases Explicit tariff discussion; diversified sourcing (~30%–40% China, ~30% U.S.), FIFO delays impact ~6 months; planning pricing, supplier negotiations, productivity offsets Elevated regulatory focus; proactive mitigation
Light Duty demand & product innovationMid-single-digit growth; margin gains; innovation strategy highlighted Strong demand; POS high-single-digit; shipments low-teens; margin +380 bps on mix and automation/productivity Strengthening; continued margin expansion
Heavy Duty marketQ3: net sales -5%, margin +150 bps; Q4: net sales -8%, margin down Net sales -11%; slight negative margin; tariffs add uncertainty Softness persists; cautious outlook
Specialty Vehicle sentimentQ3: flat sales, margin up; Q4: +5% sales; margin moderated Sales -9%; margin 10.2%; consumer spending softened post-holidays Near-term headwind; focus on nondiscretionary parts and dealers
Automation/productivity“Operational excellence initiatives” noted Cost savings from automation/productivity supporting gross margin and operating margin Ongoing execution; margin tailwind
Capital allocation & balance sheetStrong cash generation; debt reduction; new $500M buyback effective 2025–2027 $20M debt repaid; $12M buybacks; net leverage ~1.01x; liquidity ~$660M Flexibility to manage tariff costs
Tax rate24% modeling rate Expect ~24% effective tax rate; Q1 benefited from timing difference Stable modeling assumption

Management Commentary

  • “We started the year with outstanding performance, including solid top- and bottom-line growth in the first quarter.” — Kevin Olsen, CEO
  • “Adjusted operating margin for Q1 2025 was 17%, expanding 310 basis points compared to the same period last year.” — Prepared remarks
  • “We estimate that approximately 30% to 40% will be sourced from partners in China, approximately 30% in the U.S. and the remainder from various regions around the world.” — Sourcing mix
  • “The majority of our product portfolio is nondiscretionary in nature… [and] has historically done well in uncertain economic times.” — Portfolio resilience
  • “Given our performance in the first quarter… we are reaffirming our 2025 net sales growth guidance of 3% to 5% and adjusted diluted EPS guidance range of $7.55 to $7.85” (ex-tariffs). — Guidance stance

Q&A Highlights

  • Customer “buy-ahead” ahead of tariffs: none observed to date; sell-in exceeded POS due to easier comp timing; POS high-single-digit driven by new products .
  • Tariff mechanics and timing: FIFO inventory accounting implies ~6 months lag before tariff costs flow through P&L; mitigation via supplier concessions, productivity, and pricing .
  • Light Duty margin drivers: predominantly product mix (new-to-aftermarket wins like oil filter housings) and favorable vehicle age cohort (7–14 years) .
  • Competitive exposure: Dorman’s diversified footprint implies less exposure to high-tariff regions versus hard parts market overall; category-specific advantages may emerge depending on tariff outcomes .
  • Pricing dynamics: management expects to offset net impact via pricing and strategic positioning with large retail partners; nondiscretionary nature supports pass-through .
  • Interest expense: ~$7.4M in Q1; CFO indicated current quarter run-rate is reasonable for modeling given deleveraging progress .
  • Segment sourcing exposure: Specialty Vehicle industry broadly indexed to China; Dorman also has U.S. manufacturing (Madison, IN); light duty viewed as competitively advantaged .
  • Tariff exemptions/clawbacks: company continuing to evaluate; aftermarket appears subject to HTS-code-driven tariffs with OE-focused exemptions .

Estimates Context

  • Q1 2025 beats vs S&P Global consensus: revenue $507.7M vs $483.1M*; adjusted/primary EPS $2.02 vs $1.46*; EBITDA $108.5M* vs $81.0M* .
  • Implications: estimate models likely need higher gross margin trajectory and Light Duty contribution assumptions given Q1 mix and cost savings; tariff pass-through timing (FIFO ~6 months) should be incorporated with pricing offsets and supplier negotiations as management indicated .
  • FY 2025 consensus baseline remains below company-adjusted EPS guidance ($7.55–$7.85 vs $8.82* Primary EPS), but definition alignment matters; consensus “Primary EPS” generally reflects the company’s primary/adjusted EPS basis. Maintain awareness of tariff exclusion in company guidance .

Values with asterisks retrieved from S&P Global.

S&P Global Consensus Snapshot*

MetricQ1 2025Q2 2025FY 2025
Primary EPS Consensus Mean ($)1.46*1.80*8.82*
Revenue Consensus Mean ($USD)483.1M*517.1M*2.166B*
EBITDA Consensus Mean ($USD)81.0M*94.7M*427.4M*
# of Estimates (EPS/Revenue)4/4*4/4*8/8*

Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

  • Light Duty momentum and margin expansion are the core earnings drivers; product innovation and automation/productivity remain durable tailwinds .
  • Tariff risk is manageable near term due to FIFO lag and diversified sourcing; expect a 2H timing of cost impacts with pricing, supplier concessions, and productivity offsets as key levers .
  • Balance sheet and liquidity provide strategic flexibility to absorb higher inventory costs and sustain capital allocation (deleveraging + opportunistic buybacks) .
  • Heavy Duty remains cyclical and tariff-sensitive; Specialty Vehicle faces softer consumer demand—portfolio actions and nondiscretionary parts focus are prudent .
  • Trading setup: Q1 beats and guidance reaffirmation support near-term sentiment; tariff headlines are the primary volatility catalyst—watch for clarity on scope/exemptions and pass-through execution .
  • Estimate path: upward revisions to revenue/EPS likely as models reflect margin gains and Light Duty performance; incorporate management’s ~24% tax rate and lower interest expense run-rate .
  • Monitor leadership and execution continuity; Specialty Vehicle leadership transition announced in May and CFO retirement announced in June (succession process underway) .

Appendix: Source Documents

  • Q1 2025 8-K and Press Release (Exhibit 99.1): financials, segment detail, guidance .
  • Q1 2025 Earnings Call Transcript: prepared remarks and Q&A detail .
  • Prior quarters for trend analysis: Q4 2024 8-K and Q3 2024 8-K .
  • Other relevant press releases (Q1 2025 window): new product releases and Specialty Vehicle leadership appointment .
  • S&P Global consensus data: EPS, revenue, EBITDA; quarterly and FY estimates (values marked with asterisks).

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