Good morning, and thank you for standing by. Welcome to the Dorman Products' Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I'd now like to turn the conference over to Alex Whitelam, Vice President of Investor Relations. Thank you, sir. Please go ahead.

Thank you. Good morning, everyone. Welcome to Dorman's Second Quarter 2025 Earnings Conference Call. I'm joined by Kevin Olsen, Dorman's Chief Executive Officer; and David Hession, Dorman's Chief Financial Officer. Kevin will provide a quick overview of our recent performance, share our views across the business and provide our updated guidance. Then David will review the quarterly results and Kevin will then provide closing remarks before opening the call for questions. By now, everyone should have access to our earnings release and earnings call presentation, which are available on the Investor Relations portion of our website at dormanproducts.com. Before we begin, I'd like to remind everyone that our prepared remarks, earnings release and investor presentation include forward-looking statements within the meaning of federal securities laws. We advise listeners to review the risk factors and cautionary statements in our most recent 10-Q, 10-K and earnings release for important material assumptions, expectations and factors that may cause actual results to differ materially from those anticipated and described in such forward-looking statements. We'll also reference certain non-GAAP measures. Reconciliations of these non- GAAP measures to the most directly comparable GAAP measures are contained in the schedules attached to our earnings release and in the appendix to this earnings call presentation, both of which can be found on the Investor Relations section of Dorman's website. Finally, during the Q&A portion of today's call, we ask that participants limit themselves to 1 question with 1 follow-up and to rejoin the queue if they have additional questions. And with that, I'll turn the call over to Kevin.

Thanks, Alex. Good morning, and thank you for joining our second quarter 2025 earnings call. As Alex mentioned, I'll start with a high-level review of the results, along with observations within each of our segments, and then provide our updated guidance for 2025. Turning to Slide 3. I would like to briefly discuss our recent performance. David will provide more details, but we had another outstanding quarter. the top and bottom line results that exceeded our expectations. Consolidated net sales for the second quarter grew 8% year-over-year to $541 million. Strong volume growth from increased customer demand, especially within the light-duty business led our top line growth. We also saw positive signs in our heavy-duty business with slight year-over-year growth resulting from new business wins. Weak consumer sentiment persisted through the second quarter, impacting our specialty vehicle business, but the team continues to do an excellent job managing through this downturn and positioning the business for future sales growth. We also delivered solid margin expansion in the quarter. Adjusted operating margin for Q2 2025 was 16.3%, 70 basis point increase over last year's second quarter. Light Duty business was also the primary driver behind this margin improvement, largely due to strong demand in the quarter as well as ongoing supply diversification, productivity and automation initiatives. The net sales growth and margin expansion we achieved resulted in a 23% year-over-year increase in adjusted diluted EPS, which was $2.06 for the quarter. And finally, operating cash flow in Q2 was $9 million, which was impacted by higher tariff costs and additional investments in inventory to support demand. David will discuss this in more detail shortly. So overall, we're pleased with our results in the second quarter and through the first half of 2025 that's helped shape our expectations for continued momentum through…

Thanks, Kevin. Let me kick off with our results for the second quarter on Slide 6. Consolidated net sales in the second quarter were $541 million, up 8% year-over-year. As Kevin mentioned, our net sales growth was driven by solid customer demand in our light duty business, fueled by continuing positive macro trends and the strength of new products. Adjusted gross margin for the quarter was 40.6%, a 100 basis point increase compared to last year's second quarter. This margin expansion was a result of higher sales and a favorable mix of new products along with our cost savings across the enterprise, driven by our supplier diversification, productivity and automation initiatives. Adjusted SG&A expense as a percentage of net sales was 24.3%, up 30 basis points compared to the same period last year. Adjusted operating income was $88 million for the second quarter, up 12% compared to the second quarter of 2024. Adjusted operating margin expanded 70 basis points to 16.3%, largely from the gross margin improvement I just discussed. Finally, adjusted diluted EPS in the second quarter was $2.06 up 23% compared to last year's second quarter. In addition to our operating income expansion, lower debt, a slightly favorable tax rate and share count reduction from share repurchases over the last 12 months have all positively contributed to our adjusted diluted EPS growth. Next, let me provide updates on each of our business segments, starting with Light duty on Slide 7. Our Light Duty business had another strong quarter with net sales increasing 10% year-over-year in Q2. The growth was driven by strong customer demand, especially for our new products with positive macro trends continuing through the second quarter. During the quarter, we delivered on certain customer programs, which resulted in higher shipment growth in the quarter compared to…

Thanks, David. I'll finish up on Slide 12 before we move into Q&A. Just to reiterate what has already been said. We had a strong second quarter, and we're pleased with our performance through the first half of the year. While uncertainty exists, we believe our business is well positioned to deliver significant growth in 2025 and we're excited for what lies ahead. With a more diversified supply base, strong relationships with our customers and end users, a leading product portfolio and a strong financial profile, we feel as though Dorman has never been better positioned for the future. We'll continue focusing on what we can control and driving long-term growth. With that, I would now like to open up the call for questions. Operator?

[Operator Instructions] Your first question comes from Scott Stember with ROTH Capital Partners.

This is Jack on for Scott. I wanted to ask about the heavy duty segment, specifically about what are the incremental margins for every dollar of sales recovery as I see it, it turned positive this quarter? And also, like what are normalized heavy-duty margins? When do you kind of expect this to get back to the normalized level?

Thanks, Jack. It's Kevin. Great question. I believe we've talked a little bit about this in the past, but in our heavy-duty business, we're weighted more on the manufacturing side versus being much more asset light in the other 2 segments. So when volume is challenged in heavy-duty, we do face more absorption issues. So when we do have growth, like you mentioned in the quarter, we will leverage that very well. When we get back to kind of normalized levels, we expect this business to be a mid teen operating profit business. And we have -- before the downturn, we were demonstrating those levels.

Great. And then just on tariffs, what do you see kind of the impact by segment, if you can break that out? I guess, notably in specialty and heavy duty, has that been more difficult to get prices -- price increases through more than light duty?

Let me just -- it's Kevin again, Jack. I'll just characterize the tariff impact by the segments, we're not disclosing the specific impacts by segment. I would say that on the light-duty side, we have a very diversified supply chain there. So we believe we have less exposure than the overall aftermarket in general. So we think compared to a comp set, we're at a competitive advantage because of that. Heavy- duty really is a very modest impact from tariffs. So when we kind of look at around the industry and who we compare to, we believe we're very well positioned. And similar situation in Specialty Vehicles segment, we do have exposure to China, but we also have a large manufacturing footprint in Madison, Indiana. And when we look at that industry, it's very heavily weighted to China. So we think we're in a good competitive situation there as well.

Your next question comes from Bret Jordan with Jefferies.

Could you talk a little bit more about light duty, the customer POS sort of sell-in versus sell-out? I think you said it wasn't dramatically different, but was there any bias to buy inventory ahead of price increases?

So overall, Bret, POS in the quarter, we did have a gap in terms of sell-in and sell-out. Sell-out or POS, as we talked about in the past was actually low single digit in the quarter. But there was a lot of nuance to that. We had a very difficult comp as we look at last year, it was very strong in the second quarter last year. But when you look at it for kind of a sequential basis, POS was very similar in dollars to where it's been the last few quarters. When you adjust for that comp issue, Bret, POS was more in line with the sell-in growth, which has been obviously very strong. I mentioned inventory, as you know, we do receive customer inventory data, and it really tells us it's in line with historical levels, particularly when you look at the inventory turns so we haven't seen any major changes there. We haven't seen any significant buy ahead of the tariffs so far.

Okay. Great. And then I think you commented on new to the aftermarket product launch. I mean talk about sort of the [Technical Difficulty] there?

We lost you, Bret. I missed that question.

The cadence [Technical Difficulty] electronics.

Yes. Bret, still, could you try repeating that again? You're not coming through.

Okay. The Starlink systems don't work as well. We should talk...

Yes. I guess the...

New to the aftermarket -- can you hear me okay?

A little bit. Yes, go ahead, try it again.

The pipeline of new to the aftermarket, the OE fixed product and complex electronics.

Yes. All right. Great question. When we look ahead, the funnel of new products is very robust. It's as strong as we've seen it. And when we look at the composition of that funnel, obviously, as we've talked many times in the past, the composition of that funnel is becoming more and more complex, a lot more complex electronic components, which for us, we obviously like to see -- we believe that as a significant competitive advantage for us. So it remains a big part of our strategy to go after complex electronic components.

Your next question comes from Justin Ages with CJS Securities.

It's actually Jeremy on for Justin. Another solid quarter in margin growth for light duty. I know you guys touched on it briefly, but can you elaborate a little more on some of the initiatives that continue to drive this margin growth?

Yes, it's David. Yes, the margin growth for the business has been a strong focus over the last several years, and we've had great progress, the drivers of it are supply chain diversification. It's diversifying our supply chain, productivity in our distribution centers and across the organization as well as automation effort. Pretty consistent with what we've been talking about the last several quarters and we continue to drive those solid results.

Yes. I'll also add that new product has been a significant driver. It's a huge focus for us, particularly new to the aftermarket parts, which again are only available through Dorman and the OE dealer network. Those typically are our highest margin products when we bring them to market, or it can be OE fix where we're actually designing out the original flaw in the OE part. So that continued focus and the continued growth of the sweet spot, which is the 8 -- 7- to 14-year-old vehicle has continued to be able to drive accretive margins for us.

I appreciate it. And then switching gears a little, would you just talk and give us some more detail on how you guys are thinking about the capital allocation strategy?

Yes, it's a great question. So the capital allocation strategy is consistent with what it's been over the last several years. The first thing we do is look to manage our debt, our leverage targets up against our internal target of 2x, 3x in the first year following an acquisition. So after we look at that, the first place we'll look at internal investment where we get our greatest returns. Second is strategic and M&A mergers and acquisitions. And then third, opportunistically, we look to get shares -- to buy back shares and get capital back to our shareholders. So like I said, that's the allocation strategy pretty consistent with what it's been.

Ladies and gentlemen, we have reached the end of the question-and-answer session. This will conclude today's call. Thank you all for joining. You may now disconnect.