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    DORM
    Earnings call· Jun 2026(Q2 FY26)

    Dorman Products Q2 FY26 earnings call DORM

    Aug 4, 2026 Source

    Executive summary

    Dorman Products Q2 FY26 — Record Earnings Driven by Tariff Refunds and Strong Cash Flow

    Dorman Products delivered record Q2 FY26 earnings, significantly benefiting from IEEPA tariff refunds which also enabled targeted price reductions. While full-year sales guidance was lowered due to these pricing actions and first-half performance, the company demonstrated robust cash flow and strengthened its balance sheet. Management highlighted the stability of the tariff environment and continued focus on innovation and strategic investments for long-term growth.

    Highlights

    5

    • Record adjusted diluted EPS of $3.08, up 50% year-over-year, significantly boosted by IEEPA tariff refunds.

    • Strong operating cash flow of $153 million and free cash flow of $144 million, with $62 million comparable free cash flow excluding refunds.

    • Light Duty segment operating margin expanded 620 basis points to 24.7%, driven by refund dynamics.

    • Successful debt refinancing, expanding revolving credit facility to $800 million and extending maturity to 2031, resulting in $931 million total liquidity.

    • Net sales of $545 million, a record for the second quarter, up approximately 1% year-over-year.

    Concerns

    5

    • Full-year net sales growth guidance reduced from 7-9% to 3-5% due to first-half performance and targeted pricing actions.

    • Light Duty segment volume was lower in the quarter, comparing against a strong 10% year-over-year growth in Q2 FY25.

    • Heavy Duty segment continues to face challenging market conditions with no meaningful trucking mileage or tonnage growth expected in 2026.

    • Specialty Vehicles net sales were down 1% year-over-year due to slightly softer customer demand and sensitive consumer sentiment.

    • Modest pressure continued on DIY-focused and relatively discretionary categories within the Light Duty segment.

    Guidance & targets

    7
    CategoryTargetConfidence
    Full-year 2026 Net Sales Growth
    3% to 5%
    high materiality
    High
    Full-year 2026 Adjusted Diluted EPS
    $8.50 to $8.80
    high materiality
    High
    Full-year 2026 Comparable Adjusted Diluted EPS
    $8.20 to $8.50
    high materiality
    High
    Second Half 2026 Net Sales Growth
    mid-single-digit range
    medium materiality
    Medium
    Full-year 2026 Adjusted Operating Income Margin
    approximately 15.5% to 16.5%
    high materiality
    High
    Gross Margin Exit Rate
    approximately 40%
    medium materiality
    High
    Second Half 2026 Adjusted Diluted EPS
    $3.85 to $4.15
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Light Duty
    Net sales impacted by pricing actions and comparison against strong 10% YoY growth in Q2 FY25. Modest pressure on DIY-focused, discretionary categories, but portfolio skews to resilient DIFM customers. OE fix solution for Ford F-150 aluminum oil pan launched.
    Operating margin expansion: 620 bps YoYYear-to-date operating margin: 19.4%POS from top customers: mid-single-digit rangeAverage age of Light Duty vehicles: 12.9 years
    		$424Mflat—24.7%
    Heavy Duty
    Growth driven by full-year impact of last year's pricing actions and business wins in certain categories and channels. Commercialization and infrastructure investments create margin hurdle. Freight recession continues, no meaningful trucking mileage or tonnage growth expected in 2026. Leaning into OE dealers and product expansion above the frame.
    Comparable operating margin (ex-refund): 2.3%Comparable operating margin improvement: 150 bps on net sales leverage
    		$66Mapproximately 7%—4.2%
    Specialty Vehicles
    Slightly softer customer demand partially offset by pricing initiatives. Consumer sentiment sensitive to macroeconomic conditions (fuel prices, inflation). Expanding Super ATV's presence outside the United States. Market sees growth in both affluent cab models and entry-level models. Expanding portfolio for older models still in service.
    Comparable adjusted operating income margin (ex-refund): 17.8%Comparable adjusted operating income margin improvement: 50 bps YoY
    		$54Mdown 1%—26.1%

    Operational metrics

    14
    Share Repurchases Executed
    $47M
    Q2 FY26

    Deployed on opportunistic share repurchases.

    Remaining Share Repurchase Authorization
    $363M
    as of Q2 FY26 end

    Remaining authorization on share repurchase program.

    Revolving Credit Facility
    $800Mincreased from $600M
    as of Q2 FY26 end

    Amended credit agreement to increase and extend maturity.

    Senior Unsecured Notes
    $450M
    as of Q2 FY26 end

    Proceeds used to repay prior term loan.

    Net Debt
    $318M
    as of Q2 FY26 end

    Net debt position after debt refinancing.

    Total Liquidity
    $931M
    as of Q2 FY26 end

    Expanded liquidity position following debt refinancing.

    Net Leverage Ratio
    0.69x
    as of Q2 FY26 end

    Positions the company well for investments and M&A.

    Adjusted SG&A Expense as % of Net Sales
    23.8%down 50 bps YoY
    Q2 FY26

    Operational leverage in SG&A.

    Comparable Adjusted Diluted EPS (ex-IEEPA refund)
    $1.90
    Q2 FY26

    EPS excluding the one-time impact of the IEEPA refund.

    IEEPA Refund Contribution to Adjusted Diluted EPS
    $1.18
    Q2 FY26

    One-time impact representing recovery of IEEPA tariff costs recognized in Q4 2025 and Q1 2026.

    Average Age of Light Duty Vehicles
    12.9 years
    Q2 FY26

    Foundational driver of Light Duty aftermarket demand.

    Vehicle Miles Traveled
    increase
    Q2 FY26 and TTM

    Supports sustained demand for repair and replacement parts.

    Freight Market Outlook (Heavy Duty)
    no meaningful trucking mileage or tonnage growth
    2026

    Market conditions remain challenged despite freight rates beginning to rebound.

    Gross Margin (comparable, ex-refund)
    38%
    Q2 FY26

    Comparable gross margin excluding the refund benefit.

    Industry KPIs

    9
    MetricValueDetails
    EPS$3.08USD
    Revenue$545MUSD
    Gross margin46.1%%
    Sg a OPEX ratio23.8%% of net sales
    Operating margin22.3%%
    Operating income EBIT$122MUSD
    Cash investments balance$931MUSD
    Tariff impact mitigation$1.18USD
    Share buyback capital return$47MUSD

    Product announcements

    5
    ProductTypeDetails
    Aluminum Oil Panlaunch
    Hydrocarbon Injection Nozzlelaunch
    Fluid Reservoir Portfolio Expansionexpansion
    LED Headlight Assemblieslaunch
    Super ATV Vented Windshield for CFMoto Z10launch

    Risks & headwinds

    6
    Impact of targeted price reductionsH2 FY26

    Net sales growth guidance reduced from 7-9% to 3-5% for FY26

    Mitigation: Expected to drive volume growth from new business wins and new product launches; reflects pass-through of lower tariff costs.

    Lower volume in Light Duty segmentQ2 FY26

    Net sales flat YoY for Light Duty

    Mitigation: Comparing against strong 10% YoY growth in Q2 FY25; new business wins expected to drive increased volume in H2 FY26 and 2027.

    Modest pressure on DIY-focused, discretionary categoriesQ2 FY26

    Discussed, not quantified

    Mitigation: Smaller portion of overall portfolio; majority is nondiscretionary DIFM-focused; overall POS stable.

    Challenging market conditions in Heavy Duty segment (freight recession)FY26

    No meaningful trucking mileage or tonnage growth expected in 2026

    Mitigation: Focus on penetrating above-frame market, new product launches, and new channels (OE dealers).

    Softer customer demand and macroeconomic sensitivity in Specialty VehiclesQ2 FY26

    Net sales down 1% YoY for Specialty Vehicles

    Mitigation: Expanding Super ATV's international presence; expanding portfolio for older models; catering to diverse rider segments (high-end and entry-level).

    SG&A deleverage in second halfH2 FY26

    Likely to be a little bit of SG&A deleverage

    Mitigation: Not a meaningful change in dollar spend; dollars relatively consistent; will normalize in 2027.

    What to watch in Q3 FY26

    5

    Second Half 2026 Net Sales Growth (volume-driven)

    H2 FY26
    CurrentMid-single-digit range
    TargetAchieve mid-single-digit growth, primarily from volume

    Why it matters

    Verifies the effectiveness of new business wins and product launches in offsetting pricing reductions and driving volume.

    For net sales, we expect our second half growth rate to be in the mid-single-digit range compared to the same period in 2025. This growth will largely be volume driven from the new business wins that Kevin mentioned earlier.

    Q&A highlights

    6

    Clarification on whether price reductions are solely IEEPA-related, their duration, and implications for 2027 pricing.

    Kevin Olsen explained Dorman's consistent tariff pass-through philosophy. The IEEPA refund led to a lower overall tariff environment (Section 301 replacing stacking IEEPA), enabling targeted price reductions. These reductions are a one-time adjustment to reflect ongoing tariff costs, and the financial profile for 2027 is expected to be normalized. Unit growth in H2 FY26 and 2027 will be driven by new business wins and product launches.

    “Our tariff philosophy has always been to treat this as a pass-through cost. Whether that's going up, we mitigate what we can, we pass along the balance. And vice versa, if tariff costs come down, we pass those back to our customers.”

    asked by Scott Stember · answered by Kevin Olsen

    2 min read5 chapters

    Detailed Narrative

    01

    Tariff Landscape and Pricing Strategy

    Dorman experienced a significant positive impact from IEEPA tariff refunds in Q2 FY26, which contributed to record earnings. Following these developments, the company believes the tariff landscape has stabilized, moving from a 'stacking' IEEPA tariff to a more familiar Section 301 tariff environment. This stability allowed Dorman to initiate targeted price reductions in Q2, which are expected to continue through the back half of the year, reflecting the pass-through philosophy for tariff costs.

    02

    Light Duty Segment Dynamics

    The Light Duty segment's net sales were flat year-over-year at $424 million, primarily due to the new pricing actions and comparison against a strong 10% growth in Q2 FY25. Despite this, POS from top customers remained in the mid-single-digit range. The segment saw modest pressure on DIY-focused, discretionary categories, but its portfolio is largely nondiscretionary, catering to the resilient DIFM customer. Innovation, such as the new aluminum oil pan for Ford F-150s, continues to drive value.

    03

    Heavy Duty Segment Performance and Outlook

    Heavy Duty net sales increased 7% year-over-year to $66 million, driven by prior year pricing actions and business wins. Operating margin improved to 4.2%, with comparable margin at 2.3% (ex-refund). The segment continues to navigate a challenging 'freight recession,' with no meaningful trucking mileage or tonnage growth expected in 2026. Dorman is focusing on penetrating the above-frame market and new channels like OE dealers to drive long-term growth.

    04

    Specialty Vehicles Segment and Market Trends

    Net sales for Specialty Vehicles declined 1% to $54 million, impacted by softer customer demand and macroeconomic conditions like higher fuel prices. Operating margin expanded significantly to 26.1%, with comparable adjusted margin at 17.8%. The market is seeing a shift in consumer demand, with growth in both high-end cab models (lower attach rates) and entry-level models (higher upgrade potential). Dorman is expanding its Super ATV presence internationally and focusing on repair-oriented solutions for older models.

    05

    Capital Allocation and Balance Sheet Strength

    Dorman demonstrated strong capital management, generating $144 million in free cash flow and deploying $47 million for opportunistic share repurchases. The company refinanced its debt, increasing its revolving credit facility to $800 million and extending maturity to 2031, resulting in $931 million in total liquidity. This robust financial position, with a net leverage ratio of 0.69x adjusted EBITDA, provides significant flexibility for investments, M&A, and shareholder returns.

    AI-generated summary of the company’s earnings call. Not investment advice.