Dorman Products, Inc. Reports First Quarter 2023 Results

Dorman Products

COLMAR, PA — Dorman Products, Inc. (NASDAQ: DORM) this week announced its financial results for the first quarter ended April 1, 2023.

First Quarter Financial Results
The Company reported first quarter 2023 net sales of $466.7 million, up 16% compared to net sales of $401.6 million in the first quarter of 2022. The sales results reflect the addition of SuperATV, successful new product launches and price increases to offset inflationary costs. Net sales growth excluding acquisitions was approximately 3.5% compared to the first quarter of 2022 and 23% to the first quarter of 2021.

Gross profit was $144.5 million in the first quarter of 2023, or 31.0% of net sales, compared to $133.2 million, or 33.2% of net sales, for the same quarter last year. Adjusted gross margin* was 32.4% in the first quarter of 2023 compared to 34.1% in the same quarter last year. The decline in gross margin as a percentage of net sales is primarily due to the sell-through of high-cost inventory purchased in 2022 that was impacted by inflationary costs, partially offset by the favorable impacts of pricing actions and the addition of SuperATV, which has a higher gross margin percentage than the Company average.

Selling, general and administrative (“SG&A”) expenses were $126.4 million, or 27.1% of net sales, in the first quarter of 2023 compared to $86.5 million, or 21.5% of net sales, for the same quarter last year. Adjusted SG&A expenses* were $117.4 million, or 25.2% of net sales, in the first quarter of 2023 compared to $83.2 million, or 20.7% of net sales, in the same quarter last year. The increase in SG&A expenses as a percentage of net sales was due primarily to the impact of higher interest rates on the Company’s customer accounts receivable factoring programs and the addition of SuperATV, which has higher SG&A expenses as a percentage of net sales than the Company average. In addition, the Company recorded two charges in the quarter related to a customer bankruptcy filing and the settlement of a commercial dispute.

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Net interest expense was $12.0 million for the first quarter of 2023 compared to $1.2 million for the same quarter last year. The increase of $10.8 million primarily reflects the addition of the term loan used to complete the acquisition of SuperATV and significantly higher interest rates compared to the prior year.

Income tax expense was $0.8 million, or 12.8% of income before income taxes, compared to $10.4 million, or 22.7% of income before income taxes, in the same quarter last year. The decrease in the effective tax rate was due to favorable discrete items in the quarter, partially offset by an increase in state tax expense and the effect of foreign operations.

Net income for the first quarter of 2023 was $5.7 million, or $0.18 per diluted share, compared to $35.2 million, or $1.11 per diluted share, in the prior year quarter. Adjusted net income* in the first quarter of 2023 was $17.6 million, or $0.56 per diluted share, compared to $40.7 million, or $1.29 per diluted share, in the prior year quarter.

Kevin Olsen, Dorman’s President and Chief Executive Officer, stated, “I am pleased to report that 2023 got off to a solid start made possible by the dedication and hard work of our Contributors. We delivered net sales in line with our expectations although the quarter started slowly due to certain customers normalizing their inventory levels early in the quarter, which we saw through customer point-of-sale (POS) performance outpacing our net sales. However, as the quarter progressed, our net sales increased and realigned with customer POS, which we expect to continue throughout 2023. Earnings per share for the quarter were aligned with our expectations, excluding the impact of two SG&A expense items totaling approximately $4 million.

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“As expected, inventory played an important role in our results this quarter. Margins continued to be depressed as we sold through a large portion of our high-cost inventory over the last two quarters that was sourced during peak inflationary times. However, we believe the high-water mark is behind us as our inventory balance dropped substantially in the quarter. Starting in the second quarter, we expect to see lower cost inventory selling through, which will drive sequential margin expansion and solid free cash flow throughout the remainder of 2023. In addition, we were able to reduce our debt in the quarter by $27 million. The positive trends we are seeing around inventory, coupled with favorable industry dynamics and new product execution that we expect to drive demand, give us the confidence to confirm our full-year guidance.

“Operationally, we executed well against our strategic priorities. The integration of SuperATV is on schedule and their first quarter results were in line with our expectations. We made meaningful progress against our initiatives to roll out state-of-the-art automation technology across our warehouses as well as diversifying our supply chain geographically. Finally, we continue to focus on new product innovation. During the quarter we launched numerous products including two new Dorman® OE FIXTM control arms for certain EVs, a 4WD front differential housing, and a new air suspension upfit kit for millions of trucks and SUVs. We continue to deliver products that not only drive sales and profits for our customers, but also provide the solutions that professional technicians and do-it-yourselfers want.”

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2023 Guidance
The Company confirmed its full-year 2023 guidance, detailed in the table below, which includes the impact of the SuperATV acquisition but excludes any potential impacts from future acquisitions, additional supply chain disruptions, significant interest rate increases, or share repurchases.

2023 Fiscal Year
Net Sales $1.95B – $2.00B
Growth vs. 2022 12.5% – 15.4%
Diluted EPS $4.35 – $4.55
Growth vs. 2022 13.0% – 18.2%
Adjusted Diluted EPS $5.15 – $5.35
Growth vs. 2022 8.2% – 12.4%
Tax Rate Estimate 24%
Visit the Investor Relations section of the Company’s website at www.dormanproducts.com for a significant amount more information.

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